A preview of ARM Holdings plc's (LON:ARM) annual results.
Britain's biggest tech group, ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US), is due to announce its annual results on Tuesday this coming week (5 February).
At the time of writing, the shares of this world leader in semiconductor intellectual property are trading at 869p -- up 46% from a year ago compared with a 10% rise in the FTSE 100.
How will ARM's business have performed in 2012 compared with last year? And will the results justify the strong performance of the shares? Here's your cut-out-and-check results table!
| | FY 2011 | Forecast FY 2012 | Forecast FY growth |
|---|
| Revenue | £492m | £563m | +14.4% |
| Operating margin | 45% | 45% | |
| Normalised pre-tax profit | £230m | £266 | +15.7% |
| Normalised earnings per share (EPS) | 12.45p | 14.5p | +16.5% |
| Dividend per share | 3.48p | 4.15p | +19.3% |
Revenue and margin
Analysts are forecasting total revenue of around £563m for 2012, with Q4 completing a year of quarter-by-quarter increases.
| | Q1 2012 | Q2 2012 | Q3 2012 | Q4 2012 (forecast) |
|---|
| Revenue (£m) | 132.5 | 135.5 | 144.6 | 150.4 |
| Increase from 2011 | 14% | 15% | 20% | 9% |
The forecast Q4 revenue of just over £150m would represent an increase of 9% on Q4 2011, which is a lesser rate of growth than in the first three quarters. In its Q3 results, the company said the indications were that Q4 would see "another strong quarter" for licensing revenue but a "moderate sequential increase" in royalty revenue. Nevertheless, I'd suggest there's scope for ARM to better the £150m Q4 forecast -- and that the market could give a frosty reception to anything less.
Analysts are expecting ARM's operating margin to continue at around 45% -- an excellent margin that indicates the strength of the company's position in its markets.
Profits and dividend
Look out for normalised pre-tax profit and EPS to be up around 16% on 2011. As with revenue, I'd say there's scope for the pre-tax profit and EPS forecast numbers to be beaten. The Q4 profit number to look out for is around £70m; the Q4 EPS number, around 3.9p.
So far as the dividend is concerned, ARM hiked the interim 20% to 1.67p a share. Analyst forecasts are for a full-year increase of roughly the same order to around 4.15p, so expect to see a final dividend at around the 2.5p mark.
Making a million
After the strong rise in the share price over the past year to 869p, ARM is trading on an eye-watering 60 times 2012's forecast earnings. Even if you back out the company's net cash of £478 million -- 35p a share -- the earnings multiple is still a sky-high 57.5p. The prospective dividend yield is just 0.5%.
There have been opportunities for investors to buy into Britain's top tech company on a cheaper earnings rating in the past -- 30-35 as recently as last summer. Buying great companies when they're reasonably priced is one way investors like you and I can target a million-pound portfolio. A mere dream? It may be easier than you think.
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> G A Chester does not own shares in ARM Holdings.
