Imagination hopes Christmas will help sales of its Pure Digital radios

Its pre-tax losses have slimmed to �3.1m from �4.1m and revenues are up 12%.

Imagination provides "system-on-chip" intellectual property for digital radio and TV, games consoles, and PCs.

The company currently has over 80% market share in the DAB market and last year launched the UK's first digital radio priced under �100, the Evoke-1.

The upturn in sales was fuelled by partnerships with US chip giant Intel, Japanese electronics maker Sharp and Renesas, a Japanese microchip joint venture.

'Very optimistic'

The company reported "stunning" success with its range of DAB products, with revenues from its systems business soaring by a massive 300% to �7.6m.

Chairman Geoff Shingles said: "Our current success in the DAB market has been outstanding... we are very optimistic about our DAB market share across all manufacturers in general."

The freefall in the semi-conductor market that bottomed out in 2002 has begun to reverse, although somewhat slowly, the company said.

Imagination hopes to complete five new licensing deals and expects five new devices to hit the production lines this financial year.

Meanwhile it hopes to boost sales of its Pure Digital brand of DAB products over the Christmas season, which include the popular Evoke-1 radio system.

"As an increasing number of chips... move into the production phase during the next 12 months, we look forward to earning royalty incomes and having a relatively lesser dependency on licensing income," Mr Shingles said.