https://imagination-technologies-cloudfront-assets.s3.amazonaws.com/presentations/interim16/Interim-Results-2016.pdf
https://imagination-technologies-cloudfront-assets.s3.amazonaws.com/presentations/interim16/IMG-half-year-report-2016.pdf
Highlights
• Total partner shipments in line with expectation, with revenues from continuing operations up 6% to £64.4m (H1 FY16: £60.8m), as a consequence of the strong US dollar
o Royalty revenue up 6% to £52.5m (H1 FY16: £49.6m) − Total partner unit shipments 584m (H1 FY16: 584m)
o Licensing revenue up 7% £11.8m (H1 FY16: £11.0m) − PowerVR licencing slow with deals moving to H2 − Ensigma revenue up 144% to £4.4m (H1 FY16: £1.8m) - significant deals signed with large customers
• Group returned to profitability
o Continuing operations adjusted EBIT* up 65% to £12.2m (H1 FY16: £7.4m) o Continuing operations operating profit of £2.9m (H1 FY16: loss £5.5m) o £27.5m annual cost savings delivered
• Restructuring nears completion - Pure and most of IMGsystems sold, IMGworks near disposal
• Net debt of £40.8m (April 2016: £33.0m, October 2015: £35.4m), H1 outflows reflecting one-off restructuring costs and £5.2m exchange loss on dollar denominated debt. Continuing operations generated £9.5m cash from operating activities
• Peter Hill will take over as non-executive Chairman on 1 February 2017 - see separate press announcement
Andrew Heath, Chief Executive, said: “We have successfully executed the restructuring programme, initiated last February, on time and in line with our expectations. The £27.5m of cost savings, identified earlier in the year, have been delivered – this has enabled the business to return to profitability. Our Ensigma unit achieved strong licence sales as we have made good progress in agreeing deals with a number of major customers. The underlying trading performance of the Group for H1 is in line with our expectations and we additionally benefitted from the strong dollar. “We are now in a much better position to exploit our leading technologies, across a range of increasing opportunities and execute our refreshed strategy. “For our continuing operations, we remain on course to deliver an underlying trading performance for the year in line with our expectations and anticipate that we will continue to see an additional benefit from the strong US dollar.”
END
Initial market reaction is positive. Good to see Ensigma starting to get wins as predicted (and good to see new team actually closing deals,including a Tier 1) by the IoT markets getting off the ground - the new management are right to continue investment in this important area imo. Looks like the Mediatek/Spreadtrum PowerVR deals concluded by HY in his final few months will start to deliver next year and resume royalty growth in our most important division, whilst Apple revenues are actually fairly stable (taking into account dollar rate and also reduced iPhone/iPad volumes vs. 1 year ago) despite ill-informed 'expert' predictions of a fall due to increasing Apple in-house technology usage .
MIPS aiming to be profitable in FY18 - seems to have been stabilised by the well-respected Jim Nicholas. Ensigma aiming for profit in FY20.
EDIT:
CC notes:
A confident (but cautious) performance from Heath and Millward at the CC, you really get the impression that the new CEO has given IMG his full attention in the recent months, started to make important customer relationships, done some studying to improve his tech knowledge and believes in his plan.
http://seekingalpha.com/article/4028679-imagination-technology-group-plc-ignmf-ceo-andrew-heath-q2-2017-results-earnings-call?part=single
Excerpts:
for mobile, our focus is certainly there in terms of graphics and multimedia with PowerVR certainly growing market share in mobile, particularly in the mid-tier markets, where the Series8XE has being seen to getting a lot of design wins and proven to be very successful. It's been the most successful product launch that we've had as a business so far.
In the consumer, we maintain a very strong presence in digital TV and set top boxes both with MIPS which typically have 40%, 50% market share in that area. But also with PowerVR and the Series8XE that we launched for mid-tier phones has been successful in mid-tier phones is also proving to be a great fit for digital TVs,
As I said, the 8XE has been a very successful product launch. It's been actively designed in by number of licensees. And as a consequence we expect royalties and unit shipments to increase as we go into calendar year 2017. And we are seeing that being licensing in mobile, in digital TVs and in automotive. So it's getting a very broad pickup from a number of customers.
We've also seen that Mediatek have announced that our GPU architecture is in there Helio X30 product, and as we look forward we fully expect a number of the developments there to continue to grow
And finally, we've been very clear, Guy mentioned this that we fully anticipate PowerVR to be at least a minimum 40% margin business, so certainly trading in a 40% range margin. That's very much our intention and to get back to those levels we have been there in the past to get back those levels as quickly as possible.
And our differentiated technology certainly in terms of multi-threading, and that's the reason we got into mobile, baseband, modems, it's the reasons we won Mobileye and their EyeQ5 products, so that differentiated technology again is another touch point and why we believe MIPS can be successful in those markets spaces we've selected.
In terms of notable deals, what caused that uptick in licensing in the first half, where we had made deals with a mobile computing with some large industry players, also unmanned systems and also in IoT and one of the deals was with a significant Tier1 provider as well. So I think that's all are important validation of the strength of Ensigma's offering
So, one thing that I would like to be clear about is that, there has been quite a bit of speculation in some of the sort of industrial press around sort of how embedded is our technology in one of our leading customers. I just like to reaffirm our view is highly embedded. Their ecosystem has been built over many years off the back of a lot of our IP, and I'll just say the ecosystem they have established is high reliant on a number of the architectural aspects of our IP, which I am sure therefore will endure going forward
