Sondrel Holdings (LON: SND) shares are down 65% this morning. SND shares are down because they’ve a corporate news release which, essentially, says that everything’s just great except no one is buying anything. Which is one of those lovely mixed messages which leads to our insistence that there’s an art to reading a corporate release.
The background and Sondrel: “Sondrel has the largest and most experienced consulting team in Europe, with wide ranging expertise across all aspects of the design flow and all industry-standard EDA tool suits. The company's capabilities cover the entire IC design spectrum from RTL design, though verification, emulation and DFT to physical implementation, and include power analysis and yield management. Sondrel is experienced in highly-complex digital, mixed signal, analogue, low power and wireless designs having completed over 200 designs at a range of process geometries down to 28nm, all of which were delivered right first time.” A design and consultancy house that makes processing chips for people. The part of the process they don;t own is the actual manufacturing, they’re a “fabless” design house.
OK, we can all imagine this to be a useful business. And they tell us that things are great: “As a result, the Company now expects to report H1 2023 unaudited revenues of £9.3m, a 17% increase over the corresponding H1 2022 period (H1 2022: £8.0m) and adjusted EBITDA of £0.4m (H1 2022: £0.1m).” Cool, things are going great in fact.
Sondrel Holdings share price from Google Finance
So, err, why the SND share price collapse then? Because of a much later part of the same release: “it has also now been confirmed that the chip development and production for three major ASIC customers due to commence in H2 2023 have been delayed by between six and twelve months as a result of increasing inflation and weakening demand in end markets reliant on consumer spending as other sector categories have moved into negative growth.” Resulting in the first half being good, as above, the full year will be bad: “FY23 full-year revenue will be not less than £13m, substantially below current market expectations, with a corresponding impact on FY23 losses.” Actually, the second half’s going to be a stinker.
In fact, they think second half will be under £4 million, very definitely a drop from that £9,3 in the first. And that’s the sort of result that will tank a share price, yes.
As we say, as with Sondrel Holdings here, there’s something of an art to reading a corporate announcement. Usually better to read it backwards in fact - the end is always where the information they don’t want to tell you is.
