The offer price of 182p values Imagination at c.£550m and represents a 42% increase over Friday’s closing price.
Companies: Imagination Technologies Group
Imagination announced its acquisition by Canyon Bridge, for a price of £550m and corresponding to a 42% premium compared to the last closing.
Imagination reported its full results for the year ending April 2017, after the update in May.
Revenues from continuing operations came in at £145.2m, corresponding to 21% growth yoy. By segment, PowerVR came in at £94.8m (+7.9%), MIPS at £35.4m (+18.2%) and Ensigma at £7.7m (+117.2%). By type of revenues, licensing came in at £33.8m (+81.8%) and royalties at £111.1m (+8.2%).
The gross margin reached 97.1%, for an EBIT of £7.8m, corresponding to a margin of 5.4%. PowerVR was the only profitable business (£32.5m), while MIPS and Ensigma respectively lost £8m and £9.1m. The net result came in at -£27.9m, of which -£16.1m from discontinuing operations.
Management confirmed that it had entered into a legal dispute over Apple parting way by 2019, wih options being reviewed. The company being officially and wholly for sale has also been confirmed, as well as the sale of the IMGworks and FlowRadio businesses, and the discontinuation of IMGSystems.
The company expects good demand for licensing revenue in FY18, (although the sale process may cause uncertainty), as well as for royalties, benefiting from recent design wins. Apple should also fully contribute for the year to come.
A swing to operating profit will help Imagination through its sale process. Although there is much uncertainty as to what value can be achieved.
Companies: Imagination Technologies GroupApple, Inc.
Imagination has released its final results for the year to April 2017. While the results themselves are slightly ahead of our expectations, reflecting the significant restructuring undertaken in the year, events post the year end have taken over. There is no further update on the dispute with Apple within today’s update and no indication of the level at which the group has received interest from potential bidders for the whole group. The outlook for licence revenue in FY’18 is said to be strong, but we expect potential customers to wary in light of the uncertain outlook for the group. We continue to believe that the PowerVR IP will be attractive to a number of potential bidders, but as a primarily IP based sale, it is very difficult to quantify the value. We would expect a potential offer to be broadly in the 100p – 150p range. The stock remains firmly in special situation territory, but given the likelihood of an offer emerging, stay at Hold.
Apple cancelled its contract with Imagination earlier this year in a surprise move that Imagination has since challenged
Carador Income Fund (CIFU LN) Level of refinancing and reset activity remains high | Imagination Technologies Group (IMG LN) No progress with Apple; Whole group for sale | Uncovered Gems - Speed Dating Lunch Another five sparkling gems
Companies: IMG CNS LID YU/ ACC CIFU
Imagination has announced the commencement of the formal sale process for the whole group. Having announced in May the intention to sell the MIPS and Ensigma businesses, it has now announced that preliminary discussions are engaged with several potential bidders.
The company also said that it was still in dispute with Apple.
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Imagination’s interim results this week were reassuring. Underlying performance was in line and boosted by FX, leaving the group well placed for the full year. Total partner unit shipments were ahead of our expectations, offsetting some weakness in Licencing revenue. Net debt at £40.8m is well within covenants, alleviating any lingering concerns over the balance sheet. We are making material upgrades to our forecasts which are largely FX driven. With the restructuring now largely complete, and £27.5m cost savings achieved, we continue to believe that the strategy put in place by the new management team will deliver returns for shareholders. Our DCF derived target price increases to 290p (from 271p) and we stay at Buy.
Imagination reported its H1 17 results, ending in October. On a continuing operation basis, revenues came in at £64.4m (+8.8% sequentially, +3.3% yoy). PowerVR witnessed a decrease (£43.3m, -2% yoy) while MIPS (£16.7m, +13.3% yoy) and Ensigma (£4.4m, +146.7% yoy) benefited from strong growth rates.
The number of devices shipped remained stable at 584m units; total royalty revenues went up by 5.9% to £52.5m, thanks to the great performance in MIPS, for which royalty revenues went up by about 20% with a 10% increase in shipments.
The company reported a return to profitability, with a continuing operations’ EBIT of £2.9m, corresponding to a 4.4% operating margin, while the loss was £5.5m in the corresponding half last year. However, the company remains with a net loss of £4.6m for continuing operations, and £10.1m in total.
The restructuring process is progressing well, with £27.5m of cost savings. The sale of the Pure business is now effective, as well as most of IMGsystems, while IMGworks (£2.5m of revenues, for a net loss of £3.4m) is expected to soon be disposed of.
The company also announced the nomination of Peter Hill as a non-executive chairman on 1 February 2017.
Imagination has reported its interim results for the 6 months to October 2016. Group revenue from continuing operations of £64.4m (+6% y-o-y) is ahead of our expectations (N+1Se: £59.7m), with solid underlying performance boosted by FX gains. Good underlying unit shipments resulted in royalty revenues of £52.5m with licencing revenue of £11.8m broadly in-line despite some PowerVR deals moving to H2. The £27.5m of annualised cost savings have been delivered, resulting in adjusted EBIT up 65% to £12.2m. The group is seeing good demand for licences in all three of its core businesses, and with recent product launches going well, we expect unit shipments to grow. We continue to believe that the strategy put in place by the new management team will allow investors to focus on the group’s key strengths, and we maintain our belief that Imagination is a likely bid target. We retain our 271p target price. Buy.
Imagination reported FY 2016 (for the company, which we choose to rename in FY 2015 as most of the revenues occurred in that year) results, following a trading update in May in which the company had announced that the results would be below market expectations.
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GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
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Gamesys Group’s Q320 trading update is ahead of expectations with pro forma revenue growth of 31% and an improved financial position. As in previous quarters, the company increased the active player base responsibly and benefitted from new game launches. We increase our revenue forecasts for FY20–22 by 5.7–7.0%, and EBITDA forecasts by a slightly lower 2–3% as management further invests in growing a sustainable and repeatable business, while ensuring revenue growth is done responsibly. This follows an EBITDA upgrade of 7.8% for FY20 at the time of the interim results. For FY21e, the free cash flow yield is 9.2% and the dividend yield is 2.9%.
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This new Q3 update is a welcome addition to QTX reporting calendar, particularly as it reveals impressive resilience through the pandemic; far better performance than originally thought. Management expects FY 2020 revenue and FCF to be in line with consensus forecasts but with earnings substantially ahead. There is a caveat on the impact of the second wave of COVID-19, but so close to YE the risk is relatively low and we raise our forecasts appropriately. Fleet is the driver; despite the impact of lockdowns on new subscriptions in Q2, the subscription base has grown 11% YoY across the 9 months to 168k, fuelling 7% YoY growth in Fleet revenue. The annualised subscription base has risen 5.3% from £20.8m at YE to £21.9m in September, comfortably underpinning our FY 2021 forecast.
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Nanoco is now focused on generating value from three core areas: nanomaterials for the sensor market, where it has a framework agreement with STMicroelectronics; quantum dots for TV displays where a number of development projects are underway; and pursuit of the patent infringement litigation against Samsung. Noting that net cash consumption is now c £0.3m per month, which management, led by Brian Tenner, estimates gives a cash runway to December 2022, we have reinstated our estimates.
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Expected profitability in H1E will be consistent with the level delivered in the interim period last year, albeit at a substantially higher margin. Order flow had seen some disruption from COVID-19 in fiscal Q1E and into Q2E but the September cycle for RFPs and order wins has been encouraging. Our FY21E forecasts are unchanged, and with the stock at the bottom of its trading range, we maintain our buy recommendation.
Companies: Shearwater Group plc
LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group PLC
Benefiting from the pandemic-driven surge in sofa shopping, Asos has released strong FY20 results. However, the strong trading performance in FY 20 and a good start to FY21 were not enough to relieve management’s cautious view on the outlook.
The recent return rate has started to climb back from the bottom in April and the macro-economic consequence of COVID-19 may start to weigh on consumer demand. We should see the sales growth pace and profitability normalising in the coming months.
Companies: ASOS plc
AGM statement as expected; Resume with a Buy
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Gamesys Group’s interim results reporting pro forma adjusted EBITDA growth of 17% exceeded consensus expectations, demonstrating the strength of its strategy of growing the player base responsibly, while aiming for a high player retention rate. The improving financial position has resulted in the introduction of a new dividend (company commentary implies 36p/share for FY20) earlier than anticipated by us and consensus. We have increased our FY20 EBITDA forecast by 7.8%.
Companies: GYS JP7 JKPTF
Concurrent has delivered a strong H1/20 trading performance during a volatile period, with revenue of £9.2m (H1/19: £9.5m). Though COVID-19 caused initial uncertainty around FY20 activity levels, Concurrent is a supplier to some of the world's most prominent defence companies in the UK and US and was thus designated an essential defence supplier. Activity levels therefore continued throughout COVID-19 lockdown, with the defence market representing 68% (H1/19: 58%) of revenue in the period. Following strong order intake during H1/20 (record order book in May 2020) we have increased our revenue expectations by £1.7m to £18.7m for FY20. With £10m cash and no debt Concurrent is continuing to invest in R&D and progress its plans to add new hardware and software product ranges into new markets such as AI, software and services.
Companies: Concurrent Technologies Plc
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H1 results were ahead of our estimates. However, excluding select factors, profits were well above our expectations. Sumo’s strong underlying results positions it to outperform current market expectations. In addition, Sumo announced the acquisition of Pipeworks, which we estimate could drive 18% earnings accretion even based on conservative forecasts. Given the relatively modest share price reaction, Sumo now trades at a lower multiple than prior to the acquisition.
Companies: Sumo Group Plc
essensys’ FY’20E prelims highlighted strong US performance. Group sales rose 9% y/y to £22.5m (recurring: +19% to £19.4m) underpinned by the US, were 59 new site adds drove recurring sales up +45% y/y to £8.1m. Lockdown saw some sales cycle elongation, yet Group recurring sales were stable h/h, 19 new sites were added in H2 and pipeline includes 47 new contracted Connect sites to deploy. Outlook remains positive, and reintroduced N1Se numbers forecast 15% CAGR in recurring sales to FY’22E. We also explore the adjacent addressable opportunity presented by the essensys STEP product which we estimate to be worth £90m pa in London alone (US market many multiples of that). Valuation at 2.9x EV/sales is at a c.50% discount to peers exhibiting similar attractive SaaS metrics and top-line visibility.
Companies: essensys PLC
Interims reveal a particularly strong trading period for the group, with underlying organic sales growth accelerating to +20% c/c (previously mid-single digit), underpinned by both strong trading in the US (+c.50% u/l) and the UK (+11%). Additionally, Eckoh benefitted from a large perpetual Coral licence deal, bringing reported sales growth to +37%. In our view, these results speak to the strong proposition, opportunity and momentum Eckoh across its markets. We leave FY u/l forecasts unchanged but acknowledge they look more than achievable. Currently trading on a 5% FCF yield, rising to 6% in FY21E, we think Eckoh offers a unique investment opportunity.
Companies: Eckoh plc
FY19 revenue increased 16.9% to £19.4m following a strong H2/19, c9% ahead of forecast. New products released included Concurrent's first AI board, aimed at the military market. Order intake was strong, especially during H2/19, continuing into 2020. Inevitably COVID-19 has caused uncertainty about H2/20 activity levels and potential delays from customers, though there has been no immediate slow-down. Concurrent is a supplier to some of the world's most prominent defence companies in the UK and US and continues to supply these customers uninterrupted. Given COVID-19 related uncertainty we have taken a prudent view and trimmed our FY20 revenue (and consequently PBT forecasts). With over £10.5m cash and no debt, a strong order book and top tier customers, Concurrent is continuing to invest in R&D and progress its plans to add new software and hardware product ranges and enter new markets.