The shine has worn off Imagination Technologies after swinging to its biggest ever loss in a tough market just months after being courted by tech giant Apple.
The chip maker swung to an pre-tax loss of £61.5m for the year to the end of April, down from a £5.7m loss the previous year. Revenue slipped 23 per cent to £120m after a decline in both licencing and royalty revenue. The figures were largely in line with expectations.
Net debt has risen 21 per cent year-on-year to £33m, but has been reduced by six per cent since October last year.
Shares dived as much as seven per cent in early trading.
Imagination Technologies benefited from the smartphone boom but is now struggling as the market slows, particularly with large exposure to Apple, along with many semiconductor suppliers.
A restructuring that includes job cuts and selling off its non-core assets is aiming to turn things around, focusing on providing chips for growth areas such as internet of things devices and virtual reality, which require powerful graphics processors.
“As previously indicated in our trading update in May, the last year has been particularly challenging for Imagination. The results reflect a combination of difficult trading conditions and a significant restructuring of the business," said chief executive Andrew Heath.
“Despite recent trading challenges, I see a bright future for Imagination. The market for our IP remains large. We now have a sound financial position and have maintained our strong positions with leading customers.
"The focus is on three core businesses; graphics and multimedia (PowerVR), processing (MIPS) and connectivity (Ensigma) but our long-term concern, as ever, is over the company’s ability to fund the vital R&D required to keep its designs ahead of fierce and extremely well-funded global competition. It is vital that sales of Pure generate some cash and that the cost base is substantially reduced," said FinnCap's Lorne Daniel.
"Apart from new design wins at Mediatek and Spreadtrum, we expect Imagination's increasing focus on non-smartphone segments like autos, consumer electronics and IoT to contribute, while costs are being reduced by the targeted £27.5m," said analysts at Liberum.
The largely expected losses should draw a line in the sand on its struggles as it makes all the right noises to shake things up in a changing market.