Investors attracted by Imagination Technologies' strong growth prospects

As Imagination Technologies reports full year results, Sheridan Admans, investment research manager at The Share Centre, explains what they mean for investors.

"Imagination Technologies reported a good set of results this morning with group revenue for the year up 30% to £127.5m. Pre-tax profits for the year were up 74% to £28.5m and adjusted earnings per share were up 39% to 11p. As a result of the higher revenue stream, the company generated strong operating cash flow during the year of £29.1m, improving its cash flow to £66.3m.

"Growth seekers will be pleased to see royalty and licensing revenue gains drive the returns as the markets expected a strong performance from this division, which is responsible for the graphics technologies in smart phones and tablet computers. The division generated sales of £98.2m, up 41%, as its technologies were embedded in more consumer electronics. Investors will be pleased to hear growth is expected to be strong as industry analysts expect the adoption of smartphones to increase three-fold by 2015. Imagination Technologies is also expecting smart TVs to be a promising source of revenue and to see a strong demand for the upcoming Windows Phone 8 platform, due to be rolled out by the end of this year.

"Tough retail conditions in the UK saw disappointing figures from the company's DAB radio division, where revenue increased by just £1m. Overseas sales figures were good and DAB broadcasts are slowly being adopted worldwide. However, our concern is whether this technology will be adopted by consumers when tablet computers and smart phones can access the same radio stations. However, the company is increasing its lines of digitally connected radios that stream off the internet.

"We continue to recommend investors ‘buy' Imagination Technologies as we believe the company is well positioned to benefit from the further adoption of technologies by the consumer."