(MENAFN- ProactiveInvestors)Computer chip designer Imagination Technologies (LON:IMG) saw strong licensing revenues across what it calls its intellectual property (IP) families in the year to end-March 2015. The group inked 121 licences deals with more than 40 partners in the reporting period up from 115 the year before. Group revenues rose to £177.0mln from £170.8mln the previous year with technology revenues up 7% to £158.6mln from £147.6mln. Licensing revenues rose 2% to £39.0mln while royalty revenues jumped 9% to £118.9mln. Speaking to Proactive Investors chief executive officer Hossein Yassaie said this was 'good strong growth considering the strength of the performance in the comparative period last year'. He also noted that the growth rate was commendable given that the semiconductor industry has been absorbed by mergers & acquisitions (M&A) activity over the last year 'which slows down the industry'. Having said that Yassaie was chuffed with Imagination's own work in the M&A field with the integration of MIPS the chip design pioneer the company acquired in late 2012 so it could compete with fellow UK chip designer ARM Holdings (LON:ARM) producing top-line growth sooner than expected. 'When we bought MIPS we warned the market not to expect a growth in shipments in the first few years of ownership but in the last year MIPS shipments increased 9% to a record level' Yassaie said. The company made a loss before tax of £11.95mln versus a profit the year before of £775000 but the market was braced for this. Guidance for licensing revenue growth in the current year is 10% consistent with the long term growth rate and driven by the increase in the backlog at the end of the financial year just ended and the strength of the pipeline. The market responded well to this with the shares 2.4% at 220p late in the morning session and house broker Jefferies Hoare Govett said that though there may be some scepticism about the company's abilities to hit this target after March's profit warning it noted two key developments: A Tier 1 mobile player has taken a MIPS licence for 'a significant embedded sub-system in mainstream mobile applications processors; Chinese mobile chip-maker Spreadtrum has been revealed as a licensee for the first time. 'We see these as extremely positive developments for IMG with royalties most likely coming through in FY17' the broker said. Prior to the results there was some concerns over operating expenditure (opex) but the company is guiding towards 5-10% growth in the current financial year implying according to Jefferies that the company has come through the bulk of its recent investment cycle. Yassaie stressed to Proactive that 'while it is possible to please the City in the short term with cost cutting opex is a steady state long term investment; it's more about an incremental increase.' Broker Investec said the numbers were 'a small miss' but after the last two years of downgrades the figures have been greeted with an element of relief. 'The main positive likely to be picked up by the market is the improved operating cost base guidance pointing to more financial discipline. After three years of operating profit decline contrary to throwing in the towel we see multiple different avenues of option value for Imagination as an IP-heavy business where financial performance could be improved relatively simply' the broker said as it reiterated its 'hold' recommendation and 220p price target.
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