Market report: City uses Imagination in bet on a tech recovery

Imagination Technologies has been more nightmare than dream investment, but today the Apple supplier showed signs of returning to its former glory.

The company, which designs the graphics chips for the iPhone, reported strong first-half results, boosting the shares by 26.88p, or 12%, to 246.88p as it nears the end of its restructuring.

Revenues rose 6% to £64.5 million and it returned to the black on an underlying basis after making £27.5 million of cost savings, although it still made a pre-tax loss of £2.6 million.

Analysts said strong licensing revenues from Ensigma, its connected devices arm, were behind the strong performance, which beat expectations.

“We believe all three of Imagination’s businesses are well positioned to see growing licensing and royalty revenue due to the increasing importance of graphics processing, virtual reality, augmented reality, automated driving and the internet of things,” said broker Liberum.

Imagination also announced it has hired tech veteran Peter Hill as chairman, completing a management overhaul which saw Andrew Heath installed as chief executive and Guy Millward as chief financial officer earlier in the year.

Its shares are up more than 80% this year, but it follows years in the doldrums tainted by profit warnings amid the smartphone market slowdown. The recovery puts it in pole position to return to the FTSE 250 index after its ejection last year.

Traders lacked inspiration, causing the FTSE 100 to dip 5.94 points to 6740.89, with a rise from the banks offset by a mining malaise.

Huge falls from the spread-betters after the FCA’s review took its toll on the mid-cap index, which lost 60.20 points to 17,401.66. G4S was weaker on threats over about its free cashflow generation.

Exane BNP Paribas cut its forecasts for the security giant yesterday after revealing that finance director Tim Weller told analysts first-half cash inflow was unlikely to carry on.

G4S reacted today by issuing a statement saying it expects to generate “substantial” free cashflow in 2016, but it did not prevent the shares from dropping 5.2p to 226.5p.

Investors hailed change at van hire firm Northgate, which hired Kevin Bradshaw, ex-boss of car rental firm Avis, as its new chief executive. Shares in the firm, which is focusing on its UK business after a strategic review, accelerated 23.6p to 458.6p.

Among the tiddlers, cakes maker Real Good Food dipped 1.5p to 36p after warning annual profits could “fall short of current market estimates” because of weaker sterling and higher sugar prices.