Imagination Technologies PLC (LON:IMG) saw its shares jump today as it posted a return to profits and said preliminary discussions with potential bidders are continuing, although the chip maker added that it has made no progress in its royalties dispute with tech giant Apple Inc (NASDAQ:AAPL).
The FTSE small cap firm reported results showing a return to pretax profit of £2.37mln for the year ended April 30 2017, against a £29.397mln loss a year earlier, with its basic loss per share reduced to 10.1p from 29.8p.
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The improvement came as group revenue from continuing operations rose by 19% to £145.2mln, up from £121.6m, with licensing revenue up by 82% to £33.9mln royalty revenue up 8% to £111.1mln.
The firm’s net debt at the year-end was £28.4mln, down from £33.0mln a year earlier, and £40.8mln as at October 31 2016.
In reaction, in early morning trading, Imagination shares jumped 4.5%, or 6.5p higher to 150p.
In a note to clients, analysts at Liberum Capital said: “Imagination Technologies has reported FY17 results well above our forecasts and market expectations.”
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They added: “These strong results and continuing demand from major semiconductor companies is likely to be positive for the sale process currently underway.
“We expect multiple companies to be interested in buying Imagination, providing potential upside to investors from current levels.”
Last year "exceptionally challenging", says CEO
In the group's statement, Imagination’s chief executive, Andrew Heath, said: "Last year was exceptionally challenging but operationally we delivered a strong set of results.
“Our restructuring programme was implemented as planned and our focus on our core IP businesses resulted in notable progress across all three of our businesses.”
He added: "We improved our financial performance across the business. We returned the business to profitability and saw good cash generation despite the outflow from the now discontinued businesses.
"However, Apple's unsubstantiated assertions and the resultant dispute have forced us to change our course, despite the clear progress we have been making.”
Apple has claimed it will no longer use Imagination’s intellectual property in its new products in 15 months to 2 years’ time and as such does not expect to make any royalty payments to the group.
Imagination has commenced a dispute resolution procedure under its licence agreement with a view to reaching an agreement through a more structured process.
-- Adds share price, analyst comment --