11th January 2001

Interim update


Imagination Technologies Group plc (‘Imagination’, LSE:
IMG, “the Group”), a leading multimedia, processor and communications
technology company, is today issuing an Interim update for the period from 1
November 2014 to 17 March 2015. 

Business update

The Group has continued to make good progress in its
strategy of providing a comprehensive range of market-leading cores in the
three key IP families of processor, multimedia and communications and enabling
key IP platforms for existing and emerging markets.

Non-MIPS partner unit shipments increased strongly in Q4CY14,
showing growth both sequentially and over the same quarter last year.

MIPS partner unit shipments were stronger than expected
in Q4CY14 and, for a second quarter in a row, have reached a historic record
level for that quarter.

Licensing activity has been a little muted during the period,
due to timing rather than any fundamental change in demand for our products.
Indeed the pipeline is good and growing with a large number of opportunities
being pursued for closure this financial year. The pipeline is active across
all areas of our IP.

The changes made to Pure in the last financial year are
starting to deliver improved performance in its core markets.

Underlying operating costs continue to be tightly
managed and are tracking in line with expectations.

The stronger dollar has had a positive impact on
revenues which are mostly invoiced in dollars. This positive effect has been
partially offset by the impact of FX on geographically-distributed operating
costs and previous hedging activities.

Technology

Multimedia

Our multimedia business remains robust with new
class-leading products launched across the full range of end markets.  The newly announced Series7XT continues to
secure new design wins across key partners. We are also seeing a wide range of
design wins for Series6XE and more recently the newly announced Series7XE at
the lower-end complementing the Series6XT and Series7XT wins. The design wins
are strong across mobile, automotive, TV and STB segments.

At this year’s Mobile World Congress (MWC) Imagination
unveiled the PowerVR Rogue G6020 GPU that has been specially designed for
graphics efficiency in ultra-compact silicon area and lowest power consumption,
whilst delivering optimal device performance and full compatibility with the latest
APIs. With the PowerVR GX5300 and G6020 GPUs, Imagination covers graphics and
UIs from entry-level smartwatches to high-end wearables.

At the other end of the performance range the PowerVR
Series7 GT7900 continues to lead the market, with 512 ALU cores, and is a super
GPU for high-end graphics and compute delivering over 1.5 Teraflops. The
PowerVR Series7 launched during the period includes many advanced features and
uniquely provides virtualisation for ultimate multi-zone security, an area of
growing market demand given the importance of data security and the
programmability of modern GPUs. 

The new PowerVR Series5 video encoders for High
Efficiency Video Coding (HEVC) are designed to provide the highest quality
H.265 encoding, while optimizing silicon area and bandwidth usage. This multi-standard
encoder also offers high-quality H.264 encoding for compatibility with the huge
range of AVC (Advanced Video Coding) decoders available today.

CPU and processor cores

The growing unit shipments of MIPS cores is evidence of increasing
customer confidence and the stronger engagement that we have begun to see with
customers since MIPS was acquired in February 2013.

Interest in and licensing of the Warrior range of cores,
which have been developed since the acquisition, as well as the previous
generation Aptiv range, continue to be strong. Partners have been attracted by
the inherent efficiency and performance benefits of the cores, together with
the additional features of multi-threading and next generation security
capabilities.

The use of hardware virtualisation in the Warrior cores to
enable multi-zone security across the range, from microcontrollers to high-end,
provides partners with solutions to the increasingly demanding challenges of
SoC security. Our unique strategy in delivering CPU and GPU cores supporting
multi-zone security is attracting industry attention and is the foundation for
total SoC security. An announcement from the prpl Foundation yesterday on the
formation of an Open Security working group with members from industry leading
companies reinforces the importance of our approach.

The strong MIPS roadmap executed so far and being driven
going forward, the investment in internal and third party supporting tools, and
the growing momentum in the ecosystem through initiatives such as the prpl
Foundation and the Creator family of boards, are recognised and supported by
many in the industry. 

Overall we believe we are now at a stage that new and
existing tier-one partners are beginning to consider MIPS offerings as both
technically strong and strategically important to their plans.

Communications

Imagination’s Ensigma radio connectivity processors
(RPUs) are vital to servicing the growing demand for communications IP cores in
key markets including IoT, wireless home, mobile and wearables.

At MWC, Imagination demonstrated a new HDMI streaming
device using Ensigma Explorer 802.11ac connectivity, and also highlighted its
Ensigma Whisper IP that is designed to drive the next generation of wearables,
the emerging IoT and other connected devices where ultra-low power consumption
and low-cost design points are essential. Whisper RPUs, like their Ensigma
Explorer counterparts, are aimed at providing multi-standard support in a
single architecture, and are designed to enable customers to bring Wi-Fi,
Bluetooth and in the future NFC, GNSS and other low-power connectivity
technologies onto their SoCs.

A key platform that deploys Ensigma RPU and MIPS
processor cores and combines them with the industry’s best and patented
wireless synchronisation and lowest latency technologies is Imagination’s
Caskeid audio platform. We have seen significant traction in this offering with
major projects underway with key players for delivery during the second half of
this calendar year. 

Cloud IoT technologies
and initiatives 

As part of our market engagement and enablement of the emerging
IoT opportunities we have developed the FlowCloud software technologies
which can enable and accelerate easy and quick deployment of our processor and communications
IP in these markets. FlowCloud, in conjunction with the Creator family of
microcomputer and development systems and third party boards and modules, is
enabling a diverse range of applications in the IoT space. Early projects in
the areas of agriculture, health and energy are underway with partners. We are
also working on industry initiatives on the key areas of security and
interoperability which are gaining traction. 

Pure

The refocused Pure business has continued to drive
improvement in its core DAB market as well as driving other areas of strategic
significance for the Group including wireless audio, where strong partnerships
are progressing and the Creator range, which is a key enabler for the developer
community and ecosystem build-up.

Outlook

The licensing pipeline is good and is further
strengthening across all three IP families with developing engagements with new
and existing partners including several tier ones. Given the licenses signed so
far this financial year and the pipeline of opportunities scheduled to close this
quarter, we currently expect licensing revenue to be close to last year’s level
with the potential of single digit growth dependent on exact closure timing of
the remaining deals.

Non-MIPS unit shipments are expected to be in line with
previous guidance and similar to last year’s levels. Given the continued
strength of MIPS shipments we now expect MIPS units to grow by approximately
5-10% over last year’s levels.

The total unit expectation for the Group is in excess of
1.3bn units for the year.

Following the trends seen in the first half, Pure is
expected to show a reduction in the underlying loss for the year. Because of
the tighter focus on products and markets, this will be achieved from lower
overall revenue than last year.

Underlying operating costs are expected to be in line
with previous guidance of around 10% growth year on year. With the product
lines now complete, this is consistent with our planned transition from a heavy
investment phase to one where all product lines are generating a contribution.

Underlying operating costs are expected to be in line
with previous guidance of around 10% growth year on year. With the product
lines now complete, this is consistent with our planned transition from a heavy
investment phase to one where all product lines are generating a contribution.

The overall financial position of Imagination remains
robust and the Board is confident that the Group’s progress will continue.

Hossein Yassaie, Imagination’s Chief Executive said:

“I
am particularly pleased to note another strong performance from our partners
using MIPS processor IP. Customer interest in this technology is now very
strong and underpins our confidence in the value that this business will
deliver.

“”Our
multimedia business remains robust with new class-leading products launched
across the full range of end markets. We are seeing a wide range of design wins
for both Series6 and Series7 families.

“Despite
being at an earlier stage of market adoption, the traction for our Ensigma communications
IP is real and continues to increase. This is opening up substantial
opportunities in the IoT market.

“The
progress across our three main IP families is a further step forward towards
our longer term target of increasing our operating margins to 30-40%.”

Enquiries

Imagination Technologies Group plc
Sir Hossein Yassaie, CEO
Richard Smith, CFO
Tel : 01923 260 511

Instinctif
Adrian Duffield / Kay Larsen
Tel: 020 7457 2020


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