Imagination to Restrain Cost Growth, Shares Jump

   By Rory Gallivan 
 

LONDON--Shares in chip designer Imagination Technologies Group PLC (IMG.LN) rose more than 10% Tuesday after the company reported interim results in line with expectations and said it will now keep cost growth down after a period of heavy investment.

The company, whose technology is used in Apple Inc. (AAPL) devices, posted on Tuesday a pretax loss of 10.7 million pounds ($16.8 million) for the six months ended October 31, compared with a GBP2.2 million profit the previous year, on revenue down to GBP82.2 million from GBP85.2 million.

Higher revenue from royalties and licensing chips was offset by a fall in revenue at Imagination's digital radio business Pure, to GBP9.4 million from GBP14.4 million.

"Now that our product lines are complete and the heavy investment phase is over, we expect to see lower rates of operating cost growth going forward and increased focus on financial returns," said Chief Executive Hossein Yassaie.

"We now expect to see significant expansion in operating margins in the medium-term," he added.

Imagination said it is benefiting from increasing demand in hot sectors such as the "Internet of Things," a term used to describe the connection of more everyday items to the Internet.

Mr. Yassaie told Dow Jones Newswires that the company is benefiting from IoT areas including Internet-connected security cameras and health monitoring devices.

"We think the IoT will be very big... it will take a few years to deliver its promise," he said.

Analysts see the IoT as one of the most exciting areas in technology, a sentiment heightened by US technology giant Qualcomm Inc's (QCOM) recent agreed acquisition of UK connectivity chip group CSR PLC (CSR.LN) for $2.48 billion.

Imagination will still be investing "massively" in areas such as the IoT despite keeping annual cost growth around 10%, from previous levels above 20%, Mr Yassaie said.

-Write to Rory Gallivan at [e-mail]; Twitter: @RoryGallivan

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