24th May 2007 07:01
Imagination Technologies Group PLC24 May 2007 24 May 2007 Imagination Technologies Group plc Momentum continues with strong revenue growth across the Group Imagination Technologies Group plc (LSE: IMG), a leading provider ofSystem-on-Chip (SoC) Intellectual Property (IP), today announces results for thetwelve months to 31 March 2007. Business Highlights • Licensing • Concluded over 10 new license agreements, including: o Strategically important agreements with Texas Instruments for OMAP3, Intel for Mobile Computing/UMPC and Renesas o Important deals with Sharp, Freescale, Centrality, Frontier Silicon and Future Waves o Key areas of Mobile Multimedia, Personal/In-car navigation and Mobile TV o Strong pipeline of prospects • Royalties • Partner chip shipments more than doubled to 25.7m units (2006: 11.9m) • Over 45 mobile phone handsets launched/shipping from Nokia, Sony Ericsson, Motorola, Panasonic, Sharp, NEC, Fujitsu, and Mitsubishi o Further models being launched including Nokia N95 and E90, Motorola MotoRIZR Z8 and MotoQ q9 and Sony Ericsson P1i. • Maintained 70% DAB market share with products from all key brands • Leading supplier of 3D graphics technology for in-car navigation - many design wins in Japan • 50 partner chip design wins (2006: 40) with 18 in production • PURE Digital • Another strong year - number one overall radio supplier (including analogue) in UK • Increased market share and maintained margins Financials Highlights • Group revenue up 36% at £48.1m (2006: £35.3m) • Technology revenues increased 57% on a $ basis to £21.8m • Royalty revenue up 67% on a $ basis to £8.8m • Licensing revenue up 51% on a $ basis to £13.0m • PURE Digital revenue up 27% to £26.3m (2006: £20.7m) • Gross Profit up 43% to £27.1m (2006: £19.0m) • Margin % improved to 56% (2006: 54%) • Continued investment with R&D spend up 13% to £23.4m • Loss before tax reduced by 66% to £2.3m (2006: Loss £6.9m) • H2 close to break-even • Net cash balance of £9.6m at the end of March 2007 (2006: £6.4m) • Stronger technology order book of £7.4m (2006: £6.0m) Geoff Shingles, Chairman, commented: "This year we have maintained the momentum in all key aspects of the business -securing new licensing deals, SoC design wins, chip volume growth, and PUREDigital sales growth - which has led to significant revenue growth for both theTechnology business and PURE Digital. "The new extended partnership with TI for OMAP3, the growing co-operation withIntel in mobile computing/UMPC and associated investment by Intel during theyear, coupled with growing business with other key current and new partners arestriking examples of the value our partners see in our offerings and therelationship. "The Group was close to profitability in the second half of the last financialyear. Based on the active pipeline of licensing opportunities, the expectedvolume ramp-up in partner chip shipments and the strong position of PUREDigital, we are confident that we will see further progress in the currentfinancial year." Enquiries: Imagination Technologies Group plc Tel (today): 020 7457 2020Geoff Shingles, Chairman Tel (thereafter): 01923 260 511Hossein Yassaie, CEOTrevor Selby, CFO College Hill Tel: 020 7457 2020Adrian Duffield/Carl Franklin Full-year Update - 2006/07 This year has seen a significant increase in Group revenues driven by stronggrowth in both our technology licensing and PURE Digital businesses. The healthyprogress in the licensing business was achieved despite tighter conditions inthe semiconductor market during the last quarter of the financial year. Financial Review Group revenues for the year ended 31 March 2007 were £48.1m, a 36% increase onlast year (2006: £35.3m). Technology revenues, comprising royalties andlicensing, were up 49% on last year at £21.8m (2006: £14.6m) and PURE Digitalrevenues were up 27% at £26.3m (2006: £20.7m). Technology business revenues are predominantly US dollar based and whilst thesterling revenue growth reported above was 49%, the underlying growth in USdollars was 57%. Within the technology business revenues, there was stronggrowth in both licensing and royalty revenues. Licensing revenue increased by 44% (51% on a US dollar basis) to £13.0m (2006:£9.0m) with a significant proportion of this being repeat business as existingpartners broaden their use of Imagination's IP. In addition to the increasedlicensing revenue achieved during the year, an improved order book of £7.4m(2006: £6.0m) of licensing and support revenue has been carried forward at theend of the year, the majority of which is expected to be recognised in thecurrent financial year. Royalty revenue increased 57% (67% on a US dollar basis) to £8.8m (2006: £5.6m),based on the shipment of 25.7m chips (2006: 11.9m) incorporating our technology.After adjusting the first half royalty shipment volume to take into accountcorrected royalty reports, chip volume has been approximately equal in the firstand second half of this financial year due to the timing of partner chip volumeramp-up and OEM product launches. Through its broadening product range, PURE Digital has again had a strong year.The Christmas period is important for this business and as expected second halfrevenues were 48% ahead of the first half. Gross profit for the year was £27.1m, a 43% increase on last year (2006:£19.0m). The gross margin has improved to 56% (2006: 54%) mainly due to a changein the revenue mix in favour of the higher margin technology business. Despitestrong growth in the PURE Digital business, gross margins have been maintained. Research and development expenses increased by 13% to £23.4m (2006: £20.7m). Thefocus of this spend during the year has centred on the development of our coreIP as well as ensuring effective technical support for our growing partner base.The R&D activities have included development of a wider range of cores based onour PowerVR graphics technology to address a broader range of marketopportunities, development of our multi-standard video cores, TV technologiesand platforms for mobile TV and radio/audio, and development of funded SoCs forour partners. Additionally, it is critical that our engineering resources areable to fully support our partners in deploying the technologies licensed intotheir growing list of internal SoCs developments, as well as in adoptingadditional technologies from Imagination. As we reported previously, in Januarywe also opened a new design centre in India to both tap into the global talentpool and also benefit from its lower cost base. Sales and administrative costswere £6.2m (2006: £5.5m). The loss before tax for the year of £2.3m shows a 66% reduction on last year(2006: loss £6.9m) as the margin from the revenue growth has filtered through tothe bottom line. In the second half the business was close to break-even. The tax charge in the year of £0.2m (2006: £0.5m) represents tax deducted atsource on overseas earnings. This has reduced following a recent beneficialchange in the tax treaty between the UK and Japan. The Group reported a loss pershare of 1.2p, down sharply from a loss of 3.7p The Group has significantly reduced the operating cash outflow to £2.0m, whichcompares to £10.1m for 2005/06. This is after allowing for an increase of £1.6min working capital, which resulted mainly from the increased debtors associatedwith the 36% revenue growth. Capital spend in the year was £1.9m (2006: £1.5m). With the inclusion of the£5.3m proceeds from the share placement to Intel in October, net cash resourcesincreased to £9.6m at March 2007 compared to £6.4m at March 2006. As previously stated, the Group has moved the end of the financial year to 30April. Royalties are becoming an increasingly important revenue stream for thebusiness and, taking into account the timing of royalty reporting by ourpartners, this will enable the business to be able to provide a more accurateassessment of its royalty revenues at the close of financial periods. Thecurrent financial year will be extended to 13 months; running from 1 April 2007to 30 April 2008. Interim results will be announced for the 6 months to 30September 2007 and full year results for the 13 months to 30 April 2008.Thereafter financial years will run from 1 May to 30 April. Business Review Technology Business Update During the year, the active pipeline of opportunities has led to the closure ofboth strategically important and financially significant licensing agreements.We concluded over ten new licensing agreements compared to nine last year. Inaddition to broadening our partner base and the range of markets that our IP isnow addressing, our licensing activities are continuing to broaden across ourrange of technologies with the proportion of business from our META and Ensigmatechnologies continuing to grow. The agreements concluded this year were acrossgraphics, video, mobile TV and audio technologies. This demonstrates both thecompetitive advantages of our technologies and their relevance for marketopportunities. Our new licensing agreement with Texas Instruments (TI), the industry leader inwireless semiconductor devices, for the deployment of our next generationPowerVR SGX graphics in TI's OMAP3 family of products was a significantmilestone. Similarly the extended partnership with Intel, which involvedadditional licensing of PowerVR SGX as well as video and display technologiesfor mobile computing/UMPC markets, combined with its investment in Imaginationduring the year, is another clear example of the strength and value that ourpartners see in both our product offerings and the relationship withImagination. Other important agreements during the year included those withRenesas, Sharp, Freescale, Centrality, Frontier Silicon, Mavrix and FutureWaves. Partner chip unit shipments more than doubled to 25.7m units (2006: 11.9m). Thevolume growth has been primarily driven by the production ramp-up across themobile segment, the DAB market and 3D-based car navigation systems with someearly contributions from the mobile TV and TV segments. Whilst this growth wassignificant, and we saw good growth in the Japanese market, it was lower than wehad anticipated due to some delays in the introduction of a number of higher endhandsets into western markets. However, this is seen as a short-term factorgiven the increasing number of end-user products incorporating our technology,including a number of high profile handsets that are now coming to market or arein the pipeline. This progress will, in due course, be supplemented by theexpected deployment of our technology and volume growth in the other emergingmarkets such as mobile TV, Internet Protocol Television (IPTV) and personalnavigation systems which our technologies are successfully targeting. The momentum behind new partner SoC design wins has continued with thecumulative number of committed partner SoCs increasing to 50 at March 2007,compared with 40 a year ago, with 18 now in production (2006: 14). These designwins are the drivers for future partner SoC shipments and therefore furtherroyalty growth. These committed devices are spread both across our partners andour key market segments: 21 for mobile phone; three in digital radio/audio;eight for car & personal navigation; seven in mobile TV; five for digital TV;three in mobile computing/UMPC; and three in amusement. Market Segment Progress In the mobile phone market segment there are over 45 handsets that are based onour technologies. These include handsets from Nokia, Sony Ericsson, Motorola,NEC, Fujitsu, Mitsubishi, Panasonic, Sharp and Motorola. We continue to have agrowing position in the Japanese mobile phone market through our very strongranging across the latest DoCoMo phones. In addition to Sony Ericsson's W850i,M600i, and P990i models and Nokia's N93 and N93i models which are alreadyshipping, we are now seeing, albeit a little later than forecast, a growingnumber of other high profile phones which are now shipping, or about to ship, inwestern markets. Amongst these are the acclaimed Nokia N95, Nokia E90, theMotorola MotoRIZR Z8 and MotoQ q9 and Sony Ericsson P1i. We also expect otherhigh profile handsets to begin shipment starting from the second quarter of thecurrent financial year. These new phones, targeted at western as well as globalmarkets should significantly accelerate the volume ramp up for FY 07/08 whilstalso demonstrating the real benefit of graphics for both the user interface andapplication content. We have also seen continued progress in our other established markets such asdigital radio/audio and automotive, where we have market-leading positions and agrowing number of design wins. In the DAB digital radio market our digital radio/audio IP platform technology has maintained its position of around 70% marketshare and has been deployed in over 150 end-user products. This market has sofar been mostly UK centric but is now expected to make faster progress elsewhereparticularly with the advent of an enhanced DAB standard, known as DAB+, that isbeginning to be adopted in other regions. In the car navigation market the vast majority of the new 3D-based navigationsystems in Japan continue to use partner chips which deploy our PowerVRtechnology. This year we have secured new semiconductor partners in this segmentwhich are developing products for both traditional in-car navigation system aswell as the next generation of Personal Navigation Devices (PNDs) which havebecome very popular in recent years and can now benefit from advanced graphicsand video technology as well as mobile TV. Our partners in this segment nowinclude Renesas, NEC, Freescale and Centrality. With our technology already shipping in Far Eastern markets which have adoptedthe T-DMB standard, the shipment of devices featuring our new multi-standardmobile TV technology in the near future should see our technology deployed in awidening range of geographic markets. The progress of the mobile TV market andour continued commitment to the TV segment should begin to bear fruit and make agrowing contribution to our overall volume and royalty ramp-up during FY 07/08.With respect to the TV segment we expect IPTV products that deploy ourtechnology to begin shipment in the near future. Our partnership with Intel in the personal computing/UMPC segment is progressingwell, with significant additional projects committed during the year. We expectthis to lead to product shipments towards the latter part of our 07/08 financialyear. Pure Digital Update PURE Digital had a very strong Christmas period and has extended its leadershipin the DAB market. It has continued to bring to market technically advanced,high quality products across a broadening range of key market segments includinglower-cost quality portable radios, clock radios, personal radios, micros andlife-style products. In many key radio categories, PURE Digital has now achieveda market share in the range of 20-35%. Importantly it has also become the UK'snumber one overall radio supplier (including analogue radios). This has beenachieved through wide product ranging by all the key retailers, who acknowledgeand value PURE's quality, broad product range, strong brand and position as theDAB market leader. PURE Digital continues to maintain its leadership of the DAB market and hasgrown its market share through a multi-faceted strategy. It has continued to deliver products which provide advanced and novel features,taking full advantage of the opportunities that the digital nature of DAB andthe growth of digital audio offer. As a result PURE now has growing range ofproducts with advanced features such as pause/rewind/record, digital storage (SDCard), MP3 integration, USB upgradeability, EPG (Electronic Programme Guide) andteletext-style capabilities (IntellitextTM). This technology drive has won PUREDigital many awards including those for its leading-edge product EVOKE-3 whichincluded What Hi-Fi? Sound & Vision Radio Product of the Year; the CNET Awards'Best Digital Radio; and Boys Toys' DAB Radio of 2006. PURE has diversified its product range beyond portable/kitchen radios targetingother traditional consumer audio segments with DAB by increasing usability andadding advanced features. For example, PURE's new Move radio brings portabilityto a new level in a stylish and practical design, and the DMX and Legato microsystem range integrate many advanced features in addition to CD, MP3 and digitalstorage making them industry-leading products in this segment. Another segmentin which PURE secured the top position during the year has been the clock/radiosegment where PURE's Chronos and Chronos CD have achieved market leadingpositions. Additionally PURE has continued to deliver quality low-cost products formainstream markets in order to secure maximum shelf space for the PURE brand,reach the majority of consumers and drive the DAB market forward. Two examplesof this drive are the PURE ONE, at £49, an outstanding success attracting verystrong demand, and the newly launched DMX-25 micro. The above approaches combine with leading edge product innovation, designed todrive and enable new markets, will continue to be the fundamental elements inPURE Digital continued progress. Outlook and the Future We have now seen licensing revenue growth over the last three consecutive halfyears, which is a clear sign of our technology's market relevance andcompetitive advantage. The on-going requirements of our existing partners,combined with the growing interest from new customers, give us confidence thatour technologies will continue to be adopted in the future. The healthy orderbacklog carried forward to the current financial year is also providing us witha good starting base for the year. Whilst the timing and level of revenues maybe difficult to forecast accurately, we expect to see another active year forlicensing opportunities and further progress. We expect strong volume growth for the next few years as our technologydeployment continues across our key market segments, given the increasing numberof end-user products, especially high profile handsets, that are coming tomarket incorporating our technology and the expected rapid growth in theemerging markets which our technologies are targeting. With digital radio technology becoming a ubiquitous feature in most home audioand music systems in the UK, and in due course in other geographic markets, weare confident that PURE Digital will be able to maintain its strong progressthrough innovative and leading products. For the current financial year, theproduct and retailer ranging plans are firmly in place for another strong yearfrom PURE Digital. We also expect PURE to launch new innovative andmarket-changing products during this year which will further drive its growthplans as well as deployment of our key technologies. Last year saw strong growth in both our Technology and PURE Digital businesseswith the second half performance getting close to break-even. Overall we areconfident that these trends will continue and that we will see further progressin the current financial year. Hossein Yassaie Chief Executive Preliminary Results for the twelve months to 31 March 2007SUMMARISED CONSOLIDATED INCOME STATEMENT Year to Year to 31 March 31 March 2007 2006 £'000 £'000 Revenue 48,062 35,273 Cost of sales (20,913) (16,231) Gross profit 27,149 19,042 Research and development expenses (23,419) (20,649)Sales and administrative expenses (6,250) (5,549)Total operating expenses (29,669) (26,198) Operating loss (2,520) (7,156) Financial income 259 329Financial expenses (40) (43)Net financing income 219 286 Loss before taxation (2,301) (6,870) Income tax expense (244) (490) Loss after taxation attributable to (2,545) (7,360)equity holders of the parent Loss per share - basic and diluted (1.2p) (3.7p) During this and the previous year all results arise from continuing operations. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year to Year to 31 March 31 March 2007 2006 £'000 £'000Exchange differences on translation of foreignoperations (16) 2Net change in fair value of available for sale investment 872 -Total income and expense recognised directly in equity 856 2Loss for the financial year (2,545) (7,360) Total recognised income and expense for the financial year attributable to equity holders ofthe parent (1,689) (7,358) SUMMARISED CONSOLIDATED BALANCE SHEET At 31 March 2007 At 31 March 2006 £'000 £'000Assets Non-current assetsIntangible assets 4,872 4,675Property, plant and equipment 3,791 3,712Investments 7,027 6,155 15,690 14,542Current assetsInventories 3,636 3,445Trade and other receivables 11,260 9,254Cash and cash equivalents 10,818 6,384 25,714 19,083Current liabilitiesBank overdraft (1,259) -Current portion of long term borrowings (29) (29)Trade and other payables (7,495) (6,867) Net current assets 16,931 12,187 Non-current liabilitiesOther interest bearing loans and borrowings (529) (557) Net assets 32,092 26,172 Equity Called up share capital 21,748 20,706Share premium account 50,321 44,472Other capital reserve 593 319Warrant reserve 830 1,104Merger reserve 2,402 2,402Revaluation reserve 6,414 5,542Translation reserve (12) 4Retained earnings (50,204) (48,377)Total equity 32,092 26,172 SUMMARISED CONSOLIDATED CASH FLOW STATEMENT Year to Year to 31 March 2007 31 March 2006 £'000 £'000Cash flows from operating activities Loss before tax (2,301) (6,870) Adjustments for: Depreciation and amortisation 1,622 1,757 Net financing income (219) (286) Loss on sale of property, plant & equipment 15 5 Share-based remuneration 718 327Operating cash flows before movements in working (165) (5,067)capital Increase in inventories (191) (1,113) Increase in receivables (1,794) (1,993) Increase/(decrease) in payables 619 (1,539) Cash generated by operations (1,531) (9,712) Interest paid (40) (43)Taxes paid (447) (304) Net cash flows from operating activities (2,018) (10,059) Cash flows from investing activitiesInterest received 250 260Acquisition of intangible assets (683) (346)Acquisition of property, plant and equipment (990) (1,216)Proceeds on disposal of property, plant and - 6equipmentNet cash used in investing activities (1,423) (1,296) Cash flows from financing activitiesProceeds from the issue of share capital 6,891 9,857Repayment of borrowings (28) (31)Net cash from financing activities 6,863 9,826 Net increase/(decrease) in cash and cash 3,422 (1,529)equivalentsEffect of exchange rate fluctuation (247) 243 Cash and cash equivalents at the start of the 6,384 7,670period Cash and cash equivalents at the end of the 9,559 6,384period NOTES 1. The above Profit and Loss Accounts and Balance Sheets are an abridgedstatement of the full Group accounts for the years ended 31 March 2007 and 2006,on which the reports of the Auditors, KPMG Audit PLC, are unqualified and whichdid not include a statement under Section 237(2) or 237(3) of the Companies Act1985. The Statutory Accounts will be filed with the Registrar of Companies indue course. The 2006 Statutory Accounts have been filed with the Registrar ofCompanies. 2. Segmented Reporting The Group operates as two business segments; the Technology business, comprisinglicensing and royalty revenues, and the PURE Digital business. The segmentinformation in respect of these businesses is presented below. Year to Year to 31 March 2007 31 March 2006 £'000 £'000Revenue Technology business 21,749 14,624 PURE Digital business 26,313 20,649 48,062 35,273 Operating profit Technology business (4,369) (8,545) PURE Digital business 1,849 1,389 (2,520) (7,156) Total assets Technology business 22,694 20,610 PURE Digital business 7,892 6,631 Unallocated 10,818 6,384 41,404 33,625Total liabilities Technology business 4,259 4,450 PURE Digital business 3,265 2,446 Unallocated 1,788 557 9,312 7,453Net asset analysis Technology business 18,435 16,160 PURE Digital business 4,627 4,185 Unallocated 9,030 5,827 32,092 26,172Other segment itemsCapital expenditure Technology business 1,744 1,168 PURE Digital business 182 291 1,926 1,459Depreciation and amortisation Technology business 1,491 1,554 PURE Digital business 131 203 1,622 1,757 Revenue is segmented by geographical area of sales as follows:- Year to Year to 31 March 2007 31 March 2006 £'000 £'000Revenue United Kingdom and Europe 30,267 23,491 Asia 7,551 5,561 North America 8,719 4,978 Rest of the world 1,525 1,243 48,062 35,273 All revenue originated from United Kingdom and Europe. The operating loss, net assets and capital expenditure of the Group materiallyrelate to the United Kingdom and Europe. 3. The Directors do not propose the payment of a dividend. 4. The taxation charge for the period relates to tax deductedat source on overseas earnings not recoverable in the period. 5. Loss per share The basic earnings per share for the financial periods reported have beencalculated on the weighted average number of shares in issue as shown in thetable below. The diluted earnings per share has been calculated on the weightedaverage number of shares potentially in issue. There are potentially dilutiveordinary shares in issue at 31 March 2007 however these are not disclosed asthey are anti-dilutive for the period. Year to Year to 31 March 2007 31 March 2006 Loss attributable to shareholders (£2,545,000) (£7,360,000) Weighted average number of shares in 211.1m 200.8missue 6. Copies of the Group's full Report & Accounts will be sentto shareholders by 3rd July 2007. Additional copies will be available from theCompany's registered office, Imagination House, Home Park Estate, Kings Langley,Hertfordshire WD4 8LZ. 7. The Annual General Meeting of Imagination TechnologiesGroup plc will be held at Imagination House, Home Park Estate, Kings Langley,Hertfordshire WD4 8LZ at 11.00am on 25th July 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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