Imagination Technologies: Chief Executive change, trading update and restructuring initiatives

February 8, 2016 -- Imagination Technologies Group plc (LSE: IMG, “Imagination”, “the Group”), a leading multimedia, processor and communications technology company, announces that Sir Hossein Yassaie has stepped down as Chief Executive with immediate effect. Andrew Heath, one of the non-executive directors, has been appointed Interim Chief Executive.

The Group also publishes a trading update as the Board now expects to report an EBIT loss for the financial year to 30 April 2016.
Imagination is also announcing details on restructuring initiatives. These include the sale of Pure, its consumer electronics business, and the expectation at this stage that Imagination will reduce total operating costs of its on-going businesses by £15 million in the next financial year, ending April 2017.

Board change

Andrew, who has been appointed Interim Chief Executive, joined the Group’s Board in August 2012 as a non-executive director. He has a wealth of international business experience gained through executive roles at Rolls-Royce and more recently as Chief Executive Officer of Alent plc. The Group will start the search for a new Chief Executive immediately, assessing both internal and external candidates in the process.
As a result of his appointment, Andrew will step down from the Remuneration and Audit committees.

Trading update

Since the Group published its half year results in December 2015, market conditions have not improved and the slow-down in the overall semiconductor sector has continued, reinforced by global uncertainty about future trading prospects with China.
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. While the licence pipeline remains strong, and licences and related revenues already secured this year amount to £24 million, the pace of deal closure is falling short of prior 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.
The Group continues to have sufficient cash resources to meet its obligations going forward.

Restructuring initiatives

Following a detailed analysis of overhead expenses and a preliminary review of research and development expenditure, the Group will implement a number of restructuring and cost cutting initiatives and plans to sell Pure.
At this stage, the Group expects to reduce total operating costs of its on-going businesses by £15 million in the next financial year ending April 2017, with a modest impact in the current financial year. Of this, £2 million will be re-invested in Power VR, further strengthening the Group’s flagship multimedia product.
The Group believes there are potentially more appropriate owners for Pure, given the economies of scale in the consumer electronics market, who will be able to leverage its leading technologies and brand. Imagination will treat the Pure division as a discontinued operation with immediate effect.

Imagination will also initiate a full operational review, including all R&D expenditure. This review, which is expected to last several months, will ensure investment is focused on core activities which are set to deliver attractive returns.

Bert Nordberg, Chairman, said:

“Hossein has led the creation of Imagination’s successful IP business model over many years and through his vision and drive, the Group has become a global technology leader. His many notable achievements include the development of graphics and video processors for smartphones, gaming devices, TVs and the automotive industry and the
introduction of digital radios as a mainstream product.
“On behalf of the Board and everyone at Imagination, I would like to thank him for his considerable contribution, his passion, leadership and many, many achievements. We all wish him every success for the future.
“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.”

Sir Hossein Yassaie, commented:

“I am proud of the successes Imagination has achieved over the last decade or so. We have built Imagination from very small beginnings into the leading provider of graphics processors as well as general purpose micro-processors and connectivity solutions.

Imagination is now one of the genuine UK-headquartered companies with significant global influence and impact.
“It’s now time for someone else to lead this great company. I have been fortunate to work with a hugely talented team and would like to thank all my colleagues for all their support and dedication over the years. I would also like to thank the many customers and partners who have chosen to work with us over many years.”
The information required to be given in relation to section 430(2B) of the Companies Act 2006 in relation to Sir Hossein Yassaie will be available on the Group’s website in due course.

Analyst call

Imagination Technologies will be hosting a conference call for analysts and institutional investors at 8.30am today. Please contact Chris Birt at Instinctif Partners on 020 7866 7921 or email chris.birt@instinctif.com