Shares in CSR rose more than 20 per cent after the Cambridge-based chipmaker unveiled a share buy-back worth as much as $50m.
CSR, which manufactures chips for GPS, Bluetooth and WiFi devices, on Monday said a record-high gross margin of 51 per cent in the fourth quarter of 2011 had bolstered its cash pile to $278m at the year end, prompting the return of capital to shareholders.
“The share buy-back is driven by balance-sheet considerations,” Joep van Beurden, chief executive, told the Financial Times.
“We’re looking at what cash we have, how much we need to run the business, what is our assessment of the economy, and what we need for investment,” he said. “If we see some flexibility, then we’ll return some of that cash to our shareholders.”
The announcement drove CSR shares up 22 per cent to 276.8p.
In the 12 months to December 30, revenues rose 5.6 per cent to $845m, and pre-tax profit doubled to $33.9m, as the group further diversified away from the mobile phone industry.
The move into cameras, printers, scanners and audio devices has proved timely. CSR struggled to compete in providing chips for the lucrative, but intensely competitive, smartphone market because it was slow in developing a combined WiFi-Bluetooth chip.
Last year CSR axed its lossmaking digital television and silicon tuners business – which it acquired when it purchased US peer Zoran for $484m earlier in 2011 – resulting in the loss of 400 jobs in China, Israel and the US, but saving $60m a year in costs.
The group has committed to cutting a total of $130m in costs by the end of the second quarter this year – a goal Mr van Beurden said CSR was on track to achieve.
“Our fourth quarter costs came in a little bit below what the City was expecting …so it was a positive surprise. This is a good step in the right direction, but we have more to do,” he said.
CSR is also pinning its hopes on the development of voice and music technology, as well as low-energy Bluetooth systems.
Diluted earnings per share rose from 9 cents to 19 cents, and a final dividend of 71 cents was proposed, up from 65 cents last year, bringing the total pay-out for the year to $1.03 from 98 cents in 2010.
When asked to encapsulate why his company’s full-year figures had improved, Joep van Beurden’s response to the FT was blunt: “Better margins and cost controls.” Although investors were pleased with the $50m buy-back, the 22 per cent share price increase reflected confidence in the group’s outlook, as well as fourth-quarter results at the top end of forecasts. CSR’s diversification away from mobile phones has reassured the City that it has a sufficient range of products to cope with the vagaries of poor visibility and flaky consumer spending on gadgets. Trading at a 2012 price/earnings ratio of 19, compared with the technology sector average of 27, the shares are now fairly priced.
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