Imagination Technologies Group plc: Interim Management Statement

September 13, 2012 -- Imagination Technologies Group plc ('Imagination', LSE: IMG), a leading multimedia, communications and embedded processor technology company, is today issuing its Interim Management Statement for the period from 1 May 2012 to 12 September 2012.

Trading update

Following the strong performance in the last financial year, the momentum in the business has continued.

Our partners’ product launches in the second half of the last financial year, together with shipments starting for a number of customers for the first time this year, have both contributed to strong growth in unit shipment volumes. The volume growth has been driven across the expected key segments, including: mobile phone, computing/tablets, mobile multimedia/gaming and home consumer. The royalty revenue growth has continued to be strong, in line with expectations. As expected, the strong unit volume growth has steadily extended to the lower-end of the smart phone market resulting in a small downward movement in the average royalty rate.

Licensing activity remains steady but is subject to the usual uncertainty over timing, particularly given the continuing macro-economic volatility.

Pure continues to see steady growth in its international markets and small improvement in its UK business, although the tight economic environment remains a factor. Strategic product developments have been on-going in the year with several key product launches planned for the run-up to Christmas.

We continue to invest in key areas of technology both organically and through targeted acquisition activity. As part of the latter, in June we made a small acquisition of the IP, assets and employees of Nethra Imaging Inc. (Gross Assets £0.4m at end June), which further enhances our capability in the area of camera/video IP.

Technology update

PowerVR GPUs – The PowerVR graphics processor (GPU) family continues to lead the market in technological capability, roadmap strength and ecosystem and remains by far the most adopted and shipped technology of its kind. Many designs across PowerVR Series5 and 5XT and the new generation Series6 family are at different stages of delivery with increasing numbers of Series5XT-based devices entering production and contributing to volume ramp-up. The Series6 IP core family expanded to four members, with others in the pipeline. Several partner prototype devices using Series6 are now at first silicon and are functioning well, with software driver and applications development significantly advanced. The development of Caustic’s complementary ray tracing technology is on track and will, in due course, further strengthen our graphics offering and add to our competitive position.

PowerVR VPUs – Our PowerVR video decode and encode processor (VPU) families, which support the latest and emerging formats, continue to see strong volume growth. We are seeing a growing industry trend in favour of licensing rather than internal development, particularly as the next generation of advanced video standards are coming to market. In keeping with our strategy of providing leading-edge and market-driving technologies to our customers we recently launched the new PowerVR Series4 video processors offering increased performance and precision as well as supporting the emerging ultra HD resolution displays of 4Kx2K pixels. These technologies are seen as essential for future generations of smart TV products which require very high quality and/or the capability to display full HD at the same time as related information such as social network interactive pages.

Ensigma RPUs – Our Ensigma programmable radio processing unit (RPU) family supporting both multi-standard broadcast receivers and Wi-Fi/BT connectivity is becoming increasingly relevant to mainstream markets and has been designed into a growing number of chips and products. Ensigma RPUs support worldwide TV and radio reception as well as important connectivity standards such as Wi-Fi, all running on the same silicon engine in software. This technology is increasingly essential for delivery of cloud and broadcast content to home and also within the enterprise. Already we have partner devices in volume shipment using this technology for digital radio and Wi-Fi connectivity and we expect several new partner devices targeting multi-standard/global TV markets to begin shipment during the current financial year.

Meta CPUs – the Meta family of embedded processors offers state-of-the-art general-processing combined with multi-threading, demanding real-time and signal-processing capabilities. These capabilities are ideal for highly integrated, feature-rich and cost effective systems. Many of our IP cores integrate Meta processing cores already. Over 50% of the total annual volumes of our IP shipments deploy Meta technology and we expect this trend to continue upwards. The growth of open source operating systems such as Android and other Linux implementations, the trend towards heterogeneous systems/standards, and the inevitable growth of internet connectivity across the majority of devices, will further drive deployment of Meta processors in applications in embedded systems and processors in a variety of markets.

HelloSoft V.VoIP - our HelloSoft family of video and voice over IP (V.VoIP) products, including platform agnostic SDKs, continues to get stronger and more comprehensive, resulting in a number of important engagements for these technologies with both operators and mobile phone OEMs. This is in part driven by the arrival of 4G/Long Term Evolution (LTE) networks which require VoIP over LTE (VoLTE) an area where HelloSoft products are uniquely strong. HelloSoft V.VoIP technology has now been adopted by a number of key network operators for both enterprise and consumer segments with a number of handset design-wins also secured.

Caustic Professional – Technology development and initial customer delivery are making good progress with the first ray-tracing test chip demonstrated and positively received at SIGGRAPH in August 2012.

Pure update

Despite the current slow-down in consumer spending, Pure continues to effectively showcase and help to drive key strategic connectivity technologies. We expect to see a financial improvement in this division over the medium term, driven by international markets and new product opportunities.

Outlook

The continuing macro-economic volatility creates caution among our customers. Despite this the licensing pipeline remains robust, although there is the usual uncertainty over the timing of deal closures.

We expect further product launches from our customers, including a number of our significant design wins reaching production, which will continue to drive strong growth in royalty volumes and revenue.

As a result the Board remains confident that the Group is on track for continued progress.

Hossein Yassaie, Imagination’s Chief Executive said:

"Our ‘smart’ technologies are being adopted more widely across both new and existing partners, creating a wider base for continued momentum in future volume growth which maintains our stated goal of around 1bn annual unit shipments by 2016 as a realistic objective."