I-mate, the mobile devices specialist, yesterday reported an "extremely disappointing" financial year to the end of March 2007, with margins and turnover significantly down and the group posting a pre-tax loss for the first time in its short history.

Last January, the Dubai-based company, run by Scottish former BT executive Jim Morrison, saw its share price plummet 48%, wiping £103m off its £211m market cap almost overnight. The crash came after chief executive Morrison shocked investors by predicting a second-half operating loss and final results, "very significantly below market estimates for 2006-07 and 2007-08".

Analysts had forecast a pre-tax profit of $311m for this year. Instead, the group has reported a pre-tax loss of $2.1m (£1.05m), down from a profit of $22.5m in 2005-06. Sales for the year fell to $195m from $206m, with UK sales almost halved, from $23m to $12.4m.

The company, which makes Microsoft Windows-compatible mobile devices, said it expects the poor trends to continue into the first half, but continues to remain positive on its trading prospects.

It said serious problems had beset its business after it had signed supply deals with three handset manufacturers in Asia - Inventec Corporation, Tech Faith Intelligent Handset Technology and Arima Communications Corporation - to develop new products. There had been insufficient stock to fulfil existing orders, and then quality problems with other stock resulted in those units having to be recalled.

This caused a major reduction in the level of shipments of i-mate-branded products, particularly in Europe and the Americas. As a result, i-mate was forced to undertake a costly programme to address customers' concerns and to recall non-performing devices.

Its gross margin fell to 18.6% from 24.1% due to the delayed launch of the new devices, and a stock write-down charge of $1.9m related to legacy devices coming towards end of life. Administration expenses increased by $12.7m to $36.8m, "reflecting both expansion of the business and the costs related to managing the supply difficulties", the group said.

I-mate said the fundamental review of its operations was still ongoing and that it had shed 25% of its workforce, with the redundancy costs of $400,000 to be charged in 2008.

Morrison said in a statement to the stock exchange: "It has been a challenging but pivotal year for i-mate. Difficult but necessary steps have been taken to strengthen the business to ensure the problems experienced during the year are not repeated.

"With multiple supplier agreements, a growing geographical footprint, a broader product mix, and our ongoing excellent relationship with Microsoft, I remain positive about the growth opportunities available to the group."

I-mate is banking on its development of new products, which it says are "technically superior to other Windows Mobile devices in the marketplace". But it said it was unlikely to start shipping in significant volumes until the second half of the year.

However, it has plans to work more closely with network operators, and has already signed a global deal with distributor Brightpoint to distribute its portfolio of Windows Mobile smart devices.

I-mate has an existing presence in the UK and Italy, where it has sales operations in place and the deal with Brightpoint means that the whole of Western Europe is now covered.