Imagination Technologies Group Regulatory News (IMG)

19 March 2010

Imagination Technologies Group plc

Interim Management Statement

Imagination Technologies Group plc ('Imagination', LSE: IMG), a leading provider of System-on-Chip (SoC) Intellectual Property (IP), is today issuing its Interim Management Statement for the period from 1 November 2009 to 19 March 2010.

The Group has continued to see growing and considerable active interest in its technologies across many partners and markets. As we have highlighted before, the technologies we offer are of long-term and strategic significance for many of our partners and are fundamental to their business success. This is leading to deeper and wider relationships with many of our key partners. These will become more visible over time as the growing range of resulting products reach market. Our technologies are at the forefront of many of the forces that are defining the future in the electronics industry. This is both driving our progress and volume ramp-up in the short term and also positioning the Group's technologies for widespread adoption through these market changes, which we are both enabling and driving.

So far this financial year we have concluded a number of licensing agreements and are currently progressing a significant number of sizable agreements with both existing and new partners. As reported previously, during most of 2009 there was a significant slow-down in semiconductor and electronics sectors, with only tier-one players and larger companies maintaining R&D investment levels. We have seen a general improvement in semiconductor design activities in the recent months, including medium and smaller size companies, as the industry as a whole begins to gear up its development activities in response to the improving environment and plans for growth.

In the current financial quarter, there has been a marked increase in business engagements and we are seeing a build-up of a healthy and active pipeline of prospects. This has led to a significant number of licensing agreements that are in advanced negotiation and/or contractual stage. However, as always, it remains difficult to predict the precise timing of deal closure, particularly as the decision making process of some companies is still influenced by the economic environment, albeit to a lesser extent than last year.

Taking into account the most recent royalty statements received from our licensing partners for the period up to the end of December 2009, we are continuing to see the ramp-up of existing products and an increasing number of new end-user products that are starting to ship. With increasing design wins in our established markets such as mobile phone, PMP, TV/STB, PND/navigation, and the growing and developing markets for netbooks, tablets, gaming devices and in-car electronics dashboards, we expect to see continued volume ramp-up for the foreseeable future.

We remain comfortable with our previous estimate for a total unit shipment of around 200 million during our next financial year 2010-11. As a stepping stone towards this target we expect to see volume in the order of 120 million units for the current financial year.

Further to PURE's significant progress during the first half of the financial year, the business continued to make good progress with revenues in the run-up to and during Christmas. Whilst for the year as a whole we expect to see real progress compared to last financial year, we have noted a slow-down in the rate of recovery in the retail channel during the current quarter. This appears to be in line with the overall electronics and consumer market trends where, with the notable exception of the smart phone market, there has been softening in the recent months.

The adoption of digital radio standards overseas and the relevance of connected products to global markets are helping PURE to develop revenues from overseas markets. The DAB adoption speed is varied across different geographies with many countries still at early stage. It is now clear that in addition to the UK a wave of countries including Switzerland, Denmark, Norway and Australia followed by Germany, Italy, France and many other countries are going through this transition.

In the UK the Digital Economy Bill has gone through the House of Lords and should pave the way for digital switch over for radio.

We expect these trends to continue to be a key growth driver for PURE's business as the global markets begin to exit the recession. PURE has maintained its very strong product line up with the launch of several new products in both DAB range and the connected radio space. Sensia, PURE's latest all-in-one connected device, is a ground-breaking product that is setting a new benchmark in touch screen connected devices. This ground-breaking device has been well received and has seen strong demand.

Cash balances have continued to increase in the second half.

The Group remains well on track for further good growth, based on the growing and active licensing pipeline, the continued chip volume momentum and royalty revenue growth, together with PURE's strong product line-up and the emerging overseas opportunity. Whilst the macro economic volatility and its influence on consumer spending is outside our direct control, and the precise timing of licensing deal closure is difficult to predict, the Board remains confident that the Group is well placed and will continue its solid progress in line with expectations.

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