6th Apr 2005 07:00
Imagination Technologies Group PLC06 April 2005 IMAGINATION TECHNOLOGIES GROUP PLC("Imagination") Trading Update Imagination Technologies Group plc, the leading provider of System-on-Chip (SoC)Intellectual Property (IP), today announces its trading update for the yearended 31 March 2005. The Company will be announcing its preliminary results onWednesday 25 May 2005. 1- Licensing Progress Update During the second half period, from October 2004 to March 2005, we haveconcluded five new licensing agreements worth approximately $11m. Many of theseagreements are of very significant strategic importance given the partnersinvolved, including:- • Freescale (formerly the semiconductor arm of Motorola Inc.) for PowerVR mobile graphics through ARM; • Texas Instruments' major licence upgrade to a PowerVR MBX family licence that now extends to the PowerVR MBX Lite core and brings our lower-end PowerVR technology to high volume segments of the mobile handset market; • Intel which has very recently extended its agreement for PowerVR MBX and related IP to a family licence which enables wider deployment; • Frontier Silicon which has licensed our mobile TV IP platform as a lead partner. We also have two other significant deals, which have reached advanced closurestage but missed the year-end deadline. In addition to these we also haveseveral other very important agreements at advanced stages, which we wouldexpect to close during the first half of 2005-6. Specifically we see strongpotential in the following areas:- • PowerVR mobile graphics/video (MBX family and related cores) - among the potential agreements at an advanced stage are ongoing negotiations with a number of parties including another two top ten semiconductor companies. Conclusion of the latter two agreements would bring the number of top ten semiconductor companies licensing Imagination's technology to eight; • A new family of next generation graphics/video technology, where we are close to securing lead partnerships which we would also expect to involve top ten semiconductor companies. We see real and significant interest in this new technology from many of our existing partners; • Mobile TV and TV - significant ongoing discussions with partners interested in our extensive TV technology and new mobile TV IP platforms. The mobile TV market is becoming increasingly important as the mobile phone market embraces this new technology. Our unique multi-standard capability offers significant benefits over the competition and is attracting serious interest from many parties. With this in mind we expect to secure further significant penetration in themobile phone, mobile TV and TV segments as well as new market areas. We arepleased that during the second half we have made such strong strategic progressin our licensing partnerships, but naturally there is some disappointment thatthe timing of the closure of some of the deals has meant that the overall valueof the licensing business closed in the second half has been impacted. 2- Royalty Progress Update - Partner SoCs Across mobile phone, TV, mobile TV, digital radio/audio, car navigation, andamusement market segments, we now have a total of 28 partner SoCs committed, upfrom 20 at the beginning of the financial year. At the half-year, we reportedthat the launch of mobile phone products based on our technology had beendelayed due to partner project timing and in particular software integration. Itis therefore pleasing to advise that we now have better visibility of asignificant number of end product launches scheduled during the 2005/6 financialyear and beyond. There are already handsets shipping in Japan (e.g., Fujitsu'sFOMA901), and PDAs (e.g., the Dell Axim X50v), which incorporate our mobilegraphics/video technologies. These early products entered production late lastcalendar year and in the second half we have already seen encouraging chipvolumes in these markets. We now have 14 committed SoCs across our partners that incorporate our mobiletechnologies and are targeting the mobile phone and PDA markets. These includedevices from Renesas, TI, Intel, Samsung, Philips and Freescale. Significantly,in addition to Renesas and Intel, who started product shipment during the secondhalf, TI, Philips and Samsung were demonstrating mobile phone applicationprocessing devices incorporating our mobile graphics technology at the 3GSMWorld Congress in February 2005. Given that these partners between them haveover 70% of the worldwide market for chips in the mobile sector we expect to seeour technology achieve very high penetration in the growing segment of mobiledevices needing hardware graphics/video acceleration. Estimates over the nextfour years suggest that this segment will approach 50% of the total mobile phonemarket, providing the potential for our mobile technology to reach volumes inhundreds of millions per annum. Although we are at the very beginning of thisprocess we have already seen shipments of around 1.5m partner chipsincorporating our mobile graphics/video in the second half following the launchof only two to three end-user devices. We have maintained our 70% market share in DAB digital radio despite significantgrowth in this market and increased competition. Over 80 end-user products,including models from Sony, Philips, TEAC and Sharp, are now based on ourtechnology as supplied by our partner Frontier Silicon. Through the samepartnership we have also secured a lead position in the emerging T-DMB mobile TVmarket, which uses DAB as the underlying technology. Although royalty ramp-up has been delayed due to later product launches, we haveseen a growth of around 70% in royalty revenues compared to the first half withan overall growth year on year of around 30%. We expect to see acceleratedgrowth in our royalty revenues as an increasing number of end-user products inthe mobile phone, digital radio, TV, car navigation, and amusement marketsegments enter production during the 2005/6 financial year. 3- PURE Digital Update PURE Digital has maintained its leadership of the DAB market through deliveringboth feature-rich, advanced products, which push boundaries, and mainstreamproducts that have helped to drive market growth. Significantly we recentlyannounced that PURE Digital had reached the 500,000 unit shipment milestone fordigital radios. PURE Digital's revenues showed strong progress during the second half driven bya good Christmas and the launch of a broader range of products. Overall PUREDigital product margins for the year have improved but revenues for the yearwere slightly down compared to last year due to a slower first half and theexpected increased competition from low-end products. We expect PURE Digital tocontinue its steady progress and its leadership in the DAB market as thissegment continues to grow. PURE Digital has plans to launch other strategicproducts in support of Imagination's IP. 4- Financial Overall technology revenues will be similar to last year. This is primarily dueto the timing delays in the closure of licensing business noted above but alsodue to the adverse impact of the dollar exchange rate. Within technologyrevenues, royalty revenues have increased by approximately 70% compared to thefirst half and 30% relative to last year, based on the increased number of chipsshipping. We expect this trend to accelerate now as an increasing number ofchips are coming to market. Second half revenues for PURE Digital were nearly 50% up on the first half,based on a strong Christmas period and the launch of a broader range ofproducts. Whilst overall PURE revenues for the year were slightly down on theprevious year due to the general consumer slow down we reported in the firsthalf, product margins have improved. Short-term delays in licensing have impacted revenues, but it is critical thatwe continue to invest in our IP development programmes and the support of ourgrowing partner base and therefore we have maintained our increasing spend on R&D and related partner support activities. Overall group revenues will be slightly down on last year and combined with thecontinued R&D and partner support investment, the result will be a loss in thesecond half. Working capital has been tightly controlled and as a result cash resources havebeen maintained at the September 2004 level of £7.5m. 5- Summary Second half financial performance has been impacted due to the timing of dealclosure, however the Company has made significant and strategically importantprogress during the period in i) securing very important long-term new andexpanded partnerships, ii) delivering to and supporting the growing number ofpartners as they get close to product shipment, and iii) maintaining a cohesivedevelopment roadmap that underpins our business and our partners' requirements.As a result, our IP is now playing an increasingly fundamental role in ourpartners' product development plans. The quality of our partners, the scale of partner SoC design wins and thesignificant role our technologies play in our partners' roadmaps willincreasingly accelerate volume growth and hence our royalty revenues. We expectan increased news flow in the coming year as more end-user products are launchedand more partners commit to our current and future technologies. About Imagination Technologies Imagination Technologies Group plc - a leader in SoC IP - develops, licenses andsupplies market-leading graphics, video and display cores, real-timemulti-threaded DSP/RISC processors and communication and broadcast technologiesfor the consumer entertainment and PC markets. It supplies both licensable IP(Intellectual Property) and related advanced development tools to leadingsemiconductor and consumer electronics companies worldwide. ImaginationTechnologies Group plc has its corporate headquarters in the United Kingdom andis publicly traded on the London Stock Exchange (FTSE:IMG). See: www.imgtec.com. 6th April 2005 Contact: Imagination Technologies Group plc 01923 260511 Hossein Yassaie, CEO Trevor Selby, CFO College Hill 020 7457 2020 Nick Elwes Kate Pope This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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