Imagination Technologies Group Regulatory News (IMG)

17 March 2016

Imagination Technologies Group plc

Restructuring update

Imagination Technologies Group plc (LSE: IMG, "Imagination", "the Group"), a leading multimedia, processor and communications technology company, announces an update on its restructuring initiatives.

On 8 February 2016, the Group announced that it will reduce total operating costs of its ongoing businesses by £15 million in the next financial year, ending April 2017. These cost reductions will be implemented by the end of the current financial year, ending April 2016. The Group has seen considerable interest in Pure, its consumer electronics business, which it is planning to sell by the end of 2016.

Today the Group announced an acceleration of its restructuring programme and will divest or shut down non-core and/or cash consuming units as well as further reduce overheads. This will reduce its cost base by an additional £12.5 million on a net annualised basis. The savings will be delivered in full in the financial year ending April 2017.

These reductions will enable the Group to reinforce and build on the current strengths in its core three businesses; graphics and multimedia (PowerVR), processing (MIPS) and connectivity (Ensigma). There are no planned reductions in these areas.

Imagination expects to reduce the Group's headcount around the world by 200 people as part of these cost-cutting measures. This is in addition to the 150 headcount reduction resulting from the first restructuring announcement on 8 February 2016. However, Imagination is actively seeking to fill over 50 roles in its PowerVR business as part of its programme to further strengthen this business.

As part of the further restructuring announced today, the Group will undertake asset write-downs as well as record a number of contract and tax provisions. The cash cost of the total reduction will be less than £5 million, restricted to redundancy payments, and will be funded from existing resources. The Group continues to have sufficient cash resources to meet its obligations going forward.

In aggregate, the Group will deliver £27.5 million of cost savings in full by the end of April 2017. 

The operational review, initiated on 8 February 2016, will identify where Imagination needs to focus its resources in order to exploit its leading positions and ensure attractive returns.

The Group has a strong position in the graphics and multimedia markets with PowerVR. Its MIPS business is strong in networking, set top boxes and embedded processing and Ensigma, the connectivity business, has leading technologies in low energy Wi-Fi and Bluetooth.

The Group sees plenty of opportunities to provide combinations of these three areas to customers and to apply its technologies across a number of markets.

The non-core businesses that are being divested include activities that primarily aligned with the consumer radio business in the past. The System on a Chip (SoC) design business will be refocused and rescaled. There will also be further reductions in overheads, which are not focussed on the Group's core activities.

In the current financial year, both royalty and licensing revenues continue to be in line with the Board's expectations.

Andrew Heath, Interim Chief Executive, said:

"This swift and decisive action will put us back on a sound financial footing and will enable us to have the necessary resources to further strengthen our three core businesses. They are unaffected by these cuts.

"The ongoing operational review will identify clearly where we need to focus, building on our current strengths and allocating the right capital to ensure growth and attractive returns."

Analyst call

Imagination Technologies will be hosting a conference call for analysts and institutional investors at 8.15am today. Please contact Hannah Franklin at Instinctif Partners on 020 7457 2040 or email hannah.franklin@instinctif.com