Imagination Technologies:Interim Management Statement

September 17, 2014 -- Imagination Technologies Group plc ('Imagination', LSE: IMG, ‘the Group’), a leading multimedia, communications and processor technology company, is today issuing its Interim Management Statement for the period from 1 May 2014 to 16 September 2014.

Trading update

Licensing activity in the period has been good with encouraging levels of activity across all three main IP product areas and across the broad customer base.

Royalty revenue for the quarter ended 30 June 2014 has been in line with our expectations, reflecting both growth from a number of partners as well as the short term impact from known product transitions with other partners this year. We are pleased that the average royalty rate for the quarter remained strong and marginally higher than last year, which we expected given the change in product mix.

The active licensing pipeline across our IP and customer base is building the foundation for significant future unit growth.

Both licensing and royalty revenue have been affected by the strength of sterling in the period, leading to adverse comparisons with the prior year. Given the recent volatility of sterling, it is difficult to predict the likely impact of this factor for the financial year to April 2015. However, we continue to be active in hedging some of our exposure to currency movements.

The Pure business is trading in line with expectations following the renewed focus and organisational changes implemented at the end of FY14. We are expecting further progress with the latest product releases.

Despite the Group continuing to invest in a number of key areas, tight operational control has been maintained and underlying operating costs are growing at a lower rate and in line with expectations.

Technology business

Multimedia

Our PowerVR Series6 technology has seen further deployment with active licensing across all areas of the Series6 family including 6XE and 6XT.

PowerVR Series6/6XT continues to drive leading edge devices delivering best industry performance, feature set and lowest power consumption.

We were pleased to announce the industry’s smallest Android compatible GPU solution with the new PowerVR Series5XE GX5300 graphics core. With this our partners can create compelling GUIs and user experiences with longer battery life for a range of low-cost, area constrained applications.

CPU and processor cores

We recently announced our most significant new MIPS CPU IP core to date, the 64-bit I6400, the first core using the latest r6 architecture. This highly configurable I-class MIPS core targets a broad range of high volume market applications.

Licences have already been signed with multiple lead partners who value the unique features of this core, such as multi-threading and advanced security, as well as its area and power efficiency.

The Group now provides a comprehensive range of MIPS IP cores for everything from microcontrollers and Internet of Things (IoT) devices to 64-bit application processors and servers, delivering choice across the full range.

We recently revealed the first of a series of MIPS-based development boards targeted at the open source community, hobbyists, cross platform developers and partners looking to create applications using our IP portfolio. We have seen an exceptional response which bodes well for the continued ecosystem development.

Communications

Interest in the Ensigma product range remains strong with additional licenses signed during the period.

The Ensigma ‘Whisper’ RPU is designed to drive a new generation of wearables, IoT and other connected devices where ultra-low power consumption and low cost points are key.

Lead customers who have licensed the high performance ‘Explorer’ RPU IP are making good progress towards their first mass production devices.

Ecosystem

Progress and support of the prpl open source foundation continues with the founders and other partners strongly driving activities in this area.

Imagination’s partners gathered to discover and discuss the latest in our strategy and products at a series of Summit and Executive events worldwide which, over the period, attracted well over 1,000 engineers, developers and executives.

Pure business

Following the renewed focus and organisational adjustment, Pure is applying itself to driving markets and technologies that are of strategic significance to the Group’s overall business.

A new family of products has recently been launched which combines DAB with wireless streaming capability and which we believe will help to drive the emerging consumer trends. This should create more demand for the refreshed Evoke range of products.

The Jongo X family, that takes multi-room streaming to a new level both in feature set and sound quality, has just been launched at the IFA consumer electronics show with a positive reception.

We are seeing strong interest in licensing of the underlying technologies that power these showcase products.

Outlook

The progress on licensing in the period supports our target of 10% growth in licensing revenue for the year.

Non-MIPS shipments are expected to increase in the financial year, with a strong weighting towards the second half, predominantly driven by new product launches. MIPS shipments are expected to be broadly flat year on year with significant growth expected in future years, arising from the ongoing strong licensing activity.

New products and the impact of the business refocus and organisational changes made in FY14 are on course to deliver an improvement in Pure’s financial performance in the year to April 2015.

Underlying operating cost growth is expected to be reduced to around 10% this year, in line with previous guidance.

The seasonality of royalty revenues and the normal weighting of licensing revenues typically results in a stronger financial performance in the second half of the financial year. Given the anticipated contribution of new product shipments later in the year, we expect this effect to be more pronounced this year.

The overall financial position of Imagination remains robust and the Board is confident that the Group’s progress will continue in line with its expectations.

Sir Hossein Yassaie , Chief Executive, commented:

"We continue to see good progress being made across our three main IP product families, multimedia, processors and communications.

"The launch of MIPS 64-bit cores, which can be used in a broad range of high volume applications, is a significant milestone in our development and is seen as an industry changing step by many.

"The three IP families and the platforms they enable are increasingly seen as a strong and relevant proposition for the existing and emerging opportunities by many of our customers."