REG - Velocity Composites - Audited Final Results to 31 October 2024
29/01/2025 07:00
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RNS Number : 0011V Velocity Composites PLC 29 January 2025
29 January 2025
VELOCITY COMPOSITES PLC
("Velocity Composites" or the "Company")
Audited Final Results for the twelve months ended 31 October 2024
Revenue up 40% with positive adjusted EBITDA for the year
Velocity Composites plc (AIM: VEL), the leading supplier of composite material
kits to aerospace, is pleased to announce the Company's audited results for
the twelve months ended 31 October 2024 ("FY24").
Highlights:
● Total revenue increased 40% to £23.0m (FY23: £16.4m)
● US revenue quadrupled to £7.9m (FY23: 2.0m) as production ramps up at US
facility
● Gross margin up 710 bps to 25.9% (FY23: 18.8%) due to a better sales mix,
inflation adjustments and improved operational efficiencies
● Adjusted EBITDA* profit of £0.4m (FY23: loss of £1.6m)
● Net cash position of £0.7m at 31 October 2024 (FY23: £1.6m); Repaid CBILs
Loan and lease liabilities of £1.0m (FY23: £1.0m). As at 24 January 2025 the
Group had a gross cash balance of £1.6m, a CBIL loan balance of £0.8m and
undrawn availability of £1.3m under invoice discounting facilities.
● Appointed experienced CFO and Company Secretary Rob Smith to the Board in June
2024
Outlook:
● A350 programme production rates are expected to increase significantly as the
OEM strives to fulfil its order backlog. This is the largest programme in the
UK to which Velocity is a supplier
● Final contracted programme from previously announced agreement expected to
reach sustained production at US site in H1 FY25
● Additional programmes at US customer being evaluated
● Anticipated near-term growth supports the Board's key targets:
· 25% plus gross margin
· 10% adjusted EBITDA* margin
· 25% return on capital
● The Board is confident of delivering another year of strong growth in FY25
* Adjusted EBITDA is defined as Earnings before interest, tax, depreciation,
amortisation, exceptional items and adjusted for share-based payments.
Jon Bridges, CEO. Velocity Composites added: "The Board expects further
revenue growth in FY25 and into the future, while the Company retains a focus
on investing in operating efficiency and service delivery excellence on behalf
of all of our key customers. The long-term outlook for the industry is strong
and shareholders will benefit as production rates increase for both existing
and new business. We are confident that our services and business model will
deliver the expected growth."
Andy Beaden, Chairman, Velocity Composites, said: "The long-term OEM order
books and forecasts in both civil and defence aerospace markets remain robust,
with major prime manufacturers planning significant increases over the next
few years in their production rates. We have positioned our engineering
services to aid that challenge in unlocking capacity constraints and
delivering efficiencies in the composite supply chain. We believe growth for
Velocity is attainable over the longer term, through current contracts and new
business opportunities in Europe and the US."
Investor Presentation
Chairman Andy Beaden, Chief Executive Officer Jon Bridges, and Chief Financial
Officer Rob Smith will provide a live investor presentation for the Company's
results via the Investor Meet Company platform at 09:00am on Thursday 30
January 2025.
The presentation is open to all existing and potential shareholders. Questions
can be submitted in advance via the Investor Meet Company dashboard, or at any
time during the live presentation. Investors can sign up to Investor Meet
Company and add to meet Velocity Composites plc via:
https://www.investormeetcompany.com/velocity-composites-plc/register-investor
(https://www.investormeetcompany.com/velocity-composites-plc/register-investor)
Enquiries:
Velocity Composites Tel: +44 (0) 1282 577577
Andy Beaden, Chairman
Jon Bridges, Chief Executive Officer
Rob Smith, Chief Financial Officer
Canaccord Genuity Limited (Nominated Adviser and Broker) Tel: +44 (0)20 7523 8000
Max Hartley
George Grainger
Dowgate Capital Limited (Joint Broker) Tel: +44 (0)20 3903 7715
Russell Cook
Nicolas Chambers
SEC Newgate (Financial Communications) Tel: +44 (0)7540 106 366
Robin Tozer Email: velocity@secnewgate.co.uk (mailto:velocity@secnewgate.co.uk)
George Esmond
Harry Handyside
About Velocity Composites
Based in Burnley, UK, Velocity is the leading supplier of composite material
kits to aerospace, that reduce costs and improve sustainability. Customers
include BAE Systems. Hamble Aerostructures, Safran Nacelles and GKN, who
supply to the major OEMs including Airbus, Boeing, GE, Rolls Royce and
Lockheed Martin.
By using Velocity's proprietary technology, manufacturers can also free up
internal resources to focus on their core business. Velocity has significant
potential for expansion, both in the UK and abroad, including into new market
areas, such as wind energy, urban air mobility and electric vehicles, where
the demand for composites is expected to grow.
Chairman's Report
Introduction
Velocity has achieved another year of exceptional growth. Revenue increased
40% to £23 million, up from £16.4 million in FY23, which itself represented
a 37% rise on the prior year. Notably, the business achieved adjusted EBITDA
profitability for the full year and became cash positive in the second half.
We are firmly on course to achieve our objective of long-term profitability
and strong cash flow generation. The 40% revenue growth was a remarkable
achievement, when you consider short-term production rates for OEMs in the
civil aircraft industry remained flat or declined in some areas during the
year.
The growth underscores the considerable potential within Velocity's current
contracts, which will see further progress as the anticipated increases in
build rates materialise over the coming years. Our engineering and business
development teams are pursuing a broad range of new opportunities with current
and potential new customers. The well documented disruptions at Boeing
evidently impacted the underlying supply chain which prompted us to pause
several advanced opportunities in the US and refocus on alternative markets.
This has included the defence sector, as NATO countries are expected to
increase spending. The five-year breakthrough contract we agreed in December
2022 with a leading US manufacturer, has strengthened our presence in the
defence market.
Environmental
Velocity is committed to supporting the aerospace industry's environmental
objectives, including reducing emissions and waste, and promoting efficient
resource use. Carbon fibre, as a key material, offers significant potential to
lower environmental impact, the unit cost and oil-based inputs make waste
reduction essential. Velocity's services focus on minimising material waste,
contributing to a net positive environmental outcome.
We are equally proud of fostering a safe and secure manufacturing environment,
maintaining world-class employee safety standards.
Innovation
Our proprietary Velocity Resource Planning (VRP) technology continues to
deliver operational excellence. This year, VRP was fully implemented at our
new US facility, transforming it into a world-class advanced manufacturing
site. This innovation enhances efficiency and raises service levels for our
customers, reinforcing our leadership in advanced material resource planning.
People
Our lean, technology-enabled back-office structure is a key advantage for
Velocity. Centralised teams in the UK support multiple factories across
R&D, Engineering, Sales, and Finance, enabling scalability and
cost-efficiency. To support our expected growth, we have invested in hiring
and training a significant number of new employees during the year, incurring
upfront costs that will deliver long-term commercial benefits. Alongside this
investment in our operational and engineering teams, we strengthened our
senior management team, adding expertise in Finance, Operations, and the US
market.
Board
I would like to extend my gratitude to Andrew Hebb for his invaluable
contributions during his second tenure as Interim CFO and Company Secretary.
Andrew stepped down in the summer of 2024, and we were delighted to welcome
Rob Smith as our new permanent CFO, Company Secretary and Board Director. The
Board's extensive industry expertise, combined with a highly capable executive
management team, is one of the reasons Velocity is outperforming industry
growth rates.
Outlook
Looking ahead, the Board is confident of delivering another strong year of
growth in FY25, underpinned by our contractual business base. In response to
recent inflationary pressures, which affected short-term margins, we
successfully negotiated price increases with all key customers. While market
uncertainties persist, Velocity's consistent growth record provides confidence
that we are at a turning point and expect to move towards sustained
profitability and cash generation.
On behalf of the Board, I extend my heartfelt thanks to all stakeholders,
especially our investors, for their continued support.
Andrew Beaden
Chairman
28 January 2025
Chief Executive Officer's Report
Overview
This has been another year of double-digit growth for Velocity. We have
weathered the production challenges facing the global aerospace industry, and
we are entering 2025 in a healthy position to support customers as they look
to ramp up production. The migration to composite materials in newer aircraft
models continues, as OEM's focus on improved sustainability, as well as an
expected increase in Western defence expenditure, will continue to result in
more opportunities for Velocity.
Revenue was up 40% to £23.0m (FY23: £16.4m), driven by growing US sales, and
we had a positive adjusted EBITDA of £0.4m, the first time since the Covid-19
pandemic (FY23: loss £1.6m). The Group has maintained a healthy cash and
liquidity position with cash-inflows from operating activities of £0.4m
(FY23: outflows of £1.8m). We anticipate further growth in FY25 and beyond,
as higher monthly production rates are expected in the global aerospace
industry.
US Contract
Sales in the US quadrupled to £7.9m (FY23: £2.0m) following the onboarding
work from a leading US manufacturer at our site in Alabama. This is part of
the five-year contract, announced in December 2022, with expected total
revenue of £79m ($100m) as announced at the time.
At the half year, we had successfully completed the First Article Inspection
(FAI) requirements needed from our customer and were awaiting completion of
the FAI process between our customer and the OEM. Whilst we experienced delays
in FY24, we have been working directly with our US customer and the OEM to
complete the necessary work in Q1 FY25, allowing the US site to fully
discharge the existing contracted business, with sales increasing further as a
result.
Customers
During FY24, we renewed a number of long-term, existing contracts with
customers, which included price increases that factored in the increased costs
of labour, energy and finance that occurred since they were last renewed. We
have agreed with all key customers that while contracts are typically rolling
three to five-year agreements, inflation costs will be reviewed annually based
on pre-agreed indices to ensure that any price changes are proportionate and
accounted for in their annual budgeting.
Operational Development
We are rolling out our Odoo-based Velocity Resource Planning (VRP) system into
our UK sites, following the successful implementation in the US. VRP provides
better controls, more efficient operational scenarios and full traceability
from long-term demand or order management to the delivery of composite kits to
customers. The system brings all the bespoke data processing, batch
traceability and life managements used to date into one system that includes
the more "normal" and transactional process such as finance and order
processing. This enables uniform and real time management of the entire
business across all manufacturing and forward stock location sites without
local variations to the system architecture, bringing immediate improvements
to the resolution of system data along with a standard platform for new sites.
This improvement helps our sustainability reporting as we measure, track and
improve our carbon footprint across all aspects of our business.
Market and Business Development
At the start of FY24, existing customers in key programmes (particularly A350)
and bid customers in other programmes (B737, B787) were forecasting
significant build rate increases as the industry started to return to
pre-pandemic production levels. In our trading update in September 2024, the
Company highlighted delays to planned production rate increases across the
global aerospace industry, in part due to the well-publicised issues facing
Boeing, which had a short-term impact on the Group's expected growth in
FY24.
Since then, the two largest civil aircraft manufacturers have reported record
order backlogs and positive book to bill ratios in 2024. We have noted that
the manufacturers are forecasting increased aircraft deliveries in 2025, in an
expected return to more predictable and higher monthly production rates. This
will in turn flow down to Velocity's order books. For example, A350 production
is planned to double by 2028, the largest programme in the UK to which
Velocity is a supplier.
However, to ensure Velocity has a broader range of relationships, and to hedge
against future problems in the civil aircraft market, our business development
teams are building on our relationships and developing our business case with
defence OEMs in Europe and the US. Global defence expenditure is expected to
continue to rise in response to continuing Geo-Political uncertainties. Our
services are identical for defence customers who share similar issues to civil
aircraft manufacturers in terms of the need to improve fuel and operating
efficiencies.
This is progressing along the expected long-term timelines for opportunities
of this scale, and complexity. Among other things, we are working to fulfil
the requirements for export controls and accreditations around protected data
needed to work closely with this sector.
Outlook
The Company expects further revenue growth in FY25 and beyond, while retaining
a focus on investing in operating efficiency and service delivery excellence
on behalf of all of our key customers. The long-term outlook for the industry
is strong and shareholders will benefit as production rates increase for both
existing and new business. We are confident that our services and business
model will deliver the expected
growth.
Jonathan Bridges
Chief Executive Officer
28 January 2025
Financial Review
Statement of Comprehensive Income
Group revenue for FY24 increased 40.2% to £23.0m (FY23: £16.4m) as sales
from our US site ramped through the year.
Gross profit improved to £6.0m (FY23: £3.1m) as a result of the increased
sales revenue and higher gross margin percentage of 25.9% (FY23: 18.8%) that
was achieved through a better sales mix, inflation adjustments and improved
operational efficiencies delivered in FY24 that are expected to flow through
to future years.
Administrative expenses in FY24 were £7.0m (FY23: £5.8m, excluding
exceptional items), an increase of 20.7%. The main driver for the higher
expenditure was incremental costs associated with the US operations. The US
specific administrative expenses, before Group recharges, were £1.6m in FY24
(FY23: £1.2m) as we continue to invest in our capability in the US. The
increase in volume was therefore partially offset by overheads associated with
growing the US operation and resulted in an adjusted EBITDA profit of £0.4m
(FY23: EBITDA loss of £1.6m).
( ) 31 October 31 October
2024 2023
Reconciliation from operating loss £'000 £'000
Operating loss (931) (2,817)
Add back:
Share-based payments 143 206
Depreciation and amortisation 622 413
Depreciation on right of use assets under IFRS 16 540 472
Exceptional administrative costs - 120
Adjusted EBITDA 374 (1,606)
The ramp-up in the new US facility has continued at pace with additional
cutting and freezer storage capacity being added as well as on-going
investment in people to improve our capabilities. Two work packages are now
fully transferred and running in line with end customer demand. A third work
package, that was expected to transfer during FY24, has been subject to
additional approvals from the end customer, this process is being finalised in
the first half of FY25 with full production volumes now anticipated in the
second half of FY25. The third work package will not require significant
incremental overheads and will utilise existing capacity.
There is considerable further potential growth through OEM production rate
increases on existing programmes as well as opportunities on other programmes
with new and existing customers. Velocity has built an excellent capability to
deliver this growth without a linear increase to its overhead base or
installed manufacturing capacity.
Losses after tax for the year for the Group amounted to £0.8m (FY23: £3.1m).
The reduced loss was a direct result of the increased revenue.
Cashflow and Capital Investment
The cash and cash equivalents balance as at 31 October 2024 was £1.7m (FY23:
£3.2m).
Operating cash inflow before working capital movements for FY24 was £0.3m
(FY23: £1.7m outflow), this being attributable to increased revenue during
the year. The movements in working capital netted to a £0.4m outflow in FY24
(FY23: £0.1m outflow), and after other adjustments for taxation received, the
final cash inflow from operations was £0.4m (FY23: £1.8m outflow).
Working capital movements can be further analysed as follows: There was a
negative working capital movement through a £0.4m decrease in trade and other
payables from suppliers (FY23: increase of £2.4m). Inventory decreased by a
£0.2m (FY23: increase of £1.3m), largely due to improvements in operational
efficiencies. Trade receivables increased by £0.2m (FY23: £1.1m) driven by
the increased turnover offset by utilisation of supplier finance arrangements
provided by our lead US customer. Overall trade receivable days were 53 days,
compared to 71 days at the end of FY23.
Cash outflow from investment activities was £0.6m (FY23: £2.1m). The
reduction in investment activities was a result of a return to normal levels
following the investment in commencement of operation at our Tallassee
facility in FY23.
Financing activities cash outflow was £1.4m in the year (FY23: £4.8m
generation including £6.6m proceeds from issue of ordinary shares). The
outflow can be further analysed as: - finance costs paid £0.4m (FY23:
£0.3m), repayment of loans £0.5m (FY23: £0.5m) and repayment of finance
lease capital £0.5m (FY23: £0.5m).
The Company was in a Net Cash position at the end of the year, of £0.7m
(FY23: £1.6m). This includes Cash at Bank, offset by the outstanding CBILS
balance and invoice discounting facility.
( ) 31 October 31 October
2024 2023
£'000 £'000
Cash 1,663 3,178
CBILS loan (971) (1,473)
Invoice discounting facility - (68)
Net cash 692 1,637
Going Concern
The financial statements have been prepared on a going concern basis as the
directors believe that the Group has access to sufficient resources to
continue in business for the foreseeable future. This is discussed more fully
in the Directors' Report of the annual report and accounts.
Rob Smith
Chief Financial Officer
28 January 2025
Consolidated Statement of Total Comprehensive Income Year ended Year ended
31 October 31 October
2024 2023
Note £'000 £'000
Revenue 4 23,006 16,411
Cost of sales (17,045) (13,325)
Gross profit 5,961 3,086
Administrative expenses (6,978) (5,783)
Exceptional administrative expenses 8 - (120)
Other Operating Income 86 -
Operating loss 5 (931) (2,817)
Operating loss analysed as:
Adjusted EBITDA profit/(loss) 31 374 (1,606)
Depreciation of property, plant and equipment (382) (297)
Amortisation (240) (116)
Depreciation of right-of-use assets under IFRS 16 (540) (472)
Share-based payments (143) (206)
Exceptional administrative expenses 8 - (120)
Finance income and expense 9 (413) (326)
Loss before tax from continuing operations (1,344) (3,143)
Corporation tax recoverable 10 499 -
Loss for the year and total comprehensive loss (845) (3,143)
Loss per share - basic from continuing operations 11 (1.58p) (8.18p)
Loss per share - diluted from continuing operations 11 (1.58p) (8.18p)
There is no other comprehensive income in the current or prior year.
Consolidated Statement of Financial Position 31 October 31 October
2024 2023
Note £'000 £'000
Non-current assets
Intangible assets 12 987 890
Property, plant and equipment 13 1,854 2,095
Right-of-use assets 20 1,826 2,129
Total non-current assets 4,667 5,114
Current assets
Inventories 15 2,500 2,743
Trade and other receivables 16 3,977 3,667
Cash and cash equivalents 17 1,663 3,178
Total current assets 8,140 9,588
Total assets 12,807 14,702
Current liabilities
Loans 19 503 503
Trade and other payables 18 3,933 4,587
Obligations under lease liabilities 20 561 487
Total current liabilities 4,997 5,577
Non-current liabilities
Loans 19 468 970
Obligations under lease liabilities 20 1,258 1,587
Provisions 26 218 -
Total non-current liabilities 1,944 2,557
Total liabilities 6,941 8,134
Net assets 5,866 6,568
Equity attributable to equity holders of the company
Share capital 23 134 133
Share premium account 24 4,870 4,870
Share-based payments reserve 25 517 478
Retained earnings 345 1,087
Total equity 5,866 6,568
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and not presented its own statement of profit and loss
in these financial statements. The loss for the year was £984,000. The
financial statements were approved and authorised for issue by the Board of
Directors on 28 January 2025 and were signed on its behalf by:
Rob Smith Director
Co No: 06389233
Consolidated statement of changes in equity Share Share Retained Share- Total
premium based payments
capital account earnings reserve equity
£'000 £'000 £'000 £'000 £'000
As at 31 October 2022 91 9,727 (7,102) 684 3,400
Loss for the year - - (3,143) - (3,143)
91 9,727 (10,245) 684 257
Transactions with shareholders:
Share-based payments (note 25) - - - 206 206
Transfer of share option reserve on vesting of options and issue of equity - - 412 (412) -
Issue of new shares net of transaction costs 42 6,063 - - 6,105
Reduction of Share Premium Account - (10,920) 10,920 - -
As at 31 October 2023 133 4,870 1,087 478 6,568
Share Share Retained Share- Total
premium based payments
capital account earnings reserve equity
£'000 £'000 £'000 £'000 £'000
As at 31 October 2023 133 4,870 1,087 478 6,568
Loss for the year - - (845) - (845)
133 4,870 242 478 5,723
Transactions with shareholders:
Share-based payments (note 25) - - - 143 143
Transfer of share option reserve on vesting of options and issue of equity 1 - 103 (104) -
As at 31 October 2024 134 4,870 345 517 5,866
Consolidated Statement of Cash Flows
Year Year
ended ended
31 October 31 October
2024 2023
£'000 £'000
Operating activities
Loss for the year (845) (3,143)
Taxation (528) -
Profit on sale of assets - (4)
Finance costs 413 326
Amortisation of intangible assets 240 116
Depreciation of property, plant and equipment 382 297
Depreciation of right-of-use assets 540 472
Share-based payments 143 206
Operating cash flows before movements in working capital 345 (1,730)
Increase in trade and other receivables (180) (1,146)
Decrease/(Increase) in inventories 243 (1,336)
(Decrease)/Increase in trade and other payables (654) 2,380
Increase/(Decrease) in provisions 218 -
Cash (outflow)/inflow from operations (28) (1,832)
Tax received 398 -
Net cash inflow/(outflow) from operating activities 370 (1,832)
Investing activities
Purchase of property, plant and equipment net of intercompany transfers (212) (1,293)
Purchase of development expenditure (372) (833)
Proceeds from the sale of property, plant and equipment - 4
Net cash used in investing activities (584) (2,122)
Financing activities
Proceeds from issue of ordinary shares - 6,590
Share issue transaction costs - (485)
Finance costs paid (413) (326)
Loan repayment (502) (536)
Repayment of lease liabilities capital (497) (455)
Net cash generate in financing activities (1,412) 4,788
Net /(Decrease)/Increase in cash and cash (1,626) 834
equivalents
Cash and cash equivalents at 01 November 3,178 2,344
Effect of foreign exchange rate changes 111 -
Cash and cash equivalents at 31 October 1,663 3,178
Notes to Financial Statements
1. General information
Velocity Composites plc (the 'Company') is a public limited company
incorporated and domiciled in England and Wales. The registered office of the
Company is AMS Technology Park, Billington Road, Burnley, Lancashire, BB11
5UB, United Kingdom. The registered company number is 06389233.
In order to prepare for future expansion in the Asia region, the Company
established a wholly owned subsidiary company, Velocity Composites Sendirian
Berhad, which is domiciled in Malaysia. The subsidiary company commenced
trading on 18 April 2018. The Company also established a wholly owned
subsidiary company, Velocity Composites Aerospace Inc. to prepare for future
expansion in the United States of America. These subsidiaries, together with
Velocity Composites plc, now form the Velocity Composites Group ('the Group').
The Group's principal activity is that of the sale of kits of composite
material and related products to the aerospace industry.
2. Accounting policies
Basis of preparation
The consolidated financial statements of Velocity Composites plc have been
prepared in accordance with UK-adopted international accounting standards and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations.
These financial statements have been prepared on a going concern basis and
using the historical cost convention, as modified by the revaluation of
certain items, as stated in the accounting policies. These policies have been
consistently applied to all years presented, unless otherwise stated. The
financial statements are presented in sterling and have been rounded to the
nearest thousand (£'000). References to "FY24" refer to the year ended 31
October 2024, whilst references to "FY23" are in respect of the year ended 31
October 2023.
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and not presented its own statement of profit and loss
in these financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiary undertakings and are made up to 31 October
2024. Subsidiaries are consolidated from the date of acquisition, using the
purchase method.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used
by the Group. The Group's subsidiaries have prepared their statutory financial
statements in accordance with IFRS standards.
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights. The acquisition date is the date on
which control is transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases.
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all years presented in the consolidated financial
statements.
There are no new accounting standards or interpretations that are not yet
fully effective that could be expected to have a material impact on the Group.
Going concern
The financial statements have been prepared on a going concern basis as the
directors believe that the Group has access to sufficient resources to
continue in business for the foreseeable future.
The key business risks and conditions that may impact the Group's ability to
continue as a going concern are the utilisation of existing resources to
finance growth, investment and expenditure; the rates of growth and cash
generated by Group revenues, the timing of breakeven and positive cashflow
generation and the ability to secure additional debt or equity financing in
future if this became necessary. The primary area of judgement that the Board
considered, in the going concern assessment, related to revenue expectations
and visibility.
The Board was mindful of the guidance surrounding a severe but plausible
assessment and, accordingly, considered a number of scenarios in revenue
reduction against the original plans. A reverse stress test was constructed to
identify at which point the Group might run out of its available cash. The
test was designed specifically to understand how far revenue would need to
fall short of the base case forecast and does not represent the directors view
on current and projected trading. The test was modelled over an 18-month
period from the date of signing the accounts and was based on budgeted trading
that took into account contracted orderbook and existing revenue streams from
current and contracted customer programmes. The sales revenue in the budgeted
model was reduced evenly across the Group to the point where the projected
month-end cash was equal to zero at any point during test period. In the
model, zero month-end cash was reached in March 2026 when projected sales
revenue was reduced to 80.6% of budget. For the reverse stress test, the Board
specifically excluded any significant upsides to this scenario. This is
despite strong incremental demand potential at both existing and new
customers. This most severe scenario also excludes any mitigating reduction in
the cost base that the Board would clearly undertake in this event. In all
scenarios modelled, including the reverse stress test, the Group has
sufficient resources to operate and meet its liabilities throughout the going
concern review period without the inclusion of the impact of mitigating
actions.
At 31 October 2024, the Group had a gross cash balance of £1.7m, a CBIL loan
balance of £1.0m and undrawn availability of £1.5m under invoice discounting
facilities of £3.0m. As at 24 January 2025 had a gross cash balance of
£1.6m, a CBIL loan balance of £0.8m and undrawn availability of £1.3m under
invoice discounting facilities of £3.0m. On a base case scenario adopted for
their assessment, the Board is comfortable that the Group can continue its
operations for at least a 12-month period following the approval of these
financial statements.
As a result of this review, which incorporated sensitivities and risk
analysis, the Directors believe that the Group has sufficient resources and
working capital to meet their present and foreseeable obligations for a period
of at least 12 months from the approval of these financial statements.
Revenue recognition
Revenue is recognised as performance obligations are satisfied as control of
the goods and services are transferred to the customer. Contracts are
satisfied over a period of time, with the dispatch of goods at a point in
time. Revenue is therefore recognised when control is transferred to the
customer, which is usually when legal title passes to the customer and the
business has the right to payment, for example, on delivery.
The Group generates revenue from the sale of structural and consumable
materials for use within the aerospace industry. This is the sole revenue
stream of the Group.
At contract inception (which is upon receipt of a purchase order from a
customer), an assessment is completed to identify the performance obligations
in each contract. Performance obligations in a contract are the goods that are
distinct.
At contract inception, the transaction price is determined, being the amount
that the Group expects to receive for transferring the promised goods - this
is a fixed price with no variable consideration. The transaction price is
allocated to the performance obligations in the contract based on their
relative standalone selling prices - this reflects the agreed price as per
purchase order for each product. The Group has determined that the
contractually stated price represents the standalone selling price for each
performance obligation.
Revenue from sale of goods and services is recognised when a performance
obligation has been satisfied by transferring the promised product to the
customer at a point in time, usually when legal title passes to the customer
and the business has the right to payment, for example, on delivery. Standard
payment terms are in place for each customer.
Inventory
Inventory is stated at the lower of costs incurred in bringing each product to
its present location and condition compared to net realisable value as
follows:
· Raw materials, consumables and goods for resale - purchase cost on a
first-in/first-out basis.
· Work in progress and finished goods - costs of direct materials and labour
plus attributable overheads based on a normal level of activity.
Net realisable value is based on an estimated selling price less any further
costs expected to be incurred for completion and disposal.
Expenditure
Expenditure is recognised in respect of goods and services received when
supplied in accordance with contractual terms. Goods or services supplied in
a foreign currency are recognised at the exchange rate ruling at the time of
accounting for this expenditure.
Provisions
A provision is made when an obligation exists for a future liability relating
to a past event and where the amount of the obligation can be reliably
estimated.
Retirement benefits: defined contribution schemes
Contributions to defined contribution pension schemes are charged to the
statement of comprehensive income in the year to which they relate.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in respect of
wages and salaries, annual leave and sick leave in the year the related
service is rendered at the undiscounted amount of the benefits expected to be
paid in exchange for that service.
Research and development expenditure
Research expenditure - expenditure on research activities is recognised as an
expense in the year in which it is incurred.
Development expenditure - An internally generated intangible asset arising
from the Group's own development activity is recognised only if all of the
following conditions are met:
· an asset is created that can be identified and is technically and commercially
feasible;
· it is probable that the asset created will generate future economic benefits
and the Group has available sufficient resources to complete the development
and to subsequently sell and/or use the asset created; and
· the development cost of the asset can be measured reliably.
The amount recognised for development expenditure is the sum of all incurred
expenditure from the date when the intangible asset first meets the
recognition criteria listed above. This occurs when future sales are expected
to flow from the work performed. Incurred expenditure largely relates to
internal staff costs incurred by the Group.
Subsequent to initial recognition, internally generated intangible assets are
reported at cost less accumulated amortisation and impairment.
Amortisation
Amortisation is calculated to write off the cost of intangible assets less
their estimated residual values using the straight-line method over their
estimated useful lives and is generally recognised in the statement of total
comprehensive income. The estimated useful lives are based on the average life
of a project as follows:
Development costs 5 years
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As
well as the purchase price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment so as
to write off their carrying value over the expected useful economic lives. It
is provided at the following methods and rates:
Land and buildings (right-of-use) Over the term of the lease
Plant and machinery 15% straight line
Motor vehicles 25% straight line
Fixtures and fittings 15% straight line
Leasehold improvements Over the term of the lease
Foreign currency translation
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('its functional currency'). The consolidated financial
statements are presented in sterling, which is Velocity Composites plc's
functional and presentation currency.
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates the transactions occur. Foreign exchange
gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign
currencies at yearend exchange rates are recognised in the consolidated
comprehensive statement of income.
The results and financial position of foreign operations that have a
functional currency different from the presentation currency are translated
into the presentation currency, on consolidation, as follows:
· assets and liabilities for each statement of financial position presented are
translated at the closing rate at the date of the statement of financial
position;
· income and expenses for each statement of profit or loss and statement of
comprehensive income are translated at average exchange rates; and
· all resulting exchange differences are recognised immediately in the
Consolidated comprehensive statement of income.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed for impairment when
there is an indication that assets might be impaired, and at the end of each
reporting year. When the carrying value of an asset exceeds its recoverable
amount, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the asset's cash generating unit
(i.e. the smallest grouping of assets in which the asset belongs for which
there are separately identifiable cash flows).
Impairment charges are included in the income statement, except to the extent
they reverse previous gains recognised in the statement of comprehensive
income.
Financial instruments
All funding requirements and financial risks are managed based on policies and
procedures adopted by the Board of Directors encapsulating the normal day to
day trading of the Group. The Group does not use derivative financial
instruments such as forward currency contracts, or similar instruments. The
Group does not issue or use financial instruments of a speculative nature.
Bank borrowings
Interest-bearing loans are recorded initially at their fair value, net of
direct transaction costs. Such instruments are subsequently carried at their
amortised cost and finance charges are recognised in the statement of
comprehensive income over the term of the instrument using an effective rate
of interest. Finance charges are accounted for on an accrual's basis to the
statement of comprehensive income.
The Group has current borrowings of CBIL loans and can utilise its invoice
discounting facility in support of its working capital requirements.
Financial assets
The Group classifies its financial assets into the categories discussed below
and based upon the purpose for which the asset was acquired. The Group has not
classified any of its financial assets as held to maturity.
Trade and other receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of services to customers (e.g. trade receivables), but
also incorporate other types of contractual monetary asset. They are
initially recognised at fair value plus transactions costs that are directly
attributable to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest method, less provision for
impairment.
The Group's loans and receivables comprise trade and other receivables
included within the statement of financial position.
Cash and cash equivalents
Cash and cash equivalents include cash held at bank, bank overdrafts and
marketable securities of very short-term maturity (typically three months or
less) which are not expected to deteriorate significantly in value until
maturity. Bank overdrafts are shown within loans and borrowings in current
liabilities in the statement of financial position.
Impairment of financial assets
Impairment provisions are recognised through the expected credit losses model
(ECL). IFRS 9's impairment requirements use forward-looking information to
recognise expected credit losses - the 'expected credit loss (ECL) model'.
The Group considers a broader range of information when assessing credit risk
and measuring expected credit losses, including past events, current
conditions, reasonable and supportable forecasts that affect the expected
collectability of the future cash flows of the instrument.
Trade and other payables
The Group classifies its financial liabilities as comprising trade payables
and other short-term monetary liabilities, which are initially recognised at
fair value and subsequently carried at amortised cost using the effective
interest method.
Share capital
Financial instruments issued by the Group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
Group's ordinary shares are classified as equity instruments.
Share premium
Share premium represents the excess of the issue price over the par value on
shares issued less costs relating to the capital transaction arising on the
issue.
Share-based payment
The Group operates an equity-settled share-based compensation plan in which
the Group receives services from Directors and certain employees as
consideration for share options. The fair value of the services is recognised
as an expense over the vesting period, determined by reference to the fair
value of the options granted.
Leased assets
Leases
The Group makes the use of leasing arrangements principally for the buildings
and motor vehicles. The rental contracts for offices are typically negotiated
for terms of 5 and 10 years and some of these have extension terms. The Group
does not enter into sale and leaseback arrangements. All the leases are
negotiated on an individual basis and contain a wide variety of different
terms and conditions.
The Group assesses whether a contract is or contains a lease at inception of
the contract. A lease conveys the right to direct the use and obtain
substantially all of the economic benefits of an identified asset for a period
of time in exchange for consideration.
Measurement and recognition
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability in its consolidated statement of financial position. The
right-of-use asset is measured at cost, which is made up of the initial
measurement of the lease liability, any initial direct costs incurred by the
Group, and any lease payments made in advance of the lease commencement date.
The Group depreciates the right-of-use asset on a straight-line basis from the
lease commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The Group also assesses the
right-of-use asset for impairment when such indicators exist.
Measurement and recognition (continued)
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
Group's incremental borrowing rate because as the lease contracts are
negotiated with third parties it is not possible to determine the interest
rate that is implicit in the lease.
The incremental borrowing rate is the estimated rate that the Group would have
to pay to borrow the same amount over a similar term, and with similar
security to obtain an asset of equivalent value. This rate is adjusted should
the lessee entity have a different risk profile to that of the Group.
Subsequent to initial measurement, the liability will be reduced by lease
payments that are allocated between repayments of principal and finance costs.
The finance cost is the amount that produces a constant periodic rate of
interest on the remaining balance of the lease liability.
The lease liability is reassessed when there is a change in the lease
payments. Changes in lease payments arising from a change in the lease term or
a change in the assessment of an option to purchase a leased asset. The
revised lease payments are discounted using the Group's incremental borrowing
rate at the date of reassessment when the rate implicit in the lease cannot be
readily determined. The amount of the remeasurement of the lease liability is
reflected as an adjustment to the carrying amount of the right-of-use asset.
The exception being when the carrying amount of the right-of-use asset has
been reduced to zero then any excess is recognised in profit or loss.
Payments under leases can also change when there is either a change in the
amounts expected to be paid under residual value guarantees or when future
payments change through an index or a rate used to determine those payments,
including changes in market rental rates following a market rent review. The
lease liability is remeasured only when the adjustment to lease payments takes
effect and the revised contractual payments for the remainder of the lease
term are discounted using an unchanged discount rate. Except for where the
change in lease payments results from a change in floating interest rates, in
which case the discount rate is amended to reflect the change in interest
rates.
The remeasurement of the lease liability is dealt with by a reduction in the
carrying amount of the right-of-use asset to reflect the full or partial
termination of the lease for lease modifications that reduce the scope of the
lease. Any gain or loss relating to the partial or full termination of the
lease is recognised in profit or loss. The right-of-use asset is adjusted for
all other lease modifications.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients. These leases relate to property
security. Instead of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in profit or loss
on a straight-line basis over the lease term.
See the accounting policy on Property plant and equipment for the depreciation
methods and useful lives for assets held under lease.
Current taxation
The tax currently payable is based on the taxable profit of the year. Taxable
profit differs from profit as reported in the Consolidated statement of
comprehensive income because it excludes items of income and expense that are
taxable or deductible in other years and it further excludes items that are
never taxable or deductible. The Group's liability for current tax is
calculated using rates that have been enacted or substantively enacted by the
statement of financial position date.
R&D tax credit
R&D tax credits are recognised at the point when claims have been
quantified relating to expenditure within current or previous years and
recovery of the asset is virtually certain, these tax credits relating to
R&D are recognised within the tax on profit line of the income statement.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the statement of financial position differs from
its tax base, except for differences arising on:
· the initial recognition of goodwill;
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised. The amount of the asset or liability is determined using tax
rates that have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the deferred tax liabilities or assets are
settled or recovered. Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either the same taxable Company; or different Company entities
which intend either to settle current tax assets and liabilities on a net
basis, or to realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax assets and
liabilities are expected to be settled or recovered.
Operating segments
Operating segments are reported in a manner consistent with the internal
reporting provided to the executive directors. The Chief Operating Decision
Makers have been identified as the Chief Executive Officer and the Chief
Financial Officer. The Group supplies a single type of product into a single
industry and so has a single operating segment. Additional information is
given regarding the revenue receivable based on geographical location of the
customer.
No differences exist between the basis of preparation of the performance
measures used by management and the figures in the Group financial
information.
Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including the expectations of future events that
are believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Provisions for inventory
Provisions are made for obsolete, out of life and slow-moving stock items. In
estimating the provisions, the group makes use of key management experience,
precedents and specific contract and customer issues to assess the likelihood
and quantity. Stock is accounted for on a first in, first out basis.
The provision percentage is applied to various aging categories dependent on
stock type, this is a key estimate made by management based on judgement and
if change is applied to the percentage for the aged stock, then the outcome of
the value of the provision would differ.
Sensitivity analysis
A 5% increase in the levels of the current stock provision would lead to and
finance impact of an increase in stock provision of £13k.
3. Financial instruments and risk management
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies. The overall objective of the Board is to
set policies that seek to reduce risk as far as possible without unduly
affecting the Group's competitiveness and flexibility. The Group reports in
Sterling. All funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors. The Group does not
use derivative financial instruments such as forward currency contracts, or
similar instruments. The Group does not currently issue or use financial
instruments of a speculative nature but as described in the strategic report,
management may consider the potential utilisation of such instruments in the
future. The Group utilises an invoice discounting facility with its bankers to
assist in its cash flow management. In accordance with the terms of the
current facility (which is available on demand) the risk and management of
trade debtors is retained by the Group.
For non-current liabilities please see notes 18, 19 & 26.
Financial instruments
31 October 31 October
2024 2023
£'000 £'000
Current assets
Trade and other receivables 3,447 3,282
Trade and other receivables - prepayments 400 385
Amounts due from subsidiary undertakings - -
3,847 3,667
Cash and cash equivalents - loans and receivables 1,663 3,178
Total loans and receivables 5,510 6,845
Current liabilities
Trade and other payables 3,567 4,053
Trade and other payables - accruals 366 534
3,933 4,587
Loans 503 503
Obligations under lease liabilities 561 487
Total current liabilities 4,997 5,577
Risk management
The Group's activities expose it to a variety of financial risks: market risk
(primarily foreign exchange risk and interest rate risk), credit risk and
liquidity risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance. Risk management is carried out
by the Board and their policies are outlined below.
a) Market risk
Foreign exchange risk
The Group is exposed to transaction foreign exchange risk in its operations
both within the UK and overseas. Transactions are denominated in Sterling, US
Dollars and Euros. The Group has commercial agreements in place which allow it
to transact with its customers in the currency of the material purchase,
thereby allowing a large element of the transactional currency risk to pass
through the Group.
The Group is also exposed to translation foreign exchange risk on
consolidation of US operations, which are translated into Sterling from US
dollars. This can impact the consolidated income statement and also create a
movement in reserves from movements in the US balance sheet items.
The carrying value of the Group's foreign currency denominated assets and
liabilities comprise the trade receivables in note 16, cash in note 17 and
trade payables in note 18.
The Group's financial assets are held in both Sterling and US dollars, the
assets are converted to the presentation currency Sterling assets held in US
dollars are in relation to the US subsidiary, movements in the exchange rate
of the US Dollar or Euro against Sterling do have an impact on both the result
for the year and equity. The Group's assets and liabilities that are held in
US Dollar or Euro are held in those currencies for normal trading activity in
order to recover funds from customers or to pay funds to suppliers.
The Group's exposure to foreign currency risk is as follows. This is based on
the carrying amount of monetary financial instruments.
As at 31 October 2024 US Dollar Euro Total
£'000 £'000 £'000
Trade debtors 2,763 235 2,998
Cash and cash equivalents 1,097 256 1,353
Trade payables (2,759) (20) (2,779)
Balance sheet exposure 1,101 471 1,572
As at 31 October 2023 US Dollar Euro Total
£'000 £'000 £'000
Trade debtors 2,685 75 2,760
Cash and cash equivalents 204 118 322
Trade payables (3,328) (31) (3,359)
Balance sheet exposure (439) 162 (277)
Sensitivity analysis
A 5% strengthening of the following currencies against the pound sterling at
the balance sheet date would have reduced the loss by the amounts shown below.
This calculation assumes that the change occurred at the balance sheet date
and had to be applied to risk exposures existing at that date.
31 October 31 October
2024 2023
£'000 £'000
US dollar (57) 28
Euro (24) (8)
This analysis assumes that all other variables, in particular other exchange
rates and interest rates remain constant. A 5% weakening of the above
currencies against pound sterling in any year would have had the equal but
opposite effect to the amounts shown above. Included in the US dollar value is
£39,000 relating to the US Subsidiary (2023: £78,000).
Interest rate risk
The Group carries borrowings from leases and CBILS loans. Lease borrowings are
at a fixed rate of interest whilst the interest on the CBILS loans is a
combination of fixed rate and Bank of England base rate plus 3.96%. The
Directors do not consider there to be a significant interest rate risk on the
element of loans linked to movements in the Bank of England base rate. The
Group also has access to an invoicing discounting facility that carries a
fixed monthly charge plus interest at a fixed rate of 4.75%.
b) Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Group. In order to
minimise this risk, the Group endeavours only to deal with companies which are
demonstrably creditworthy and this, together with the aggregate financial
exposure, is continuously monitored. The maximum exposure to credit risk is
the value of the outstanding amount.
Supply of products by the Group results in trade receivables which the
management consider to be of low risk, other receivables are likewise
considered to be low risk. However, four of the customers comprise in excess
of 10% of the revenue earned by the Group (see note 4). Credit risk on cash
and cash equivalents is considered to be small as the counterparties are all
substantial banks with high credit ratings. The maximum exposure is the amount
of the deposit.
c) Liquidity risk
The Group currently holds cash balances in Sterling, US Dollars and Euros to
provide funding for normal trading activity. Trade and other payables are
monitored as part of normal management routine. The Group also has access to
banking facilities including invoice finance which it utilises when needed in
order to manage its liquidity risk.
As at 31 October 2024 Within 1 year One to two years Two to five years Over five years
£'000 £'000 £'000 £'000
Loan 503 468 - -
Obligations under lease liabilities 561 575 683 -
Provisions - - 218 -
Trade payables 3,251 - - -
Accruals 584 - - -
Within 1 year One to two years Two to five years Over five years
As at 31 October 2023
£'000 £'000 £'000 £'000
Loan 503 503 467 -
Obligations under lease liabilities 487 508 1,079 -
Trade payables 3,786 - - -
Accruals 534 - - -
Other payables 15 - - -
Invoice discounting facility 68 - - -
d) Capital risk management
For the purpose of the Group's capital management, capital includes issued
capital, and all other equity reserves attributable to the equity holders of
the Group. The Group's objectives when managing capital are to safeguard the
Group's ability to continue as a going concern in order to provide returns for
shareholders and benefits for other members. The Group will also seek to
minimise the cost of capital and attempt to optimise the capital structure.
4. Segmental analysis
The Group supplies a single type of product into a single industry and so has
a single reportable segment. Additional information is given regarding the
revenue receivable based on geographical location of the customer. An
analysis of revenue by geographical market is given below:
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Revenue
United Kingdom 15,058 14,350
Europe 6 41
US Subsidiary 7,915 1,967
Rest of the World 27 53
23,006 16,411
During the year four customers accounted for 92.75% (2023: 91.9%) of the
Group's total revenue for the year ended 31 October 2024. This was split as
follows; Customer A - 25.52% (2023: 34.5%), Customer B - 26.77% (2023: 34.9%),
Customer C - 6.06% (2023: 10.49%) and the fourth customer a customer of
Velocity Composite Aerospace Inc 34.40% (2023: 11.99%).
The majority of revenue arises from the sale of goods. Where engineering
services form a part of revenue it is only in support of the development or
sale of the goods.
During the current and previous year, the Group operated in Asia. No revenue
was generated in Asia during the year ended 31 October 2024 and year ended 31
October 2023 as the site operates as an Engineering Support Office for the
Group. The US subsidiary started to trade in April 2023, revenue of £7,915k
(2023: £1,967k) has been generated since the US subsidiary was incorporated.
5. Operating loss
The operating loss is stated after charging / (crediting):
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Staff costs (see note 6) 4,664 3,700
Cost of inventories 14,966 11,687
Foreign exchange loss 165 57
Amortisation of development costs 240 116
Depreciation:
Owned assets 382 297
Property, plant and equipment under right-of-use assets 540 472
Profit on disposal of assets - (5)
Auditor's remuneration:
Audit of the accounts of the Group 85 75
Other audit related services (relating to interim review) 16 12
6. Staff costs
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Wages, salaries and bonuses 4,019 3,049
Social security costs 406 348
Defined contribution pension costs 96 97
Share-based payments 143 206
4,664 3,700
The average monthly number of employees including directors, during the year
was as follows:
Year ended Year ended
31 October 31 October
2024 2023
Head count Head count
Manufacturing 53 55
Administration 49 47
102 102
7. Directors' costs
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Directors' remuneration included in staff costs:
Wages, salaries and bonuses 387 505
Defined contribution pension costs 27 21
414 526
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees 196 190
Defined contribution pension costs 19 12
215 202
8. Exceptional administrative expenses
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Fees associated with newly issued shares - 120
- 120
Exceptional expenses incurred during the previous year were in relation to the
costs associated with the cash fundraise through the placing and subscription
of the New Ordinary Shares. Total costs incurred were £120,000 and £485,000
charged to the share premium as being directly related to newly issued shares.
No exceptional costs were recognised in the current year.
9. Finance income and expenses
Year ended Year ended
31 October 31 October
2024 2023
£'000 £'000
Finance expense
Finance charge from lease liabilities 108 120
Other interest and invoice discounting charges 305 206
413 326
10. Income tax
Company Year ended
Year ended
31 October 31 October
2024 2023
£'000 £'000
Current tax income
UK corporation tax adjustment in respect of R&D 101
UK corporation tax adjustment in respect of prior years - R&D 398 -
Total tax income 499 -
The reasons for the difference between the actual tax charge for the year and
the standard rate of corporation tax in the United Kingdom applied to the loss
for the year are as follows:
Tax rate 25.00% 22.00%
Loss for the year before tax (1,344) (3,143)
Expected tax credit based on corporation tax rate (336) (691)
Expenses not deductible for tax purposes (84) (17)
Adjustment in respect of prior year - R&D (398) -
Adjustment in respect of current year - R&D (101)
Different tax rates in other countries 20 232
Tax losses not recognised 400 476
Total tax income (499) -
On 3 March 2021, the Chancellor of the Exchequer announced that the
corporation tax rate would increase to 25% from 1 April 2023. It was
substantively enacted on 24 May 2021.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised, based on tax
law and the corporation tax rates that have been enacted, or substantively
enacted, at the Statement of Financial Position date. As such, the deferred
tax rate applicable at 31 October 2024 is 25% and deferred tax had been
re-measured at this date.
11. Loss per share
Year ended Year ended
31 October 31 October
2024 2023
£ £
Loss for the year (845,000) (3,143,000)
Shares Shares
Weighted average number of shares in issue 53,454,166 38,410,094
Weighted average number of share options 1,829,734 1,348,066
Weighted average number of shares (diluted) 55,283,900 39,758,160
Loss per share (basic) 1.58p 8.18p
Loss per share (diluted) 1.58p 8.18p
Share options have not been included in the diluted calculation as they would
be anti-dilutive with a loss being recognised.
12. Intangible assets
Group Development
costs Total
£'000 £'000
Cost
At 31 October 2022 575 575
Additions 833 833
At 31 October 2023 1,408 1,408
Additions 372 372
Exchange adjustments (41) (41)
At 31 October 2024 1,739 1,739
Amortisation
At 31 October 2022 402 402
Charge for the year 116 116
At 31 October 2023 518 518
Charge for the year 240 240
Exchange adjustments (6) (6)
At 31 October 2024 752 752
Net book value
At 31 October 2022 173 173
At 31 October 2023 890 890
At 31 October 2024 987 987
Impairment
The Group reviews the Development costs at each reporting year for indicators
of impairment. An indication of impairment can be generated from the loss of a
customer, or contracted sales. No impairment was judged to be required for
either year.
13. Property, plant and equipment
Group Leasehold Plant & Motor Fixtures Total
improve-ments machinery vehicles & fittings
£'000 £'000 £'000 £'000 £'000
Cost
At 31 October 2022 628 1,855 23 455 2,961
Additions 367 528 - 398 1,293
At 31 October 2023 995 2,383 23 853 4,254
Additions 48 159 - 5 212
Exchange adjustments (33) (26) - (22) (81)
At 31 October 2024 1,010 2,516 23 836 4,385
Depreciation
At 31 October 2022 149 1,382 23 308 1,862
Charge for the year 73 150 - 74 297
At 31 October 2023 222 1,532 23 382 2,159
Charge for the year 105 187 - 90 382
Exchange adjustments (1) (7) - (2) (10)
At 31 October 2024 326 1,712 23 470 2,531
Net book value
At 31 October 2022 479 473 - 147 1,099
At 31 October 2023 773 851 - 471 2,095
At 31 October 2024 684 804 - 366 1,854
14. Investment in subsidiaries
31 October 31 October
2024 2023
£'000 £'000
Subsidiary undertakings - -
- -
A list of all the investment in subsidiaries is as follows:
Name of company Registered office Country of registration Type of shares Proportion of shareholding and voting rights held Nature of business
Directly owned
Velocity Composites SDN. BHD Pentagon Suite, ES-04, Level 3, Wisma Suria, Jalan Teknokrat 6, Cyber 5, Malaysia Ordinary 100% Provider of engineering composite services for the aerospace sector non
63000, Cyberjaya, Selangor trading
Velocity Composites Aerospace, Inc. Corporation Trust Center, 1209 N. Orange St, Wilmington, Delaware 19801 United States of America Ordinary 100% Manufacturer of composite material products for the aerospace sector
15. Inventories
31 October 31 October
2024 2023
£'000 £'000
Raw materials & consumables 1,698 1,830
Finished goods 802 913
2,500 2,743
Inventories totalling £2,500,000 (2023: £2,743,000) are valued at the lower
of cost and net realisable value. The Directors consider that this value
represents the best estimate of the fair value of those inventories net of
costs to sell. The decrease of inventories provision during the previous year
amounted to £55,000 Velocity Composites plc and £47,000 for Velocity
Composites Aerospace Inc, in 2023 the increase was £53,000 for Velocity
Composites plc and £113,000 for Velocity Composites Aerospace Inc.
The inventory at 31 October 2024 is after a stock provision of £272,000
(2023: £374,000). The provision reflects the aged stock profile consistent
with FY23, as well as specific provisions related to slow moving stock as a
result of reduced demand.
Inventories recognised as an expense during the year ended 31 October 2024
amounted to £14,966,000 (2023: £11,687,000), and these were included in cost
of sales.
16. Trade and other receivables
31 October 31 October
2024 2023
£'000 £'000
Trade receivables 3,349 3,187
Prepayments 400 385
Other receivables 98 95
Tax receivable 130 -
Amounts due from subsidiary undertakings - -
3,977 3,667
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within an average of 53 days (2023: 71 days) and therefore are all
classified as current. Trade receivables are recognised initially at the
amount of consideration that is unconditional unless they contain significant
financing components, when they are recognised at fair value. The Group holds
the trade receivables with the objective to collect the contractual cash flows
and therefore measures them subsequently at amortised cost. Details about the
Group's impairment policies and credit risk are provided in note 3. £23,000
Trade receivables (Group and Company) were overdue over three months at the
yearend (2023: £Nil).
The overall expected credit loss is trivial (2023: trivial). There is no
movement in allowance of impairment of trade receivables during each year.
Trade receivables (Group and Company) held in currencies other than sterling
are as follows:
31 October 31 October
2024 2023
£'000 £'000
Euro 235 75
US Dollar 2,763 2,685
2,998 2,760
17. Cash and cash equivalents
31 October 31 October
2024 2023
£'000 £'000
Cash at bank 1,663 3,178
1,663 3,178
18. Trade and other payables
31 October 31 October
2024 2023
£'000 £'000
Trade payables 3,251 3,786
Accruals and deferred income 366 534
Other taxes and social security 316 184
Other payables - 15
Invoice discounting facility - 68
3,933 4,587
Book values approximate to fair values.
19. Bank loans
31 October 31 October
2024 2023
£'000 £'000
Not later than one year 503 503
One to two years 468 503
Two to five years - 467
971 1,473
In FY20 the Company took out a Coronavirus Business Interruption Loan for
£2.0m and on 19 January 2021 the term of this loan was extended to 6 years.
Repayment by instalment commenced in August 2021, with the final instalment
due in August 2026. The loan was interest free for the initial 12 months,
followed by an interest rate of 3.96% above the Bank of England base rate
which was 5.00% as at 31 October 2024. Therefore, the rate payable at 28
January 2025 is 8.96%.
During FY21, the Company took out a further Coronavirus Business Interruption
Loan for £0.45m secured against owned non-current assets. This is being
repaid over 5 years with the first payment made in July 2021 and the final
instalment due in June 2026. The loan was interest free for the initial 12
months, followed by an interest rate of 7.75% per annum.
20. Leases
Right-of-use-assets
Group Land & Plant & Motor Total
buildings machinery vehicles
£'000 £'000 £'000 £'000
Cost
Balance at 31 October 2022 2,433 561 110 3,104
Additions 232 - 100 332
Disposals - - (5) (5)
Balance at 31 October 2023 2,665 561 205 3,431
Additions - 165 107 272
Exchange adjustments (38) - - (38)
Balance at 31 October 2024 2,627 726 312 3,665
Depreciation
Balance at 31 October 2022 478 294 63 835
Depreciation charge for the year 363 81 28 472
Disposals - - (5) (5)
Balance at 31 October 2023 841 375 86 1,302
Depreciation charge for the year 413 82 45 540
Exchange adjustments (3) - - (3)
Balance at 31 October 2024 1,251 457 131 1,839
NBV
At 31 October 2022 1,955 267 47 2,269
At 31 October 2023 1,824 186 119 2,129
At 31 October 2024 1,376 269 181 1,826
The associated right-of-use assets for property leases and other assets were
measured at the amount equal to the lease liability, adjusted by the amount of
any prepaid or accrued lease payments relating to that lease recognised in the
statement of financial position as at 31 October 2024.
Right-of-use lease liabilities
Group
£'000
At 31 October 2023 2,074
Repayment (598)
Additions to right-of-use assets in exchange for increased lease liabilities 272
Interest and other movements 100
Exchange adjustments (29)
At 31 October 2024 1,819
Analysis by length of liability
Group Land & Plant & Motor Total
buildings equipment vehicles
£'000 £,000 £'000 £'000
Current 426 75 59 560
Non-current 957 189 142 1,288
Exchange adjustments (29) - - (29)
1,354 264 201 1,819
Number of right-to-use assets leased 4 2 4
Range of remaining term 1-10 years 1-10 years 1-4 years
Reconciliation of minimum lease payments to present value
Group Minimum Interest Present
lease value
payments
£'000 £'000 £'000
31 October 2024
Not later than one year 651 90 561
Later than one year and not later than two years 646 71 575
Later than two years and not later than five years 781 98 683
2,078 259 1,819
31 October 2023
Not later than one year 585 98 487
Later than one year and not later than two years 589 81 508
Later than two years and not later than five years 1,209 130 1,079
2,383 309 2,074
Low value leases
The Group leases comprise both office and assembly space, under low value
leases. The total value of the minimum lease payments due is payable is
£Nil (2023: £Nil).
Low value leases not classed as right-of-use assets due to the minimal value
of the lease, relate to a building security contract, all other prior year
operating leases have been classed as right-to-use asset on transition to IFRS
16. Payments made under such leases are expensed on a straight-line basis.
21. Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using tax rates appropriate for the year. The movement on the
deferred tax account is as shown below:
The movement on the deferred tax (asset)/liability is shown below:
Company 31 October 31 October
2024 2023
£'000 £'000
Unrecognised deferred tax in respect of losses brought forward (1,630) (1,401)
Corporation tax loss adjustments in respect of prior year 120 -
Corporation tax losses arising during the year (158) (229)
Unrecognised deferred tax in respect of losses carried forward (1,668) (1,630)
The Group has unused tax losses which were incurred by the parent company. A
deferred tax asset of £1,668,000 (2023: £1,630,000) is not recognised in
these accounts. Corporation tax losses can be carried forward indefinitely and
can be offset against future profits which are subject to UK corporation tax.
22. Reconciliation of liabilities arising from financing
activities
Group Lease Other Lease Other Total
liabilities < short-term liabilities > long-term
one year borrowings one year borrowings
£'000 £'000 £'000 £'000 £'000
At 31 October 2022 405 503 1,792 1,506 4,206
Cash flows
Repayment (506) (536) - - (1,042)
Non-cash
Other differences - - 332 - 332
Increase to lease liabilities - - 51 - 51
Transfer from long-term to short term borrowings 588 536 (536) -
(588)
At 31 October 2023 487 503 1,587 970 3,547
Cash flows
Repayment (597) (502) - - (1,099)
Non-cash
Other differences - - 70 - 70
Increase to lease liabilities - - 272 - 272
Transfer from long-term to short term borrowings 671 502 (671) (502) -
As at 31 October 2024 561 503 1,258 468 2,790
23. Share capital
31 October 31 October
2024 2023
£ £
Share capital issued and fully paid
53,509,706 (2023: 53,393,368) Ordinary shares of £0.0025 each 133,774 133,483
Ordinary shares have a par value of 0.25p. They entitle the holder to
participate in dividends, and to share in the proceeds of winding up the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in
person or by proxy, is entitled to one vote, and upon a poll each share is
entitled to one vote. The Company does not have a limited amount of authorised
capital.
Movements in share capital Nominal Number of
value shares
£
Ordinary shares of £0.0025 each
At the beginning of the year 133,483 53,393,368
Exercising of share options 291 116,338
Closing share capital at 31 October 2024 133,774 53,509,706
On 24 January 2024, the Company issued 75,000 new ordinary shares of £0.0025
each to satisfy the exercise of options granted under the Group's 2023 Share
Option Scheme.
On 7 October 2024, the Company issued 41,388 new ordinary shares of £0.0025
each to satisfy the exercise of options granted under the Group's 2017 Share
Option Scheme.
Options
Information relating to the Velocity Composites plc Employee Option Plan,
including details of options issued, exercised and lapsed during the financial
year and options outstanding at the end of the reporting year, is set out in
note 25.
24. Share premium
31 October 31 October
2024 2023
£'000 £'000
At the beginning of the year 4,870 9,727
Shares issued net of transaction costs - 6,063
Reduction of Share Premium Account - (10,920)
At the end of the year 4,870 4,870
25. Share-based payments
The Group's employees are granted option awards under the Velocity Composites
Limited Enterprise Management Incentive and Unapproved Scheme.
The share options dated 13 March & 17 October 2017 have no attached
performance conditions and have vested as a resulted of continued employment.
The options may be exercised at any point up to the tenth anniversary of the
grant date.
The 100,000 share options dated 29 October 2019 have no attached performance
conditions and vest subject only to continued employment. They were awarded in
relation to joining senior management, providing an equity incentive around
the performance of the business
The 155,932 remaining shares options dated 30 October 2020 have no attached
performance conditions and have been issued in exchange for qualifying staff
agreeing to accept 20% of their basic salary in equity alternatives.
The 28,805 shares options dated 1 April 2021 have no attached performance
conditions and have been issued in exchange for qualifying staff agreeing to
accept 20% of their basic salary in equity alternatives.
The 125,000 shares options dated 1 April 2021 have no attached performance
conditions and vest subject only to continued employment. They were awarded in
relation to joining senior management, providing an equity incentive around
the performance of the business.
The 321,411 remaining shares options dated 26 January 2022 have no attached
performance conditions and have been issued in exchange for qualifying staff
agreeing to accept 20% of their basic salary in equity alternatives.
The 20,940 shares options dated 29 March 2022 have no attached performance
conditions and have been issued in exchange for qualifying staff agreeing to
accept 20% of their basic salary in equity alternatives.
399,467 shares options dated 28 March 2023. These options have no attached
performance conditions and have been issued in exchange for qualifying staff
agreeing to accept 20% of their basic salary in equity alternatives.
150,000 shares options dated 28 March 2023. These options have attached
performance conditions linked to specific contract performance. These options
shall only be exercisable to the extent vested upon satisfaction of the
performance targets during the exercise period from the earlier of, the normal
vesting date of one year or on or after the occurrence of an exercise event in
accordance with the rules.
During the year ended 31 October 2024, further share options were granted as
follows:
282,134 shares options dated 24 January 2024. These options have no attached
performance conditions and have been issued in exchange for qualifying staff
agreeing to accept 20% of their basic salary in equity alternatives.
75,000 shares options dated 24 January 2024 have no attached performance
conditions and have vested as a resulted of continued employment. The options
may be exercised at any point up to the tenth anniversary of the grant date.
400,000 shares options dated 15 July 2023. These options have attached
performance conditions linked to profit after tax. They vest after two years,
or earlier if a vesting event occurs in the rules of the Scheme.
Vesting events are defined within the rules of the Scheme as a reorganisation,
takeover, sale, listing (except on AIM), asset sale or death of the Option
holder. The options may be exercised at any point up to the tenth anniversary
grant date
There were no cancellations or modifications to the awards in the year.
The following options were outstanding as at 31 October 2024:
Scheme and grant date Exercise price (£) Vesting date Expiry date Vested Not vested Total
13 March 2017 0.0025 13 Mar 2019 13 Mar 2027 54,338 - 54,338
17 October 2017 0.6926 17 Oct 2019 17 Oct 2027 25,000 - 25,000
29 October 2019 0.2065 29 Oct 2022 29 Oct 2031 100,000 - 100,000
30 October 2020 0.2065 01 Nov 2021 01 Nov 2026 155,932 - 155,932
01 April 2021 0.0025 01 Apr 2021 01 Apr 2026 28,805 - 28,805
01 April 2021 0.1300 01 Apr 2021 01 Apr 2026 125,000 - 125,000
26 January 2022 0.0025 26 Jan 2023 01 Nov 2027 321,411 - 321,411
29 March 2022 0.0025 29 Mar 2023 01 Nov 2027 20,940 - 20,940
28 March 2023 0.0025 28 Mar 2024 28 Mar 2028 549,467 - 549,467
24 January 2024 0.0025 24 Jan 2026 24 Jan 2029 - 75,000 75,000
24 January 2024 0.0025 24 Jan 2025 24 Jan 2029 - 282,134 282,134
15 July 2024 0.4150 30 Apr 2026 15 July 2034 - 400,000 400,000
1,380,893 757,134 2,138,027
The Group recognised a cost of £143,000 (2023: £206,000) relating to
share-based payment transactions which are all equity settled, an equivalent
amount being transferred to share-based payment reserve. This reflects the
fair value of the options, which has been derived through use of the
Black-Scholes model.
The cost of share-based payments is included in "Administrative expenses"
within the Statement of total comprehensive income. The share-based payments
reserve is used to recognise the grant date fair value of options issued to
employees but not exercised. The table below sets out the movement to the
share-based payment reserves in the year.
The tables below split the Share-based payments according to the terms they
have been awarded.
Share options granted under the salary sacrifice scheme.
Scheme and grant date Exercise price (£) Vesting date Expiry date Vested Not vested Total
30 October 2020 0.2065 01 Nov 2021 01 Nov 2026 155,932 - 155,932
01 April 2021 0.0025 01 Apr 2021 01 Apr 2026 28,805 - 28,805
26 January 2022 0.0025 26 Jan 2023 01 Nov 2027 321,411 - 321,411
29 March 2022 0.0025 29 Mar 2023 01 Nov 2027 20,940 - 20,940
28 March 2023 0.0025 28 Mar 2024 28 Mar 2028 399,467 - 399,467
24 January 2024 0.0025 24 Jan 2025 24 Jan 2029 - 282,134 282,134
926,555 282,134 1,208,689
Share options granted not under the salary sacrifice scheme.
Scheme and grant date Exercise price (£) Vesting date Expiry date Vested Not vested Total
13 March 2017 0.0025 13 Mar 2019 13 Mar 2027 54,338 - 54,338
17 October 2017 0.6926 17 Oct 2019 17 Oct 2027 25,000 - 25,000
29 October 2019 0.2065 29 Oct 2022 29 Oct 2031 100,000 - 100,000
01 April 2021 0.1300 01 Apr 2021 01 Apr 2026 125,000 - 125,000
28 March 2023 0.0025 28 Mar 2024 28 Mar 2028 150,000 - 150,000
24 January 2024 0.0025 24 Jan 2026 24 Jan 2029 - 75,000 75,000
15 July 2024 0.4150 30 Apr 2026 15 July 2034 - 400,000 400,000
454,338 475,000 929,338
Movement in share options
Scheme and grant date As at 1 Nov 2023 Issued Expired Exercised Vested As at 31 Oct 2024
£'000 £'000 £'000 £'000 £'000 £'000
13 March 2017 55 - - (24) - 31
17 October 2017 10 - - - - 10
29 October 2019 16 - - - - 16
30 October 2020 24 - - - - 24
01 April 2021 14 - - - - 14
01 April 2021 8 - - - - 8
26 January 2022 47 - - - (1) 46
26 January 2022 24 - - - - 24
29 March 2022 4 - - - - 4
28 March 2023 276 - - (62) (28) 186
24 January 2024 - 54 - - - 54
24 January 2024 - 58 - - - 58
15 July 2024 - 42 - - - 42
478 154 - (86) (29) 517
26. Provisions
During the year a provision of £218,000 (2023: £Nil) was recognised in
relation to dilapidations
As part of the group's property leasing arrangements there is an obligation to
repair damages which incur during the life of the lease, such as wear and
tear. The cost is charged to profit and loss as the obligation arises. The
provision is expected to be utilised between 2026 and 2029 as the leases
terminate.
The dilapidations provision is considered a source of significant estimation
uncertainty. The provision has been calculated using one years' worth of
rental over estimated lease termination dates prorated to the term the lease
has been occupied.
27. Related party transactions
Balances and transactions between the Company and its subsidiary, which are
related parties, have been eliminated on consolidation. However, the key
transaction with a related party is as follows:
During the year the Group engaged North West Aerospace Alliance, which
provides membership and subscription services for the Aerospace Industry.
One of the directors of North West Aerospace Alliance Limited is a director of
Velocity Composites plc. The Group paid £809 (2023: £2,009) to North West
Aerospace Alliance during the year and had £Nil outstanding at the year end
(2023: £Nil).
28. Ultimate controlling party
The Directors do not consider there to be an ultimate controlling party due to
no individual party owning a majority share in the Group.
29. Capital commitments
At 31 October 2024 the Group had £1,164,144 (2023: £Nil) of capital
commitments relating to the purchase of leasehold improvements, plant and
machinery and fixture and fittings.
30. Pension commitments
The Group makes contributions to defined contribution stakeholder pension
schemes. The contributions for the year of £96,034 (2023: £97,191) were
charged to the Consolidated Income statement. Contributions outstanding as at
31 October 2024 were £Nil (2023: £13,595).
31. Contingent liabilities
As at 31 October 2024 the Group had in place bank guarantees of £Nil (2023:
£Nil) in respect of supplier trade accounts.
As at 31 October 2024, National Westminster Bank plc hold a debenture that
provides a fixed and floating charge on the assets of the Company.
32. Adjusted EBITDA
EBITDA is considered by the Board to be a useful alternative performance
measure reflecting the operational profitability of the business. Adjusted
EBITDA is defined as earnings before finance charges, taxation, depreciation,
amortisation and adjusted for share-based payments. Share-based payments are
added back to make the share-based payment charge clear to stakeholders.
Year ended Year ended
31 October 31 October
2024 2023
Reconciliation from operating loss £'000 £'000
Operating loss (931) (2,817)
Add back:
Depreciation of property, plant and equipment 382 297
Amortisation 240 116
Depreciation of right-of-use assets under IFRS 16 540 472
Share-based payments 143 206
Exceptional Administration expenses - 120
Adjusted EBITDA 374 (1,606)
( )
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