Imagination Technologies Interim Results 2011/12

Solid set of results from IMG this morning with some nice surprises.

Overall PTP were a bit above most estimates, with licensing the standout performer (as suspected), royalties volume was lower than expected but there will be 'substantial acceleration' in H2 - it is due to the timing of releases of the key devices (Android 4.0 and iOS5 and Kindle Fire etc) - the actual royalty revenue was within range though due to a higher ASP average (31c per chip  vs. 27c at FY).
The big surprise was the naming of QUALCOMM as a licensee of the display IP - a major agreement and for IMG surely a 'foot in the door' . The license extension with ST/E (a Rogue licensee) was also intriguing (one of the presentation slides confirms ST/E has also licensed PowerVR 5 now)
The Tier 1 UCC licensee was not named but most are now agreed it is Broadcom.
Plenty of mentions for Android and Windows 8 (where IMG will be very strong via TI/Intel etc). Committed SoCs are up by 10 from the FY results and shipping SoCs by 6, further evidence of IMG still being in the rapid phase of expansion/development 'early days' as HY puts it.
Analyst meeting this morning followed by the IMG Roadshow this week.
Slides:
http://www.imgtec.com/corporate/presentations/Interim11/index.asp

Great stuff IMG!

Full rns (long):
http://www.imgtec.com/corporate/presentations/interim11/Interims-final-13-12-11.pdf
Summary
Adjusted pre-tax profit* jumps 52% to £15.3m; driven by strong licensing and
continued royalty revenue growth
Imagination Technologies Group plc (LSE: IMG, “Imagination”, “the Group”), a leading multimedia,
communications and embedded processor technology company, today announces results for the six months to 31
October 2011.
Financial highlights
Group half-year revenue up 28% to £56.3m (2010: £44.1m)
o Technology revenues increased 41% to £42.6m (2010: £30.3m)
Licensing revenues up 65%; high levels of activity across IP portfolio
Royalty revenue up 26%; 29% on a US dollar basis
o PURE £13.7m (2010: £13.8m)
Tough retail environment in UK offset by strong overseas growth
Adjusted pre-tax profit* up 52% to £15.3m (2010: £10.1m)
Reported pre-tax profit up 35% to £10.4m (2010: £7.7m)
Adjusted earnings per share* up 48% to 4.9p (2010: 3.3p**)
Reported earnings per share 3.0p (2010: 4.8p)
o Reduction due to a £3.9m tax credit in 2010 compared to a £2.7m tax charge in current year
o No UK tax payable, £18.3m deferred tax asset as at 31 October 2011
Cash balance increased to £56.1m at 31 Oct 2011 (30 April 2011: £49.4m)
* The reconciliation from reported results to adjusted results is set out in Note 6.
** Using normalised tax rate of 26%
Business highlights
Technology business
Royalties and design wins
Partner chips shipped in the period increased to 123m units (2010: 107m) and substantial acceleration
expected in the second half, post October product launches
Significant volume shipments in mobile phone,  tablets/personal computing, personal media players, TV/STB,
digital radio and automotive markets
Significant growth in chip design wins with 125 active partner chips (2010: 98); 54 in production (2010: 42)
Average royalty rate strengthened due to enhancing mix of IP in each chip
Licensing
Strong licensing activities
o Addition of several new key partners including MStar, Ricoh, Qualcomm, Rockchipo Many new and extended agreements with existing partners including Sony, Intel, Mediatek, Renesas,
Samsung, Sigma, Realtek
15+ important agreements involving 22+ silicon IP cores – almost doubling over the same period last year
o Across all markets - mobile phone, digital TV/STB (set top boxes), Personal Media Player (PMP), mobile
computing/tablets/netbooks, in-car navigation/dashboard and industrial/enterprise equipment
o Included graphics, video, display, broadcast/connectivity and processor silicon IP cores and HelloSoft VoIP
technologies
Significantly increased and active pipeline of prospects across all IP families
Acquisitions
Integration of HelloSoft and Caustic Graphics progressing to plan. Positive initial commercial developments for
both businesses
PURE business
Continued softness in UK revenues offset by momentum in overseas growth
o On-going tight economic environment and cautious retailers in the UK
o Continued DAB adoption worldwide and growing demand for PURE‟s connected radios
Continued strategic development and path-finding role
o Focus on development of technologies for digital broadcast, connected devices and Cloud solutions
Key recent new products launched
o PURE Music cloud-based on-demand music service announced and very well received
o Highway in-car digital radio and audio adapter with Halfords as the initial exclusive retailer
Hossein Yassaie, Chief Executive, commented:
“The continued strong demand for our technologies has again resulted in a material jump in our
half-year revenues and profits.
“As demonstrated by very strong licensing revenue growth, our technologies, due to technical and
ecosystem advantages, are in demand and are being adopted more widely across new and existing
partners, creating a solid base for continued momentum in future volume growth.
“Most of these markets are still at early stages of transition and/or development and have large
growth potential, making our stated goal of 1bn annual unit shipment within five years a realistic
objective.
“Despite the current slow-down in consumer spending, PURE continues to effectively showcase and
help to drive key strategic technologies. We expect to see an improvement in this division over the
medium term, driven by international markets and new product opportunities.
“Whilst acknowledging the on-going challenges to the global economy, we remain confident of our
continued good progress in the current financial year and beyond, given the fundamental
strengthening of our business on the back of a very active and growing pipeline of licensing
prospects, the growth in design wins and the momentum in our chip volume.”
END

TI Q4 mid-quarter update

TI lowered revenue expectations due to lower demand across most of their segments, apart from Apps Processors which are doing very well.
Excerpts:

Ron Slaymaker:
' I mentioned the one bright spot is Wireless, and there our OMAP revenue is doing very well this quarter. Just as a reminder, we're now seeing the benefit of customer programs that have ramped into production using our latest OMAP 4 processor. Those customer programs include Samsung's Nexus smartphone, which is our first production program based on Google's Ice Cream Sandwich reference design; Samsung's GALAXY S II smartphone, Motorola's DROID BIONIC and RAZR smartphones, LG's Thrill smartphone with its 3D playback and capture feature. And then most recently, the Amazon Fire tablet and the Barnes & Noble NOOK Tablet are both based upon OMAP 4.'

'Well, yes. OMAP is doing better than expected. I can't quantify it at this point in the quarter, but I would just say OMAP is growing very nicely, and we'll have more details for you in January. But we expected good growth out of it and it's delivering even better growth. '
END

No doubt this will be reflected in IMG's H1 royalty volume next week.
Meanwhile, the usual analyst games (UBS, Numis) have commenced in the week prior to interims, with deliberate omissions and distortions of the truth trying to knock IMG - we'll let IMG's numbers and HY do the talking  next Tuesday.
 Licensing, and royalties will be very strong with positive outlook, Pure not so great but then all the R&D for Cloud/Meta/Ensigma gets loaded into that (otherwise it would be profitable). Will the mystery Tier 1 UCC Ensigma licensee be revealed (or a Broad hint given at the analyst meeting )?

New partnership with Ricoh

Interesting agreement announced today by IMG, with Ricoh, the large Japanese (10/11 sales circa. US $24B) company. Another example of IMG  reaching beyond traditional semis and dealing with product manufacturers directly.

Imagination Technologies Group plc (LSE: IMG; "Imagination"), a leader in System-on-Chip Intellectual Property ("SoC IP"), has signed a license agreement with Ricoh Company, Ltd., a worldwide leader in digital office equipment and advanced document management solutions and services, for IP cores from Imagination's PowerVR family.

Under the terms of its licensing arrangements, Imagination receives license fees and royalty revenues on SoCs incorporating Imagination's IP.