Okay, so my recent whirlwind life of a great storm, hospitals and long journeys over the last two weeks is now behind me. My better half and I are at home in the Scottish Highlands again and I already feel the energy flowing back into me. I can also now devote more attention to that which I love, investing…
Today’s Trading Update from EnSilica certainly appeared on face value to be disappointing news, some might say disastrous in the hyperbolic fashion that seems to have become de rigueur nowadays, however that is clearly not the case in my opinion for anyone but a short term investor (which I am not).
Yes, the situation with SIAE has resulted in a bad debt provision for FY25. However that is all it is currently, a provision. It may not remain a bad debt in perpetuity and given the circumstances management are right to be cautious considering the original timescales for the contract have been missed by SIAE.
Given SIAE’s announcement¹ last month in relation to new investors, as part of restructuring and refinancing of the Italian firm, it seems probable that their EU designated ‘Important’ manufacturing contract will be progressed in time as long as it can be done so profitably by a financially stable SIAE. While nothing is certain I am confident that the potential investors (new and existing) in SIAE will not let slip from their grasp the €149 million in EU grant funding available for the proposed networking product and which EnSilica’s ASIC agreement should play a critical role. In time I expect EnSIlica to recognise the expected revenues for the contract.
Yes, the recent cyberattack with Jaguar Land Rover (JLR) halted production. However JLR have confirmed all production lines are back up and running and they are ‘cautiously’ optimistic that full production will resume by the end of October². EnSilica management have therefore been right to lower their forecast for this FY26 as potentially losing approximately £800,000³ from two months of production is a big hit for a relatively small firm.
My late grandfather (the one who flew Mosquito’s during the war) worked for Land Rover many decades ago and from what I know of the firm, its staff will be keen to make up lost production over the coming months, so in time we may not see much of a material impact to EnSilica’s finances.
So that aside, let’s consider the clear positives in the update. Firstly EnSilica has ‘Good visibility on additional multi-million-pound design and manufacturing contracts, expected to further boost revenues for the financial year ending 31 May 2026 (“FY 2026”) onwards.’ So there is additional upside potential for FY26 in addition to SIAE and JLR.
Secondly, almost five months into the FY ‘EBITDA is now expected to be between £3.5 million and £4.5 million for FY 2026’ so that appears to largely remove the cash flow concerns related to EnSilica over the last year or so. I also note that the highly accretive EDGE AI contract appears to have been taped out now otherwise it should have been mentioned. That alone was expected to contribute £3 million towards EBITDA this year.
Thirdly, the medium to long term chip supply opportunity remains substantial. I say this as Ian Lankshear, EnSilica CEO, stated in the trading update ‘We maintain our forecast for total lifetime revenue from supply contracts of over US$250 million in chip supply revenues as the reduction from SIAE has been made up by increased demand from other clients.’⁴
So for me, the trajectory of the business is still on track for the medium term (which aligns with my investment rationale) and while the revenue has been choppy of late, that is not unexpected of such a relatively small firm with such large and notable contracts (e.g. Rolls Royce Aerospace & Defence, Siemens, Jaguar Land Rover as well as the British and European space agencies).
Furthermore if as I have been encouraging EnSilica’s management to consider, a US OTC Markets listing is achieved this FY, then I stand by my forecast for late 2026 of 85p a share. Otherwise I expect somewhere around 70p is more probable by late 2026, which would still potentially be a return in excess of 50% from today’s share price. All of that assumes the company is not acquired for multiples of the current price which is not out of the question as I have written about in the past.⁵
² https://www.itv.com/news/2025-10-08/jlr-optimistic-full-production-will-resume-by-end-of-october
³ https://www.reddit.com/r/DoubleBubbler/comments/1ntcln4/will_the_jaguar_land_rover_cyberattack_hit/
⁴ https://www.londonstockexchange.com/news-article/ENSI/trading-update/17280894
