Investors

Proposed Re-registration as a Private Limited Company  

Notice of General Meeting

Sondrel (AIM: SND), a leading provider of ultra-complex chips for leading global technology brands, announces, further to the Company's announcement of 18 July 2024 concerning the publication of its audited annual report and accounts for the year ended 31 December 2023, the proposed cancellation of the admission of its ordinary shares to trading on AIM (the "Cancellation") and the proposed re-registration of the Company as a private limited company following the Cancellation becoming effective (the "Re-registration").

A circular (the "Circular") will today be sent to Shareholders setting out the background to and reasons for the proposed Cancellation and the Re-registration together with the adoption of new articles of association with effect from the Re-registration ("New Articles"). The Circular will also contain a notice convening a general meeting (the "General Meeting") at which Shareholders are invited to consider the proposed resolutions therein ("Resolutions").

The General Meeting will be held at Sondrel House, Theale Lakes Business Park, Moulden Way, Sulhampstead, Reading, RG7 4GB at 10 a.m. on 12 August 2024.

The Directors consider that the proposals are in the best interests of the Company and its Shareholders as a whole and, therefore, unanimously recommend that you vote in favour of the Resolutions  at the General Meeting as each of the Directors intends to vote, or procure the vote, in respect of, in aggregate, 124,943,504 Ordinary Shares to which they or their connected persons are beneficially entitled, representing approximately 72.45% of the Company's issued ordinary share capital.

The Circular and the notice of General Meeting will be made available shortly on the Company's website at https://ir.sondrel.com/investors/shareholder-information#notices and defined terms used in this announcement shall have the meaning ascribed to them in the Circular.   

Process for Cancellation

Under the AIM Rules for Companies (the "AIM Rules"), it is a requirement that the Cancellation must be approved by Shareholders holding not less than 75 per cent. of votes cast by Shareholders at the General Meeting. Accordingly, the notice of General Meeting set out in the Circular contains a special resolution to approve the Cancellation (the "Cancellation Resolution").

Furthermore, Rule 41 of the AIM Rules requires any AIM company that wishes the London Stock Exchange to cancel the admission of its shares to trading on AIM to notify shareholders and to separately inform the London Stock Exchange of its preferred cancellation date at least 20 clear Business Days prior to such date. In addition, a period of at least five clear Business Days following Shareholders' approval of the Cancellation is required before the Cancellation may become effective.

In accordance with AIM Rule 41, the Directors have notified the London Stock Exchange of the Company's intention, subject to the Cancellation Resolution being passed at the General Meeting, to cancel the Company's admission of the Ordinary Shares to trading on AIM on 21 August 2024. Accordingly, if the Cancellation Resolution is passed by the Shareholders, the Cancellation will become effective at 7.00 a.m. on 21 August 2024.

Sherry Madera, a Non-Executive Director of the Company, has confirmed that she intends to resign as a Director of the Company from the date of Cancellation.

Re-registration

As set out above, following the Cancellation, the Directors believe that the requirements and associated costs of the Company maintaining its public company status will be difficult to justify and that the Company will benefit from the more flexible requirements and lower costs associated with private company status. It is therefore proposed to re-register the Company as a private company limited by shares. In connection with the Re-registration, it is proposed that the New Articles be adopted to reflect the change in the Company's status to a private company. The principal effects of the Re-registration and the adoption of the New Articles on the rights and obligations of Shareholders and the Company are summarised in Part 2 of the Circular.

An application will be made to the Registrar of Companies for the Company to be re-registered as a private company limited by shares. Re-registration will take effect when the Registrar of Companies issues a certificate of incorporation on Re-registration. The Registrar of Companies will issue the certificate of incorporation on Re-registration when it is satisfied that no valid application can be made to cancel the resolution to re-register as a private company or that any such application to cancel the resolution to re-register as a private company has been determined and confirmed by the Court.

Dealing and settlement arrangements

The Directors are aware that certain Shareholders may wish to acquire or dispose of Ordinary Shares in the Company following the Cancellation.

Therefore, the Company has made arrangements for the Matched Bargain Facility to assist Shareholders to trade in the Ordinary Shares to be put in place from the day of Cancellation if the Resolution is passed. The Matched Bargain Facility will be provided by J P Jenkins Limited ("JP Jenkins"). JP Jenkins is a liquidity venue for unlisted or unquoted assets in companies, enabling shareholders and prospective investors to buy and sell equity on a matched bargain basis. JP Jenkins is a trading name of InfinitX Limited and Appointed Representative of Prosper Capital LLP (FRN453007).

Under the Matched Bargain Facility, Shareholders or persons wishing to acquire or dispose of Ordinary Shares will be able to leave an indication with JP Jenkins, through their stockbroker (JP Jenkins is unable to deal directly with members of the public), of the number of Ordinary Shares that they are prepared to buy or sell at an agreed price. In the event that JP Jenkins is able to match that order with an opposite sell or buy instruction, they would contact both parties and then effect the bargain. Should the Cancellation become effective and the Company put in place the Matched Bargain Facility, details will be made available to Shareholders on the Company's website at https://ir.sondrel.com/investors and directly by letter or e-mail (where appropriate).

Following Cancellation, the provision of the Matched Bargain Facility will be kept under review by the Board and, in determining whether to continue to offer a Matched Bargain Facility, the Company shall consider expected (and communicated) Shareholder demand for such a facility as well as the composition of the Company's register of members and the costs to the Company and Shareholders. Shareholders should therefore note that there can be no certainty that the Matched Bargain Facility will continue to be in place for an extended period of time following Cancellation.

For further information:

Background to and reasons for the Cancellation and Re-registration

On 28 March 2024, the Company announced, inter alia, that it had resolved to adopt a transformation plan to assist the Company in re-establishing its baseline costs, introducing revised robust management processes and refocusing the business to resolve matters which were central to the cash flow issues being faced by the Group (the "Transformation Plan"). The Transformation Plan was adopted in connection with the Company's entry into a £2 million secured 15% convertible loan agreement with ROX ("Loan") and alongside a then proposed subscription by ROX to raise gross proceeds of £5.6 million for the Company (the "Subscription"). The Loan was conditional upon the adoption of the Transformation Plan and was required to ensure that the Company could continue to operate. The Subscription was conditional, inter alia, on a waiver being granted by the Panel ("Rule 9 Waiver"), conditional upon the approval by the Shareholders of the resolution approving such Rule 9 Waiver. The Rule 9 Waiver was obtained, the Shareholders approved the Rule 9 Waiver at a general meeting of the Company held on 30 May 2024 and the Subscription was subsequently completed on 14 June 2024.

As part of the Transformation Plan and as announced by Sondrel on 14 May 2024, the Company decided (including by unanimous approval of the independent Non-Executive Directors at the time) that it would seek to cancel the admission of the Ordinary Shares to trading on AIM.

The Directors are of the opinion that the Cancellation is in the best interests of the Company and its Shareholders as a whole. The significant management time, cost and the legal and regulatory burden associated with maintaining the Company's admission to trading on AIM is, in the Directors' opinion and in light of the above, now disproportionate to the benefits of the Company's continued admission to trading on AIM, particularly at a time when the business is undergoing significant transformation.

Given the lower costs associated with private company status, it is estimated that the Proposals will reduce the Company's recurring administrative and adviser costs by approximately £400,000 per annum, which amount the Directors believe can be better spent supporting growth in the Group's business for the benefit of Shareholders.

Furthermore, with ROX and Graham Curren (and his connected parties) collectively owning approximately 72.05 per cent. of the Company's issued Ordinary Shares, the Directors believe that there is now limited liquidity in the trading of the Ordinary Shares and, consequently, the admission of the Ordinary Shares to trading on AIM does not necessarily offer investors the opportunity to trade in meaningful volumes or with frequency within an active market.

Following careful consideration, the Directors therefore believe that it is in the best interests of the Company and Shareholders as a whole to seek the proposed Cancellation and Re-registration at the earliest opportunity.

In addition, in connection with the Re-registration, it is proposed that the New Articles be adopted to reflect the change in the Company's status to a private company limited by shares. The principal effects of the Re-registration and the adoption of the New Articles on the rights and obligations of Shareholders and the Company are summarised in Part 2 of the Circular.

Current trading and prospects

On 18 July 2024 the Company published its audited final results for the year ended 31 December 2023, with the Company reporting revenues of £9.4 million (2022: £17.3 million), an operating loss of £17.3 million (2022: £5.2 million) and a loss after tax of £21.5 million (2022: £3.2 million).

The business experienced a very difficult and challenging year from a trading point of view that also came at the same time as a slow-down in the semi-conductor market in Europe in particular. Additionally, the strategic decision taken to focus on project-based ASIC work meant that some of the smaller scale time and materials-based services work was lost. Winning of new contracts in FY23 was particularly weak, with a total of new business won of only £4.0m (2022: £25.6m).  

Steady project progress was made during the first half of the year before the lack of new business won during the year and delays on the largest ASIC project being undertaken meant that second half revenues fell significantly. This project had originally been forecast to be completed in September 2023 but only reached its successful conclusion in April 2024. This led to revenue of some £2.7m being deferred from 2023 into 2024. In parallel to this, the second phase of the project that had been expected to commence in July 2023 was also delayed and has not yet commenced.

As at 31 December 2023, the Company held gross cash balances of approximately £20,000 and a net debt position of £0.9m.

The completion of the recent Subscription and the support of ROX will ensure that the business is stabilised and put on a growth footing in the future based on a more solid foundation. In the short term, the current trading losses are targeted by the transformation planning to be eliminated by the last quarter of the current year and thereby avoiding the need for any further subscription or other fundraising to support trading activities. To achieve this target, new business wins and further cost saving measures will be required, some of them related to the Cancellation process.

During the 12-month period from completion of the Subscription, Sondrel can request (but not require) ROX to provide a further £1.5m funding to Sondrel by way of a subscription for up to 15,000,000 Ordinary Shares at a price of 10 pence per share ("Additional Subscription"). If the Additional Subscription is agreed to by ROX, this would provide more liquidity should it be necessary. However, it is recognised that the Additional Subscription may not be sufficient should the expected new business wins fall short of current forecasts over the next 12 months. This creates a material uncertainty over the cash flows of the business until such time as the revenues increase.

Despite this, the Board believes that the future prospects for the business will be more positive once the Transformation Plan has been delivered and Sondrel is able to compete more effectively for the many opportunities that are available in the market

General Meeting

The Company is convening the General Meeting to consider and, if thought fit, pass: (i) a special resolution to approve the Cancellation, (ii) a special resolution to approve the Re-registration (including approving the New Articles), (iii) an ordinary resolution to present the Company's FY23 Annual Report to Shareholders, and (iv) an ordinary resolution to consider the re-appointment of the Company's auditors. The resolution to approve the Re-registration is conditional upon the resolution to approve the Cancellation being passed by Shareholders at the General Meeting.

The General Meeting will be held at Sondrel House, Theale Lakes Business Park, Moulden Way, Sulhampstead, Reading, RG7 4GB at 10 a.m. on 12 August 2024.