REG - EnSilica PLC - Audited Full Year Results
10/10/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231010:nRSJ4813Pa&default-theme=true
RNS Number : 4813P EnSilica PLC 10 October 2023
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the UK Market Abuse
Regulation
10 October 2023
EnSilica plc
("EnSilica", the "Company" or the "Group")
Audited Full Year Results for the Year Ended 31 May 2023
EnSilica (AIM: ENSI), a leading mixed signal chipmaker announces full year
results for the year ended 31 May 2023 ("FY 2023").
Financial Highlights
· Revenue increased to £20.5 million (FY 2022: £15.3 million)
· Operating profit increased to £0.83 million (FY 2022: adjusted
£0.70 million)
· Gross margin 39.9% (FY 2022: 33%)
· EBITDA £1.56 million (FY 2022: Adjusted £1.04 million)
· Diluted eps 2.30p an increase of 1050% (FY 2022: 0.2p)
· Cash and cash equivalents at 31 May 2023 of £3.1 million (FY 2022:
£5.7 million)
· Net cash at 31 May 2023 of (£1.07 million) (FY 2022: £0.6 million)
· Net assets increased by 31% at 31 May 2023
· Further investment in IP of £4.13 million (FY 2022: £2.24 million)
Operational Highlights
· Strong pipeline of new business across FY 2023
· Sales and marketing initiatives now generating increased market
visibility and traction resulting in higher value opportunities
· Key contract wins and contract extensions include:
o Major industrial factory automation design win worth $30 million
o Automotive ASIC designed into new models increasing revenue forecast for
this product to $40 million
o €5m contract award to develop Satellite Broadband Chip funded by UK
Space Agency with a lead customer having committed €2.5 million toward
taking the chip to production, including an order for the first 50,000 chips
o Award of e-mobility sensor ASIC contract estimated to be worth in excess
of $7 million
Outlook
· The Company has started FY 2024 well, supported by both existing
contracts and new business momentum
· The business has built a strong pipeline with a sizeable order book
that continues to underpin management's confidence in the business
· Looking ahead, the Board believes the Company is well placed to continue
to capitalise on the significant growth opportunity that exists within the
semiconductor industry
Ian Lankshear, Chief Executive Officer of EnSilica plc, commented:
"I am delighted to be announcing such a strong set of full years results for
EnSilica, which provides a clear indication of the strength and resilience of
our business. Our recent new design wins are a clear indication that our model
is being fully deployed, securing both revenue and profit growth in the medium
term."
Analyst meeting
A briefing for analysts will be held on Tuesday, 10 October 2023 at 10.00 a.m.
BST. To attend the meeting please contact Vigo Consulting by email at
ensilica@vigoconsulting.com (mailto:ensilica@vigoconsulting.com) .
Investor presentation
An online presentation of the annual results will be held on Wednesday, 11
October 2023 at 12 noon BST. The presentation will be hosted on the Investor
Meet Company platform. Questions can be submitted pre-event via the Investor
Meeting Company dashboard up until 9.00 a.m. the day before the meeting or at
any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet
EnSilica via:
https://www.investormeetcompany.com/ensilica-plc/register-investor
(https://www.investormeetcompany.com/ensilica-plc/register-investor)
Annual Report and AGM
The annual report and accounts together with notice of the Annual General
Meeting will be posted to shareholders by the end of October and will be made
available on the Company's website.
The Annual General Meeting will be held on 28 November 2023 at 10.00 a.m. at
the Company's office at Milton Park Innovation Centre, 99 Park Drive, Milton
Park, Abingdon OX14 4RY.
For further information please contact:
EnSilica plc Via Vigo Consulting
Ian Lankshear, Chief Executive Officer +44 (0)20 7390 0233
www.ensilica.com (http://www.ensilica.com/)
Allenby Capital Limited, Nominated Adviser & Broker +44 (0)20 3328 5656
Jeremy Porter / Vivek Bhardwaj (Corporate Finance) info@allenbycapital.com (mailto:info@allenbycapital.com)
Joscelin Pinnington/Tony Quirke (Sales & Corporate Broking)
Vigo Consulting (Investor & Financial Public Relations) +44 (0)20 7390 0233 ensilica@vigoconsulting.com
(mailto:visum@vigoconsulting.com)
Jeremy Garcia / Kate Kilgallen
About EnSilica
EnSilica is a leading fabless design house focused on custom ASIC design and
supply for OEMs and system houses, as well as IC design services for companies
with their own design teams. The company has world-class expertise in
supplying custom RF, mmWave, mixed signal and digital ICs to its international
customers in the automotive, industrial, healthcare and communications
markets. The company also offers a broad portfolio of core IP covering
cryptography, radar, and communications systems. EnSilica has a track record
in delivering high quality solutions to demanding industry standards. The
company is headquartered near Oxford, UK and has design centres across the UK
and in Bangalore, India and Porto Alegre, Brazil.
Executive Chair Review
As you will all be aware the last two years have been difficult times and
economically challenging from a geopolitical risk point of view as well.
This background to our first full year as a public company has made the
experience even more challenging than it would have been and so the team are
proud that we have delivered a set of results that surpassed the expectations
that were set at the time of the IPO. It was pleasing to have this
recognised by being chosen as 'IPO of the Year' by Small Cap Network.
As I reported last year we went through a tremendous period of organisational
and operational change in the business pre IPO and in the year since we have
built steadily on the corporate infrastructure whilst delivering these
results. Notwithstanding this considerable progress, equity markets have been
nervous and therefore we believe we have not seen the full advantage of our
shares being publicly quoted. We have continued nonetheless to deliver on our
long term plans and we have begun our second year with the business in good
condition with good demand for our services across a range of markets on which
we focus.
Ian and the team have expanded our sales effort, have enlarged our engineering
resource and adopted new processes and procedures, whilst delivering
significant contract wins and improved margins and I would like to thank the
whole team across our global footprint for their combined efforts during the
year. They have been tremendous.
This post IPO positive momentum has resulted in an outcome for the financial
year ending 31 May 2023 in which EnSilica delivered revenues for FY 2023 of
£20.5m (2022: £15.3m), a 34% increase on the prior year, and an unadjusted
EBITDA of £1.56m (2022 adjusted: £1.04m), and a much improved earnings per
share of 2.30p compared to 2022 which was 0.2p, overall delivering resilient
year on year growth.
This performance represents the consolidation of our underlying business
strategy first adopted in 2016, with the start in 2022 of direct chip supply
to our first automotive customer.
That said, our strategy develops and gets refined as we focus on niche markets
within the broader target markets and the year under review saw the Company's
sharper focus in satellite communications on the design and supply of
beamformer chips, a first contract which was announced recently.
The award of a significant industrial contract, announced in July 2022,
provides further validation of our operating model and financial drive. This
prestigious customer win, combined with our substantial order book is directly
attributable to our highly experienced team who have worked tirelessly to
ensure we remain best in the business.
As I set out last year, we are committed to pursuing excellent Board
performance and we have worked this year with advisors to assess and develop
how we can work better as a Board with the foundation of development
programmes to promote outstanding achievement in Board performance attainment.
This will be an ongoing programme each year and we report in our governance
report progress to date.
As a responsible business, we remain focused on corporate environmental,
social, and governance ('ESG') values to build a strong, profitable, and
sustainable business. We have undertaken to establish critical ESG priorities,
opportunities and risks, and will be reporting across these headings going
forward.
Despite the challenges presented by the broader macro-economic climate, we
continue to service a sizeable order book and a strong level of enquiries for
ASICs from a variety of sources across automotive, industrial, healthcare and
satellite communications, capitalising on our longstanding reputation for
innovation and excellence.
Our staff remain our most important asset and we continue to develop reward
structures that benefit employee development and efficient and rewarding
technical work environments. During the year the number of our staff increased
to 168 (2022:117).
Finally, financial year 2024 has started well with a growing pipeline. Our
supply revenues continue to grow as planned and the Board are confident that
the Company is well placed to continue its growth trajectory.
Mark Hodgkins
Executive Chair
Chief Executive Review
Introduction
We are delighted to report our first full twelve months as a quoted company,
in which time we have continued to strengthen our business, delivering a
record period of growth.
Pleasingly, we have maintained excellent new business generation across the
period, which has in turn further bolstered our financial position. To that
end, we are pleased to report that both revenue and EBITDA were in line with
expectations at £20.5 million and £1.56 million respectively.
This ongoing operational and financial progress further reinforces the
strength of EnSilica's business model, which has enabled the Company to
maintain excellent new business momentum alongside growing the Company's
substantial sales pipeline.
Our increased profile owing to the Company's quoted status on the AIM market
of the London Stock Exchange continues to support the growth of the business,
helping us to accelerate our stated goal to be the premier application
specific fabless chipmaker in Europe. Our enhanced visibility in the market,
strengthened balance sheet, and financial transparency have broadened our
engagement with top-tier customers, enabling increased new business activity.
Proof of this was in July 2022 with the $30 million supply award from a market
leading industrial OEM. Our investment in a European direct sales organisation
and specialist sales representatives has also increased the quality and
lifetime value of the opportunities being uncovered.
I would like to express my sincere thanks to all our highly talented and
hardworking staff, who continue to be at the heart of everything we do, and to
our loyal customers and investors, who have played a pivotal role in our
success to date and whose continued support underpins our growth ambitions for
the future.
EnSilica's Business Model
EnSilica operates a Fabless Semiconductor Model, providing an end-to-end
solution for the development, manufacturing and supply of Integrated Circuits
("ICs") from initial scoping and design through to the delivery of products.
This sits alongside our design consultancy, supporting customers with their
own design teams to develop ICs.
EnSilica's specialist operation team manage the fabrication of ICs, working
with the leading semiconductor wafer foundries, following which the processed
wafers are sent for dicing, testing, and packaging by outsourced semiconductor
assembly and test partners.
This model is well proven and used by fabless semiconductor companies such as
Broadcom, Nvidia, and Nordic Semiconductor.
EnSilica's focus on ASIC design and supply embeds the Company further into the
electronics value chain, which sees customers typically pay an upfront fee
towards the costs of design, tooling, and test development of the ASIC,
otherwise known as non-recurring engineering costs ("NRE"). Customers will
subsequently purchase the EnSilica designed ASIC or, in some cases, pay
royalties to EnSilica for the ASICs that a third party will manufacture on the
customer's behalf.
EnSilica will often co-invest in the development of an ASIC alongside the
customer, and, depending on the sector, the ASIC can take two to five years to
reach full production. At the production stage, revenues can be high, last
several years, and generate gross margins in the 35% to 60% range. The gross
margin will depend on the market and the level of co-funding of the NRE
required, as well as the amount of EnSilica's intellectual property present in
the finished IC product. Therefore, part of EnSilica's expertise is in
scrutinising the potential financial upside of investing in various IC
development programmes, with the right projects in turn resulting in long-term
component supply or royalty revenue for the Company.
In niche areas where the Company identifies market opportunities, the Company
invests in its own IP as the basis of a customer-specific ASIC or what is
known as an Applications Specific Standard Part ("ASSP"). These chips are sold
to multiple customers hence generating even larger returns. Examples of this
are the Company's Satellite Communications and Healthcare Vital signs sensor
technologies.
The Company's recent new business wins are a clear indication that this model
is being fully deployed, securing both revenue and profit growth in the medium
term.
Growth strategy
To that end, our growth strategy remains unchanged from that outlined during
our IPO, and we will continue to pursue the following business objectives:
· leverage EnSilica's strong positions and IPR within automotive,
industrial, healthcare, and satellite connectivity applications for mixed
signal ASICs;
· scale the Company's successful Fabless ASIC Model to fully exploit
revenue opportunities from design and supply engagements;
· develop ASSPs to address key customer driven opportunities, with two
significant standard platforms already at the device evaluation stage; and
· expand EnSilica's offering through consolidation and vertical
integration.
Market Drivers
The market for microchips continues to grow at pace with estimates now
suggesting that 1.1 trillion microchips were produced in 2021, equating to
c.140 per person globally.
EnSilica remains focused on four principal markets where we believe there is
significant growth opportunities: satellite communications, industrial,
automotive, and healthcare.
Satellite Communication Sector
The Satellite Communication Sector, specifically internet broadband using
Lower Earth Orbit (LEO) satellites, is a growing area. Elon Musk SpaceX's
Starlink constellation of more than 4000 satellites has proven that high-speed
resilient internet connection is possible and is considered a vital part of
the communication infrastructure with a very wide range of use cases,
including government, automotive, maritime, and aerospace connectivity, as
well as connectivity for rural households.
A satellite internet system typically contains approximately 600 RF (radio
frequency) and 20 beamformer chips per user terminal. As this market grows we
expect to see it drive demand for low cost and low power RF and mixed signal
chip design. Today's subscriber levels are relatively low at approximately 2
million subscribers, but even this is driving demand for up to 1.2 billion RF
chips and 40 million beamforming chips.
EnSilica has key IPR and know-how and has announced a number of contracts in
this sector, there are a wide range of opportunities in the growing number of
new LEO constellation. Many of these will be providing services by 2025.
Industrial Sector
Substantial further growth is expected within the Industrial Sector, with the
global industrial semiconductor market worth an estimated $60 billion in 2021,
rising to $130 billion in 2030. The industrial market also has room for
manufacturing optimisation through realising the benefits of AI and machine
learning. The sector is also undergoing changes due to new cyber security
standards being driven by an EU Directive known as NIS2. Both these factors
are increasing the number of requests for quotations (RFQs). EnSilica has one
of the largest European industrial OEMs as a supply customer, and hence is
well positioned to service the next generation of industrial chips.
Automotive Sector
The Automotive Sector continues to be driven by innovation and an accelerated
shift to electric powered vehicles, infotainment systems, advanced driver
assist systems, autonomous driving systems, connectivity, safety, and security
systems. A standard hybrid electric car contains, on average, c3,500
semiconductor chips. This growing trend is further evidenced with the
automotive semiconductor market expected to be worth an estimated $82 billion
in 2025, increasing to $130 billion by 2030, which further validates
EnSilica's keen focus on this high value end market.
Healthcare Wearables Sector
The Healthcare Wearables Sector remains of considerable interest to the
Company as advancements in AI have made it possible to detect medical
conditions through a range of monitoring devices from devices worn on the
wrist, sensors on a small patch, or even within earbuds or as a ring.
Semiconductors in the healthcare market is expected to be worth $7.47 billion
in 2023, rising to $12.82 billion by 2028, growing at a CAGR of 11.41% during
this period.
Central to this growing trend is the growth in consumer health and wellness
wearable devices shipped worldwide, which is expected to be nearly 440 million
devices by 2024. These figures include both smartwatches and medical-grade
wearables, which are often prescribed by healthcare professionals but are also
increasingly becoming available off the shelf.
The Company has developed key IPR including a vital sign sensors IC offering
accurate sensor interfaces with very low power consumption. This IC is being
evaluated by a number of customers and the Directors believe this will lead to
either a standard part sold to many customers as an ASSP or various customised
versions of the IC optimised for specific customers.
Semiconductor supply chain and Geo-political changes
Looking more broadly at the semiconductor market, the much-publicised global
chip shortage has undoubtedly increased the awareness of the multitude of
benefits of using custom silicon compared to standard parts, including
simplified and secure supply chains. This has strengthened our turnkey ASIC
pipeline to an all-time high.
Our next stage of accelerated growth will be driven by the global demand for
semiconductors and our expertise in mixed signal chips, enabling a greener,
safer, smarter, and more connected world.
It took recent chip shortages to cement the "critical" status of the
semiconductor sector, establishing it as a truly essential industry. In
addition, the COVID-19 pandemic highlighted the importance of access to a
local thriving semiconductor ecosystem. With Asia accounting for 60% of global
semiconductor sales, European and U.S authorities recognise the need to be
less dependent on a handful of East Asian countries to guarantee supply. To
that end, Europe and the U.S have passed multibillion "Chip Acts" to encourage
local semiconductor design and production capabilities.
Our executive and non-executive team have been actively contributing to the UK
government's plan to become more self-sufficient in relation to key elements
of the semiconductor supply chain, and in August, the Company was proud to
announce that Janet Collyer, a Senior Independent Director, had been appointed
to the UK Government's Semiconductor Advisory Panel.
With the heightened Chinese/ US tension over Taiwan, there has been a drive to
move the supply chains away from China and even towards longer term options
outside of Taiwan. Investment has been announced in a number of wafer
foundries including major ones in the USA, Germany, and Japan.
There has also been increased investment in packaging and test outsources
assembly and test (OSAT) increasing their geographical diversity. Customers
are demanding visibility of their full supply chain with second source and
contingency planning. OEMs are seeing that ASICs are an ideal method of
driving this resilient supply chain.
Customer Activity
The Company currently manages a sales pipeline that is at an all-time high.
Business wins and sales opportunities have been across all our focus sectors.
Key contract awards since the start of FY 2023 include:
· Major industrial factory automation design win worth $30 million
· Automotive ASIC design into new models increasing revenue forecast
for this product to $40 million over 6 years.
· €5 million contract award to develop Satellite Broadband Chip funded by
UK Space Agency, a lead customer also committed €2.5 million toward taking
the chip to production, including an order for the first 50,000 chips
· Award of sensor ASIC for e-mobility (electric vehicles (EVs), electric
two wheelers, e-bikes and e-scooters applications estimated to be worth in
excess of $7 million.
· $1.3 million ASIC contract extension and estimated royalty payment
increase from $5 million to $15 million over a five-year period
In addition, the Company is also pursuing a number of significant supply ASICs
opportunities with both new and existing customers which are all progressing
well. The life-time values per opportunity has increased significantly
compared to the previous year, this is due to the wider reach of the sales
team and the newly-listed status of the Company capturing a new set of
customers.
Our People
Our team have done an excellent job delivering some of the most complex
semiconductor engineering projects in the industry. This includes developing
innovative advanced node RF designs that very few teams outside the
semiconductor giants could deliver.
The Company remains focused on attracting new talent, and in the UK we are
actively working with the UK Electronics Skills Foundation ("UK ESF") to offer
undergraduate scholarships. EnSilica employees have also been actively
promoting Science, Technology, Engineering, and Mathematics subjects (STEMS)
in schools, with a focus on encouraging more girls to pursue a career in
engineering. In Brazil and India, our team is undertaking similar initiatives
to attract the best talent into the Company and promote the excellent career
opportunities that exist within the semiconductor sector.
Industry Recognition
In the prestigious UK TechWorks Award in November 2022, EnSilica was proud to
take home three awards:
· The Company of the Year Award.
· The Young Engineer of the Year Award won by Omotade Iluromi.
· The TechNES Design Award for innovative design involving strong
industry and academic collaboration. This was awarded for the satellite RF IC
work with Swansea University.
Board
In April 2023, Matthew Wethey stepped down from his position as Chief
Financial Officer and Executive Director of the Company. The Board is grateful
to Matthew for his contribution during a period of significant operational
change and wishes him every success in the future.
Following Matthew's departure, the Company announced the appointment of Chris
Mann as Interim Chief Financial Officer (non-Board) from 11 April 2023 to
support the business while the search for a permanent replacement is
ongoing.
Outlook
Having successfully delivered our FY 2023 results in line with market
expectations, I am pleased to report that the Company has started FY 2024
well, supported by existing contracts and ongoing new business momentum.
The business has built a strong pipeline and order book, which continues to
underpin the confidence we have in the business.
Looking ahead, the Board believes that the Company is well placed with strong
IP and market know-how to continue to capitalise on the significant growth
opportunity that exists within the semiconductor industry, and in particular,
within the high-growth market segments the business has identified.
Ian Lankshear
Chief Executive Officer
Interim Chief Financial Officer's Review
Introduction
The Company's financial performance during the year under review has been
achieved on the back of cautious financial planning.
At the time of the Company's IPO in May 2022, the economic outlook had
recently become extremely uncertain due to the invasion of Ukraine. That
economic background demanded an approach to budgeting that ensures that
there is no reliance on providers of finance whether it be equity or debt in
the event of growth.
This has allowed the Company, to demonstrate that with careful planning the
"fabless" semi-conductor model, is one that can be executed from resources
generated by the business itself.
Our cash generation was supported by a small equity raise in March of this
year on the back of a strong run of contract wins at the turn of the year, as
well as the receipt of £2.1 million as part of the HMRC research and
development credit tax programme.
The Company remains in the investment phase of the fabless semi-
conductor cycle having invested a further £4.13 million in anticipation of
further growth in our revenues and penetration of our chosen markets. This
investment will, in time, pay off with further supply revenues which have
begun to flow in financial year 2024.
Financial Summary
A summary of the key financial results for the year and details relating to
its financial position at the 31 May 2023 are set out in the table below.
31 May 31 May 31 May
2023 2022 2021
£000 £000 £000
Revenue 20,476 15,293 8,607
Gross Profit 8,170 5,047 2,057
Gross margin (%) 39.9 33.0 23.9
Operating profit/(loss) excluding impairment of intangible assets and IPO 825 705 (169)
costs
IPO costs - (609) -
Impairment of intangible assets - - (2,019)
Profit/(loss) before tax 47 165 (714)
Tax 1,745 683 658
Profit/(loss) for the year 1,792 848 (56)
EBITDA 1,555 1,036 59
31 May 31 May 31 May
2023 2022 2021
£000 £000 £000
Cash and Cash equivalents 3,095 5,742 1,404
Liabilities arising from financing activities (4,167) (5,159) (6,095)
Net Debt (1,072) 853 (4,691)
Intangible assets 12,433 8,576 6,506
31 May 31 May 31 May
2023 2022 2021
FTE FTE FTE
Administration 17 10 9
Marketing 6 5 4
Research, development and technical 146 102 83
Average number of employees 168 117 96
Notable from the table above
The Company has delivered a resilient set of results for the year ending 31
May 2023, building on the strong results of 2022. Revenue growth of 33.9%
(2022: 77%) to £20.5 million, compared to £15.3 million for 2022. This was
driven by strong growth across all business lines particularly satellite
communications as well as emerging supply revenues in automotive. Our legacy
consulting revenue stream also contributed to the growth in revenues. In 2022
revenue from two different customers amounted to £8.4 million 55% of total
revenue. In 2023 our largest customer represented 28% of total revenues.
The Company continues to focus on developing the revenue derived from
Supply/NRE revenue streams as compared to its legacy Consultancy revenues. In
the year to 31 May 2023, Supply/NRE has reduced in percentage terms from 40.9%
to 39.9% of total revenue in the year, although the overall amount has
increased 30.8% year on year.
The Company maintains a level of consultancy work which provides a reliable
income stream, though going forward management will focus on the higher
returns of design and supply work and consultancy income will become less
important to the business.
Supply revenue from prior NRE work, which typically involves 1-2 years' work
prior to development is now beginning to flow through. The pipeline of NRE
work, which supports future supply revenues remains strong. We now have three
ASICs which have been released for production and we anticipate this
increasing in line with the Company's plans. As noted above, we continue to
invest in new contracts with new customers which will feed the supply revenues
of the Company in future years.
The Company has delivered further improvement in its gross margin percentage
by undertaking higher margin projects, increasing the utilisation of the
increasing number of engineers and leveraging the IP library that has grown
strongly in recent years. As a result the Company was able to increase its
gross margins by 6.5% from 33% in FY 2022 to 39.9% in the current year.
We take a critical review of the carrying value of our intangible fixed
assets. The Board has overseen a rigorous review of the value which is
supported by supply revenue streams.
As mentioned above the difficulties in the economy and investment markets has
emphasised the ever present focus on cash management and it is pleasing to
report that EBITDA for the year to May 2023 continues its improving trend
and was £1.555 million unadjusted compared to 2022 £1.0 million adjusted.
In addition to the unadjusted EBITDA of £1.555 million we recognised £2.1
million due from HMRC as an R&D tax credit.
The net debt of £1.07 million compares to £0.6 million of net cash at the
end of May 2022.
The improving EBITDA and the R&D tax credit have allowed the repayment of
£0.8 million loan capital in line with agreed amortisation. This while
maintaining our investment in IP which amounted to £4.13 million.
The Company increased the average number of employees during the year by 51
heads, of these 44 were research, development and technical heads. The
majority of these are based in the UK.
Financial items of note during the year other than those set out above
The Company had two bank loans totalling £4.167 million at the end of the
current year and £4.966 million at the end of the previous year, these loans
charged interest of £0.6 million (2022 £0.5 million).
The Company qualifies for support under the HMRC R&D Tax Credit scheme.
In the current year the amount recoverable from HMRC is £2.1 million (2022:
£1.67 million).
Going Concern
It is the Company's normal business practice to prepare short term, annual and
long term plans which are reviewed and approved by the Board.
The assumptions around projected sales, staffing and purchases are based on
management's expectations and are consistent with the Company's experience.
The plans take into consideration the possibility of the continuance of the
Russia/Ukraine war, increasing interest rates, and the current economic
environment, which is likely to create problems for global supply chains and
negatively impact demand. The financial statements have been based on these
considerations.
As at 31 May 2023 the Company's financing arrangements consisted of a loan of
£2.7 million (2022: £3.1 million) from SME Alternate Financing and a
Coronavirus Business Interruption Loan (CBIL) for £1.7 million (2022: £2.1
million) used to mitigate delays caused by Covid-19. The Company held a cash
balance of £3.1 million (2022: £5.7 million) at that date.
The Directors are satisfied that the Company has adequate resources to
continue in business for the foreseeable future (being a minimum period of 12
months from the date of signing the balance sheet), and accordingly continue
to adopt the going concern basis in preparing the accounts.
Financial Risk Management Objectives and Policies
Details of the Company's financial risk management objectives and policies are
disclosed in note 22 to the financial statements.
Key performance indicators and risks
We have a range of performance measures to monitor and manage the business,
some of which are considered key performance indicators (KPIs).
Certain one-off items which are shown as exceptionals on the Income Statement,
namely IPO costs and Impairments to Intangible Assets, have been adjusted for
as disclosed in Note 4 in the Notes of the Financial Statements, in the KPIs
below.
Consolidated Statement of Comprehensive Income
For the year ended 31 May 2023
Note 2023 2022
£'000 £'000
Revenue 3 20,476 15,293
Cost of sales
(12,306) (10,246)
Gross profit 5 8,170 5,047
Other operating/(expense) income 8 (14)
Administrative expenses excluding non-recurring items (7,352) (4,328)
IPO costs - (699)
Total administration expenses (7,352) (5,027)
Operating profit 825 6
5
Interest 7 7 25
income
7
Interest 8 (785) (565)
expense
Profit/(loss) before taxation 47 (534)
Taxation 9 1,745 683
Profit for the year 1,792 149
Other comprehensive (expense)/income for the year (50) 40
Currency translation differences
Total comprehensive income for the year 1,742 189
Profit for the year attributable to:
Owners of the company 1,792 149
Non-controlling interests - -
1,792 149
Total comprehensive (expense)/income for the year attributable to:
Owners of the company (50) 40
Non-controlling interests - -
(50) 40
Basic earnings per share (pence) 10 2.36 0.20
Diluted earnings per share 10 2.30 0.20
(pence)
Adjusted Basic earnings per share 10 2.47 1.13
(pence)
Adjusted Diluted earnings per share 10 2.41 1.11
(pence)
Consolidated Statement of Financial Position
As at 31 May 2023
2023 2022
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 11 2,566 382
Intangible assets 12 12,433 8,576
Total non-current assets 14,999 8,958
Current assets
Inventories 14 304 215
Trade and other receivables 15 7,025 3,257
Corporation tax recoverable 2,064 1,671
Cash and cash equivalents 16 3,095 5,742
Total current assets 12,488 10,885
Total assets 27,487 19,843
Current liabilities
Borrowings 17 (883) (800)
Lease liabilities 18 (171) (88)
Trade and other payables 19 (4,723) (2,391)
Total current liabilities (5,777) (3,279)
Non current liabilities
Borrowings 17 (3,284) (4,166)
Lease liabilities 18 (2,104) (105)
Provisions 20 (199) (140)
Deferred tax 21 (160) -
Total non current liabilities (5,747) (4,411)
Total liabilities (11,524) (7,690)
Net assets 15,963 12,153
Equity
Issued share capital 23 137 134
Share premium account 8,752 6,900
Currency differences reserve (49) 1
Retained earnings 7,123 5,118
Equity attributable to owners of the Company 15,963 12,153
Non-controlling interests - -
Total equity 15,963 12,153
The financial statements were approved by the Board of Directors and
authorised for issue on 9 October 2023 and signed on its behalf by:
Ian
Lankshear
Mark Hodgkins
Chief Executive Officer
Chair
Consolidated Statement of Changes in Equity
For the year ended 31 May 2023
Share Share Currency translation reserve Retained Total equity
capital
earnings
premium account £'000
£'000
£'000
£'000
£'000
At 31 May 2021 2 - (39) 2,875 2,838
Comprehensive income for the year to 31 May 2022 - - - 149 149
Profit for the year
Other comprehensive income - - 40 - 40
Total comprehensive income for the year - - 40 149 189
Share based payment - - - 120 120
Deferred tax in respect of share options - - - 1,713 1,713
Corporation tax in respect of share options - - - 378 378
Issue of share capital 132 7,407 - - 7,539
Costs of share issue - (507) - - (507)
Bonus share issue - - - (117) (117)
At 31 May 2022 134 6,900 1 5,118 12,153
Comprehensive income for the year to 31 May 2023 - - - 1,792 1,792
Profit for the year
Other comprehensive expense - - (50) - (50)
Total comprehensive income for the year - - (50) 1,792 1,742
Share based payment - - - 213 213
Issue of share capital 3 2,015 - - 2,018
Costs of share issue - (163) - - (163)
At 31 May 2023 137 8,752 (49) 7,123 15,963
Non-controlling interests hold 0.002% of the issued share capital of the
Indian subsidiary, EnSilica India Private Limited in accordance with local
requirements and there is a non-controlling interest of £nil at 31 May 2023
(31 May 2022:£nil), further details are disclosed in note 27.
Consolidated Statement of Cash Flows
For the year ended 31 May 2023
2023 2022
Note
£'000 £'000
Cash flows from operating activities
Cash generated from 290 (1,915)
operations
A
Tax received 1,512 3,306
Net cash generated from operating activities 1,802 1,391
Cash flows from investing activities
Purchase of property, plant and equipment (395) (276)
Additions to intangible assets (4,133) (2,241)
Interest received 7 25
Net cash used in investing activities (4,521) (2,492)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 1,855 6,915
Interest paid (785) (565)
Lease liability payments (166) (103)
Repayment of bank loans (832) (768)
Commitment fees - (80)
Net cash generated from financing activities 72 5,399
Net (decrease)/increase in cash and cash equivalents (2,647) 4,298
Cash and cash equivalents at beginning of year 5,742 1,404
Foreign exchange gains/(losses) - 40
Cash and cash equivalents at end of 3,095 5,742
year
B
Notes to the Consolidated Statement of Cash Flows
For the year ended 31 May 2023
A. Cash generated from operations
2023 2022
£'000 £'000
Profit for the year 1,792 149
Adjustments for:
Depreciation 454 160
Amortisation of intangible assets 276 171
Share based payments 213 120
Net interest costs 778 540
Tax credit (1,745) (683)
1,768 456
Working capital movements
Increase in inventories (89) (185)
Increase in trade and other receivables (3,770) (304)
Increase/(decrease) in trade and other payables 2,322 (699)
Increase/(decrease) in provisions 59 (1,183)
Cash generated from/(used in) operations 290 (1,915)
B. Analysis of net debt
At June 2021 Cash flow Non-cash changes At 31 May 2022
£'000 £'000 £'000 £'000
Loans (5,799) 768 65 (4,966)
Lease liabilities (296) 50 53 (193)
Liabilities arising from financing activities (6,095) 818 118 (5,159)
Cash and cash equivalents 1,404 4,298 40 5,742
Net debt (4,691) 5,116 158 583
At June 2022 Cash flow Non-cash changes At 31 May 2023
£'000 £'000 £'000 £'000
Loans (4,966) 832 (33) (4,167)
Lease liabilities (193) 363 (2,445) (2,275)
Liabilities arising from financing activities (5,159) 1,195 (2,478) (6,442)
Cash and cash equivalents 5,742 (2,647) - 3,095
Net debt 583 (1,452) (2,478) (3,347)
Parent Company Statement of Financial Position
As at 31 May 2023
2022
2023 £'000
Note
£'000
Assets
Non-current assets
Property, plant and equipment 11 2,459 228
Intangible assets 12 12,433 8,576
Investments 13 89 68
Total non-current assets 14,981 8,872
Current assets
Inventories 14 304 215
Trade and other receivables 15 6,985 2,909
Corporation tax recoverable 2,064 1,671
Cash and cash equivalents 16 2,903 5,655
Total current assets 12,257 10,450
Total assets 27,238 19,322
Current liabilities
Borrowings 17 (883) (800)
Lease liabilities 18 (146) (50)
Trade and other payables 19 (5,643) (2,860)
Total current liabilities (6,671) (3,710)
Non-current liabilities
Borrowings 17 (3,284) (4,166)
Lease liabilities 18 (2,104) (78)
Deferred tax 19 (160) -
Total non-current liabilities (5,548) (4,244)
Total liabilities (12,220) (7,954)
Net assets 15,018 11,368
Equity
Issued share capital 23 137 134
Share premium account 8,752 6,900
Retained earnings 6,129 4,334
Total equity 15,018 11,368
The profit/(loss) for the financial year dealt with in the financial
statements of the Parent Company was profit £1,582,000 (2022: loss
£126,000). The financial statements were approved by the Board of Directors
and authorised for issue on 9 October 2023 and are signed on its behalf by:
Ian
Lankshear
Mark Hodgkins
Chief Executive Officer
Chair
Company registration number: 04220106
Parent Company Statement of Changes in Equity
For the year ended 31 May 2023
Share capital Share premium account Retained Total equity
earnings
£'000 £'000
£'000
£'000
At 31 May 2021 2 - 2,366 2,368
Comprehensive income for the year to 31 May 2022 - - (126) (126)
Loss for the year
Other comprehensive expense - - - -
Total comprehensive income for the year - - (126) (126)
Share based payment - - 120 120
Deferred tax in respect of share options - - 1,713 1,713
Corporation tax in respect of share options - - 378 378
Issue of share capital 132 7,407 - 7,539
Costs of share issue - (507) - (507)
Bonus share issue - - (117) (117)
At 31 May 2022 134 6,900 4,334 11,368
Comprehensive income for the year to 31 May 2023 - - 1,582 1,582
Profit for the year
Other comprehensive expense - - - -
Total comprehensive income for the year - - 1,582 1,582
Share based payment - - 213 213
Issue of share capital 3 2,015 - 2,018
Costs of share issue - (163) - (163)
At 31 May 2023 137 8,752 6,129 15,018
Parent Company Statement of Cash Flows
For the year ended 31 May 2023
2023 2022
Note
£'000
£'000
Cash flows from operating activities
Cash used in 2 (1,748)
operations
A
Tax received 1,671 3,378
Net cash generated from/(used in) operating activities 1,673 1,630
Cash flows from investing activities
Purchase of property, plant and equipment (385) (174)
Additions to intangible assets (4,133) (2,241)
Acquisition of subsidiary (21) (68)
Net cash used in investing activities (4,539) (2,483)
Cash flows from financing activities
Proceeds from issuance of ordinary shares 1,855 6,915
Interest paid (782) (556)
Lease liability payments (127) (75)
Repayment of bank loans (832) (768)
Commitment fees - (80)
Net cash generated from financing activities 114 5,436
Net (decrease)/increase in cash and cash equivalents (2,752) 4,583
Cash and cash equivalents at beginning of year 5,655 1,072
Cash and cash equivalents at end of year 2,903 5,655
B
Notes to the Parent Company Statement of Cash Flows
For the year ended 31 May 2023
A. Cash generated from operations
The reconciliation of profit/(loss) for the year to cash generated from
operations is set out below:
2023
2022
£'000
£'000
Profit/(loss) for the year 1,582 (126)
Adjustments for:
Depreciation 402 115
Amortisation of intangible assets 276 171
Share based payments 213 120
Net interest costs 782 556
Tax credit (1,903) (754)
1,352 82
Working capital movements
Increase in inventories (89) (185)
Increase in trade and other receivables (4,077) (176)
Increase/(decrease) in trade and other payables 2,816 (295)
Decrease in provisions - (1,174)
Cash used in operations 2 (1,748)
B. Analysis of net debt
At 1 June 2021 Cash flow Non-cash changes At 31 May 2022
£'000 £'000 £'000 £'000
Loans (5,799) 768 65 (4,966)
Lease liabilities (203) 50 25 (128)
Liabilities arising from financing activities (6,002) 818 90 (5,094)
Cash and cash equivalents 1,072 4,583 - 5,655
Net debt (4,930) 5,401 90 561
At 1 June 2022 Cash flow Non- cash changes At 31 May 2023
£'000 £'000 £'0000 £'000
Loans (4,966) 832 (33) (4,167)
Lease liabilities (128) 324 (2,446) (2,250)
Liabilities arising from financing activities (5,094) 1,156 (2,479) (6,417)
Cash and cash equivalents 5,655 (2,752) - 2,903
Net debt 561 (1,596) (2,479) (3,514)
Notes to the Consolidated Financial Statements
For the year ended 31 May 2023
1. General information
EnSilica plc is a public limited company incorporated in the United Kingdom,
listed on the Alternative Investment Market ('AIM') of the London Stock
Exchange. The Company is domiciled in the United Kingdom and its registered
office is 100 Park Drive, Milton Park, Abingdon, OX14 4RY. The consolidated
financial statements comprise the Company and its subsidiaries (together
referred to as the 'Group').
The Company is a leading fabless design house focused on custom ASIC design
and supply for OEMs and system houses, as well as IC design services for
companies with their own design teams. The Company has world-class expertise
in supplying custom RF, mmWave, mixed signal and digital ICs to its
international customers in the automotive, industrial, healthcare and
communications markets. The Company also offers a broad portfolio of core IP
covering cryptography, radar and communications systems. EnSilica has a track
record in delivering high quality solutions to demanding industry standards.
The Company is headquartered near Oxford, UK and has design centres across the
UK, India, Brazil and a sales office in Germany.
In July 2022 the Company launched a subsidiary in Munich, Germany that has the
purpose of acting as the sales office to further enhance and capitalise on the
Group's opportunities.
Basis of preparation
The consolidated financial statements of the Company have been prepared in
accordance with UK-adopted International Accounting Standards ("IFRS") as
issued by the International Accounting Standards Board (IASB) and the
Companies Act 2006.
The financial information has been prepared under the historical cost
convention unless otherwise specified within these accounting policies. The
financial information and the notes to the financial information are presented
in thousands of pounds sterling ('£'000'), the functional and presentation
currency of the Group, except where otherwise indicated.
The principal accounting policies adopted in preparation of the financial
information are set out below. The policies have been consistently applied to
all periods presented, unless otherwise stated.
Judgements made by the Directors in the application of the accounting policies
that have a significant effect on the financial information and estimates with
significant risk of material adjustment in the next year are discussed in note
2.
2. Accounting policies
Going concern
As part of its normal business practice, the Company regularly prepares both
annual and longer-term plans which are based on the directors' expectations.
The assumptions around project sales, staffing and purchases are based on
management's expectations and are consistent with the Company's experience
since June 2022. As at 31 May 2023 the Company's financing arrangements
consisted of a loan of £2.7 million from SME Alternate Financing and a
Coronavirus Business Interruption Loan (CBIL) for £1.7 million used to
mitigate delays caused by Covid-19. The Company held a cash balance of £3.1
million at that date. The possible continuing and future impact of the
Russia/Ukraine war on the Company has been considered in the preparation of
the financial statements.
The Directors are satisfied that the Company has adequate resources to
continue in business for the foreseeable future (being a minimum period of 12
months from the date of signing the balance sheet), and accordingly continue
to adopt the going concern basis in preparing the accounts.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Company and its subsidiaries as at 31 May 2023. Control is achieved when the
Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power
over the investee. Specifically, the Group controls an investee if, and only
if, the Group has:
· Power over the investee (i.e., existing rights that give it the
current ability to direct the relevant activities of the investee)
· Exposure, or rights, to variable returns from its involvement with
the investee
· The ability to use its power over the investee to affect its
returns generally, there is a presumption that a majority of voting rights
results in control. To support this presumption and when the Group has less
than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
- The contractual arrangement(s) with the other vote holders of the
investee
- Rights arising from other contractual arrangements
- The Group's voting rights and potential voting rights. The Group
re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of
control.
Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets,
liabilities, income and expenses of a subsidiary acquired or disposed of
during the year are included in the consolidated financial statements from the
date the Group gains control until the date the Group ceases to control the
subsidiary. Profit or loss and each component of OCI are attributed to the
equity holders of the parent of the Group and to the non-controlling
interests, even if this results in the non-controlling interests having a
deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies in line with the
Group's accounting policies. All intra-group assets and liabilities, equity,
income, expenses and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation. A change in the ownership
interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it
derecognises the related assets (including goodwill), liabilities,
non-controlling interest and other components of equity, while any resultant
gain or loss is recognised in profit or loss. Any investment retained is
recognised at fair value.
Revenue recognition
Revenue, in accordance with IFRS15 is recognised at an amount that reflects
the consideration to which the Company expects to be entitled in exchange for
transferring control of goods or services to a customer. Revenue is measured
at the fair value of the consideration received, excluding discounts, rebates,
VAT and other sales taxes or duty.
The following principles are applied to each area of revenue as set out below:
· Identify the contract with a customer
· Identify the performance obligations in the contract
· Determine the transaction price
· Allocate the transaction price to the performance obligations in the
contract
· Recognise revenue when the Company satisfies performance obligations
Services
Design services are provided specifically for each customer and may be either
consultancy services only in respect of IC design or design services as part
of a design and supply model involving a contract for the initial
non-recurring engineering costs of development (NRE). When the outcome of a
contract can be measured reliably, the Company recognises both income and
costs over a period of time by reference to the percentage of completion of
the contract as this is considered the most appropriate measurement of
performance of the obligations. If the outcome cannot be reliably measured,
all costs are expensed, and revenue is only recognised to the extent that it
is probable that costs are recoverable.
Sale of goods
Revenue from the sale of goods is recognised at a point in time when control
over the goods has passed to the buyer, usually on dispatch of the goods when
the amount of revenue can be measured reliably and it is probable that the
economic benefits associated with the transaction will flow to the entity as
the Company fulfils its performance obligation.
Licensing and similar income
Income in respect of a licensing arrangement for the use of IP is recognised
on a straight line basis over the period of the agreement or where typically
linked to the delivery of design services, recognised by reference to the
underlying arrangement and delivery of services.
Invoicing of revenue is undertaken in accordance with the terms of the
agreement with the customer. If amounts recognised in respect of revenue for
completed performance obligations have not been invoiced at the financial
position date, accrued income is recognised. When an invoice is due for
payment at the statement of financial position date but the associated
performance obligations have not been fulfilled the amounts due are recognised
as trade receivables and a deferred income contract liability is recognised
for the value of the performance obligations that have not been provided.
Employee benefits
The EnSilica Group operates a defined contribution pension scheme.
Contributions are recognised in the Statement of Comprehensive Income in the
year in which they become payable in accordance with the rules of the scheme.
Short term employee benefits including holiday pay are recognised as an
expense in the period in which the service is rendered.
Share based payment
The Company operates an equity-settled share-based compensation plan in which
the Company receives services from employees as consideration for share
options. The fair value is established at the point of grant using an
appropriate pricing model and then the cost is recognised as an expense in
administrative expenses in the statement of comprehensive income, together
with a corresponding increase directly in equity over the period in which the
services are fulfilled. This is the estimated period to vesting in respect of
employees. The cumulative expense recognised for equity-settled transactions
at each reporting date until vesting date reflects the extent to which the
vesting period has expired and the Company's best estimate of the number of
equity instruments that will ultimately vest.
Taxation
The taxation expense or credit comprises current and deferred tax recognised
in the profit for the financial period or in other comprehensive income or
equity if it arises from amounts recognised in other comprehensive income or
directly in equity. Current tax is provided at amounts expected to be paid (or
recovered) in respect of the taxable profits for the period using tax rates
and laws that have been enacted or substantively enacted by the reporting
date.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.
Deferred tax assets and liabilities are offset only where there is a legally
enforceable right to offset and where the deferred tax balances relate to the
same taxation authority.
Non-recurring items
The Company classifies certain one-off charges or credits that have a material
impact on the Company's financial results as 'non-recurring items'. These are
disclosed separately to provide further understanding of the financial
performance of the Company.
Government grants
Grants are accounted under the accruals model, and grants of a revenue nature
are recognised in the Statement of Comprehensive Income in the same period as
the related expenditure. Government grants relate to the receipt of
Coronavirus Job Retention Scheme income, to innovation grants and to the
interest free period on Coronavirus Business Interruption loans.
Foreign exchange
Transactions denominated in foreign currencies are translated into sterling at
the rates ruling on the date of the transaction. Monetary assets or
liabilities denominated in foreign currencies at the Statement of Financial
Position date are translated at the rate ruling on that date and all
translation differences are charged or credited in the Statement of
Comprehensive Income.
On consolidation, the results of overseas operations are translated into
Sterling at rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations are translated at the
rate ruling at the reporting date. Exchange differences arising on translating
the opening net assets at opening rate and the results of overseas operations
at actual rate are recognised in other comprehensive income and accumulated in
a separate equity reserve.
Intangible assets - research and development expenditure
Intangible assets are represented by capitalised development costs including
proprietary intellectual property developed by the business for both its own
use and for licensing to third parties.
An internally generated intangible asset arising from development (or the
development phase) of an internal project is recognised if, and only if, all
of the following have been demonstrated:
· It is technically feasible to complete the development such that
it will be available for use, sale or licence;
· There is an intention to complete the development;
· The method by which probable future economic benefits will be
generated is known;
· The Company is able to sell or use the product;
· There are adequate technical, financial and other resources
required to complete the development;
· There are reliable measures that can identify the expenditure
directly attributable to the project during its development.
The amount recognised is the expenditure incurred from the date when the
project first meets the recognition criteria listed above. Where the above
criteria are not met, development expenditure is charged to the consolidated
income statement in the period in which it is incurred. The capitalisation of
development costs is subject to a degree of judgement in respect of the
viability of new technology and know-how, supported by the results of testing
and customer trials and by forecasts for the overall value and timing of sales
which may be impacted by other future factors which could impact the
assumptions made.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and impairment losses. An
impairment review is undertaken annually, and amortisation commences once
management consider that the asset is available for use, i.e., when it is
judged to be in the location and condition necessary for it to be capable of
operating in the manner intended by management and the cost amortised over the
estimated useful life of the know-how based on expected customer product
cycles and lives. This is typically 5 to 10 years, and the charge is reported
within administrative expenses in the consolidated statement of comprehensive
income. During the year under review the policy to charge amortisation was
changed to match the level of revenue. This method allocated the charge in a
more representative manner, with larger charges made in years where most
revenue was recognised, but still over the same time period. The prior year
charge would not have been materially affected by this change, and hence no
adjustment was made to reflect this.
As part of the impairment review, consideration is also made regarding the
validity of impairment provisions made in previous periods, and to whether the
provision is still warranted in the period under review.
Research expenditure is recognised as an expense in the period in which it is
incurred.
Financial assets
Financial assets, including trade and other receivable balances are initially
recognised at transaction price, unless the arrangement constitutes a
financing transaction, where the transaction is measured at the present value
of the future receipts discounted at a market rate of interest. Such assets
are subsequently carried at amortised cost using the effective interest
method. Cash and cash equivalents comprise cash held at bank which is
available on demand.
The Company applies the IFRS 9 simplified approach to measuring expected
credit losses using a lifetime expected credit loss provision for trade
receivables. The Company measures loss allowances at an amount equal to
lifetime expected credit loss (ECL), which is estimated using past experience
of the Company's historical credit losses experienced over the three year
period prior to the period end. Historical loss rates are then adjusted for
current and forward-looking information on macroeconomic factors affecting the
Company's customers, such as inflation rates. The gross carrying amount of a
financial asset is written off (either partially or in full) to the extent
that there is no realistic prospect of recovery.
To measure expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and ageing. The
contract assets have similar risk characteristics to the trade receivables for
similar types of contracts.
The Company recognises loss allowances for expected credit losses on financial
assets measured at amortised cost to the extent that these are material. The
Company has determined that there is no material impact of ECLs on the
financial information.
Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand, deposits held at call with financial
institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in
value.
Financial liabilities
Financial liabilities, including trade and other payables and bank borrowings
are initially recognised at transaction price, unless the arrangement
constitutes a financing transaction, where the debt instrument is measured at
the present value of the future receipts discounted at a market rate of
interest. Debt instruments are subsequently carried at amortised cost, using
the effective interest rate method.
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less. If not, they are presented as non-current liabilities. Trade payables
are recognised initially at transaction price and subsequently measured at
amortised cost using the effective interest method.
Financial liabilities are derecognised when the liability is extinguished,
that is when the contractual obligation is discharged, cancelled or expires.
Borrowings are initially stated at the fair value of the consideration
received after deduction of wholly attributable issue costs. Borrowings are
subsequently stated at amortised cost using the effective interest method.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or
production of an asset that necessarily takes a substantial period of time to
get ready for its intended use or sale are capitalised as part of the cost of
the asset. All other borrowing costs are expensed in the period in which they
occur. Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
Leases
The Company as lessee
The Company assesses whether a contract is or contains a lease, at inception
of the contract. The Company recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which
it is the lessee, except for short-term leases (defined as leases with a lease
term of 12 months or less) and leases of low value assets (such as tablets and
personal computers, small items of office furniture and telephones). For these
leases, the Company recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another systematic basis
is more representative of the time pattern in which economic benefits from the
leased assets are consumed.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease. If this rate cannot be readily determined, the
Company uses its incremental borrowing rate.
The incremental borrowing rate depends on the term, currency and start date of
the lease and is determined based on a series of inputs including: the
risk-free rate based on government bond rates; a country-specific risk
adjustment; a credit risk adjustment based on bond yields; and an
entity-specific adjustment when the risk profile of the entity that enters
into the lease is different to that of the Company and the lease does not
benefit from a guarantee from the Company.
Lease payments included in the measurement of the lease liability comprise:
· Fixed lease payments (including in-substance fixed payments),
less any lease incentives receivable.
· Variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement date. The
amount expected to be payable by the lessee under residual value guarantees.
· The exercise price of purchase options, if the lessee is
reasonably certain to exercise the options.
· Payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease. The lease
liability is presented as a separate line in the consolidated statement of
financial position.
The lease liability is subsequently measured by increasing the carrying amount
to reflect interest on the lease liability (using the effective interest
method) and by reducing the carrying amount to reflect the lease payments
made.
The Company remeasures the lease liability (and makes a corresponding
adjustment to the related right-of-use asset) whenever:
· The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the assessment of exercise of
a purchase option, in which case the lease liability is remeasured by
discounting the revised lease payments using a revised discount rate.
· The lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using an unchanged discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used).
· A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the
revised lease payments using a revised discount rate at the effective date of
the modification.
The Company did not make any such adjustments during the years presented.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, lease payments made at or before the commencement day, less
any lease incentives received and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and impairment
losses.
Whenever the Company incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the
underlying asset to the condition required by the terms and conditions of the
lease, a provision is recognised and measured under IAS 37. To the extent that
the costs relate to a right-of-use asset, the costs are included in the
related right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of lease term and
useful life of the right-of-use asset. If a lease transfers ownership of the
underlying asset or the cost of the right-of-use asset reflects that the
Company expects to exercise a purchase option, the related right-of-use asset
is depreciated over the useful life of the underlying asset. The depreciation
starts at the commencement date of the lease.
Variable rents that do not depend on an index or rate are not included in the
measurement the lease liability and the right-of-use asset. The related
payments are recognised as an expense in the period in which the event or
condition that triggers those payments occurs and are included in the line
"Other expenses" in profit or loss.
As a practical expedient, IFRS 16 permits a lessee not to separate non-lease
components, and instead account for any lease and associated non-lease
components as a single arrangement. The Company has not used this practical
expedient. For contracts that contain a lease component and one or more
additional lease or non-lease components, the Company allocates the
consideration in the contract to each lease component on the basis of the
relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.
Property, plant and equipment
Property, plant and equipment assets are stated at cost less depreciation.
Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its intended
use. Depreciation is provided on all property, plant and equipment assets at
rates calculated to write off the cost of each asset on a straight line basis
over its expected useful life, as follows:
Asset
class
Depreciation method rate
Leasehold improvements
Over the period of the lease
Computer Software
5 years straight line on cost
Office Equipment
4 years straight line on cost
Computer Equipment
3 years straight line on cost
Inventories
Inventories are valued at the lower of purchase cost and net realisable value,
after due regard for any slow moving items. Net realisable value is based on
selling price less anticipated costs to completion and selling costs. Cost is
based on the cost of purchase on a weighted average basis. Work in progress
and finished goods include labour and attributable overheads.
At each reporting date, inventories are assessed for impairment. If inventory
is impaired, the carrying amount is reduced to its net realisable value. The
impairment loss is recognised immediately in the Statement of Comprehensive
Income.
Share capital and reserves
Financial instruments issued by the company are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
parent company's ordinary shares are classified as equity instruments.
The cumulative currency differences reserve represents translation differences
in respect of the net assets of overseas subsidiaries.
Retained earnings comprises opening retained earnings and total comprehensive
income for the year, net of dividends paid.
New or revised accounting standards and interpretations
At the date of authorisation of these financial statements, the company has
not early adopted the following amendments to Standards and Interpretations
that have been issued but are not yet effective:
Standard or Interpretation Effective for accounting periods commencing on or after
Annual improvements to IFRS standards 2018-2020: Amendments to IAS 1: 01 January 2023
Classification of Liabilities as Current or Non-Current
Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting 01 January 2023
Policies
Amendments to IAS 8: Definition of Accounting Estimates 01 January 2023
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising 01 January 2023
from a Single Transaction
The application of these standards is not expected to have a material impact
on the amounts reported in these financial statements.
Critical accounting estimates and judgements
The preparation of the financial information under IFRS requires the use of
certain critical accounting assumptions and requires management to exercise
its judgement and to make estimates in the process of applying the Company's
accounting policies.
Management bases its estimates on historical experience and on various other
assumptions that management believes to be reasonable in the circumstances.
The key estimates and judgements used in the preparation of this financial
information that could result in a material change in the carrying value of
assets or liabilities within the next twelve months are as follows:
Intangible assets - capitalisation, impairment and amortisation of development
expenditure
Judgement
The capitalisation of development costs is subject to a degree of judgement in
respect of the timing when the commercial viability of new technology and
know-how is reached, supported by the results of testing and customer trials,
and by forecasts for the overall value and timing of sales which may be
impacted by other future factors which could impact the assumptions made. In
making their judgements, the Directors considered the carrying values that are
shown in note 12.
Estimation
Amortisation commences once management consider that the asset is available
for use, i.e. when it is judged to be in the location and condition necessary
for it to be capable of operating in the manner intended by management and the
cost is amortised over the estimated useful life of the know-how based on
experience of and future expected customer product cycles and lives. The
useful economic lives and residual values are re-assessed annually. They are
amended when necessary to reflect current estimates, based on technological
advancement, future investments and economic utilisation.
Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit
exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions,
conducted at arm's length, for similar assets or observable market prices less
incremental costs of disposing of the asset. The value in use calculation is
based on a DCF model. The cash flows are derived from the budget for the next
five years and do not include restructuring activities that the Group is not
yet committed to or significant future investments that will enhance the
performance of the assets of the CGU being tested. The recoverable amount is
sensitive to the discount rate used for the DCF model as well as the expected
future cash-inflows and the growth rate used for extrapolation purposes. These
estimates are most relevant to goodwill and other intangibles with indefinite
useful lives recognised by the Group. The key assumptions used to determine
the recoverable amount for the different CGUs, including a sensitivity
analysis, are disclosed and further explained in Note 12.
Revenue
Estimation
In accordance with the policy on revenue recognition, management are required
to judge the percentage of completion of the contract in order to recognise
both income and costs. The overall recognition of revenue will depend upon the
nature of the project and whether it is billed on a time and materials basis,
or, on a project milestone basis where invoices can only be raised on
completion of specific, pre-agreed objectives. The company maintains complete
and accurate records of employees' time and expenditure on each project which
is regularly assessed to determine the percentage completion, and thereby
whether it is appropriate to recognise any profits.
The level of management judgement is based on a strong track record of
successful completion of projects and accurate forecasting of the time
required together with the hindsight period available to support the balance
sheet date assumptions made.
Adjusting items
The Company has chosen to present an adjusted measure of profit and earnings
per share, which excludes certain items which are separately disclosed due to
their size, nature or incidence, and are not considered to be part of the
normal operating costs of the Company. These costs include IPO preparation
costs. The Company believes adjusting for these items provides additional
useful information to users of the financial statements to enable a better
understanding of the Company's underlying financial performance. The
classification of items as adjusting requires significant management
judgement.
Treatment of costs incurred in relation to the IPO
The decision of how to split the costs incurred on an equity raise via IPO
requires judgement given that, whilst costs incurred on an equity raise should
be recognised against equity in share premium, costs that relate to a stock
market listing should be recognised as an expense in the consolidated
statement of comprehensive income.
3. Analysis of revenue
The Board continues to define all the Company's trading as operating in the
integrated circuit design market and considers all revenue to relate to the
same, one operating segment. Revenue is defined as per the accounting
policies.
Revenue in respect of the supply of products is recognised at a point in time.
Design and related services including income for the use of IP are recognised
over the period when services are provided.
2023 2022
£'000
£'000
Recognised at a point in time
Supply of products 2,856 1,769
Recognised over time
NRE 8,175 6,250
Consultancy design services 9,400 7,073
Licensing related income 45 201
17,620 13,524
20,476 15,293
By destination:
UK 1,831 2,808
Rest of Europe 11,817 4,721
Rest of the World 6,828 7,764
Total revenue 20,476 15,293
The nature of the design services and projects is such that there will be
significant customers as a proportion of revenue in any one year but that
these may be different customers from year to year. Revenue in respect of two
customers amounted to £5.7 million and £5.4 million representing 28% and 27%
of the revenue for the year ended 31 May 2023 (2022: two different customers
amounted to £3.6 million at 36% and 19% respectively). The Group's
non-current assets comprising investments, tangible and intangible fixed
assets and the net assets by geographical location are:
Non-current assets 31 May 2023 31 May 2022
£'000 Net assets Non-current assets Net assets
£'000 £'000
£'000
United Kingdom 14,892 14,967 8,804 11,301
India 34 1,199 67 817
Brazil 73 67 87 35
Germany - (270) - -
14,999 15,963 8,958 12,153
4. Alternative performance measures
These items are included in normal operating costs of the business, but are
significant cash and non-cash expenses that are separately disclosed because
of their size, nature or incidence. It is the Company's view that excluding
them from operating profit gives a better representation of the underlying
performance of the business in the year.
The Company's primary results measure, which is considered by the directors of
EnSilica plc to better represent the underlying and continuing performance of
the Company, is Adjusted EBITDA as set out below. EBITDA is a commonly used
measure in which earnings are stated before net finance income, amortisation
and depreciation as a proxy for cash generated from trading.
2023 2022
£'000 £'000
Operating profit before interest 825 6
Compensation for loss of office 85 -
IPO costs - 699
Adjusted Operating profit before interest 910 705
Depreciation 454 160
Amortisation of intangible assets 276 171
Adjusted EBITDA 1,640 1,036
Profit for the year 1,792 149
Compensation for loss of office 85 -
IPO costs - 699
Adjusted Profit for the year 1,877 848
Compensation for loss of office
Compensation for loss of office covers the non-recurring costs in relation to
the termination of employment of a Director as described in the Remuneration
Committee report.
IPO Costs
Attributable costs relating to the IPO performed during the prior year were
recognised within the consolidated statement of comprehensive income as an
exceptional cost. These costs were excluded from the adjusted results of the
Company since the costs are one-off in nature and will not repeat in future
years.
5. Operating profit
The operating profit is stated after charging:
2023
2022
£'000
£'000
Depreciation of property, plant and equipment 164 106
Depreciation of right-of-use assets 290 54
Amortisation of intangible assets 276 171
Cost of inventory sold 1,863 1,717
Research and development costs 4,603 3,133
Share based payments 213 120
Foreign exchange (gains)/losses 50 (40)
Research and development expenditure credit (8) 14
Total government grants received (8) 14
Development expenditure was also capitalised in each year as shown in note 12.
Auditor's remuneration:
Audit of the Company and Company financial statements - current year 80 53
11 -
- previous year
Non-audit services 20 83
Total Fees payable to the Company's auditor 111 136
6. Information regarding directors and employees
Employees
The aggregate remuneration of employees comprised:
2023 2022
£'000
£'000
Wages and salaries 8,727 6,601
Social security costs 989 679
Other pension costs 1,042 777
Share based payments 213 46
10,95311
Total 10,971 8,103
Average number of employees
The monthly average number of employees in the year was:
2023 2022
Administration 16 10
Marketing 6 5
Research, development and technical 146 102
Total 168 117
6. Information regarding directors and employees - continued
Directors' remuneration
2023 2022
£'000 £'000
Directors' remuneration - aggregate emoluments 825 378
Company pension contributions in respect of 3 (2022:2) directors 66 12
Share based payments 146 -
1,037 390
Remuneration of the highest paid director 231 140
Company pension contributions 20 5
Share based payments - -
251 145
Key management is defined as those persons having authority and responsibility
for planning, directing, and controlling the activities of the Company, and
was considered to be only the executive directors with compensation as
disclosed above.
7. Interest income
2023
2022
£'000 £'000
Bank interest receivable 7 25
7 25
8. Interest expense
2023 2022
£'000
£'000
Interest on bank and other borrowings 565 461
Lease liability financing charges 201 15
Interest on conversion of convertible loan note - 47
Other interest 19 42
785 565
9. Taxation on profit
2023
2022
£'000 £'000
Current taxation
UK corporation tax credit 2,064 1,293
Foreign tax charge (159) (71)
1,905 1,222
Deferred taxation
Origination and reversal of timing differences 160 (539)
Charge due to change in tax rate - -
160 (539)
Tax credit on profit 1,745 683
Factors affecting the tax credit for the year
The tax credit on the profit/(loss) for the year differs from applying the
standard rate of corporation tax in the UK of 20% (2022: 19%). The differences
are reconciled below:
2023
2022
£'000
£'000
Profit/(loss) before taxation 47 (534)
Corporation tax at standard rate (2023:20%, 2022 19%) 9 (102)
Factors affecting charge for the year:
Disallowable expenses 164 135
Allowances and enhanced deductions (966) -
Research and development allowances (1,940) (1,205)
Reduced rate on surrender of R&D losses for tax credit 762 360
RDEC expenditure credit (62) -
Foreign tax charges 85 -
Deferred tax 160 -
Share options 43 -
Charge due to change in tax rate - 129
Tax credit on profit/(loss) (1,745) (683)
10. Earnings per share
2023
2022
Profit used in calculating EPS (£'000) 1,792 149
Number of shares for basic EPS ('000s) 75,833 75,232
Basic earnings per share (pence) 2.36 0.20
Number of shares for diluted EPS ('000s) 77,874 76,106
Diluted earnings per share (pence) 2.30 0.20
Adjusted Earnings per share
2023
2022
Adjusted Profit used in calculating EPS (£'000) 1,877 848
Number of shares for basic EPS ('000s) 75,833 75,232
Adjusted basic earnings per share (pence) 2.47 1.13
Number of shares for diluted EPS ('000s) 77,874 76,106
Adjusted diluted earnings per share (pence) 2.41 1.11
There are 424,440 of exercisable share options over ordinary shares
respectively which are potentially dilutive to profit.
As part of the company's 2022 long term incentive plan, share options over
6,684,300 Ordinary shares and warrants over 450,000 Ordinary shares are
potentially dilutive to profit.
11. Property, plant and equipment
Right-of-use property Leasehold improvements Office equipment Right-of-use Computer Total
equipment
equipment
Group £'000 £'000 £'000 £'000 £'000 £'000
Cost 194 - 56 174 321 745
At 1 June 2021
Additions - - 142 - 134 276
Exchange adjustments 19 - - - - 19
At 31 May 2022 213 - 198 174 455 1,040
Depreciation (112) - (46) (100) (225) (483)
At 1 June 2021
Charge for the year (29) - (23) (25) (83) (160)
Exchange adjustments (15) - - - - (15)
At 31 May 2022 (156) - (69) (125) (308) (658)
Net book value 57 - 129 49 147 382
At 31 May 2022
Cost
At 1 June 2022 213 198 174 455 1,040
-
Additions 1,825 240 45 423 110 2,643
Exchange adjustments - - (3) - (2) (5)
At 31 May 2023 2,038 240 240 597 563 3,678
Depreciation
As at June 2022 (156) - (69) (125) (308) (658)
Charge for the year (211) (24) (43) (79) (97) (454)
Exchange adjustments - - - - - -
At 31 May 2023 (367) (24) (112) (204) (405) (1,112)
Net book value
At 31 May 2023 1,671 216 128 393 158 2,566
Company Right-of-use property Leasehold improvements Office equipment Right-of-use Computer Total
equipment
equipment
£'000 £'000 £'000
£'000
£'000 £'000
Cost - - 52 126 347 525
At 1 June 2021
Additions - - 96 - 78 174
At 31 May 2022 - - 148 126 425 699
Depreciation -
At 1 June 2021 - - (43) (92) (221) (356)
Charge for the year - - (19) (26) (70) (115)
At 31 May 2022 - - (62) (118) (291) (471)
Net book value - - 86 8 134 228
At 31 May 2022
Cost
At 1 June 2022 - - 148 126 425 699
Additions 1,825 241 41 423 103 2,633
At 31 May 2023 1,825 241 189 549 528 3,332
Depreciation
At 1 June 2022 - - (62) (118) (291) (471)
Charge for the year (183) (24) (35) (79) (81) (402)
At 31 May 2023 (183) (24) (97) (197) (372) (873)
Net book value
At 31 May 2023 1,643 217 92 352 156 2,459
12. Intangible assets
Group and Company Development Software Intellectual property Total
costs £'000 £'000 £'000
£'000
Cost 7,471 - - 7,471
At 1 June 2020
Additions 1,672 123 - 1,795
At 31 May 2021 9,143 123 - 9,266
Amortisation and impairment (627) - - (627)
At 1 June 2020
Charge for the year (110) (4) - (114)
Impairment in the year (2,019) - (2,019)
At 31 May 2021 (2,756) (4) - (2,760)
Net book value
At 31 May 2021 6,387 119 - 6,506
Cost 9,143 123 - 9,266
At 1 June 2021
Additions 2,241 - - 2,241
At 31 May 2022 11,384 123 - 11,507
Amortisation and impairment
At 1 June 2021 (2,756) (4) - (2,760)
Charge for the year (148) (23) - (171)
Impairment in the year - - - -
At 31 May 2022 (2,904) (27) - (2,931)
Net book value
At 31 May 2022 8,480 96 - 8,576
Cost 11,384 123 - 11,507
At 1 June 2022
Additions 4,094 - 39 4,133
At 31 May 2023 15,478 123 39 15,640
Amortisation and impairment
At 1 June 2022 (2,904) (27) - (2,931)
Charge for the year (248) (24) (4) (276)
Impairment in the year - - - -
At 31 May 2023 (3,152) (51) (4) 3,207
Net book value
At 31 May 2023 12,326 72 35 12,433
Capitalised development expenditure relates to developed intellectual property
in respect of circuit and chip design.
The recoverable amount of a cash generating unit (CGU) is assessed using a
value in use model across each individual project that forms the intellectual
property that has been capitalised. The value in use for each portion is
dependent on the envisaged life cycle of the CGU using a discount factor of
11.50% (2022:10%), being the cost of capital for the CGU.
13. Investments in subsidiaries
Company 31 May 2023 31 May 2022
£'000 '£000
Investments in subsidiaries at 1 June 68 -
Investment in EnSilica Do Brasil Sociedade Unipessoal Limitada - 68
Investment in EnSilica GMBH 21 -
EnSilica India Private Limited - -
Total 89 68
Name Country of incorporation Nature of business Proportion of Ordinary shares directly held
EnSilica India Private Limited India Semiconductor design consultants 99.99%
Registered office: No.2064, 2(nd) floor, Siri Iris, 24(th) Main,
1st Sector, HSR layout, Bangalore, 560 102
EnSilica ADAS Limited UK Semiconductor design consultants (dormant) 100.00%
Registered office: Building 3 115 Olympic Avenue, Milton
Park, Abingdon, Oxfordshire, United Kingdom, OX14 4SA
EnSilica Do Brasil Sociedade Unipessoal Brazil Semiconductor design consultants 100.00%
Limitada
Registered office: 6681 Av Ipiranga, Sala 1009 Preio 99,
Partenon, Porto Alegre, Rio Grande do Sul, Brasil
EnSilica Germany GMBH Germany Semiconductor design sales office 100.00%
Registered Office: c/o Steuerberaterin Renate Schnürch, Nymphenburger Straße
1, 80335 Munich
On 18 July 2022 the company invested 25,000 Euros in consideration for a 100%
interest in the share capital of EnSilica GMBH, with a registered office
situated at EnSilica Germany GmbH, c/o Steuerberaterin Renate Schnürch,
Nymphenburger Straße 1, 80335 Munich
14. Inventories
31 May 2023 31 May 2022
Group and Company £'000
£'000
Raw materials and consumables 304 215
No impairment losses have been recorded in respect of inventory in the period.
15. Trade and other receivables
31 May 2023 31 May 2022
Group £'000
Current
Trade receivables 3,893 1,541
Other receivables 807 458
Prepayments 483 248
Accrued income 1,842 1,010
Total 7,025 3,257
Analysis of expected credit losses is included in note 22.
Company
31 May 2023 31 May 2022
£'000 £'000
Current
Trade receivables 3,893 1,297
Other receivables 497 357
Receivable from subsidiary undertakings 271 245
Prepayments 483 245
Accrued income 1,842 1,010
Total 6,985 2,909
Analysis of expected credit losses is included in note 22.
16. Cash and cash equivalents
31 May 2023 31 May 2022
Group £'000 £'000
Cash at bank and in hand 3,095 5,742
Company
Cash at bank and in hand 2,903 5,655
17. Borrowings
Group and Company 31 May 2023 31 May 2022
£'000 £'000
Current
Bank loans 883 800
Non-current
Bank loans 3,284 4,166
4,1674
Total 4,167 4,966
A bank loan of £1,657,000 (2022: £2,068,000) is secured by fixed and
floating charges over the assets of the group and bears interest at rates of
8% over SONIA or 10% if higher. It is repayable in monthly instalments over
the period to August 2026.
A loan of £2,662,000 (2022: £3,088,000) is unsecured and bears interest at a
fixed rate of 13%. It is being repaid by quarterly instalments over the period
to October 2027.
The loan liabilities are stated net of unamortised loan issue costs as at 31
May 2023 of £152,000 (2022: £189,000) which are being amortised over the
period to the loan repayment dates.
18. Lease liabilities
The Company has entered into lease contracts in respect of property in the
jurisdictions from which it operates, and the use of equipment which are
typically for terms of 3 to 5 years. In respect of options to extend the
initial period these are factored into the liabilities where the Company plans
to use these for a longer period. For property leases, it is customary for
lease contracts to be reset periodically to market rental rates. Leases of
equipment comprise only fixed payments over the lease terms.
Right of use assets, additions and amortisation are included in note 11.
Interest expenses relating to lease liabilities are included in note 8.
The amounts relating to leases were as follows:
Group 31 May 2023 31 May 2022
£'000 £'000
Short term lease expense 257 100
Cash outflow for capitalised leases 169 109
Total cash outflow from leases 426 209
Company
Short term lease expense 233 90
Cash outflow for capitalised leases 130 72
Total cash outflow from leases 363 162
The maturity of lease liabilities were as follows:
Group 31 May 2023 31 May 2022
£000 £'000
Within 1 year 171 88
1-2 years 193 105
2-5 years 1,911 -
Total 2,275 193
Company
Within 1 year 146 40
1-2 years 193 47
2-5 years 1,911 41
Total 2,250 128
19 Trade and other payables
31 May
2023
31 May 2022
Group
£'000
£'000
Current
Trade payables 2,388 919
Taxation and social security 281 227
Other payables 161 75
Accruals 1,293 1,156
Contract liabilities 600 14
Total 4,723 2,391
31 May
2023
31 May 2022
Company
£'000
£'000
Current
Trade payables 3,324 1,620
Taxation and social security 236 200
Other payables - 8
Accruals 1,483 1,018
Contract liabilities 600 14
Total 5,643 2,860
The carrying amounts of trade and other payables are considered to be the same
as their fair values, due to their short-term nature.
In the year ended 31 May 2023 £14,000 of revenue was recognised in respect of
contract liabilities at 31 May 2022 (year ended 31 May 2022: £859,000 in
respect of liabilities at 31 May 2021).
20. Provisions
31 May 2023 31 May 2022
At 31 May 2022 140 95
Foreign exchange revaluation (6)
Gratuity redeemed (3) (7)
Provided in year 68 52
Overseas employee provisions 199 140
The provision relates to the liability under the Government of India Gratuity
Act in respect of payments to employees on cessation of service in respect of
death or disability or otherwise after more than 5 years' service.
21. Deferred tax liabilities
Intangible assets Accelerated capital Tax losses Other Total
allowances
£'000 £'000 £'000 £'000 £'000
At 31 May 2021 1,596 64 (173) (313) 1,174
Charge/(credit) for the year 524 15 - - 539
Debited to equity in the year - - - - (1,713) (1,713)
At 31 May 2022 2,120 79 (173) (2,026) -
Charge/(credit) for the year 952 - - (792) 160
At 31 May 2023 3,072 79 (173) (2,818) 160
Deferred tax has been recognised at an average rate of 25% (2022: 25%).
22. Financial Instruments
Financial risk management
The determination of financial risk management policies and the treasury
function is managed by the CFO. Policies are set to reduce risk as far as
possible without unduly affecting the operating effectiveness of the Company.
The Company's activities expose it to a variety of financial risks, the most
significant being credit risk, liquidity risk and interest rate risk together
with a degree of foreign currency risk as discussed below.
Categories of financial instruments
The Group has the below categories of financial instruments:
Recognised at amortised cost 31 May 2023 31 May 2023
£'000 £'000
Cash and bank balances 3,095 5,742
Trade receivables - net 3,893 1,541
Accrued income 1,842 1,010
Other receivables 807 457
Total financial assets 9,637 8,750
Trade payables 2,388 919
Other payables 1,454 1,231
Bank loans 4,167 4,966
Total financial liabilities 8,009 7,116
There were no assets or liabilities at 31 May 2023 or 2022 that were
recognised and measured at fair value in the financial information
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss for the Company. Financial
instruments, which potentially subject the Company to concentration of credit
risk, consist primarily of cash and cash equivalents, trade accounts
receivable and accrued income.
The Company places its cash and cash equivalents with major financial
institutions, which management assesses to be of high-credit quality in order
to limit the exposure of each cash deposit to a minimal level.
Trade receivables
Trade accounts receivable are derived primarily from design income and have
0-45 day payment terms, most commonly 30 days. The largest customer accounts
for 31% of the balance at 31 May 2023 (2022: 25%) of the trade receivable
balance as a result of the invoices relating to design projects with a
significant element being in advance of the design services being carried out.
Credit risk with respect to accounts receivable is otherwise dispersed across
a number of customers. Collateral is not required for accounts receivable. The
credit worthiness of customers with balances in trade receivables not yet due
has been assessed as high.
The ageing of trade receivables according to their original due date is
detailed below:
31 May 2023 31 May 2022
£'000 £'000
Not yet due 3,452 1,179
1-30 days past due date 454 229
Over 30 days past due date (13) 133
Total 3,893 1,541
The expected credit loss on balances is considered immaterial.
Other receivables and accrued income are considered to bear similar risks to
trade receivables. Hence any expected credit loss on other financial assets is
considered to be immaterial.
Liquidity risk
The Company funds its business through bank and other loans and from cash
generated from operations including the payment terms with customers to fund
larger design projects. Details of the Company's borrowings are discussed in
note 17. The Company monitors and manages cash within its banking facilities
to mitigate any liquidity risk it may face. The following table shows the
Company's contractual maturities of financial liabilities based on
undiscounted cash flows including interest charges and the earliest date on
which the Company is obliged to make repayment:
At 31 May 2022 Less than one year 1-2 years 2-5 years More than 5 years Total
£'000 £'000 £'000 £'000 £'000
Trade and other payables 2,151 - - - 2,151
Bank loans 1,383 1,390 3,722 396 6,891
Lease liabilities 98 71 54 - 223
Total 3,632 1,461 3,776 396 9,265
Less than one year 1-2 years 2-5 years More than 5 years Total
At 31 May 2023 £'000 £'000 £'000 £'000 £'000
Trade and other payables 2,388 - - - 2,388
Bank loans 1,390 1,390 3,327 - 6,107
Lease liabilities 389 398 1,197 1,408 3,392
Total 4,167 1,788 4,524 1,408 11,887
Interest rate risk
The bank loan of £1.657 million is subject to interest at rates of 8% over
SONIA if this exceeds 10%. A 1% increase in interest rates would therefore
have a £16,570 impact per annum on finance costs at current base rates.
The other bank loan bears interest at a fixed rate of 13%. A 1% increase in
interest rates would therefore have had no impact on finance costs at current
base rates.
Currency risk
The Company operates from the UK with sterling being its functional currency
and has a degree of exposure to foreign currency risk, with this predominantly
being income and expenses in US dollars together with Indian rupees in respect
of both income and operational activity in the Indian subsidiary. The impact
of a 10% fluctuation in all foreign exchange rates moving in the same
direction against GBP has been assessed to be an overall impact of
approximately £99,000 as mitigated by some matching of income and expenses
together with the relatively short payment terms for accounts receivable
(including the USD balance at 31 May 2023).
The net underlying foreign currency balances, comprising overseas assets
and liabilities, cash, receivables and payables in the UK, in the Company
statement of financial position by underlying currency at the year-end were:
USD Euro INR Total
£'000 £'000 £'000 £'000
At 31 May 2021 1,644 892 605 3,141
At 31 May 2022 1,453 352 388 2,193
At 31 May 2023 2,612 1,482 352 4,446
Capital management
The Company's capital comprises share capital and retained earnings. The
Company's objectives when maintaining capital are:
To safeguard the entity's ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other
stakeholders and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The capital structure of the Company consists of shareholders equity as set
out in the consolidated statement of changes in equity. The longer term
funding requirements for development have been financed from term bank debt.
All working capital requirements are financed from existing cash resources.
The Company sets the amount of capital it requires in proportion to risk in
conjunction with the retained earnings. The Company manages its capital
structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to
maintain or adjust the capital structure, the Company may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new
shares, or sell assets to reduce debt.
23. Share capital
Allotted, called up and fully paid At 31 May 2023 At 31 May 2022
£'000 £'000
1,700,000 A ordinary shares of £0.001 each - -
273,000 B ordinary shares of £0.001 each - -
78,115,158 (2022:75,231,809) ordinary shares of £0.001 each 78 75
59,190 (2022: 59,190) Deferred shares of £1.00 each 59 59
137 134
On 14 March 2023, the Company announced a retail offer to existing
shareholders to raise £2.0 million before expenses via a placing of 2,857,143
new Ordinary shares. The new Ordinary shares are credited as being fully paid,
rank pari passu and carry rights to dividends, distribution of capital upon
winding up and the right to receive notice of, attend, speak and vote at a
general meeting.
Subsequently, on 15 March 2023, the Company announced a supplementary retail
offer to raise up to £0.5 million before expenses via a placing at 70 pence
per new Ordinary share. The results of the offer led to the issuance of 26,206
new Ordinary shares, raising £18,344.20 before expenses. The new Ordinary
shares are credited as being fully paid, rank pari passu and carry rights to
dividends, distribution of capital upon winding up and the right to receive
notice of, attend, speak and vote at a general meeting.
24. Share based payment
In the previous year, options were granted in May 2022 to directors and
employees under the new 2022 LTIP scheme over 6,461,500 ordinary shares at an
exercise price of £0.50 per share. These are subject to performance
conditions in respect of earnings per share for the year ending 31 May 2025.
The share based payment charges for these options was calculated at a fair
value of 18 pence each using a Black Scholes share pricing model with 50%
volatility, 2% risk free rate and 3.5 year vesting period assumptions.
Options were also granted in May 2022 over 200,000 ordinary shares to
non-executive directors at an exercise price of £0.50 subject only to a 4
year vesting period. A fair value of 19 pence per share has been calculated
using a Black Scholes share pricing model with 50% volatility, 2% risk free
rate and 4 year vesting period assumptions.
In the current year options were granted in December 2022 to employees under
the new 2022 LTIP scheme over 395,800 ordinary shares at an exercise price of
£0.895 subject to a 2.5 year vesting period. These are subject to performance
conditions in respect of earnings per share for the year ending 31 May 2025
where the percentage of the amount of option that will vest depends on the
following sliding scale:
Earnings per share Options to vest
Less than 2p 0%
2p 25%
Greater than 2p but less than 5p 25 to 75% pro rate
Between 5-6.5p 75 to 100% pro rate
Greater than 6.5p 100%
The options have an expiry on the tenth anniversary of the date of the grant.
The share based payment charges for these options have been calculated at a
fair value of 29 pence each using a Black Scholes share pricing model with 50%
volatility, 4% risk free rate and vesting period assumptions of between 2.5
and 3 years.
A separate scheme operates in respect of the non-executive directors that are
not subject to a performance period and will vest 33.33% on the second
anniversary of the date of the grant and 66.67% on the fourth anniversary of
the date of the grant, with a similar 10 year lifespan from date of grant.
At 31 May 2023 none of the share options had vested, and none remained
exercisable at the year-end date.
A share based payment charge of £213,000 (2022: £46,000) has been recognised
in the statement of comprehensive income.
Average Exercise D options 2022 LTIP scheme Non-executive options
Price Number Number Number
Share options outstanding at 31 May 2021 £0.001 811,000 - -
Exercised in May 2022 £0.001 (718,000) - -
Remaining options aligned to new ordinary share structure £0.001 331,440 - -
Share options granted during the year £0.50 - 6,461,500 200,000
Share options outstanding at 31 May 2022 £0.47 424,440 6,461,500 200,000
Options lapsing in the year £0.50 - (373,000)
Share options granted during the year £0.895 - 395,800 -
Share options outstanding at 31 May 2023 £0.49 424,440 6,484,300 200,000
The weighted average exercise price for all options is £0.49 at 31 May 2023
(£0.47 per share at 31 May 2022) and the average remaining vesting period was
estimated at 2 years at 31 May 2023 (2022: 3 years).
There are also arrangements in place under which employees have an option to
buy existing shares from certain shareholders at £0.50 per share. These will
not impact the company nor dilute shareholdings and are considered outside the
scope of share based payment accounting.
During the previous year, warrants were issued to the listing advisers over
450,000 ordinary shares at an exercise price of £0.50, exercisable in the 3
years following the date of admission to AIM. The share based payment of
£74,000 in respect of the services was calculated at a fair value of 17 pence
per share using a Black Scholes model with 50% volatility, 2% risk free rate
and immediate vesting period assumption, and relates to expenses that have
been charged to the share premium account with no impact on the income
statement.
The weighted average exercise price for the warrants is £0.50 at 31 May 2023.
Exercise price Ordinary shares
Exercisable at 01 June 2022 brought forward 450,000
Warrants issued over Ordinary shares in year Nil
Exercisable at 31 May 2023 450,000
25. Share premium
31 May 2023
31 May 2022
Group and Company £'000
£'000
At 1 June 6,900 -
Conversion of loan notes into ordinary shares - 1,419
Issue of new shares 2,015 5,988
Expenses relating to share issue (163) (507)
Total 8,752 6,900
The net proceeds of the Fundraising are to be used primarily to develop
further the Company's depth and strength of offering. As well as providing the
Company with funds it will enhance both transparency and the international
profile of the Company with customers, allow the Company to access equity
capital to fund growth and support potential M&A opportunities, and enable
the Company to attract, recruit and retain key employees.
Share issue costs relate to commissions charged and other directly
attributable costs of the fundraise exercise.
26. Post balance sheet events
There have been no events since the year end that warrant specific mention in
the Company's financial statements at 31 May 2023.
27. Related party transactions
During the year the company undertook transactions with the following related
parties:
2023 2022
Name Services Transactions Balance owing/(owed) at Transactions Balance owing/(owed) at
during the year 31 May 2023 during the year 31 May 2022
£'000 £'000
£'000 £'000
EnSilica India Private Limited Semiconductor design 1,282 Nil 1,428 Nil
services
Semiconductor design 1,187 Nil 614 Nil
EnSilica Do Brasil Sociedade Unipessoal Limitada services
EnSilica GMBH Semiconductor sales services 271 (271) - -
Non-Executive Directors services prior to Company appointment:
Hexameter Services Limited Consultancy services - Nil Nil 14 Nil
D Tilston
Janet Collyer Consultancy services Nil Nil 14 Nil
Details of Directors' remuneration for services during the year is separately
disclosed as part of the remuneration committee report.
28. Non-controlling interests
A non-controlling interest exists for the Company's subsidiary EnSilica India
Private Limited, where 1 shareholder holds 1 share in the Company,
representing 0.002% of the issued share capital.
The summarised results of the company are shown below:
2023
2022
£'000
£'000
Current assets 1,460 1,236
Non-current assets 34 67
Current liabilities (95) (319)
Non-current liabilities (199) (167)
1,200 817
Equity attributable to owners of the Company 1,200 817
Non-controlling interests -
Revenue 1,536 2,251
Expenses 1,108 (1,940)
Profit for the year 428 311
Profit attributable to the owners of the Company 428 311
Profit attributable to the non-controlling interests - -
Profit for the year 428 311
29. Reserves
Retained earnings
Retained earnings includes all current and prior year retained profits and
losses attributable to the owners of the parent company.
Currency translation reserve
The currency translation reserve includes all translation differences that
arise from the conversion of the financial statements of the Company's foreign
subsidiary entities into pound sterling (£).
Share premium account
The share premium account includes the amount by which a share has been issued
in excess of its nominal value. The account has also been used to offset costs
in relation the raising of funds via a share issue (note 25).
Glossary of Terms
5G The fifth generation technology standard for broadband cellular networks,
which cellular phone companies began to deploy worldwide in 2019.
Analog A type of signal in an electronic circuit that takes on a continuous range of
values rather than only a few discrete values
ADAS Advanced driver-assistance systems
AGM Annual General Meeting of the Company's shareholders
AI Artificial Intelligence
ASIC An application-specific integrated circuit is an integrated chip,
custom-designed for a specific application
ASSP Applications Specific Standard Part
Beamforming Beamforming or spatial filtering is the technique used in antenna for
directional signal transmission or reception. This is achieved by combining
elements in an array of elements in such a way that signals at particular
angles experience constructive interference whilst others experience
destructive interference. Beamforming is used in Radar, 5G antenna and
satellites, it allows the focusing of one or more beams to improve the
sensitivity of the system.
CAGR Compound Annual Growth Rate, a method of assessing the average growth of a
value over time.
CEO Chief Executive Officer
CFO Chief Financial Officer
Chip Electronic integrated circuit
CMOS complementary metal-oxide semiconductor
Digital A type of signal used to transit information that has only discrete levels of
some parameter ("usual voltage").
DSE Display Screen Equipment
EBIT Earnings before interest and taxes (also known as operating profit)
EBITDA Earnings before depreciation, amortisation, interest and taxes
ESG Environmental, Social and Governance
Fabless A company that design and delivers semiconductors by outsourcing the
fabrication ("manufacturing") process.
Foundry A manufacturing plant where silicon wafers are produced.
Group The Company and its subsidiaries
IC Integrated Circuit. An electronic device with numerous components on a
single chip.
IFRS International Financial Reporting Standards
IP Intellectual Property
IPO Initial Public Offering
Ka or Ka-band A portion of the microwave part of the electromagnetic spectrum defined as
frequencies in the range 26.5 to 40 gigahertz (GHz).
KPIs Key performance indicators, a range of indicators to assess performance, to
ensure performance is aligned to strategy and to ensure continued alignment
with shareholder interests.
LTIP Long Term Incentive Plan
Mixed Signal A combination of analog and digital signals being generated, controlled or
modified on the same chip.
mmWave Millimetre wave; the band of radio frequencies in the electromagnetic spectrum
from 30 to 300 gigahertz (GHz) often used for Satellite, 5G and Radar systems.
These are also microwave frequency bands.
NRE Non-Recurring engineering cost
OEM Original equipment manufacturer; such as car manufacturers or complex products
which include sub-systems from other suppliers.
OSAT Outsourced semiconductor assembly and test
QCA The Quoted Companies Alliance
R&D Research and development
RF Radio frequency
SIG Special Interest Group
Semiconductor A base material halfway between a conductor and an insulator, which can be
physically altered by mixing in certain atoms. Semiconductors form the basis
for present-day electronics.
SoC System-on-Chip. An integrated circuit with all the necessary electronic
circuits and parts for a given system.
Tape-Out A major milestone in every ASIC project lifecycle representing the transition
between the design phase and the manufacturing phase. It means the design
phase is completed and you are ready to send out the design files to the Fab
for mask generation and production.
Wafer A slice of silicon from a 4, 5, 6 or 8 inch diameter silicon bar and used as
the foundation on which to build semiconductor products
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FZMGGLLVGFZMRecent news on EnSilica
See all newsREG - EnSilica PLC - Holding(s) in Company
AnnouncementREG - EnSilica PLC - Contract Update
AnnouncementRCS - EnSilica PLC - EnSilica Establishes Engineering Hub in Cambridge
AnnouncementRCS - EnSilica PLC - New Satellite User Terminal Chips
AnnouncementRCS - EnSilica PLC - Investor Event - Mello 2025
Announcement