Pure sold off, finally

Sold for peanuts, but a serial loss maker and not IP. Holding on to Pure was the single biggest reason for HY's (and IMG's) fall from grace - if only he'd listened to us PI's 5 years ago. 

Imagination Technologies Group plc (LSE: IMG, “Imagination”, “the Group”), a leading multimedia, processor and communications technology company, announces the sale of its Pure digital radio business and a trading update for the first quarter of Imagination’s financial year.

The Pure business, with its assets and liabilities, is being sold on a cash and debt free basis to AVenture AT GmbH, an Austrian company, for £2.6 million in cash. The buyer has also been granted an option to acquire one of the Group’s properties in Kings Langley, Hertfordshire for £4.5 million. The cash will be used to reduce the Group’s debts.

In the year to 30 April 2016, Pure’s loss before tax was £7.9m and it had gross assets of £5.2m. The deal is expected to complete on 30 September 2016.

The performance of the Group’s continuing operations in the first quarter of the financial year to 30 April 2017 continues to be in line with the Board’s expectations.

The sale of other non-core cash consuming activities is progressing with on-going discussions with several interested parties. A small part of IMG Systems was sold earlier in September for minimal consideration.

Andrew Heath, Chief Executive, said:

“With the difficulties of last year behind us, continuing operations have traded in line with expectations in the first quarter.

“I would like to thank the staff of Pure for their contribution to Imagination over the years and wish them, and Pure’s new owners, well for the future. The sale underlines the Group’s focus on its core IP licensing activities.”

END

2016 AGM

Many thanks to Roninja for this AGM report:

Location and timing - both wrong!! Surreal to see such a poor turnout. Clearly management wanted it this way but it cannot be allowed to continue.

Jeffries offices by the River Thames are pretty ordinary. The receptionist asked if I was here for the board meeting - should have said I was!!

Being first to turn up I was glad to see David Harold arriving and we had a quick chat mostly about Susie and HY.

A 9am start for an IMG AGM - who would have ever thought, given the lavish days of past! 11am would be more appropriate. If there needs to be a board meeting same day just hold it before.

The room wasn't completely empty as we had what look like reps from the auditors and some other firms.

As for PIs fortunately I wasn't the only one in the room, at the start there were 4 and fortunately joined by 2-3 latecomers. 
There was also a fund-manager who said he had 1-2million in IMG and was very happy with the change of management.

Onto proceedings, Bert went through the AGM formalities in fast forward mode. Very disappointing there was no presentation from either CEO or CFO. 

So onto Q&A: this would have been limited to a meagre 10mins if it hadn't been for one late-comer who had a list of questions for the board.

Post Q&A both Andrew and Guy made themselves available for further conversations.

Key takeaways in no particular order:

- licensing : market is still slow and therefore deals are slow to materialise. No pick up in FY17.

- royalties : forecast flat. Dollar strength though implies some positives.

- cost base and profitability. Eliminating the £27m was a straightforward exercise given previous management had attempted to over diversify. Taking this cost out it is expected to deliver a profitable FY17.
Investment is now channelled towards PowerVR, MIPS and Ensigma. Staff are 75%,of costbase.

Ensigma is still embryonic and management will give it sometime to either establish or make a strategic decision. 

MIPS is strategic and will be invested in. They will not go after all markets as ARM is too dominant. MIPS will thrive were embedded multithreaded competitive advantages are key.

- Ray tracing : there are no licences yet. The tech is in silicon and hugely disruptive. Licenses are still 12-18months away as the solution is further enhanced. It is already 50x more efficient and better looking than a comparable high end Nvidia solution. Ray Tracing will come through to workstations, AR/VR and consoles first. Andrew doesn't believe it will extend to mobile or fully to tablets. One throwaway remark (HY style) was in workstations there is AMD and Nvidia. IMG will not be in completion with both!?!

- Intel : Andrew Heath still pushing to get them back onboard. He is visiting in 2 weeks.

- Mediatek : will dual source but have selected IMG for a range of SoCs across high and mid-range. They've licensed MIPS for baseband which should start shipping this FY.

- Spreadtrum / RDA both licenses will ship 8XE starting FY17, expectation is this will drive volume but too early to say how much.

- HiSilicon : looking to gain a larger share of business with 8XE

8XE has led to strong take up. IMG see being able to design software (Vulkan) across mid to high end as essential and are better positioned than previous years.

8XT is being actively licensed - though it hasn't been formally launched.

- Apple : no change in a strong relationship. 

- Mobile-eye - IMG remain key players in the roadmap despite ARM presence. 

- Pure - on track for 2016 sale. Down to a short list of serious parties. Likely they will want the building as well.

- Investor recordings will have the Q&A included going forward.

- an IMS will come out late September although IMG will not move to quarterly reporting.

END

I guess whilst HY and his team had serious issues with costs/business focus, they were pretty good at making licence deals with large semis/OEMs ie. they had credibility and relationships . Any royalty growth in the short/medium term is dependant on the big deals made by HY with Spreadtrum and Mediatek in his last few months as CEO. It still looks to me as though Heath & Co. are intent on selling IMG, hence the continued support from Institutional Investors.