Imagination Technologies reports £8.7m worth of errors ahead of planned IPO
A British microchip designer backed by China has admitted to a string of accounting errors ahead of a planned stock market listing.
Imagination Technologies, which develops graphics chip technology licensed by companies including Apple, reported a series of “prior year errors” collectively worth £8.7m as it restated its 2020 accounts.
Its parent company, Canyon Bridge, a private equity fund which is ultimately owned by the Chinese state, also reported a number of errors in its UK accounts. This included underreporting its annual tax charge by £1.9m which is blamed on a “computational error”.
Imagination’s accounts, which are audited by BDO, said it failed to report a £711,000 share bonus scheme started in 2020, in which executives were given shares in its Chinese-controlled private equity owner.
Members of the company’s executive committee are given so-called “growth shares” in its parent company as part of its share bonus scheme. If Imagination goes public at a valuation of more than $800m (£699m), the share awards will be paid out in full at the listing price.
It also misstated a series of accruals, in accounts for Imagination Technologies Limited, meaning it recognised revenues and costs as occurring in the wrong period. The overall impact of the changes was to increase its profits by £680,000 in 2020.
The errors come as Imagination gears up for an initial public offering, which could come as soon as next year. The float had originally been slated for 2022, although market turbulence has resulted in most listing activity being put on hold. An Imagination spokesman declined to comment on its listing plans.
Revenues at Imagination grew by 15pc from a restated £96m in 2020 to £111.3m in 2021. It made a profit of £22.4m compared to a loss of £5.5m. In 2020, it signed a new multi-year deal with iPhone-maker Apple. As well as designing graphics chips, it has expanded to challenge rival Arm by developing microprocessor designs.
Imagination has been considering whether to float in New York or London, where it was previously listed until it was acquired by Canyon Bridge.
The company’s acquisition by a Chinese-owned fund has been the subject of scrutiny by MPs. Canyon Bridge, which is run by American executive Ray Bingham, is heavily backed by investors China Reform, a fund backed by Beijing.
In 2020, Imagination’s then chief executive, Ron Black, departed the company amid plans by China Reform to install a number of new directors.
Imagination and Canyon Bridge executives were dragged in front of MPs to give evidence amid concerns over China’s influence. Plans to install directors from China Reform were ultimately dropped, and it has since appointed three independent directors.
The company’s chief financial officer left the company in October, according to Companies House filings. A source close to Imagination said his exit was unrelated to the errors.
Until 2019, Imagination’s accounts were audited by KPMG. In 2020 and 2021, its accounts were audited by BDO, the fifth largest accounting firm in the UK.
In Imagination’s latest two sets of annual accounts, BDO warned: “Our audit planning identified fraud risks in relation to management override and inappropriate or incorrect revenue recognition.”
We rely on advertising to help fund our award-winning journalism.
We urge you to turn off your ad blocker for The Telegraph website so that you can continue to access our quality content in the future.
Thank you for your support.
Need help?
Visit our adblocking instructions page.