Wolfson eyes return to black but losses widen to $24.1m

WOLFSON chief executive Mick Hickey believes the Edinburgh-based chip developer has the “right products, customers and markets” to return to underlying profit this year, despite results yesterday showing last year’s losses had widened.

Revenues from its micro-chips being included in tablet computers jumped by 90 per cent last year, with mobiles phones up 33 per cent and games consoles 25 per cent higher.

The growth came through the firm’s strategy of focusing on “audio hubs” – advanced chips that improve the sound quality of music or telephone calls – for mobile devices.

Wolfson hailed growth with existing customers such as Amazon’s Kindle, Samsung and Sony during 2011 and with new customers, including Acer, Fujitsu and Toshiba.

The company had made similar predictions about a return to underlying profitability last year. But a slowdown in orders from one of its biggest customers – which analysts suggested was Samsung – and weaker demand for chips used in digital cameras, hi-fi systems and satnav units left total revenues flat for 2011 at $156.9 million (£98.7m).

Underlying operating losses widened to $7.5m from $1.5m as the company spent money developing more chips. Wolfson hopes to make an underlying profit in 2012. Pre-tax losses also swelled, to $24.1m from $11.3m.

Hickey said: “Last year was characterised by strong first-half growth, followed by a weak second half, resulting in flat year-on-year revenues for 2011.”

But Wolfson chips were chosen for 382 devices in 2011, a record number of so-called design-ins. Hickey said: “We delivered a record year for design-ins driven in part by establishing technology leadership over our competitors in the fast-growing smartphone and tablet markets.”

Financial director Mark Cubitt added: “We’re quietly confident. We don’t need a big upturn in consumer confidence to return us to an underlying profit, although obviously it would help.

“We’ve got chips in a broader range of products this year, many of which we think will be high-volume sellers.”

Sandeep Deshpande, an analyst at JP Morgan, said: “Management believes it has gained more traction at key smartphone customers, which we believe could be Samsung and LG.”

But Peel Hunt analyst Alex Jarvis warned that higher overheads could eat into profits. Before yesterday’s results, he had predicted Wolfson would make a pre-tax profit of $5.5m in 2012, but has now downgraded that forecast to a $700,000 loss. The shares fell 4p at 155p.