REG - Sondrel (Holdings) - Final Results for the Year Ended 31 December 2022
24/05/2023 07:00
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RNS Number : 4088A Sondrel (Holdings) plc 24 May 2023
For immediate release 24 May 2023
Sondrel (Holdings) plc
("Sondrel", the "Company" and together with its subsidiaries the "Group")
Final Results for the Year Ended 31 December 2022
Strong financial and operational progress; positive outlook
Sondrel (Holdings) plc (AIM:SND), the fabless semiconductor business providing
turnkey services in the design and delivery of 'application specific
integrated circuits' ("ASICs") and 'system on chips' ("SoCs") for leading
global technology brands, is pleased to announce its audited full year results
for the year ended 31 December 2022 ("FY 22").
Financial Highlights
· Revenue up 116% to £17.5 million (FY 21: £8.1 million),
exceeding pre-pandemic levels
· Record new orders received, with growth of over 130% YoY FY22
£25.6 million (FY21: £10.8 million) and providing strong visibility over
FY23 revenue
· ASIC revenues growth of 313% YoY, representing 73% of total revenues
(FY 21: 38%)
· Adjusted EBITDA of £1.1 million (FY 21: loss of £2.5 million)
· Adjusted Loss Before Tax (excl amortisation and IPO costs) of £2.6
million (FY 21: loss £3.4 million)*(see note 4)
· Cash balance at year end £4.4 million (FY 21: £(1.2) million)
· Repayment in FY22 of £1.8m of debt (FY21: nil) - Group is now
debt free
· Net assets of £8.5million (FY21 £(6.6) million)
Operational Highlights
· Successful IPO on AIM in October 2022, raising £20 million excl
costs
· Record new design orders received in the automotive, Edge AI,
mobile, networking, and aerospace markets totalling £25.6 million
· Significant progress made both during 2022 and the start of 2023
in respect of a material turnkey ASIC engagement secured in Q2 2022 for a Tier
1 OEM Automotive customer
· Extended key partner software supply relationships for a further
three years
· Expanded US sales operation
Post Period End Highlights
· Maiden post IPO tapeout of an ASIC design for a leading provider
of Edge AI Hardware Accelerator solution
· Successful design tapeout for a leading provider of home network
devices, estimated to be worth £1.8 million in FY 23
Outlook
· New design wins in line with Board expectations, delivering a
strong increase in the pipeline for volume supply
· Strong design pipeline identified for 2023 providing good
visibility of future growth
Graham Curren, Chief Executive Officer of Sondrel, commented:
"I am delighted to present our first set of results since our IPO on AIM with
the strong increase in revenue clearly demonstrating the significant potential
of our full-service ASIC offering. Our focus on end markets that are
supported by enduring megatrends, including high performance computing,
automotive, artificial intelligence, VR/AR, video analytics, image processing,
mobile networking and data centres, means Sondrel is well positioned for
material future growth.
"With a strong pipeline of new designs, continued progress on tapeouts and
prototyping, and the near-term benefit of production revenues, I am incredibly
excited about our future growth prospects and look forward to updating
shareholders as we progress to our medium-term target of revenues of over
£100 million."
Analyst presentation
There will be an in-person presentation for analysts at 9:30 a.m. (BST)
today. If you would like to join, please contact Buchanan at
sondrel@buchanan.uk.com (mailto:sondrel@buchanan.uk.com)
This announcement contains inside information as stipulated under the UK
version of the Market Abuse Regulation No 596/2014 which is part of English
Law by virtue of the European (Withdrawal) Act 2018, as amended. On
publication of this announcement via a Regulatory Information Service, this
information is considered to be in the public domain.
- Ends -
FOR FURTHER ENQUIRIES:
Sondrel (Holdings) plc Via Buchanan
Graham Curren, CEO Tel: +44 (0) 20 7466 5000
Joe Lopez, CFO
Cenkos Securities plc Tel: +44 (0)20 7397 8900
Ben Jeynes / Katy Birkin / George Lawson - Corporate Finance
Alex Pollen / Michael Johnson - Sales
Buchanan Communications Tel: +44 (0) 20 7466 5000
Chris Lane sondrel@buchanan.uk.com (mailto:sondrel@buchanan.uk.com)
Stephanie Whitmore
Jack Devoy
Abby Gilchrist
About Sondrel
Sondrel is a UK-based fabless semiconductor company specialising in high end,
complex digital Application Specific Integrated Circuits (ASICs) and System on
Chips (SoCs). It provides a full turnkey service in the design, prototyping,
testing, packaging and production of ASICs and SoCs.
The Company is one of only a few companies capable of designing and supplying
the higher-spec chips built on the most advanced semiconductor technologies,
selling into a range of hyper growth end markets such as high-performance
computing, automotive, artificial intelligence, VR/AR, video analytics, image
processing, mobile networking and data centres. Sondrel designs have enabled
products by leading technology brands including Apple (iPhone), Sony
(PlayStation), Meta's (Oculus), Samsung, Google and Sony smartphones, JVC
(prosumer camcorders), Tesla and Mercedes-Benz cars.
Sondrel is well-established, with a 20-year track record of successful
delivery, supported by long standing ecosystem partnerships including Arm,
TSMC and Samsung. Headquartered in the UK, Sondrel has a global presence with
offices in UK, USA, China, India and Morocco.
For more information please visit: www.sondrel.com (http://www.sondrel.com/)
Chairman's statement
In this first Chairman's Statement since Sondrel became a publicly listed
business on 21st October 2022, I would like to begin with words of thanks.
Firstly, the international Sondrel team contributed so much to ensure we
achieved the IPO, not just in 2022, but over the years since formation,
building the company from a start-up to a highly regarded and globally
recognised chip design leader. The IPO is already enabling us to attract
further talent to continue to drive strong growth. The dedication of our
employees no doubt played a significant role in the strong investor interest
throughout the IPO process and beyond, and we welcome and appreciate the
support shown by all shareholders, both before and after the IPO. The IPO
has also resulted in us gaining three extremely talented NEDs whose wise
counsel and business acumen is already adding great value to the company.
World events during 2022 clearly affected the business environment. However,
as is usually the case with technology-based businesses, Sondrel's target
market continued to invest in new designs and to plan further new products. As
a consequence, Sondrel's orders increased by 137% during the year to £25.6m
and sales revenue by 116% to £17.5m. We secured a number of contracts that
will yield material production-based revenues, thus successfully delivering a
key, strategic goal. The revenue in respect of these contracts will begin
later in 2023, and will then increase in the following years. When undertaking
such complex projects, customers occasionally seek changes to meet new
requirements. Although all additional work undertaken is reflected in the
final project revenue, such changes can result in a milestone payment slipping
to the next quarter, as happened to a large automotive design in Q4 2022,
totalling £4m, leading to a reduction in year-end cash to £4.4m.
As our customers are based all around the globe, Sondrel's operations have
been built to optimally service the leading-edge, technological needs of those
customers. Hence, 2022 saw strengthening of our teams, particularly in India
and Morocco. We also ensure that our teams have a diverse and inclusive
culture, for example our Moroccan team now comprises 27% female engineers.
Members of these global teams continued to deliver high quality designs and to
enhance our capabilities through R&D programmes that keep us at the
forefront of chip design. These programmes and the ongoing upskilling of our
teams enable us to target the most advanced chip designs in growth markets
such as AI, autonomous driving, networking and video processing.
The Board is mindful of its duty to consider the wider needs of society. In
that context, Sondrel has a long track record of connecting with the local
communities in which it operates and takes a particular interest in
education. We plan to further enhance this commitment in line with the
growth of the company. In addition, our expertise in power management greatly
assists our customers' drive to reduce energy consumption.
The Board is positive about Sondrel's outlook for the future and is ensuring
we undertake robust debates on all key operational and strategic matters to
drive sustainable, long-term growth. This perspective is supported by the
increased recognition by governments and businesses in diverse sectors, of the
critical role advanced semiconductor designs play in the modern world. Hence,
despite the current economic challenges, the Board remains confident that
Sondrel's core business model and team will deliver success in the years
ahead.
Nigel Vaughan
Independent Non-Executive Chairman
23 May 2023
CEO's statement
Introduction
In sharing our first set of results as a newly quoted public company, I am
delighted to report that, in what has been a monumental year for our business,
we have produced extremely strong results in all key areas. Not only have we
made significant operational progress, we have also delivered strong growth,
reflecting the underlying strength of Sondrel and our business model. Over the
last 12 months, we have developed a substantial order book, coupled with a
successful listing on the AIM market of the London Stock Exchange, alongside
celebrating our 20th anniversary. I'm especially pleased to see such a strong
adoption of our ASIC supply services by customers old and new.
Our progress has also been reflected in our financial performance across FY
2022, with revenues increasing 116% to £17.5 million (2021: £8.1 million),
alongside record new orders received, with growth of over 130% YoY.
We are focused on driving the accelerated growth of Sondrel in the coming
years. Our business is built upon a small number of high value projects,
executed in very close partnership with the likes of ARM, Synopsys and TSMC,
and with our suppliers and customers. This approach gives me great
confidence that we will be delivering excellent growth over the next couple of
years, as we can see strong customer demand from new and repeat customers.
Like every company we have challenges to overcome. Technology in
semiconductors moves fast so we need to invest in and accelerate our R&D
programme. We need to strive harder to meet and exceed our customers' demands
and we need to give our employees a great place to work. Our three goals for
2023 are to ensure robust financial management, delight all of our
stakeholders (customers, employees, shareholders and partners), and to achieve
operational excellence in every department. Achieving these three objectives
is what drives us all forwards.
As we move into 2023, I have enjoyed getting out to see our customers and
employees in remote sites in person again. There are many customers and people
in the company that I have never met personally, and whilst video conferencing
has made a positive contribution to much of communication, there is no
substitute for in-person contact. As a distributed company, we also of course
need to be aware of the carbon footprint associated with air travel so we
expect to be travelling less than a few years' ago, but we still need to see
people in person.
The ASIC market and its growth trajectory
Sondrel is a UK founded and headquartered fabless semiconductor business
providing turnkey services and the supply of silicon for complex, high end
'application specific integrated circuits' ("ASICs") and 'system on chips'
("SoCs") for leading global technology brands.
Sondrel's capabilities are provided to customers seeking competitive advantage
by including customised ASIC devices enabling differentiation of their end
products while addressing fast growth technology megatrends.
We are seeing an acceleration in momentum towards digital transformation, with
the clear trend to use advanced processes to enable adoption of Artificial
Intelligence and Machine Learning based systems. To overcome the technical
hurdles of adopting these advanced processes, we foresee that major technology
companies will continue to expand their chip design outsourcing in the coming
years.
There are certainly headwinds facing the semiconductor industry now. The trade
restrictions on China from the USA, the war in Ukraine resulting in Sondrel
pulling out of Russia and losing a major customer, the political uncertainty
in Israel impacting investment, and the general downturn in VC finance have
all had an impact. This is however countered by strong demand from the
automotive sector and the adoption of artificial intelligence into almost
everything. For Sondrel this has meant a shift in some of our customers and
geographical focus and is proceeding well. I am pleased with the progress that
we have made, especially in the USA where we are already engaged with a number
of customers with strong future silicon volume requirements. Therefore, 2023
will be an important year for us in this market.
Artificial intelligence is the process of building and developing machines to
perform tasks that historically have required human intelligence. AI is now
regularly being used by individuals and is present in almost every key sector
of business including healthcare, financial services, retail and
transportation. Large scale uses of AI can be seen in content suggestions on
social media, facial and speech recognition, or text editors, with tools such
as ChatGPT becoming hugely popular. The growth in the adoption of AI continues
to be a tailwind for the semiconductor industry, with high performing,
AI-enabled chips needed to deal with the greater capacity required for data
manipulation, whilst keeping power consumption and costs under control.
According to Fortune Business Insights, the global AI market is projected to
grow from US$387 billion in 2022 to US$1,394 billion by 2029, at a CAGR of
20.1 per cent in the forecast period. ASIC designs in advanced processes will
be an important part of enabling that to happen.
Thus, we expect that business opportunities in the global ASIC market will
continue, and that Sondrel's business growth will also continue. Moreover,
advanced processes will continue to expand as a proportion of our sales.
Through these opportunities, Sondrel provides its customers with greater added
value, and effectively create competitive advantages through differentiation.
Growth strategy
We have the ambition to grow revenues to over £100 million in the medium
term, by focussing on our key strengths to deliver our growth strategy.
Continued transition in business model
Sondrel has transitioned its business model to provide a full turnkey ASIC
design and supply service for its customers, which includes contracting for
the testing and production of ASICs in addition to the previously offered
design and production consulting. Although the testing, packaging, and other
capital-intensive engineering functions necessary for production of an ASIC
will continue to be outsourced to third parties, Sondrel will provide the
product engineering and will manage the complex manufacturing process by
engaging the various third parties directly. We believe that developing both
the commercial and technical relationships with customers will enable the
Group to generate significantly more revenue in the medium term, whilst
remaining within the value chain throughout the ASIC production life. We
expect that turnkey design and supply contracts will allow the Group to
address more opportunities in parallel than has historically been the case and
therefore to scale revenues more rapidly. This is due to the different
elements of the production phase being subcontracted on a managed basis to
specialist third party providers and foundries as well as increasing the
engineering headcount.
Increase opportunities in the US and Europe
Sondrel has identified the US and Europe as key markets. We are pleased that
we have very strong support from our key partners in the US with whom we are
working to create valuable solutions for our mutual customers and we are
focusing on growing the sales and technical support team in the US throughout
2023.
Strong relationships with key industry participants
Sondrel has established highly valuable relationships with many participants
in the semiconductor industry. Sondrel is a recognised trading partner with
some of the world's largest chip companies and foundries, namely:
• one of only 21 global Approved Design Partners of Arm;
• a Design Centre Alliance Partner of TSMC, the world's largest provider
of advanced silicon IC's.
• one of only 3 Samsung Foundry SAFE™ Design Service Partners outside
of Asia. Samsung Foundry began production of the first 3 nanometre SoC in June
2022; and
• an approved partner of Global Foundries.
These relationships, together with IP, EDA, test and packaging companies, are
vital to deliver a compelling turnkey design and supply solution.
These organisations include leading OSAT organisations (such as Synergie-CAD,
Amkor and ASE), IP vendors (such as Synopsys, Siemens, Arm and Arteris) and
EDA vendors (such as Synopsys, Arteris and Siemens).
Sondrel's key strengths and advantages
We believe that Sondrel has several key strengths and advantages that are
important to the success of the business:
1. Sondrel has already delivered designs at 5 nanometres and is now
working on 3 nanometre process nodes. This level of engineering capability is
limited to Sondrel and a small number of Asian competitors and positions
Sondrel to benefit from the megatrends driving the increasing use of ASICs
globally and the production of system solutions utilising increasingly complex
design geometries.
2. Sondrel provides leading edge ASIC designs to a global customer
base in advanced end markets with significant structural growth drivers
including high performance computing, automotive, artificial intelligence,
VR/AR, video analytics, image processing mobile networking and data centres.
3. Sondrel has a team of over 140 engineers that are located in design
centres globally. This enables Sondrel to be one of only a handful of
companies worldwide with the scale, capability and strength of industry
relationships to deliver projects in leading technologies.
4. From concept to delivered ASICs, Sondrel is able to act as a single
counterparty to its customers as a provider of a full turnkey service in the
design, prototyping, testing, packaging and production of ASICs and SoCs.
Sondrel is able to provide customers with the ability to de-risk the design of
ASICs through the use of Sondrel's "Architecting the Future" Intellectual
Property.
5. Sondrel has a clear organic growth strategy focused on increasing
its engineering headcount and investing in IP development to further enhance
its competitive position, accelerating its growth in key geographies including
the USA and Europe.
6. Sondrel has a proven and experienced founder-led management team.
Customer Activity
The group continues to have a very strong pipeline of revenue opportunities
providing good visibility of future growth. Customers cover multiple markets,
including major industrial OEMs, automotive suppliers, and satellite
communication services.
Key contracts and progress on projects in 2022 include:
An ASIC for a leading edge AI Hardware Accelerator manufacturer. Based on
production volumes and product lifetime currently projected by the Customer,
revenues for Sondrel associated with the production and supply of the
manufactured Project ASIC would be worth in excess of US$20million to the
Company over three years. The Project design contract was awarded to the
Company in late 2021 and was fully funded by the customer. Project production
and supply are expected to begin at the end of calendar year 2023.
An ASIC design for a leading provider of home network devices. The Project
design contract was awarded to the Company in late 2022 and was fully funded
by the Customer. The Project is estimated to be worth £1.8 million to Sondrel
in 2023, which encompasses the partial design and NPI phases with a view to
the ASIC entering production at the start of 2024. Based on production volumes
and product lifetime currently projected by the Customer, revenues associated
with the production and supply of the ASIC could be worth in excess of US$25
million over five years.
An ASIC design for a leading provider of ASIC controller for mobile phone
application. The project design contract was awarded to the Company in early
2022 and was fully funded by the Customer. The Project encompasses the design
and NPI phases with a view to the ASIC entering production at the start of
2024. A significant project for a leading European Automotive OEM. The Project
design contract was awarded to the Company in mid-2022 and is fully funded by
the Customer. Contract was signed July 2022 and design work has commenced.
Significant progress has been made in respect of this turnkey ASIC engagement
for this Tier 1 OEM Automotive customer - with major project milestones
achieved in 2022. As stated at the time of the Group's IPO, Sondrel expects
typical production volumes for each contract to deliver revenue of £10m to
£100m per annum and the contract with the Tier 1 Automotive customer could
deliver production revenue at the upper end of this range.
Major design service developments were undertaken during 2022 and completed
designs sent for manufacture, including two advanced networking chips in 5nm
FinFet Technology, a satellite communication device in 22nm, and two domain
controller MCU's in 7nm for the automotive ADAS market.
Summary and Outlook
Having successfully delivered our FY22 results, I am pleased to report that
the Company has started FY23 well, supported by existing contracts and ongoing
new business momentum, as evidenced by our maiden post IPO design tape out for
a leading provider of Edge AI Hardware Accelerator solutions in January 2023
and the March 2023 tapeout of an ASIC design for a leading provider of home
network devices.
The Board firmly believes that the Company is well placed to continue
capitalising on the sizeable growth opportunity within the semiconductor
industry.
Graham Curren
Chief Executive Officer
23 May 2023
CHIEF FINANCIAL OFFICER'S REVIEW
I am pleased to report on a significant growth in revenue for the group, up
116% to £17.5m
Revenue
£'000 2022 2021
Consultancy 4,672 5,036
ASIC 12,839 3,082
Total 17,511 8,118
The Group has recovered strongly from the impact of the COVID-19 pandemic in
2020 and 2021 in line with the Group's successful transition into a provider
of turnkey services, ASIC revenues have increased 313% to £12.8m (FY21:
£3.1m) driven by one new and two existing major projects totalling £11.3m.
These projects are all within the design phase moving to prototype in 2023 and
going to production in later 2023, 2024 and 2025. ASIC revenues now comprise
73% of total revenues
Consultancy revenues have decreased to £4.7m (FY21: £5.0m) as the Group
focuses on developing the ASIC business for the future.
Margins
The majority of the Group's direct cost base relates to engineering headcount
and software. The Group focussed on retaining engineering resources through
the COVID-19 pandemic and in developing further the Group's proprietary
Architecting the Future technologies in order to deliver the expected future
growth in demand, which has proven to be the case.
During 2022 the revenues in the first half of the year were out of alignment
with the Group's operating costs. However, with revenues increasing in the
second half of the year gross margins are improving and are expected to return
to normal trading levels during 2023.
Administrative expenses (excluding share-based payments, depreciation,
amortisation and exceptional items)
Underlying administrative expenses (excluding foreign exchange gains and
losses) increased by 18% to £6.0m (FY21: £5.1m) driven predominantly by the
increase in sales activity and the increased ongoing costs associated with
being a public company.
Foreign exchange
The Group had 70% (2021: 30%) of revenues invoiced in currencies other than
GBP, with the Group's cost base predominantly in GBP and USD, this has
historically provided a natural hedge to currency exchange risk. However,
during 2022 a new Euro contract led to 41% of revenues denominated in Euro
and, together with the volatility of the USD during 2022, led to an exchange
loss of £0.5m.
Adjusted EBITDA and Loss
Adjusted EBITDA (earnings before interest, tax, exceptional items,
depreciation and amortisation) is considered by the Board to better represent
the ongoing operating performance of the Group as it removes the impact of
significant cash and non-cash expenditure items. Adjusted EBITDA improved to a
loss of £1.1m (FY21: loss £2.5m). See note 4.
Loss before tax of £6.4 million (2021: Loss £5.5 million) includes
significant cash and non-cash expenditure items. These are analysed as
follows:
£'000 2022 2021
Loss before tax (6,412) (5,531)
Amortisation of intangible assets 2,385 2,155
Exceptional costs (1) 1,393 0
Adjusted loss before tax (2,634) (3,376)
Interest 1,176 521
Depreciation 394 382
Adjusted EBITDA (1,064) (2,473)
(1) Costs relating to the IPO which are not considered to be trading
expenditure
Development costs
Under IFRS 15 development costs of £1.1m associated with the creation of mask
sets that will deliver future economic benefits from production revenues were
expensed to the profit and loss.
Research and development
Total expenditure on research and development in the year was £8.1m (2021:
£7.1m) of which £0.4m (2021: £0.6m) was on internal research and
development to increase the engineering differentiation and capability to
efficiently deliver new technologies. Research & development costs of
£0.2m were capitalised during the year relating to the commencement of an
automotive development programme. Costs incurred relating to the development
of internal process improvements are not able to be reliably measured and have
therefore been expensed through the P&L.
Due to the nature of the work the Group is entitled to claim R&D tax
credits. The amount recoverable this year is £1.0m (2021: £0.5m)
Exceptional items
During the year costs expensed to the profit and loss relating to the IPO were
£1.4m. In addition, costs relating to the IPO of £1.8m were taken to equity.
Depreciation and amortisation
Depreciation and amortisation of £2.8 m (FY21: £2.5m) principally comprises
the amortisation of the intangible software assets.
Interest
The investment in the software asset has led to an additional interest charge
under IFRS 16 of £0.8m in 2022.
Taxation
No provision for tax has been made in the period (FY21: £Nil) due to the
available tax losses carried forward of £ 1.8m creating a deferred tax asset
of £3.2m.
Earnings per share
Loss per share was 0.06 pence (FY21: loss per share 0.11 pence).
Dividend
The Board has determined that no dividend will be paid in the year. The Group
is primarily seeking to achieve capital growth for shareholders. It is the
Board's intention during the current phase of the Group's development to
retain distributable profits from the business to the extent they are
generated.
Balance sheet
The Group has strengthened its balance sheet position with net assets at 31
December 2022 of £8.5m (FY21: £(6.6)m).
Intangible assets
The intangible asset of £14.5m (FY21: £9.3m) arises from the recognition of
long term right to use software assets and in 2022 the capitalisation of
£0.2m of research and development. During 2022 an additional asset of £7.3m
was recognised securing software rights to 2025. The amortisation associated
with the capitalised asset was £2.4m (FY21: £2.8m).
Cash flow and net debt
At 31 December 2022 the cash balance was £4.4m (FY21: £(1.2)m).
The Group repaid its bank debt post IPO and at the year end a shareholder loan
of £0.7m was outstanding (FY21: £2.5m). This loan was repaid post year end
leaving the Group debt free.
Two significant customer milestones originally anticipated to be received in
Q4 2022, totalling £4m were deferred to 2023, with £1.5m received post year
end and £2.5m to be received in the next few months.
Joe Lopez
Chief Financial Officer
23 May 2023
Consolidated statement of profit and loss and other comprehensive income
for the year ended 31 December 2022
2022 2021
Note £ £
Revenue 3 17,510,825 8,118,236
Cost of sales (15,897,751) (8,165,554)
Gross profit/(loss) 1,613,074 (47,318)
Administrative expenses (7,814,885) (5,480,905)
Other operating income 965,655 517,178
Operating loss (5,236,156) (5,011,045)
Finance costs (1,175,510) (520,777)
Finance income 30 724
Loss before tax (6,411,636) (5,531,098)
Income tax credit 5 3,219,735 74,711
Loss for the year attributable to the owners of the parent (3,191,901) (5,456,387)
Other comprehensive (expense)/income
Other comprehensive (expense)/income that may be reclassified to profit or
loss in subsequent periods (net of tax):
Exchange differences on translation of foreign operations (39,079) 5,501
Other comprehensive (expense)/income for the year (39,079) 5,501
(net of tax)
Total comprehensive expense for the year attributable to the owners of the (3,230,980) (5,450,886)
parent
Losses per share attributable to the owners of the parent
Basic 6 (0.06) (0.11)
Diluted 6 (0.06) (0.11)
All activity in both the current and the prior period relates to continuing
operations.
Consolidated statement of financial position
at 31 December 2022
31 December 31 December 1 January
2022 2021 2021
Note £ £ £
Non-current assets
Property, plant and equipment 293,914 175,181 200,604
Right-of-use assets 637,100 525,165 498,965
Intangible assets 7 14,547,870 9,346,380 11,507,008
Deferred tax assets 3,199,744 - -
Total non-current assets 18,678,628 10,046,726 12,206,577
Current assets
Inventories 1,044,069 - -
Trade and other receivables 10,197,124 3,006,941 3,665,628
Cash and cash equivalents 8 4,449,812 29,797 110,069
Income tax receivable 149,853 107,125 365,267
Total current assets 15,840,858 3,143,863 4,140,964
Total assets 34,519,486 13,190,589 16,347,541
Current liabilities
Trade and other payables 14,677,767 9,948,585 5,040,054
Short-term borrowings - 1,351,042 58,333
Short-term lease liabilities 291,124 276,788 248,290
Total current liabilities 14,968,891 11,576,415 5,346,677
Non-current liabilities
Other payables 9,984,228 6,791,294 10,555,114
Borrowings 700,000 1,140,625 2,041,667
Lease liabilities 307,944 258,794 243,003
Deferred tax liabilities 74,933 - -
Total non-current liabilities 11,067,105 8,190,713 12,839,784
Total liabilities 26,035,996 19,767,128 18,186,461
Net assets/(liabilities) 8,483,490 (6,576,539) (1,838,920)
Consolidated statement of financial position
at 31 December 2022 (continued)
31 December 31 December 1 January
2022 2021 2021
Note £ £ £
Equity
Issued share capital 9 87,462 8,345 8,345
Share premium 18,286,562 122,431 122,431
Foreign currency translation reserve (55,597) (16,518) (22,019)
Share-based payment reserve 812,676 1,236,397 523,130
Retained deficit (10,647,613) (7,927,194) (2,470,807)
Total equity 8,483,490 (6,576,539) (1,838,920)
The consolidated financial statements were approved and authorised for issue
by the Board on 23 May 2023 and were signed on its behalf by:
G S Curren
Director
Company statement of financial position
at 31 December 2022
Note 31 December 31 December 1 January
2022 2021 2021
£ £ £
Non-current assets
Investment in subsidiaries 1,328,086 1,238,601 525,334
Long-term receivables 19,272,024 - -
Deferred tax assets 490,622 - -
Total non-current assets 21,090,732 1,238,601 525,334
Current assets
Trade and other receivables 189,339 2,471,290 2,407,391
Cash and cash equivalents 11,356 43 -
Total current assets 200,695 2,471,333 2,407,391
Total assets 21,291,427 3,709,934 2,932,725
Current liabilities
Trade and other payables 40,669 - -
Total current liabilities 40,669 - -
Non-current liabilities
Borrowings 700,000 700,000 700,000
Total non-current liabilities 700,000 700,000 700,000
Total liabilities 740,669 700,000 700,000
Net assets 20,550,758 3,009,934 2,232,725
Equity
Issued share capital 9 87,462 8,345 8,345
Share premium 18,286,562 122,431 122,431
Share-based payment reserve 812,676 1,236,397 523,130
Retained earnings 1,364,058 1,642,761 1,578,819
Shareholders' funds 20,550,758 3,009,934 2,232,725
The Company has taken advantage of the exemption under S408 of the Companies
Act 2006 and has not presented its own profit and loss account in these
financial statements. The loss for the year of the Company after tax was
£750,185 (2021: profit of £63,942).
The Company financial statements were approved and authorised for issue by the
Board on 23 May 2023 and were signed on its behalf by:
G S Curren
Director
Company number: 07275279
Consolidated statement of changes in equity
For the year ended 31 December 2022
Note
Share capital Share premium Foreign currency translation reserve Share-based payment reserve Retained deficit
Total
£ £ £ £ £ £
Balance at 1 January 2021 8,345 122,431 (22,019) 523,130 (2,470,807) (1,838,920)
Loss for the year - - - - (5,456,387) (5,456,387)
Other comprehensive income - - 5,501 - - 5,501
Total comprehensive income /(expense) for the year - - 5,501 - (5,456,387) (5,450,886)
Share-based payment charge - - - 713,267 - 713,267
Total transactions with owners - - - 713,267 713,267
8,345 122,431 (16,518) 1,236,397 (7,927,194) (6,576,539)
At 31 December 2021
Loss for the year - - - - (3,191,901) (3,191,901)
Other comprehensive expense - - (39,079) - - (39,079)
Total comprehensive expense for the year - - (39,079) - (3,191,901)
(3,230,980)
Share issues 9 36,364 18,164,131 - - - 18,200,495
Exercise of share options 1,029 - - (513,206) 513,206 1,029
Bonus issues 9 41,724 - - - (41,724) -
Share-based payment charge - - - 89,485 - 89,485
Total transactions with owners 79,117 18,164,131 - (423,721) (471,482) 18,291,009
87,462 18,286,562 (55,597) 812,676 (10,647,613) 8,483,490
At 31 December 2022
Company statement of changes in equity
for the year ended 31 December 2022
Note
Share capital Share premium Share-based payment reserve Retained earnings
Total
£ £ £ £ £
Balance at 1 January 2021 8,345 122,431 523,130 1,578,819 2,232,725
Profit for the year - - - 63,942 63,942
Total comprehensive income for the year - - - 63,942 63,942
Share-based payment charge - - 713,267 - 713,267
- - 713,267 - 713,267
Total transactions with owners
At 31 December 2021 8,345 122,431 1,236,397 1,642,761 3,009,934
Loss for the year - - - (750,185) (750,185)
Total comprehensive expense for the year - - - (750,185) (750,185)
Transactions with owners in their capacity as owners:
Share issues 9 36,364 18,164,131 - - 18,200,495
Exercise of share options 1,029 - (513,206) 513,206 1,029
Bonus issues 9 41,724 - - (41,724) -
Share-based payment charge - - 89,485 - 89,485
79,117 18,164,131 (423,721) 471,482 18,291,009
Total transactions with owners
87,462 18,286,562 812,676 1,364,058 20,550,758
At 31 December 2022
Consolidated statement of cash flows
for the year ended 31 December 2022
2022 2021
Note £ £
Cash used in operations (4,952,766) (260,744)
Income tax credit received in respect of R&D 202,222 332,853
Net cash (outflow)/inflow from operating activities (4,750,544) 72,109
Cash flows from investing activities
Purchase of property, plant and equipment (204,194) (55,319)
Purchase of intangible assets (4,306,066) (106,165)
Interest received 30 724
Net cash outflow from investing activities (4,510,230) (160,760)
Cash flows from financing activities
Proceeds from issue of share capital 18,200,495 -
Proceeds from exercise of share options 1,029 -
Proceeds from borrowings - 450,000
Repayment of borrowings (1,791,667) (58,333)
Payment of principal portion of lease liabilities (269,838) (285,000)
Interest paid (1,160,881) (610,929)
Interest paid on lease liabilities (24,833) (19,527)
Net cash inflow/(outflow) from financing activities 14,954,305 (523,789)
Net increase/(decrease) in cash and cash equivalents 5,693,531 (612,440)
Cash and cash equivalents at the beginning of the financial year 8 (1,243,719) (631,279)
Cash and cash equivalents at end of year 8 4,449,812 (1,243,719)
1. Basis of the announcement
The financial information of the Group set out above does not constitute
statutory accounts for the purposes of Section 435 of the Companies Act
2006. The financial information for the year ended 31 December 2022 has
been extracted from the Group's audited financial statements which were
approved by the Board of directors on 23 May 2023 and delivered to the
Registrar of Companies for England and Wales following the Company's 2022
Annual General Meeting. The report of the auditor on the 2022 financial
statements was unmodified and did not contain a statement under either Section
498 (2) or Section 498 (3) of the Companies Act 2006.
Whilst the financial information included in this preliminary announcement
has been prepared in accordance with UK adopted international accounting
standards, in conformity with the requirements of the Companies Act 2006, that
are relevant to companies that report under these standards, this announcement
does not itself contain sufficient information to comply with those standards.
This financial information has been prepared in accordance with the
accounting policies set out in the 2022 Annual Report.
The Company is a public limited company incorporated and domiciled in England
& Wales and whose shares are quoted on AIM, a market operated by The
London Stock Exchange.
The principal activity of Sondrel Holdings plc and its subsidiaries is the
design and delivery of complex, high end 'application specific integrated
circuits' (ASICs) and System on Chips (SoCs). It provides a full turnkey
service in the design, prototyping, testing, packaging and production of ASICs
and SoCs.
2 Segment information
The Group considers there to be only one business segment which is monitored
and reported to the Chief Operating Decision Maker ('CODM'), being the Board
of Directors. This judgement is based on the fact that the Group provides
similar products and services to all its customers, and the key performance
indicators monitored by the CODM are total revenue and profit/(loss) for the
year.
Revenue from transactions with major customers comprises the following, each
percentage reflects a different customer:
2022 2022 2021 2021
Major customer percentage revenue Revenue Major customer percentage revenue Revenue
% £ % £
41 7,150,114 28 2,239,947
16 2,732,508 20 1,626,474
14 2,506,110 13 1,051,556
________ ________ ________
Revenue is split geographically as follows (for more information on revenue
see note 3):
2022 2021
£ £
UK 5,275,305 5,667,207
USA 3,742,760 300,338
China 825,267 754,891
Rest of world 7,667,493 1,385,800
________ ________
Total revenue 17,510,825 8,118,236
________ ________
Non-current assets excluding deferred tax are split as follows:
2022 2021 1 January 2021
£ £ £
UK 15,422,036 9,799,302 12,064,349
Morocco 38,538 214,504 93,155
Rest of world 18,310 32,920 49,073
________ ________ ________
Total non-current assets 15,478,884 10,046,726 12,206,577
________ ________ ________
3 Revenue from contracts with customers
In the following table, revenue is disaggregated by major products/service
lines and primary geographical market. All revenue is recognised over time.
2022 2021
£ £
Major service lines
Projects (ASIC) 12,838,700 3,082,166
Consultancy 4,672,125 5,036,070
________ ________
Total 17,510,825 8,118,236
________ ________
Primary geographical markets
UK 5,275,305 5,667,207
USA 3,742,760 300,338
China 825,267 754,891
Non-UK 7,667,493 1,385,800
________ ________
Total 17,510,825 8,118,236
________ ________
The Group has recognised the following assets and liabilities related to
contracts with customers:
2022 2021 1 January 2021
£ £ £
Trade receivables 3,138,895 2,232,781 2,921,746
Contract receivables 5,972,166 152,236 19,179
Contract liabilities (5,753,646) (224,189) (37,494)
________ ________ ________
Customers are typically invoiced on the basis of milestones set out in the
contracts. These milestones do not correspond with the timing of satisfaction
of performance obligations. The differences in the timing between the agreed
invoicing schedule and the satisfaction of performance obligations result in
the recognition of a contract receivable for services performed but not yet
invoiced and a contract liability for consideration received but services not
yet performed. Invoices are raised at agreed dates throughout the duration of
the Projects and monthly in arrears for Consultancy arrangements. Payment is
typically due within 30 days of issue of the invoice.
The movement on these balances during 2021 and 2022 was purely the result of
the general course of business for the Group. Existing contracts were
fulfilled, and new contracts were entered into during these periods.
3 Revenue from contracts with customers (continued)
The following table shows how much of the revenue recognised in the current
reporting period relates to carried-forward contract liabilities and how much
relates to performance obligations that were satisfied in a prior year:
2022 2021
£ £
Revenue recognised in the year that was included in the contract liability 114,613 37,494
balance at the beginning of the year
Revenue recognised in the year that relates to ongoing projects at the 3,696,914 1,889,640
previous year end
________ ________
The following table shows unsatisfied performance obligations resulting from
project works continuing into 2023. The largest three balances from individual
projects amount to £6.9m, £1.9m and £1.4m:
2022 2021
£ £
Transaction price relating to performance obligations that are unsatisfied (or 11,623,495 4,715,857
partially unsatisfied) at the year end
________ ________
These amounts are expected to be recognised as revenue as follows:
£11,302,466 recognised as revenue in 2023; £321,029 recognised as revenue in
2024.
The Group is applying the practical expedient to not disclose the transaction
price relating to the Consultancy performance obligation because the
performance obligation is part of a contract that has an original expected
duration of one year or less.
4 Alternative performance measures
These items are included in normal operating costs, however as they are
considered significant cash and non-cash expenditure items, they are
separately disclosed because of their nature. It is the Group's view that
excluding them from the operating loss gives a better representation of the
ongoing trading performance of the business in the year.
The Group's primary results measure, which is considered by the Directors of
Sondrel (Holdings) plc to better represent the ongoing operating performance
of the Group, 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.
2022 2021
£ £
Loss before tax (6,411,636) (5,531,098)
IPO costs 1,393,265 -
Depreciation 394,022 382,355
Amortisation 2,384,795 2,154,711
Finance costs 1,175,510 520,777
________ ________
Adjusted EBITDA (1,064,044) (2,473,255)
________ ________
Loss before tax (6,411,636) (5,531,098)
IPO costs (1) 1,393,265 -
________ ________
Adjusted loss (5,018,371) (5,531,098)
________ ________
(1) Costs relating to the IPO, which are not considered to be trading
expenditure.
5 Taxation
2022 2021
£ £
Current tax
UK current tax on loss for the year (149,853) (189,100)
Adjustments in respect of previous years - 81,975
Foreign tax on income for the year 54,929 32,414
________ ________
Total current tax credit (94,924) (74,711)
Deferred tax
Origination and reversal of timing differences (3,124,811) -
________ ________
Total deferred tax credit (3,124,811) -
________ ________
Total tax credit (3,219,735) (74,711)
________ ________
5 Taxation (continued)
The standard rate of corporation tax in the UK for the year was 19% (2021:
19%). The differences between the total tax shown above and the amount
calculated by applying the standard rate of UK corporation tax to the loss
before tax are as follows:
2022 2021
£ £
Loss before tax (6,411,636) (5,531,098)
________ ________
Loss at the standard rate of corporation tax in the UK of 19% (1,218,211) (1,050,909)
(2021: 19%)
Effect of:
Expenses not deductible for tax purposes 307,182 114,032
Non-taxable income (5,383) (23)
Adjustments in respect of prior periods - 81,975
Share option exercise relief (113,250)
Additional deduction for R&D expenditure (110,986) (106,882)
Surrender of tax losses for R&D tax credit refund 258,368 25,516
Previously unrecognised deferred taxes on losses (1,730,511) -
Previously unrecognised deferred taxes on share-based payments (317,340) -
Deferred tax movement not recognised - 1,014,037
Difference in overseas tax rates 10,894 (3,211)
Change in tax rates on deferred tax (320,479) -
Other 19,981 176
________ ________
Total tax credit for the year (3,219,735) (74,711)
________ ________
Factors that may affect future tax charge
The Finance Act 2021 was substantively enacted in May 2021 and has increased
the UK corporation tax rate to from 19% to 25% with effect from 1 April 2023.
The deferred tax balances have been measured using the rates expected to apply
in the reporting periods when the timing differences reverse. The UK
corporation tax rate is currently 19%. The net deferred tax asset as at 31
December 2022 has been calculated also taking into account the 25% rate
effective from 1 April 2023. The change from 19% to 25% will increase the
Groups future tax charge, but as the deferred tax assets and liabilities have
been recognised for the first time in 2022, this change in rate has had no
effect on the deferred tax balances as they have only ever been calculated at
25%.
6 Earnings per share (EPS)
Basic EPS is calculated by dividing the profit attributable to ordinary
shareholders of the Group by the weighted average number of ordinary shares
outstanding during the period.
2022 2021
Loss for the year (£) (3,191,901) (5,456,387)
Weighted average number of shares 57,444,856 50,068,686
________ ________
Basic earnings/(loss) per share (£) (0.06) (0.11)
________ ________
Diluted earnings per share is determined by adjusting the profit attributable
to ordinary shareholders by the weighted average number of ordinary shares
outstanding, taking into account the effects of all potential dilutive
ordinary shares, including options.
2022 2021
Loss for the year (£) (3,191,901) (5,456,387)
Weighted average number of shares 57,444,856 50,068,686
Dilutive effect of share options - -
________ ________
Weighted average number of diluted shares 57,444,856 50,068,686
________ ________
Diluted earnings/(loss) per share (£) (0.06) (0.11)
________ ________
The weighted average number of shares includes the effect of the bonus issue
of 41,723,905 shares which occurred in the year ended 31 December 2022.
During 2021 and 2022, the Group made a loss and so the share options are
anti-dilutive. As such they are not taken into account in determining the
weighted average number of shares for calculating the diluted Earnings Per
Share. As a result, the diluted Earnings Per Share is equal to the Basic
Earnings Per Share.
7 Intangible assets
Group Software licences Development costs Total
£ £ £
Cost
At 1 January 2021 12,517,506 - 12,517,506
Disposals (5,917) - (5,917)
_______ _______ _______
At 31 December 2021 12,511,589 - 12,511,589
Additions 7,346,912 239,373 7,586,285
Disposals (1,186,586) - (1,186,586)
_______ _______ _______
At 31 December 2022 18,671,915 239,373 18,911,288
_______ _______ _______
Amortisation
At 1 January 2021 1,010,498 - 1,010,498
Amortisation charge for the year 2,154,711 - 2,154,711
_______ _______ _______
At 31 December 2021 3,165,209 - 3,165,209
Amortisation charge for the year 2,384,795 - 2,384,795
Disposals (1,186,586) - (1,186,586)
_______ _______ _______
At 31 December 2022 4,363,418 - 4,363,418
_______ _______ _______
Net book value
At 31 December 2022 14,308,497 239,373 14,547,870
_______ _______ _______
At 31 December 2021 9,346,380 - 9,346,380
_______ _______ _______
At 1 January 2021 11,507,008 - 11,507,008
_______ _______ _______
Amortisation charges for software licences represent cost relating directly to
the Group's revenue and, therefore, they have been charged through cost of
sales in the statement of profit and loss and other comprehensive income.
8 Cash and cash equivalents
Cash and cash equivalents for the purpose of the statement of cash flows,
comprises:
Group Group Group Company Company Company
2022 2021 1 January 2021 2022 2021 1 January 2021
£ £ £ £ £ £
Cash at bank and in hand 4,449,812 29,797 110,069 11,356 43 -
Less bank overdrafts - (1,273,516) (741,348) - - -
________ ________ ________ ________ ________ ________
Total 4,449,812 (1,243,719) (631,279) 11,356 43 -
________ ________ ________ ________ ________ ________
Cash at bank earns interest at floating rates based on daily bank deposit
rates.
9 Share capital
Group and Company Allotted, called up and fully paid
2022 2021 1 January 2021 2022 2021 1 January 2021
Number Number Number £ £ £
Ordinary shares of £0.001 each 87,461,772 166,895 166,895 87,462 167 167
Ordinary A shares of £0.001 each - 8,117,886 8,117,886 - 8,178 8,178
________ ________ ________ ________ ________ ________
Total 87,461,722 8,344,781 8,344,781 87,462 8,345 8,345
________ ________ ________ ________ ________ ________
In the prior year, there were two distinct classes of shares; Ordinary and
Ordinary A.
Ordinary A shares were prescribed one vote per share. Ordinary shares did not
hold the right to attend or vote at general meetings. The Ordinary shares had
second right on wind up to the assets of the Company.
On 8 September 2022, the Company issued and allotted 40,889,430 A Ordinary
shares at a price of £0.001 per share, for no consideration. The Company also
issued and allotted 834,475 Ordinary shares at a price of £0.001 per share,
for no consideration. This bonus share issue, carried out on a 5 for 1 basis
via capitalisation from retained deficit, was done in order to increase the
share capital to meet the minimum requirements of £50,000 for registration to
plc status. Immediately following that issue and allotment, the issued share
capital of the Company was comprised of 50,068,686 shares.
Pursuant to the IPO placing on 21 October 2022, all A Ordinary shares were
reclassed as Ordinary shares.
On the same day, 36,363,636 Ordinary shares were issued and allotted at a
price of £0.001 per share, for total consideration of £0.55 per share, to
certain new investors. Additionally, 1,029,450 share options over Ordinary
shares were exercised by a Company employee at an exercise price of £0.001
per share.
Immediately following this issue and allotment, the Company's issued share
capital increased to 87,461,772 Ordinary shares. All shares are equally
eligible to receive dividends, the repayment of capital on winding up of the
Company and represent one vote at the shareholders' meeting of the Company.
10 Annual Report
The annual report for the year ended 31 December 2022 will be posted to
shareholders shortly, and will be made available on the Company's
website www.sondrel.com (http://www.sondrel.com) .
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. END FR ZZGZKVFDGFZMRecent news on Sondrel (Holdings)
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