Results round-up

ARM Holdings posted a strong set of full year results and said it was confident of meeting forecasts for 2016 as demand for its microchip technology continues to grow.

Despite the profit warning from smaller peer Imagination Technologies earlier this week, ARM's fourth quarter saw a 19% increase in revenue to £269.1m, ahead of consensus forecasts, helping to lift profits 17% to £138.7m.

For the full year this meant revenue rose 22% to £968.3m, beating consensus forecasts of £962m, with profit before tax up 24% to £511m and earnings per share up 25% to 30.2p. A 25% increase in the final dividend to 5.63p per share, means the total payment is also up 25% to 8.78p, while management also plans to continue its small share buyback programme.

Licence revenues in the fourth quarter were down 2% in dollar terms, with order backlog for licences up 10% sequentially from the signing of 11 new licences for products in development.

Royalty revenue was up 31% in the final quarter, representing 53% of group revenue, as demand for its products in the mobile sector continued to boom. "During the year ARMv8-A surpassed 50% share of smartphone shipments, Mali became the industry's highest-shipping GPU architecture, and our Partners increased their shipments into enterprise infrastructure and embedded markets," said chief executive Simon Segars.

On outlook, the company said it expects group dollar revenues for the full year to be "broadly in line with market expectations", as it enters 2016 with a "robust opportunity pipeline for licensing".

Chips based its ARMv8-A technology are expected to continue to gain share in mobile and enterprise markets, and the higher royalty rate earned on these products helps to underpin growth in royalty revenues. "Demand for our technology is increasing, and during the quarter we signed multiple licences for the next generation of high-performance and secure ARM processors," Segars added.

"Our increased investments in both 2015 and 2016 will help us meet demand by extending the capabilities of our technology and the ecosystem, and will support long-term growth and returns for shareholders."

For 2016 £1.1bn of revenue is the consensus forecast, with earnings before interest and tax of £561m and earnings per share or 34.3p. Analyst Mike van Dulken at Accendo Markets said profits were a fraction ahead of consensus and growing faster than revenues.

"What’s not to like? Maybe management’s confidence in the semi-conductor industry is being questioned after Apple’s warning on China stress and rival Imagination Technology’s profits warning earlier this week," he suggested. "Perhaps global recessionary fears are too much to discount given a mature and slowing high-end smartphone market starting to eat into margins and hopes too high that connected devices can ride to the rescue. The tech sector as a whole has also suffered since early February as investors caution about a murky US economic picture and divergent monetary policy, and sentiment having worsened sharply this week."

Steve Clayton at Hargreaves Lansdown agreed that ARM is "a gem", a world leader in a fast-growing field, and gaining market share in a wide swathe of end markets, while newer designs carry higher royalties that will drive revenues strongly forward. "Mobile computing will grow for years to come, and the spread of ARM cores into new product categories only increases the growth opportunity. So although ARMis not obviously cheap per se, the growth opportunities ahead of it look compelling and with net cash of £900m, it has the wherewithal to chase after them."

On a technical analysis note, van Dulken said bears will be eyeing 16-month lows around 810p should the global sell-off persist.

Tullow Oil has nearly halved its full year loss, however the company’s revenues for the year have dropped substantially.

The FTSE 250 oil and gas exploration and production group released its results for the year to 31 December 2015 on Wednesday.

It showed revenues had fallen 27% for the year from $2.21bn (£1.52bn) in 2014 to $1.61bn, due to the fall in oil prices.

Its pre-tax operating cash flow also fell 38% from $1.55bn to $967m while gross profit fell 46% from $1.10bn to $591m.

However the company had pegged back its full-year loss from $1.97bn to $1.09bn in 2015.

It said Tullow has focused on cost savings, improved efficiencies, and a lower capital expenditure, for which it is aiming to cut another $1.1bn of capex in 2016.

Chief executive Aidan Heavey said the results show the company has adjusted well to last year’s low oil prices.

“We secured current and future cash flow through good operational delivery in West Africa, continued to build our resource base in East Africa, significantly cut costs across the Group and benefitted from our strong hedging position.”

He said 2016’s challenge is to be “equally robust” in responding to remaining uncertainties.

“In the year ahead, we have three key priorities: ensuring continued low cost production from West Africa - including the start-up of production from TEN between July and August 2016; driving further reductions in operating costs and capital expenditure; and focusing on deleveraging the balance sheet through free cash flow generation and strategic portfolio management.”