Imagination Technologies warns on profit, announces CEO departure

Chip designer Imagination Technologies announced a restructuring and the resignation of its chief executive with immediate effect, as it warned that it now expects to report a loss for the year.

The company said it will implement a number of restructuring and cost-cutting initiatives to reduce the total operating costs of its ongoing businesses by £15m in the next financial year ending April 2017.

Imagination said the restructuring includes the sale of its consumer electronics business, Pure.

In addition, the company will also initiate a full operational review, including all research and development expenditure.

Imagination said that since the half year results in December, market conditions have not improved and the slowdown in the overall semiconductor sector has continued.

Royalty returns from some key customers have fallen short of previous expectations for the last calendar quarter of 2015, with lower forecasts for the first calendar quarter of 2016.

The group said although the licence pipeline remains strong, the pace of deal closure is falling short of previous expectations.

“The royalty reduction coupled with continuing uncertainty over licence revenue timing is likely to result in a material reduction in expected FY16 revenues and resulting profitability. The group now expects to report an EBIT loss for the financial year to 30 April 2016.”

Still, Imagination said it has sufficient cash resources to meet its obligations going forward.

Chairman Bert Nordberg said: “Trading conditions continue to be very demanding. We need to be very focussed on continuing to meet our customers' needs, and commercialising our IP, cost effectively, based on our core business.

"The measures announced today will allow the business to maintain the necessary investment in key areas, in order to further strengthen our unique IP, technologies and system solutions. They will also set the group on track to deliver attractive returns in the coming years."

The company also said on Monday that its chief executive, Sir Hossein Yassaie, has stepped down with immediate effect, and non-executive director Andrew Heath has been appointed interim CEO.

N+1 Singer said although the profit warning was bad news, the sale of Pure “is effectively what investors have been demanding and although shares will be off today now is the time to take a close look as to whether it is now time to get involved”.

At 0950 GMT, shares were down 1.7% to 129.50, paring much heavier losses at the open.