LONDON (Alliance News) - Imagination Technologies PLC Tuesday said its operating profit before items for the full year will be lower than its previous expectations after reporting a wider pretax loss and a fall in revenue during the first half.
The software and intellectual property licensing company said its pretax loss widened in the first half ended October 31 to GBP22.7 million from only a GBP10.7 million loss a year earlier as revenue declined to GBP71.1 million from GBP82.2 million.
Revenue from licensing activities fell to GBP12.6 million in the first half from GBP16.0 million a year earlier, with royalty revenue falling to GBP49.8 million from GBP56.3 million due to the average royalty rate reducing due to a change in its product mix, it said.
The fall in revenue in the first half hit its gross profit, falling to GBP63.5 million from GBP73.9 million as its gross margin fell to 89% from 90%. Higher administrative and research costs pushed the company's operating loss to GBP22.7 million compared to a GBP9.0 million loss a year ago.
Its operating loss before non-recurring items, impairments, restructuring costs, amortisation and non-cash share based incentives came in at GBP7.3 million in the first half, compared to a GBP5.0 million profit a year ago.
The company said it expects a "stronger" second half from its licensing division, with the company expecting a rise from in revenue from the second half of the last financial year. However, the board is expecting its overall operating profit before items for the full year to be "below its previous expectations".
Importantly, Imagination said its operating costs for the full year will have grown by around 2%, considerably less than its guidance range of 5% to 10%, saving the company an extra GBP5.0 million, it said.
"Although our financial performance in the first half has been disappointing, reflecting a short-term slow-down in the overall semiconductor industry and softness in the mobile market, the fundamental medium-term demand drivers remain strong," said Chief executive Hossein Yassaie.
"Imagination has significantly strengthened its position in several key markets and in particular in mobile, automotive and TV/STB segments. The strategic license agreements secured with key players in these segments provide the backbone for significant acceleration in unit shipments with multiple 100's of million unit growth over the next two to three years," he added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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