memo self at 38.5/39.9 Keep finger off buy button - Only time will tell if a correct gut-feel. |
I recall when IQE was one of the stock-market darlings ('the next ARM') - look at that one now ... |
Net cash expectations:
Sept 2024
2024: £1.9m
2025: £3.9m
2026: £8.2m
November 2024
-2024: £1.1m actual
-2025: £2.7m net debt
-2026: £2.4m net debt
That is a drastic change in expectations. |
Interesting to see the difference in the thinking between paid advisor and private investor. Both I suppose have different biases - cannacord getting paid vs PIs using (or at the moment losing) their own cash.I don't think the story has changed, cash spender for a bit longer but (extremely) cash generative in the future. You rather believe the story or you don't. |
 Anthony Miller - 5/11/24
I worry that Abingdon-based ‘fabless’ ASIC (Application Specific Integrated Circuit) designer EnSilica could become a victim of its own success.
Today’s FY results came with a guarded warning that EnSilica could run out of cash within the next 12 months without additional financing.
Cofounder and CEO Ian Lankshear attributed the problem in part to customer order and payment slippage, and in part to ‘complications’ in the global semiconductor supply chain exacerbated by the deteriorating relationship between the US and China.
The latter was already evident and beyond EnSilica’s control.
The former leans towards overoptimistic forecasting (see my recent post on Substack at In fact, EnSilica now has a new CFO.
In truth I think the problems are of a more fundamental nature.
First, EnSilica is both a semiconductor design and a supply business. The design is done in-house, the manufacturing by partner foundries.
While this business model has the advantage of long-term, recurring revenues (8-10 years is not unusual), it is also hostage to changing demand in customer delivery schedules, as has already happened.
Second, as I have said many times before, management chose to IPO far too early, in my opinion.
EnSilica listed on AIM in May 2022 when its revenues were under £10m and was losing money. Since then, management has had to go back to investors and lenders multiple times – all, of course, in the unforgiving spotlight of a public market. EnSilica’s shares currently trade around 4p below the 50p IPO price.
EnSilica is growing fast on the back of an impressive order book. Revenues last FY (to 31st May 2024) exceeded £25m, though the company is now back to a (small) net loss.
However, this rapid growth – along with the aforementioned challenges – means that the business spends more cash on capex than its operations generate. And this gap risks widening the faster EnSilica grows.
I would not want EnSilica to suffer the same fate as its ‘neighbour’, semiconductor design startup, Sondrel, which listed on AIM a few months after EnSilica.
Never having made a profit, Sondrel quickly ran out of cash, its shares crashed and Sondrel delisted from AIM in August at a fraction of its IPO valuation (see
For now, EnSilica is in a much better position than Sondrel ever was.
But Lankshear and new CFO Kristoff Rademan need to take a long, hard look at the best capital structure that will help the business achieve its proven potential in the long term.
EnSilica should be cherished as a jewel in the UK semiconductor industry crown. Personally, I think it will be in the best interests of its customers, employees and backers for EnSilica to go private on its own terms while it still can.
-Source: LinkedIn |
"they are clearly going to need more external finance, as they make clear."
Actually no, they made it clear they do not need more finance (with the possible exception of a very large contract win which would require substantial upfront funding for development). |
one's toe has been dipped. |
From the Albany note the interest rate on existing debt sends its own message. If Albany's estimate of the rate for the new Lloyds debt at 8% is correct then encouraging but how accurate? Also what, if any, trigger conditions for the rate to be increased. |
A drop always precipitates looking for business model reasons when it is often just a bit of selling.
As with many companies working towards decent profits, a current snapshot is misleading. The revenue vs profit ratio is always uncertain until the business reaches a critical size. Nobody promised a jump in ebitda for the year just reported. Waiting doesn’t suit everyone.
The gross margin in itself is a bit low but not a big problem.
Capitalising R&D is partly subjective, depending on whether you view the R&D as adding to future IP value or as a per-project cost. The first produces ongoing exceptionals and higher ebitda, the latter hits ebitda but results look cleaner because of fewer exceptionals.
Not sure institutional involvement is a good indicator. Double edged sword quite often. |
I hope not but there is no intrinsic value in the shares. The margins are so far insufficient to generate any meaningful profits, this is a tiny fish in a very large pond. All we really have is the 2025 EBITDA target and faith in the business model and the people executing it.
I have a horrid feeling that cash flow is going to be a big factor - the clients tend to be large multinationals, famous for screwing smaller supplers of goods and services. The only really good news for me has been the apparent decent flow of new business orders and the fact that the board and management appear really well qualified.
It is too small and risky for any serious funds yet - Amati has a small position presumably in their Aim Fund - but I can't see any other institutions among the bigger shareholders. And given the high level of skill required for employment here - surely implying high personnel costs - they are clearly going to need more external finance, as they make clear. |
Today's drop is on very low volume so I don't mind buying a few more. It should pop if a bunch of new contracts are signed soon. |
The concern is that they may require more funding as stated in the results of they get any delays on orders . The poor profit margin on contracts isn't helping to and that with the risks of funding are cashing the drip . Might see late 20s again without some good news.
They really need to either improve margin or slash costs here m they have decent revenue but simply not making enough off it |
blimey, would I be catching a falling knife? |
The Allenby Capital research note is out |
Yep yump 🤣 |
Glad I sold up before the results just after the new contract RNS.
Far too risky with Trump’s administration. |
I'm certainly looking for an entry point. could be support at 40p maybe not but definately looking attractive at these levels. |
Personally surprised by the fall in price as nothing really new came out and they are not raising equity for the first time with results although they have previously shot themselves in the foot by doing so after results so jury still out. They continue to deliver growth but patience needed to see it drop through to the bottom line.The brave will want to buy at this new level. |
Looks like about £35000 difference between buys and sells dropped the price 16% ! |
H,
Yes!
I was struck by the stark contrast between the CEO’s perspective and the Chairman's remarks at the Share Society presentation.
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Val,
CNC has managed expectations beautifully to date. RNS's, IMC's and the occasional interview with the CEO on a podcast - the story is crystal clear and not muddied.
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This looks most interesting from today's RNS:
"...to develop ASSPs, based upon customer demand and leveraging the funding available from lead customers, the European Space Agency and various semiconductor stimuli. EnSilica currently has two significant platforms at the device evaluation stage"
The CEO came across as quite animated when discussing the potential in the Satellite Communications division. Big potential. |
Well I have got very “picky” with possible problems with my small stocks, but I reckon 50% of that is because their market is rubbish at the moment. Problem started with rising interest rates and the cost of debt which our smaller businesses have had to deal with very suddenly, while trying to expand.
So lots have been caught between the rock of equity raises on depressed prices and the hard place of expensive debt. Vicious circle, but perhaps we are over the worst.
One day, the husinesses that have survived and are actually growing well, will burst into life.
I just hope they’re not taken over beforehand. |
Pug, but that's got nothing to do with ENSI and the going concern question!I agree on the investor part to a point, however plenty of ways to shelter a good chunk of investment gains if needed. |
Premium B - The changes to CGT rules will hit investors in AIM stocks - so potentially less attractive where no dividends and trusting on share price appreciation instead. |
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