9th December 2009

Interim Results for the six months to 31 October 2009.

Strong momentum in partner chip volume and royalty growth, combined with PURE’s international growth, drive half-year pre-tax profit* up 439% to £4.4m

Click here to view the full financial results

9 December 2009. Imagination Technologies Group plc (LSE: IMG), leading provider of System-on-Chip (SoC) Intellectual Property (IP), today announces results for the six months to 31 October 2009.

Financial highlights

  • Group revenue up 40% to £38.2m (2008: £27.2m)
    • Technology revenues increased 31% to £20.4m (2008: £15.5m)
      • Licensing revenue up 2%
      • Royalty revenue up 72%
    • PURE revenues increased 52% to £17.8m (2008: £11.7m)
      • International revenue trebled to £5.4m (2008: £1.8m); 30% of revenue (2008: 16%)
  • Adjusted Group operating profit* of £4.4m (2008: £0.8m)
    • Technology – adjusted operating profit* doubled to £4.0m (2008: £2.0m)
    • PURE – adjusted operating profit** £0.4m (2008: loss £1.3m)
  • Group operating profit £3.8m (2008: nil)
  • Adjusted Group pre-tax profit* up 439% to £4.4m (2008: £0.8m)
  • Group pre-tax profit £3.9m (2008: £0.1m)
  • Adjusted EPS 2.8p (2008: 0.3p)
  • Reported EPS 2.6p (2008: nil)
  • Cash balance improved £7.9m to £22.5m at 31 October 2009 (£14.6m – 30 April 2009)

* Adjusted before share-based remuneration expenses and gain on investment.  ** Adjusted before share-based remuneration expenses

Business highlights
Technology business

  • Six important agreements involving over 11 silicon IP cores
  • Significant number of smaller deals, software licenses and upgrades driving further technology adoption and spread
  • Licences in key areas – Mobile Phone, Digital TV, Personal Media Player (PMP), Personal Computing, Digital Camera, Connected Devices, Green/Smart Power
  • Active pipeline of prospects

Royalties and design wins

  • Partner chips shipped up 33% to 54m units (2008: 41m)
    • Strong mobile phone, PMP volume ramp-up – over 150 models announced or shipping
    • Growing momentum in TV chip volume – well over 15 models shipping – and Mobile Internet Device (MID)/Netbooks – over 85 models announced or shipping
    • Continuing global adoption of DAB-based standards – significantly enlarged market opportunity
    • Strong position for graphics for In-car navigation and Personal Navigation Device (PND)
    • Emerging market for internet and connected audio technologies
    • Initial partnerships in new markets:- Green Energy/Power, Home Automation, & Healthcare
  • 85 active partner chip designs (2008: 73);  35 in production (2008: 28)

PURE business

  • Improving economic environment helped revenue growth
  • Significant growth in international sales and strengthening of market share in UK
  • Gross margin recovering with further product cost management
  • Major new product category with internet connectivity and portal support successfully launched
  • Gross margin recovering with further product cost management
  • Strong, innovative and diversifying roadmap underpins further progress
  • Plans for further increasing global presence and market position

Hossein Yassaie, Chief Executive, commented:

“The continuing momentum in royalty generation by our Technology licensing business and PURE’s significant international progress have resulted in record half-year revenues and a quadrupling of first-half profits.
“Our technologies in multimedia, communication/broadcast and embedded processing offer unique and significant advantages to our partners and a strong scalable base for our progress. These technologies have been both driving and riding many of the key recent trends. This is reflected in the fact that they have shipped in well over 200 million devices across numerous end-user product categories.
“PURE has managed to ride out the tough environment here in the UK and, with the increasing international adoption of digital radio, we have seen significant growth in a number of other countries. The progression of ‘global DAB’ and the ‘cloud-based/connected content and services’ revolution offer market opportunities that PURE is well positioned to exploit.
“Based on the active pipeline of prospects for licensing, growth in SoC design wins and chip volume ramp up, together with PURE’s leading position and scope of international opportunities, we remain confident of further good progress in the current financial year.”

Imagination Technologies Group plc Tel (today): 020 7457 2020
Geoff Shingles, Chairman Tel (thereafter): 01923 260 511
Hossein Yassaie, CEO
Trevor Selby, CFO
College Hill Tel: 020 7457 2020
Adrian Duffield/Carl Franklin

About Imagination Technologies
Imagination Technologies Group plc (FTSE:IMG) – a leader in semiconductor System on Chip Intellectual Property (SoC IP) – creates and licenses market-leading embedded graphics, video, display and multi-threaded processors and multi-standard receiver technologies. These IP solutions are complemented by dynamic and extensive developer and middleware ecosystems.  Target markets include mobile phone multimedia, handheld multimedia, home consumer entertainment, in-car and mobile computing. Its licensees include leading semiconductor and consumer electronics companies, as well as innovative leading edge start-up and fabless semiconductor companies. Imagination has corporate headquarters in the United Kingdom, with sales and R&D offices worldwide. See: www.imgtec.com.
Financial and Business Review

The importance of the Group’s technologies is reflected in Imagination’s robust performance despite the challenges to the global economic environment.

The half year saw good financial and strategic progress for the Technology business, with strong chip volume and royalty growth and the successful closure of a number of important licensing deals. This resulted in a significant jump in operating profit for the Technology business.

The PURE business, having weathered the economic storm, moved back into profitability after strengthening its position in the UK market, and more significantly, developing its presence and revenues overseas.

Financial Review

Group revenues for the six months to 31 October 2009 were £38.2m (2008: £27.2m), up 40%.

Technology revenues, comprising licensing and royalties, increased by 31% to £20.4m (2008: £15.5m) on a sterling basis and 29% on a US dollar basis.

Licensing revenues at £9.3m were 2% higher than last year on a sterling basis, and level on a US dollar basis. As highlighted before, licensing revenues are dependent on the timing of partners’ project commitments and as a result revenues can fluctuate across the financial year.

Royalty revenues were £11.1m, up 72% (2008: £6.5m) on both a sterling and a US dollar basis. The volume of partner chips shipping with Imagination’s IP increased by 33% to 54m (2008: 41m) as volumes of existing chips gain momentum and as a larger number of partners’ chips begin to ship.

As anticipated, the royalty rate per chip has improved as royalty flows come on stream from SoCs incorporating newer IP cores such as POWERVR SGX, from chips with multiple IP cores, and from the phasing out of the revenue sharing with ARM on the MBX IP core.

PURE Digital revenues increased by 52% to £17.8m (2008: £11.7m).  In the UK, revenues increased 25% to £12.4m (2008: £9.9m) as the Group saw volume recover from the tough retail conditions in the first half of last year.

Internationally revenues for PURE have nearly trebled from £1.8m to £5.4m this year as digital radio standards are progressively being adopted overseas. As a result, international sales now contribute 30% of PURE revenues, up from 16% last year.

Group gross profit rose 37% to £25.2m (2008: £18.4m). The overall gross margin of 66% has reduced slightly (2008: 68%) as a result of the higher revenues at PURE.

With the dollar weakening in the first half, the Group incurred an exchange loss of £0.4m (2008: gain £1.0m).

Excluding this exchange loss, which is included in sales and administrative expenses, overall expenses have increased by 10% to £21.4m (2008: £19.4m). R&D investment increased by 11% to £16.8m (2008: £15.1m) and sales and administrative expenses, excluding the exchange loss, increased by 7% to £4.7m (2008: £4.3m). These expenses include a non-cash charge of £1.0m for share-based incentives (2008: £0.7m). In addition, Toumaz Holdings exercised an option to settle £1.7m of debt by the issue of equity resulting in a £0.5m gain on investment.

Adjusted operating profit for the Technology business, before share-based incentive costs of £0.8m (2008: £0.5m) and the gain on investment of £0.5m (2008: nil), increased 97% to £4.0m (2008: £2.0m).

The PURE business returned to profitability with an adjusted operating profit of £0.4m (2008: loss £1.3m), before share-based incentive costs of £0.2m (2008: £0.2m).

The Group’s adjusted pre-tax profit was £4.4m (2008: £0.8m), before share-based incentive costs of £1.0m (2008: £0.7m) and the gain on investment of £0.5m (2008: nil). The reported pre-tax profit was £3.9m (2008: £0.1m).

The net tax credit of £2.2m (2008: tax charge £0.2m) included a tax credit of £2.4m (2008: nil) offset by a tax charge of £0.2m (2008: £0.2m). The tax credit recognised further unrecognised tax losses that were transferred to the deferred tax asset on the Group balance sheet.

The Group’s adjusted earnings per share, excluding share-based remuneration expenses and gain on investment, rose to 2.8p (2008: 0.3p). Reported earnings per share has risen to 2.6p (2008: nil).

There was a net cash inflow from operating activities of £3.9m for the half (2008: £1.6m). An additional £5.2m inflow resulted from the issue of share capital which included £3.1m from the issue of new shares to Apple Inc. in June 2009.

The cash outflow on capital expenditure in the first half was £0.7m (2008: £1.4m). As a result of the net cash inflow and the issue of share capital, the cash balance at the end of October improved £7.9m to £22.5m (£14.6m at 30 April 2009).

Business Review

Technology Business

The Technology business continued to make real progress in its three key metrics:-

  • New licensing deals, which generate short-term revenue and are the underlying driver behind royalty generation
  • Growth of SoC design wins, which is a good measure of technology adoption
  • Partner chip volume ramp-up which drives royalty revenues


The continuing active pipeline of opportunities led to a number of strategically and/or financially significant licensing agreements or their extensions including six major licensing agreements and a number of smaller deals and upgrades.

Among the agreements, there were new partner deals with Ambarella, Green Plug and Infomax as well as extensions or continuations with Intel, Sigma Designs and Apple. The Group signed software licenses and upgrades with a number of partners including Samsung, Frontier Silicon, and O2 as well as important software licensing and development agreements with a number of key OEMs deploying partner chips with Imagination IP.

The major license agreements involved 11 IP Core licenses. The target markets for these include Mobile Phone, Digital TV, Personal Media Player (PMP), Personal Computing, Digital Camera, Connected Terminals and Green/Smart Power.

Significantly the Group has seen continuing momentum in design-wins for its POWERVR graphics technology, which has so far achieved over 35 licenses, including three partners that are working on active designs with the very latest multi-processing (MP) core variants of the SGX543MP family.
Additionally we are seeing a steady diversification of design wins and growing interest across our other key IP cores including:

  • Video – POWERVR VXD and VXE families supporting the latest and emerging video decode and encode formats
  • Display – POWERVR I2P and FRC enabling best image processing technology for TVs, STBs and other consumer devices
  • Communication/broadcast – ENSIGMA UCC series 2 and 3 programmable radio processing units (RPU) supporting worldwide TV and radio reception as well as important connectivity standards such as Wi-Fi running on the same silicon engine in software
  • Embedded processor cores – META LTP, MTP and HTP offering multi-threading, hard real-time and signal-processing capabilities ideal for highly integrated and cost effective devices running modern operating system and connected to internet

Partner chip shipments and royalties

Partner chip unit shipments grew strongly, up 33% to 54m units (2008: 41m units). Growth was driven by increasing sales of mobile phone, PMP (personal media player), TVs, MIDs/Netbooks, digital radio and car navigation/information systems. Contributions from the TV segment and the MID (mobile internet device)/Netbook segments are increasing significantly.

The royalty per device has increased as a result of the deployment of multiple Imagination IP cores in the same SoC and the transition from devices based on older generation graphics POWERVR MBX, some of which had legacy revenue sharing arrangements with ARM, to the newer POWERVR SGX technology.

With current information and visibility, we see no reason to adjust our long-standing target of achieving around 200 million partner chip shipments in the FY 2010/11 timeframe.  As can often happen in the early stages of a market development, the exact timing and the rate of product introduction by the OEMs and the speed of production ramp-up can, however, create some variability.

SoC Design wins and pipeline

SoC design wins are the driver for future partner chip shipments and royalty revenue growth. Strong continuing momentum saw new partner SoC design wins increase to 85 (net of obsolescence) compared with 73 as at October 2008. Of these, 35 are shipping or beginning to ship, with the balance of 49 still in design. The latter are the driver for significant further royalty revenue growth. These committed devices are continuing to diversify across Imagination’s partners and key market segments:

  • 30 for Mobile Phone Multimedia devices
  • Nine for Handheld Multimedia (PMP, mobile entertainment/gaming, camera, mobile TV)
  • 21 for Home Consumer Entertainment (TVs, STBs (set top boxes), DVDs, digital radio & audio, connected audio, and home entertainment devices)
  • 10 in Mobile Computing (MID/UMPC/Netbook/PC/Laptop)
  • 11 for In-car (Navigation, Dashboard, PNDs (personal navigation devices))
  • Four for other markets covering Green energy, healthcare, amusement and toys

Technology business markets

Mobile Phone Multimedia – More than 150 handsets have so far incorporated Imagination’s technologies, of which 40 use latest POWERVR SGX technology. Many of the handsets are market-leading models with new capabilities from the key OEMs, including Apple, Fujitsu, Mitsubishi, Motorola, NEC, Nokia, Palm, Samsung, Sharp and Sony Ericsson. We have visibility of well over 60 further handsets in the pipeline from various OEMs that are using Imagination’s technology.

As reported previously, the requirement for hardware acceleration is rapidly expanding to a larger proportion of mobile phones. It is also clear that smartphones, to which high-level graphics and video are most relevant, are the fastest growing segment within the mobile phone market. Some predict that the smartphone category will ultimately subsume the feature phone category. With its strong partnerships in this segment, Imagination is well positioned to continue to exploit this opportunity as it grows.

Handheld Multimedia (PMPs, Mobile Entertainment/Gaming, Camera & Mobile TV) – This segment is Imagination’s second largest in chip volume terms after mobile phones.  Imagination has already seen its technology deployed by the leading player in the PMP market where products increasingly require advanced graphics and video capabilities to improve interactivity and user interface capabilities. Combined with other partner SoCs in design, Imagination expects to obtain a growing market share in this important segment.

We have also seen a growing demand for a more advanced user interface on cameras. We see this market as a new emerging area for a number of our technologies.

In the mobile TV market, Imagination’s current technology is already shipping in some of the early T-DMB mobile TV markets in Asia. Further progress in the mobile TV market requires other world markets such as the North American and European regions to embrace such services.  Using Imagination’s multi-standard UCC receiver technology, our partners in this market are able to offer very small, high-performance and cost-efficient solutions across multiple regions. As a result, Imagination believes it is well placed to service this market as it develops.

Home Consumer Entertainment (Digital Radio, Connected Audio, TV, IP TV, STB, DVD, Home Entertainment) – Our technologies for, and partnerships in, the TV and STB segments have begun to deliver growth. There are now several devices shipping, with an increasing number in development for these consumer segments.

The partnership with NEC has resulted in Imagination IP being deployed in TVs from a major global brand, which started shipping in Japan and Europe from March 2009. Intel consumer SoCs, including the CE3100 and new CE4100 chips, have begun making a contribution to this segment. In addition, other important existing partnerships with NXP and Sigma Designs are close to being able to supply SoCs for these markets. The emerging market of IP TV is a key driver requiring advanced graphics and multi-standard video processing.

The digital radio market continues to be an important focus for Imagination’s multi-standard receiver and processor/DSP technologies. Imagination plays a leading role in providing key technologies for this market and has seen its digital radio technology deployment share reaching 80%. Overseas markets are increasingly adopting digital radio formats, many based on the DAB standard or its variants. This DAB adoption is gaining significant momentum as what was once a local UK technology market transforms into a global market for our technologies and PURE products.

Furthermore the rapid spread of internet connectivity and Wi-Fi is enabling new opportunities in the form of internet and Wi-Fi based radio and audio streaming that are strongly supported by our combined broadcast radio and connected audio technology platform. We see this combination as an important market that Imagination will continue to lead, both from a technology licensing perspective as well as through PURE.

Mobile Computing (MID, UMPC, Netbook devices) – Imagination’s partnership with Intel in the personal computing/UMPC and MID segments has progressed to plan with shipment of the Intel® Atom™ Z range of products that deploy Imagination’s graphics and video technologies. This initial solution has secured many OEM design wins with more than 85 products shipping or announced. Our strong partnership with Intel continues to develop with a wider scope of co-operation across several significant projects. In addition, the growing netbook market is also opening up opportunities for other partners who need the advanced multimedia technologies that Imagination can provide.

In-car – The vast majority of the new 3D-based navigation systems in Japan continue to use partner chips that deploy Imagination’s POWERVR technology. In addition to the long-standing relationship with Renesas which is progressing well, the more recent relationships with other key players in this market, such as NEC, Freescale and SiRF/CSR, are helping to increase our market share in both traditional in-car navigation systems and next generation PNDs.

The attention that the traditional mobile phone application processor semiconductor companies, such as TI, and also Intel through its Intel® Atom™ technology, are paying to these markets has increased the routes through which our technologies can be deployed. There is now a fast developing market as the car manufacturers transition from the traditional mechanical displays to LCDs for electronic dashboards; we are well placed to target this market as it emerges.

Emerging Markets (Home Automation, Green/Smart Energy, Healthcare) Given the diversity and capability of our IP family, we are forging partnerships in emerging markets that will see the deployment of our technologies in a wide variety of devices. Highly relevant to these markets are our embedded processing cores, which are able to combine modern flexible and operating system based requirements with hard real-time processing involving signal processing computation. Combined with our software programmable connectivity solutions, these cores offer a highly effective solution for next generation applications requiring the capability of a “connected processor”. We plan to complement these silicon technologies with internet and portal based solutions offering our partners a comprehensive offering designed to address the requirements of the new connected world. Partnerships formed recently in these new market areas include those with Toumaz Holdings and Green Plug Inc.

PURE Business

PURE achieved record first-half revenues and a return to profitability, driven by a 25% increase in the UK and a trebling of international sales, which now contribute 30% of total PURE revenues. PURE took six years to ship its first million radios – a milestone achieved in December 2006 – but tripled these sales to three million by November 2009. The key drivers of this growth were economic recovery in the UK, the increasing globalisation of digital radio and the emergence of new, connected audio devices for streaming internet radio from thousands of channels.

In the UK and other markets, PURE retained its leadership position in key product categories and strengthened its line-up with significant new models including further expansion of the Flow family of internet connected products and a strengthening of the DAB range with new micro-system, bedside and portable radios.

Overseas, it is clear that the transition from analogue to digital radio is underway on a global scale and reaching far beyond PURE’s early markets of the UK, Switzerland, Norway and Australia. With many other countries including France, Germany and Italy beginning to switch to DAB standards, often driven by government switch-over plans, Imagination stands to gain as both the provider of the core technology and through PURE, the leading radio manufacturer.

The launch of PURE’s well received Flow ‘connected audio’ family and the associated internet portal, www.thelounge.com, have opened up further significant opportunities in both DAB and non-DAB countries as such products take advantage of Wi-Fi and internet connectivity. Following the launch of EVOKE Flow last year, which became the most successful connected digital radio, PURE continues to extend this range. Among the additions are the AVANTI Flow, a high quality next-generation digital audio system with iPod connectivity, the Siesta Flow bedside clock radio, and most notably the newly announced Sensia which brings a new dimension to not only radios but also to the emerging connected devices.

The Sensia is the beginning of a convergence that brings together broadcast radio, which we see as the “bed rock” of mass content delivery, and the on-demand and interactive benefits of internet connectivity. The colour touch screen offers a fun and easy user interface whilst at the same time offering relevant internet content such as social networking, instant messaging and other community, information and entertainment-based applications.

PURE, as has become customary, continued to win many prestigious awards. These included three top awards at “What HiFi? Sound and Visions Awards 2009; the overall radio category award ‘Radio Product of the Year 2009’ for AVANTI Flow, the prize of the ‘Best Desktop DAB £100-£200’ for EVOKE-2S, and the award for the ‘Best Desktop DAB up to £100’ for ONE Elite. Additionally, PURE won two key awards in Australia’s 2010 Sound and Image Awards: Digital Radio of the Year for Sensia and Highly Commended for ONE Classic. The innovative Sensia also took Best Product of the Year in Smart House magazine’s Best of the Best’ Awards’.

PURE radios offer significant eco-friendly features with many PURE products having now been recommended by the Energy Saving Trust, a message being promoted in trade and consumer campaigns in the run up to Christmas.

As a result of its continuing innovation, strong product line up and planned delivery of new technologies, PURE has once again maintained strong product ranging at key retailers in the UK and has been able to develop key overseas relationships in support of its strategy to develop its international business. These trends see PURE playing a key role in the UK as well as other regions as the inevitable digital wave sweeps the radio industry and as the new connected products become a major new consumer product category.

The Group’s investment in developing the internet and web services portal, www.thelounge.com, in support of its ’connected‘ radio and multimedia platform and its first deployment in the form of the PURE  Flow range is enabling the next generation of the ’cloud-based‘ products and services. These connected technologies and services are considered of significant strategic importance to Imagination as a whole; not only in the delivery of internet-based multimedia content but also for other connected services such as automation, security and remote health care.


It is increasingly clear that several aspects of our long-standing strategy are beginning to deliver. Our technologies in multimedia, communication/broadcast and embedded processing offer both unique and significant advantages to our partners and at the same time providing a strong and highly scalable base for our growth. Despite the significant progress we have made to date, the exploitation of many of our key technologies is still at an early stage in many markets. We remain on course to achieve significant growth as existing markets develop and new markets and applications emerge where our technology can make a significant difference to the consumer experience. It has been a feature of our strategy to both ride and drive key trends. This process is still very much ongoing.

Another key aspect of our business is the cyclic nature of technology roll-out, which continues to offer opportunities for follow-on generations of previously deployed IP cores. This is particularly relevant to flexible and programmable solutions, an attribute we offer in all our key IP solutions and one that can over time result in an ecosystem of value to the user community. We therefore continue to believe that significant opportunities exist going forward to offer existing customers next generations of technologies that they have already licensed, to extend existing partnerships with completely new complementary IP categories and to engage with entirely new customers.

The technologies we offer are highly relevant to many of the trends in new and evolving markets. These go across the three carefully planned areas of; multimedia (graphics and video processing units – GPUs), programmable baseband for the growing connectivity/broadcast standards (radio processing units – RPUs) and embedded processor cores offering multi-threading, hard real-time and signal-processing capabilities all in one.

PURE is an integral part of our strategic activities and focuses on targeting emerging consumer markets that can benefit from a concerted drive across the Group. This has been successfully executed on digital radio in the UK with the focus now on international development of this market. The connected devices and the opportunities they offer are another key area where PURE efforts are directed, with a starting point that bridges broadcast and internet arena and enables optimal delivery of both mass and individual targeted content. The strategy will ultimately also lead to complementary areas involving home connectivity and the provision of useful remote services. The progress made by PURE in the half year is a very good base for further steps including its planned expansion into the USA and other important global markets. This will of course be done with the considered and prudent approach we have taken in developing the business to date.

We are continuing to invest in a controlled and targeted manner to exploit fully our strong market positions and expand the opportunities for both our Technology and PURE businesses. The Group remains well placed for further growth based on its active licensing pipeline, expected chip volume ramp up and royalty growth, as well as the potential for PURE to exploit its strong product line-up, new sales territories and benefit from a general improvement in the UK and world economies.

Whilst the macro economic volatility and its influence on consumer spending may still continue to have some impact on aspects of our development, the Board remains confident that the Group’s solid progress will continue.

Hossein Yassaie
Chief Executive
9 December 2009

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