IMG today released an RNS giving a trading update on what to expect in the FY results for 2012/13. Much of what is contained seems in line with previous expectations but there is a pretty serious profits warning relating to a collapse in licensing revenue in H2. I will not editorialise here or debate the implications of what this means both in the short and near terms as the BBs are a better forum for this and my opinions may not match those of the boss !
So here goes :
Imagination Technologies Group PLC Year-end trading update |
2 May 2013
Imagination Technologies Group plc
Year-end trading update
Imagination Technologies Group plc (LSE: IMG, 'Imagination', 'the Group'), a leading multimedia, communications and processor
 technology company, is today issuing a trading update for the year to 30 April 2013.
For the full year we expect unit shipment growth to continue to be very strong (annual shipments in excess of 500m units) driving significant year on year royalty revenue growth. The average royalty rate is expected to be maintained at a level similar to that achieved in the first half of the year. The overall H2 shipment unit volume reported to us so far is in line with management expectations and has continued to show significant growth, although we have not yet received all partner shipment reports for Q1 CY2013.
As highlighted in the IMS on 12 March 2013, despite an active pipeline of licensing engagements, the closure timing of a number of deals has been subject to higher levels of uncertainty due to structural and organisational changes among a number of semiconductor
 partners in various regions. As a result several agreements have been subject to short term delays, impacting FY13 licensing revenues.
As a consequence of this we now expect licensing revenue (excluding MIPS) to be around GBP27m for the year. We are confident this timing issue is a short term phenomenon related to the 'lumpy' nature of licensing revenues. We continue to see strong widespread interest in our technologies and in the recent months we have witnessed increased engagement activities and a growing pipeline of opportunities across all our key IP offerings, in particular graphics and communications. For FY14 we currently expect licensing revenue to be in the range of GBP30m - GBP35m (excluding MIPS).
MIPS business
performance and integration activity remains on track, with licensing and royalty revenues in line with expectations. Feedback from existing and new partners has been positive: they have welcomed the certainty of MIPS' future under Imagination ownership, and are demonstrating real interest in and support for the technology, our roadmap and our intent of ensuring a much needed choice in the processor IP segment.
As stated in the IMS, Pure's trading environment has continued to be tough in a number of geographies as well as in the UK, resulting in H2 FY13 financial performance similar to that of H1 FY13. Going forward we expect this division's performance to significantly improve as its new and well-received multi-room audio systems and associated cloud services ramp up. This progress will also help to demonstrate the strategic importance of this aspect of our business as it increasingly leads to licensing of resultant technologies.
Operating costs are in line with expectations for FY13, with the year on year growth being higher than previous years due to planned additional investments during FY13 in strategic R&D programmes including the acquisition of camera technologies. For FY14 we expect the operating cost growth to return to normal levels of 18-20%.
The Group now expects adjusted pre-tax profits to be below market expectations due to the closure timing of a number of licensing deals in H2 and continued short-term pressure on Pure's revenue.
During the recent months we have seen significant new product launches from key partners including Samsung, MediaTek, Intel, AllWinner, LG, Sony and others. We expect further product launches from our growing customer base, including a number of significant design
wins reaching production, which will continue to drive strong growth in unit volumes and revenue. These demonstrate ongoing momentum towards our stated target of one billion units by 2016 (excluding MIPS shipments).
Hossein Yassaie, Imagination's Chief Executive said:
"Whilst we continue to see strong demand for our technologies, we are disappointed that the licensing revenues are below our expectations in this period. Despite these short-term timing issues, we continue to see growing partner engagements across our key technologies - these include a number of very significant, strategic deals.
"The volume shipment ramp up continues apace towards our target of one billion units in 2016 (excluding MIPS) whilst the licensing pipeline remains as active, strong and sound as ever."
Despite the transient timing issues in licensing closure, overall the Board remains very confident that we will continue to make strong progress across all our operations.
The Group expects to publish its results for the year to 30 April 2013 on 19 June 2013.
There will be an analyst conference call at 8.00am, please contact Fran Cadoni at: francesca.cadoni@collegehill.com or on +44 (0)20 7457 2020 for details.
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