ARM Q4 Pre-tax Profit Dips, Sees FY14 Revenues In Line With View; Stock Down

(RTTNews) - ARM Holdings Plc's (ARMH, ARM.L) shares declined around 5 percent in the morning trade in London after the chipmaker reported sharply lower pre-tax profit in its fourth quarter along with a loss after tax, hurt mainly by an impairment charge. However, revenues climbed with growth in both licensing and royalty revenues. The company announced a higher dividend, and said it expects dollar revenues for fiscal 2014 to be in line with market expectations.

For the fourth quarter, the company's pre-tax profit, on IFRS basis, plunged 79 percent to 12.2 million pounds from last year's 59.5 million pounds.

On a per share basis, the company recorded a loss of 0.4 pence, compared to last year's profit of 3 pence. Loss per ADS was 2.2 cents, compared to profit of 14.8 cents a year ago. The latest quarter results included a non-cash exceptional charge of 59.5 million pounds related to the impairment of an asset.

Normalized pre-tax profit, which excluded items, climbed 19 percent to 95.5 million pounds from 80 million pounds a year ago. Normalised earnings per ADS was 26.4 cents, compared to 19.9 cents per ADS in 2012.

Revenue increased 15 percent to 189.1 million pounds from last year's 164.2 million pounds.

In dollar terms, revenues grew 15 percent year-over-year to $302.9 million. In the quarter, technology licensing revenue climbed 27 percent with strong growth in processor and physical IP businesses.

Revenues from royalties, which are recognized one quarter in arrears, increased 7 percent, and represented 48 percent of total revenues. ARM noted that its processor royalty revenue grew faster than the overall semiconductor industry, however the degree of outperformance was impacted by slower sales of chips for high-end smartphones.

Group order backlog at the end of the fourth quarter climbed 17 percent from last year, but was down slightly sequentially.

Operating margin was 5 percent, compared to prior year's margin of 34.5 percent. Normalized operating margin increased to 48.8 percent from 46.6 percent in the previous year.

Further, ARM said its directors recommended the payment of a final dividend for 2013 of 3.6 pence per share, 27 percent higher than last year. The total dividend for the year would be 5.7 pence per share, an increase of 27 percent from the prior year.

Looking ahead, the company said it enters 2014 with a strong opening order backlog and a healthy pipeline of licensing opportunities after a strong licensing performance in 2013. Despite slower growth in one end market, the company projects full year 2014 processor royalty revenues to grow at a similar rate to that reported over the last three years.

Chief Executive Officer Simon Segars said, "2014 brings exciting opportunities and challenges as ARM competes in new markets where we are well positioned to succeed with our leading technology, innovative business model and thriving ecosystem of Partners."

In London, ARM shares are currently trading at 887.50 pence, down 42.50 pence or 4.57 percent.