Another big name in UK tech is losing its independence, with the £550m sale of Imagination Technologies to China-backed private equity firm Canyon Bridge announced last weekend. It was the last significant British chip company left standing after the £24bn sale of Arm to Japanese investor SoftBank last year.
The UK has been criticised for its lack of ambition and an inability to scale its tech companies compared with Silicon Valley, but it has been steadily gaining a reputation for academic expertise in areas from artificial intelligence to virtual and augmented reality and chip design. AI businesses in the UK have been a major acquisition target for large US tech companies such as Apple, Amazon and Google.
Instead of mourning the loss of Imagination, one should take a look at smaller upstart companies focusing on futuristic tech. Frontier Smart Technologies and EVR Holdings have both acquired solid partners in the US, including Universal Music, Google and Microsoft. London-based Telit, once considered a rising star, is currently fighting to get over a scandal involving its former chief executive to continue developing internet of things chips.
London-based semiconductor company Frontier specialises in chips for digital radios and smart audio devices, having found its niche as a key technology provider for the connected home. It is one of a handful of companies working on smart Google products, including its Chromecast platform, which allows wireless speakers to stream music from services such as Spotify over WiFi, and Google Home, the tech group’s speaker with a voice-controlled intelligent assistant.
Frontier’s proprietary audio chips are found in a range of consumer brands including Bose, Panasonic, JBL, Sony and Harman Kardon, and it has garnered 80 per cent market share in the digital radio market.
This week, the 15-year-old company, founded by Imperial College engineering professor and entrepreneur Christofer Toumazou, reported that revenues were up 44 per cent in the first half of 2017, and it reached £1.5m worth of smart audio revenue for the first time.
“This is key, as central to our Buy thesis is that Frontier will be one of a few key technology enablers to the third-party voice-personal-assistant market (first parties including Google Home, Amazon Alexa etc) that we expect will number some 23m units by 2020,” said analysts at Peel Hunt.
In the first half of the year, Frontier’s earnings before interest, tax, depreciation and amortisation were £1.1m, compared with a loss in the same period last year. Analysts at N+1 Singer said their ebitda forecast for the full financial year was 20 per cent ahead of their previous forecasts, at £1.8m.
Anthony Sethill, Frontier’s chief executive, said: “In Smart Audio, we have secured the first material revenues for our Google Chromecast product.”
He added: “In the second half of the year, we expect trading to hold up well and our full year ebitda performance should be significantly ahead of current market expectations.”
Shares in Frontier traded 6.3 per cent up at 135p on the back of the positive results on Thursday.
It has been a good few months for virtual reality content maker EVR Holdings, which listed on AIM in May following a reverse takeover of Armstrong Ventures. Despite widening losses, the company has secured licensing agreements with all three of the world’s major record labels — Warner Music, Universal Music and Sony Music Entertainment — for its MelodyVR app. The app, which contains a large library of VR music, aims to allow fans to watch recorded and live gigs and music videos on VR headsets.
In June, it signed a partnership with Microsoft that will provide funding and technical expertise, as well as helping market the app for its forthcoming “mixed reality” devices. In the same month, the company raised £5m from both new and existing shareholders, with the aim of creating more original content with musicians.
The company is forging a path in a new sector. With the launch of a number of VR headsets including Facebook’s Oculus Rift, PlayStation VR and HTC Vive, the VR content industry could break the $1bn sales barrier for the first time in 2017, according to Deloitte. The market could be worth $80bn by 2025, according to Goldman Sachs.
For the six months ending June 30, pre-tax losses widened to £2.6m, from £1.2m in the same period last year, with the company reporting no revenues in either year. EVR attributed its growing losses to expansion and administrative costs associated with agreements with content providers. It said it had cash in excess of £6.5m as of June 30 for future expansion and development.
“As . . . manufacturers such as Facebook, Google, Samsung, Microsoft and Sony PlayStation continue to research, innovate, collaborate and collectively invest billions into R&D, we expect the quality of virtual reality devices to improve significantly,” said Sean Nicolson, EVR’s chairman. “Falling hardware device costs will inevitably stimulate expansion of the global VR install base and the consequent growth in consumer consumption of VR content across an ever expanding horizon of verticals, services and applications.”
Shares in EVR were down 0.2 per cent at 7.12p on Thursday.
The Israeli-Italian internet of things company Telit appeared to be in rude health earlier this year, when it commanded a market value of £500m — then crisis struck in August.
Its founder and chief executive Oozi Cats quit last month amid a scandal over his identity. The share price fell 60 per cent and Telit issued a profit warning on Thursday for 2017, revealing that reviews of its operations and finances were under way.
In a trading update, Telit described the warning as a “narrowing” of guidance by the chip developer, which sells hardware modules and software to companies that want to connect objects — everything from cars and factory equipment to wearables — using wireless technologies, such as 3G and WiFi. It now expects adjusted earnings before interest, tax, amortisation and depreciation of $44m to $48m for 2017. It also lowered its revenue guidance by $30m, but said it expected significant cash generation in the second half of the year.
Telit made profits of $54.4m last year and said in August it expected to report ebitda of between $47m and $60m for the year. That guidance was issued just two days before Mr Cats was put on temporary leave, after he was linked to a US fugitive named Uzi Katz.
Telit’s chips are sold to Honda, which uses it to connect robots in its Alabama factory, and the Kennedy Space Center, which embeds chips in its fleet of 50 vehicles so they can talk to each other. In 2016, Telit sold 22m hardware modules to a range of customers, from factories and restaurants to industrial companies.