Chairman’s Statement
Over the last year we have made real progress in building and broadening our range of innovative and complementary technology offerings, each of which provides our partners with real competitive advantage. We have also continued to expand our partnerships with key players to exploit these offerings. In particular, I would draw attention to our success with STMicroelectronics and the KYRO range of PC chips and our new partnership with ARM that strategically positions Imagination Technologies to benefit from the future mobile market. Our entry into the growing Digital Signal Processing (DSP) market with the revolutionary META multi-threaded DSP core is a very significant development for the business, forming the base for future revenue streams. We have already partnered with Digital One to exploit our DSP capability.
Along with many other high technology companies, the company has not been untouched by the volatility and change in our markets. The sudden withdrawal of Sega from the manufacture of game console hardware has had an immediate effect on Dreamcast revenues and the slowdown last year in the PC market has been a compounding factor. However, we have resolutely maintained our strategic path which has taken the company forward and preserved our overall financial well being albeit with much reduced profitability in the second half.
Financial Result
Group revenue was £17.8m an increase of 6% (2000: £16.9m). Gross profit margins have continued to be strong at 75% compared to 82% last year. This is within the range that we have always said was to be expected from our business model. Gross profit was £13.3m against £13.8m in 2000 as a result of the lower than expected revenues. In this environment our overhead expenses, excluding goodwill amortisation, have increased modestly by 5% and we have continued to invest fully at our customary rate in research and development with a growth of 16%. We plan this commitment to the future to continue as we invest to create revenues. Our profit before tax and goodwill amortisation was £3.3m (2000: £4.7m).
Our balance sheet remains strong and we generated cash in the year. Cash generated from operations increased from £3.9m in 2000 to £4.2m this year as we maintained our control on working capital. At the end of the year cash was £12.4m against £10.1m at March 2000. We continue to invest in capital equipment to ensure that our engineers and scientists have state of the art computer equipment. Capital spend in the year increased to £2.8m (2000: £1.4m). We remain confident that current cash resources will be sufficient for the foreseeable future.
Looking ahead we will continue to implement apace our plans to build a much wider intellectual property (IP) capability and we will continue to widen our partnerships. We expect this to build new revenue streams leading to a resumption in revenue growth in the second half of this financial year.
We need, more than ever, the support of strong, committed and capable teams to succeed. The board will continue the path of creating a well managed, motivated and appropriately rewarded workforce that is without doubt Imagination Technologies’ key strength.
The company has demonstrated the value of its innovative IP and with its broader range of technology offerings is now in a significantly stronger position to capitalise on existing and emerging markets. We remain confident that our strategy will create substantial shareholder value in the future. I would like to thank our shareholders for their continued support and enthusiasm.
