Imagination Technologies Group plc (lon:img)
Imagination Technologies Not For Me Even After Buyout Publicity

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Title: Imagination Technologies Not For Me Even After Buyout Publicity
Company: IMG - Imagination Technologies Group plc
Share Price Then: 139p
Author: Ian Smith
Date: Wed 26 Jul 2017
Comments: When I first read about the Apple plans to drop Imagination chip designs and the large share price drop that followed I thought who are IMG?

Once I went to their web site I remembered, I had looked at the group quite a while back and decided not for me. They owned the DAB Radio brand Pure, they were making graphics chipsets and the MIPs microprocessor range and had a number of development and consultancy businesses.

In other words they were far too diverse and in many areas sweating older assets and losing money.

By now most of those businesses have been disposed of and there are three core areas.

MIPs processors - these have been around a long time, they were created in the days that designing processors that were incompatible with Intel was seen as having a future. There is nothing wrong with them, they are just a hard sell into new markets.

Power VR - the graphics chips design that Apple amongst others have been licencing and the source of most of the groups profits, again it is a fairly limited market.

Ensigma - designs wireless connectivity and broadcast solutions and seems to be relevant to a much broader market.

Borrowing from the annual report

We have allocated all overheads to business units for the first time this year to show the standalone profitability of each of them.

Overall Income was £151m,
PowerVR £37.8m adjusted operating profit (2016: £31.0m) on revenues of £94.8m.
MIPS lost £1.2m (2016: loss £5.0m)
Ensigma £6.5m (2016: loss £11.7m).

The company reported a loss of £27m or and adjusted profit of £14m, the difference is not unusual but with a huge revenue hit expected in the next couple of years it is worrying.

They also have debt of about £28m.

As there is value in IMG I am expecting someone to buy either the company as a whole or the parts, as I understand it both the Group as a whole and MIPs and Ensigma are up for sale.

I just can't see it being at anything like the share price that was supported by the Apple PowerVR licencing.
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