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Imagination: Apple relations still rotten but, hey, losses have shrunk

Brit chip designer opens up on annus horribilis

Brit chip designer Imagination Technologies has returned to operating profit, in part aided by 350 poor souls – about a fifth of its workforce – that were tossed onto the employment bonfire amid wider cost cutting.

The firm had found itself in the middle of a perfect storm what with stalling smartphone and tablet sales, and mounting pressure from rivals including ARM, and in April went public on Apple, its largest customer, terminating a trade agreement.

In terms of raw numbers, group revenue bounced 19 per cent year-on-year to £145.2m for the financial year ended April 30; licensing and royalty sales were up 82 and 8 per cent respectively to £33.9m and £111.1m.

In licensing, wireless comms unit Ensigma grew from £2m to £6m, and the RISC architecture subsidiary MIPS grew 12 per cent to £7.2m. Both units were put up for sale in May and are "making progress toward profitability", Imagination said today. The PowerVR processor business grew 43 per cent to £14.5m.

With regard to royalty payments, trade customers' chip shipments in PowerVR fell to 422 million units from 465 million, a drop caused by Apple – but we'll get to that sticky wicket in a bit. MIPS and Ensigma each recorded gains of 7 and 9 per cent.

Operating expenses slipped to £137.4m from £148.3m, leaving profit from operations at £7.79m compared to a loss of £26.7m.

But after net financing costs, tax and losses from discontinued operations, the net loss was £27.9m versus £80.8m in fiscal 2016 – the record loss that triggered restructuring plans dreamt up by management some 16 months ago.

Top brass stripped out £27.5m of operating expenses in the most recent financial year, comprised of redundancies and penny pinching on overheads including marketing, property, third-party software and hardware rental, travel and contractors.

The Pure radio business and Hellosoft were offloaded during the financial year and IMGWorks, the SoC design operation, and FlowRadio went to new homes in May and June.

In total, some 500 people – a third of the headcount – have left Imagination since the restructuring was confirmed in spring 2016. Around 150 staff worked for units that were sold.

In addition to the sale talks concerning MIPS and Ensigma, the London Stock Exchange-listed corporation told the market it had also received advances from third parties interested in buying the entire group.

"Last year was exceptionally challenging but operationally we delivered a strong set of results," said chief exec Andrew Heath in a statement.

One cloud that still casts a massive shadow over Imagination is the conflict with Apple that pertains to the Mac maker rolling out "unsubstantiated assertions" that it had "designed Imagination out" of its chips and would halt royalty payments in 2018 or early 2019, Imagination said.

The dispute between the pair shows no sign of ending with "no progress" made in talks and options still "being reviewed". ®

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