Evolution X

S EC U R I T IES

www.evosecurities.com 8 December 2004

Imagination Technologies (IMG) Sell

Mkt cap: £126m Net cash: £8m Trading update Price/Target: 67p/55p
IMA GIN A TION TE C HN OLO GIE S
120 FROM 5/12/03 T O 7/12/04 DA ILY

110

100
This is news?
90

80

70
Imagination have signed a licence deal with a start up – we need more than
60
this if full year numbers are to be achieved and if the company is to avoid
50
DE C J A N FE B

HIGH 114 .00

MA R APR MA Y J UN J UL A UG S E P OCT NOV DE C

5/ 3/04 LOW 5 6.0 0 13 / 8/ 04 L A S T 66.2 5S ourc e: DA T A S T RE A M

returning to the market in the next 18 months – remains a SELL

Licence deal signed with Chips & Imagination has announced today that it has signed a PowerVR licence deal with
Systems Chips & Systems Inc. This is a big worry. Is this the licence deal that
management referred to in their comments at the time of the interim results and
how can signing a licence deal with a start up merit a statement to the market?

Chips & Systems Inc was only established in June 2004 and a visit to its web site
reveals little but it does suggest that they do not have the key engineering talent
in place. The track history of small start-ups such as this is not good and whilst
Chips & Systems’ founder Gordon Campbell has some notable achievements to
his name, success is far from guaranteed.

Where are the UCC and META We are also awaiting news of licences for the META and UCC technologies. If
licence deals? these do not come through soon we will once again have to revise down our
forecasts for Imagination Technologies. Furthermore if significant licence
revenues are not achieved in the next year, we could well be looking at another
fund raising.

Ian Robertson +44 (0)20 7071 4463 ian.robertson@evosecurities.com

Year end Sales (£m) EBITDA (£m) PTP (£m) EPS (p) PER (x) Yield (%) EV/EBITDA (x) Revised?
03/04A 31.2 -1.2 -2.9 -1.2 - - - -
03/05E 34.5 -0.9 -2.4 -1.0 - - - No
03/06E 40.3 2.0 0.6 0.25 268 - 59 No

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