Corporate Governance

Non-Executive Chairman's Statement
Period from 1st November 2018 to 31st October 2019

Board members believe strongly in the value and importance of good corporate governance and in our accountability to all of Velocity’s stakeholders, including investors, staff, customers and suppliers. In the statement below, we explain our approach to governance, and how the Board and its committees operate.

The Board adheres to the Quoted Companies Alliance (QCA) Corporate Governance Code for small and mid-size quoted companies (revised April 2018).

The corporate governance framework which the Group operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the Group’s values.

Andy Beaden, Non-Executive Chairman, 1st December 2019


Corporate Governance and the QCA Code

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each. The board considers that it does not depart from any of the principles of the QCA Code.

The ten Principles are grouped under three broad headings:

Deliver Growth
  1. Establish a strategy and business model which promote long-term value for shareholders.
  2. Seek to understand and meet shareholder needs and expectations.
  3. Take into account wider stakeholder and social responsibilities and their implications for long-term success.
  4. Embed effective risk management, considering both opportunities and threats, throughout the organisation.
Maintain A Dynamic Management Framework
  1. Maintain the Board as a well-functioning, balanced team led by the Chair.
  2. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities.
  3. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement.
  4. Promote a corporate culture that is based on ethical values and behaviours.
  5. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.
Build Trust
  1. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

Corporate Governance Statement

The Code requires the Chair to provide a clear explanation of how the Company applies the Code in a corporate governance statement. It is recommended that the corporate governance statement is included both within the Company’s annual report and on its website. It is intended that the statement:

  • Clearly articulates the Chair’s role and demonstrates their responsibility for corporate governance;
  • Explains, at a high level, how the QCA Code is applied by the Company and how its application supports the Company’s medium to long-term success;
  • Explains, in a clear and well-reasoned way, any areas in which the Company’s governance structures and practices differ from the expectations set by the QCA Code; and
  • Identifies any key governance related matters that have occurred during the year, including any significant changes in governance arrangements.
  • The following paragraphs set out Velocity’s compliance with the ten principles of the QCA Code.

Principle 1 - Establish a strategy and business model which promote long-term value for shareholders

The purpose of the Group is "To be the supplier of choice to all high value composite manufacturers globally for value engineered raw materials" (Vision) and "To revolutionise aerospace composites manufacturing by enabling our customers to reduce costs whilst meeting increased global demand by creating a lean and scalable supply chain in a more for less era, delivering real value for all stakeholders" (Mission).

The key challenges we face include:

  • Maintaining consistently high levels of quality – very high standards are expected by the aircraft part manufacturers. We have implemented testing wherever possible, and our system-driven workflow management ensures that quality control is paramount in our processes.
  • Ensuring security of data – the safekeeping of data is of paramount importance. Our manufacturing facilities in Burnley and Fareham are audited for annual compliance with the requirements of Airbus, NADCAP and our customers.
  • Delivering continuous availability – a failure in the Group’s systems could lead to an inability to deliver kits. This is addressed by operating redundant systems and having a disaster recovery programme assigning staff from both UK facilities on different customer projects.
  • Recruiting and retaining suitable staff – the Group’s ability to execute its strategy is dependent on the skills and abilities of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages are competitive in the market.

We believe we have the right strategy and service in place to deliver strong growth in sales over the medium to long term. We expect the gross profit to improve in future periods as our nesting and kitting software are used to greater effect with the overall use of less composite material, which will result in improving EBITDA margins, and provide us with scope for additional investment in new facilities, products and services. This will enable us to deliver sustainable shareholder value.


Principle 2 - Seek to understand and meet shareholder needs and expectations

Responsibility for investor relations rests with the CEO, supported by the CFO. During the period under review the following activities were pursued to develop a good understanding of the needs and expectations of all constituents of the Group’s shareholder base:

Date Description Participants Comments
Jan 19 Year End Results roadshow MM, AH
Mar 19 AGM MM, BT, MP, AH
Jun 19 Interim results roadshow JB, AH
Nov 19 Investor meetings AB, JB, AH

Key: AB: Andy Beaden (Non-Executive Chairman from 26 July 2019); MM: Mark Mills (Executive Chairman until 25 March 2019);JB: Jonathan Bridges (Chief Executive Officer from 26 July 2019; BT: Brian Tenner Non-Executive Director) until 24 July 2019; MP: Meera Palmer (Non-Executive Director) until 24 July 2019; AH: Andrew Hebb (Non Board Interim CFO from 14 November 2018 and Company Secretary from 01 February 2019).

The Group is committed to communicating openly with its shareholders to ensure that its strategy and performance are clearly understood. We communicate with shareholders through the Annual Report and Accounts, full-year and half-year announcements, trading updates and the annual general meeting (AGM), and we encourage shareholders’ participation in face-to-face meetings. A range of corporate information is also available to shareholders, investors and the public on our website.

Private shareholders: The AGM is the principal forum for dialogue with private shareholders, and we encourage all shareholders to attend and participate. The Notice of Meeting is sent to shareholders at least 21 days before the meeting. All directors whenever possible, attend the AGM and are available to answer questions raised by shareholders. Shareholders vote on each resolution, by way of a poll. For each resolution we announce the number of votes received for, against and withheld.

Institutional shareholders: The directors actively seek to build a mutual understanding of objectives with institutional shareholders. Our CEO and CFO make presentations to institutional shareholders and analysts immediately following the release of the full-year and half-year results. We communicate with institutional investors frequently through a combination of formal meetings, roadshows and informal briefings with management. The majority of meetings with shareholders and potential investors are arranged by the broking team with the Group’s Nominated Advisor. Following meetings, the broker provides anonymised feedback to the board from all fund managers met, from which sentiments, expectations and intentions may be gleaned. In addition, we review analysts’ notes to achieve a wide understanding of investors’ views. This information is considered by the Board and has contributed to the preparation of the Group’s investor relations strategy.


Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success
Stakeholder Reason for engagement How we engage
Staff – our ability to fulfil client services and develop and enhance the cloud software platforms on which they depend relies on having talented and motivated staff. Good two-way communication with staff is a key requirement for high levels of engagement, fostering a culture of innovation. Monthly staff briefings, emails and a quarterly staff newsletter.
Invitation to staff to ask questions of management that are answered in the briefings.
These initiatives have provided insights that have led to enhancement of management practices and staff incentives.
Clients – our success and competitive advantage are dependent upon fulfilling client requirements, particularly in relation to quality of service, its speed of delivery and security. Understanding current and emerging requirements of clients enables us to develop new and enhanced services. Seek feedback on services.
Obtain requests for new services and service enhancements.
These have led to the Group securing approvals with a number of large aircraft parts’ manufacturers.
Suppliers – a key supplier group is the manufacturers of the composite and consumable materials. Manufacturers will provide similar services to other organisations, including our competitors, so we must ensure they are available to us and accommodating. We optimise our systems to simplify the work of manufacturers as much as possible, including in relation to administration of projects.
We operate systems to ensure that supplier invoices are processed and paid promptly.
These have led to a large, growing and supportive manufacturer network.
Shareholders – as a public company we must provide transparent, easy-to-understand and balanced information to ensure support and confidence. Meeting regulatory requirements and understanding shareholder sentiments on the business, its prospects and performance of management. Regulatory news releases.
Keeping the investor relations section of the website up to date.
Participation at investor events.
Annual and half-year reports and presentations.
AGM.
Capital markets events.
We believe we have successfully engaged with our shareholders over the past 12 months.
Industry bodies – the services we provide must meet certain requirements. The views of certain industry groups, including the NADCAP and NWAA are influential in the way the group is perceived by certain clients. Membership of NWAA and approval by NADCAP and participation in security programs.
Annual audit of security.
These have resulted in audit reports that have led to certain clients commencing engagement.
Communities – what we do impacts communities in the places where we operate and elsewhere. It is important to be perceived as a reputable business that makes a positive contribution to local economies and is attractive as an employer and partner. Participation in apprenticeship and other schemes to support and provide opportunities to young people.

Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board has prepared a risk register for the Group that identifies key risks in areas including strategy, financial, customers and staff. The register is reviewed periodically and is updated as and when necessary.

Within the scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency, interest rates, liquidity and credit.

Staff are reminded that they should seek approval from the CFO if they, or their families, plan to trade in the Group’s shares.


Principle 5 - Maintain the board as a well-functioning, balanced team led by the chair

The members of the Board have a collective responsibility and legal obligation to promote the interests of the Group and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the Chair.

The QCA Code requires that the Board of an AIM company has an appropriate balance between executive and non-executive directors of which at least two should be independent. The Board consists of two independent non-executives. During the period, the Executive Chairman resigned as did two non-executive directors.

The Board changes in July 2019 resulted in the appointment of Andy Beaden as Non-Executive Chairman. Andy is a chartered accountant and, holds a degree in economics and econometrics from Nottingham University and is a Fellow of the RSA (Royal Society for the Encouragement of the Arts, Manufactures and Commerce). He most recently served as Group Finance Director and a member of the board of Luxfer Holding plc, a producer of highly engineered advanced materials, from 2011 to 2017, having joined its predecessor British Aluminium in 1997. Luxfer (LXFR) is listed on the New York Stock Exchange. Mr Beaden is a co-founder and Chairman of IN4.0 Group Limited, a company encouraging growth through the use of industry 4.0 technologies.

At the same time Rob Soen was appointed as a Non-Executive Director. He has worked extensively in aerospace and automotive supply chains, ending his executive career as Senior Vice President Supply Chain in GKN Aerospace Services Limited. Mr Soen is currently a Non-executive Director of Nasmyth Group Limited, a global precision engineering and metal treatment business. He is a Fellow of the Institute of Purchasing and Supply.

In July 2019 Jon Bridges was re-appointed to the Board as Chief Executive Officer.

Margaret Amos joined the Board on the 7 April 2020. She has worked extensively in aerospace ending her executive career with Rolls Royce Holdings Plc. Ms Amos is currently a Non-Executive Director is nmcn plc, Trinity House and the Ombudsman Services.

Andy Beaden is Chair of the Nominations committee, Rob Soen Chairs the Remuneration committee and Margaret Amos Chairs the Audit Committee.

Following the departure of Alan Kershaw on 31 January 2019, Andrew Hebb took over the financial leadership responsibility of the Group as Interim CFO which is a Non Board position. Andrew also took over the responsibility of Company Secretary. Since 2009 Andrew has been a professional interim CFO for several AIM listed and private companies across a range of sectors. Prior to that, as CFO, Andrew helped build Hedra Plc into a major public sector consulting business and managed the sale process in 2008. Previously Andrew held CFO and operational roles in major UK companies.

The Board is supported by three committees: audit, remuneration as well as nomination. All members of the Board are involved in the appointment of new directors.

Non-executive directors are required to attend Board and Board Committee meetings and to be available at other times as required for face-to-face and telephone meetings with the Executive Team and investors.

Meetings held during the period under review and the attendance of directors is summarised below:

Board meetings Audit Committee Remuneration Committee Nomination Committee
No Meetings in Year 10 3 1 0
Andrew Beaden **** 3 1 1 0
Robert Soen **** 3 1 1 0
Brain Tenner *** 8 2 0 0
Meera Parmar *** 7 1 0 0
Mark Mills ** 4 1 0 0
Alan Kershaw * 4 1 n/a n/a
Jon Bridges ***** 3 n/a n/a n/a

* resigned as Company Secretary and Director on 31 January 2019
** resigned as Director on 25 March 2019
*** resigned as Director on 24 July 2019
**** appointed as Director on 24 July 2019
***** appointed as Director on 26 July 2019
n/a - indicates that a Director was not a member of a particular committee

The Board has a schedule of regular business, financial, operational and city related matters, and each board committee has compiled a schedule of work to ensure that all areas for which the board has responsibility are addressed and reviewed during the course of the year. The Chairman is responsible for ensuring that, to inform decision-making, directors receive accurate, sufficient and timely information. The company secretary compiles the board and committee papers which are circulated to directors prior to meetings. The Company Secretary provides minutes of each meeting and every director is aware of the right to have any concerns minuted and to seek independent advice at the Group’s expense where appropriate.


Principle 6 – Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The 4 members of the Board bring relevant experience to their roles, one has previous public markets experience and is a chartered accountant; the second has extensive experience as a Board Director of a large aerospace company, the third is a Chartered Management Accountant with aerospace experience and the fourth founded the company and brings substantial experience of the Composite aerospace industry. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy. Directors attend seminars and other regulatory and trade events to ensure that their knowledge remains current.

Andy Beaden, Non-Executive Chairman
Term of office
Joined as Non-Executive Chairman on the 24 July 2019 and was appointed by the Board as Chairman on the 26 July 2019; Andrew Chairs the Nomination Committee and is a member of the Audit and Remuneration Committee.
Background and suitability for the role
He most recently served as Group Finance Director and a member of the board of Luxfer Holding plc, a producer of highly engineered advanced materials, from 2011 to 2017, having joined its predecessor British Aluminium in 1997. Luxfer (LXFR) is listed on the New York Stock Exchange. Mr Beaden is a co-founder and Chairman of IN4.0 Group Limited, a company encouraging growth through the use of industry 4.0 technologies. Mr Beaden is a Chartered Accountant, holds a degree in economics and econometrics from Nottingham University and is a Fellow of the RSA (Royal Society for the Encouragement of the Arts, Manufactures and Commerce).
Time commitment
One day per week.
Rob Soen, Independent Non-Executive Director
Term of office
Joined as Non-Executive Director on 24 July 2019; Chair of the Remuneration Committee and member of the Audit and Nomination Committees.
Background and suitability for the role
Mr Soen has been appointed to the Board as an independent Non-executive Director. He has worked extensively in aerospace and automotive supply chains, ending his executive career as Senior Vice President Supply Chain in GKN Aerospace Services Limited. Mr Soen is currently a Non-executive Director of Nasmyth Group Limited, a global precision engineering and metal treatment business. Mr Soen is a Fellow of the Institute of Purchasing and Supply.
Time commitment
One to two days per month.
Margaret Amos, Independent Non-Executive Director
Term of office
Joined as Non-Executive Director on 7 April 2020; Chair of Audit Committee and member of both the Nomination and Remuneration committee.
Background and suitability for the role
She has 27 years’ experience working for Rolls Royce Holdings plc and held a number of important senior roles in Finance, Strategy Development, Supply Chain and Programme management, including the position of Divisional Finance Director – Engineering, IT and Corporate Sector. She has since developed a significant portfolio of Non-Executive roles, including nmcn plc, Trinity House and The Ombudsman Services. She is also a Corporate Fellow for Denstone College. Margaret is a Fellow of both the Chartered Institute of Management Accountants (CIMA) and the Chartered Institute of Purchase and Supply (CIPs). She has a BA degree in Secretarial Administration and French and a Masters in Supply Chain Management from Nottingham University and is currently studying for a Doctorate in Professional Studies.
Time commitment
One to Two days per month.
Jon Bridges
Term of office
Appointed as Chief Executive Officer on the 26 July 2019. Jon is a member of the Nomination Committee.
Background and suitability for the role
Jon co-founded Velocity Composites in October 2007. Jon has over 25 years’ experience within the advanced composites industry and is an experienced composite engineer. Previously, Jon was an Aerospace and Lean Solutions Specialist at Cytec Process Materials where he was responsible for direct sales support of UK and European based clients. From 2003 to 2005 Jon was a manufacturing engineer for Safran Nacelles where he was responsible for the manufacturing function for a growing, highly loaded aerospace unit supplying multiple assembly lines.
Time commitment
Full-time.

Principle 7 – Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

A Board and management evaluation process led by the Chairman will take place in 2020 as the Board has only been in place for a few months.

As the business expands, the executive directors will be challenged to identify internal candidates who could potentially occupy board positions and set out development plans for these individuals.


Principle 8 – Promote a corporate culture that is based on ethical values and behaviours

Our long-term growth is underpinned by our six core values, which were defined as part of the Integrated Business Plan process in 2019. They are:

  1. Trust – Sharing information, learning and engaging with people internally and externally is key to our success.
  2. Teamwork – We work in partnership and see strength in our interdependencies, knowing that in the long term this will benefit us as teams and individuals.
  3. Passion – Our environment should be engaging and inspiring. Work should be enjoyable and delivered with passion.
  4. Agility – We change, adapt and transition with the times to ensure we move forward with an entrepreneurial mindset.
  5. Efficiency – We are in the business of creating efficiencies and eliminating waste – no matter the context.
  6. Partnership – To promote ‘customer first’ thinking that exceeds their expectations and work ‘with’ suppliers knowing we all have the same goals.

The culture of the Group is characterised by these values which are communicated regularly to staff through internal communications and forums. The core values are communicated to prospective employees in the Group’s recruitment programmes and are considered as part of the selection process.

The Board believes that a culture that is based on the six core values is a competitive advantage and consistent with fulfilment of the Group’s mission and execution of its strategy.


Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board provides strategic leadership for the Group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the Group implements in its business plans. The Board defines a series of matters reserved for its decision and has approved terms of reference for its Audit and Remuneration committees to which certain responsibilities are delegated. The chair of each committee reports to the Board on the activities of that committee.

The Audit Committee monitors the integrity of financial statements, and reviews external auditor independence.

The Remuneration Committee sets and reviews the compensation of executive directors including the setting of targets and performance frameworks for cash-based and share-based awards.

The Executive, consisting of the executive directors and certain other senior executives, operates as a management committee, chaired by the CEO, which reviews operational matters and performance of the business, and is responsible for significant management decisions while delegating other operational matters to individual managers within the business.

The Chairman has overall responsibility for corporate governance and in promoting high standards throughout the Group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual directors, the Board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the Group and its shareholders.

The CEO provides coherent leadership and management of the Group, leads the development of objectives, strategies and performance standards as agreed by the Board, monitors, reviews and manages key risks and strategies with the Board, ensures that the assets of the Group are maintained and safeguarded, leads on investor relations activities to ensure communications and the Group’s standing with shareholders and financial institutions is maintained, and ensures that the Board is aware of the views and opinions of employees on relevant matters.

The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the Board, making operational and financial decisions required in the day-to-day operation of the Group, providing executive leadership to managers, championing the Group’s core values and promoting talent management.

The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure that the Group is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the Board and its committees and supports the Board on matters of corporate governance and risk.

The matters reserved for the Board are:

  1. Setting long-term objectives and commercial strategy.
  2. Approving annual operating and capital expenditure budgets.
  3. Changing the share capital or corporate structure of the Group.
  4. Approving half-year and full-year results and reports.
  5. Approving dividend policy and the declaration of dividends.
  6. Approving major investments, disposals, capital projects or contracts.
  7. Approving resolutions to be put to general meetings of shareholders and the associated documents or circulars.
  8. Changes to Advisors covering Nomad/Broker, Auditors, Financial PR, Banks, Legal Advisors, Registrars
  9. Approving changes to the Board structure.
  10. The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group evolves.

Principle 10 - Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

We have made significant efforts to ensure effective engagement with both institutional and private shareholders. In addition to the roadshows held for investors following the release of full year and interim results, we have actively promoted our AGM as a forum to present to and meet with investors.

The Board has ultimate responsibility for reviewing and approving the Annual Report and Accounts and it has considered and endorsed the arrangements for their preparation, under the guidance of the Audit Committee. The Directors confirm that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy.

In addition to the investor relations activities described above, the following audit and remuneration committee reports are provided.

Audit Committee Report

The Audit Committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems, monitoring the requirement for an internal audit function and overseeing the relationship with the external auditors (including advising on their appointment, agreeing the scope of the audit and reviewing the audit findings) and reviewing arrangements for the Company’s employees to raise concerns about possible wrongdoing in financial reporting.

The Audit Committee now consists of Margaret Amos as Chair and Rob Soen and Andy Beaden. The Committee has met on three occasions in the period, and the external auditor, CEO and CFO were invited to attend these meetings. Consideration was given to the auditor’s pre- and post-audit reports and these provide opportunities to review the accounting policies, internal control and the financial information contained in both the annual and interim reports. The committee also met with the auditors with no executives present.

Remuneration Committee Report

The remuneration committee will be responsible for determining and agreeing with the Board the framework for the remuneration of the executive Directors and other designated senior executives and, within the terms of the agreed framework, determining the total individual remuneration packages of such persons including, where appropriate, bonuses, incentive payments and share options and other share awards. The remuneration of non-executive Directors will be a matter for the Chairman and the Executive members of the Board. No Director will be involved in any decision as to his or her own remuneration.

The Remuneration Committee is Chaired by Rob Soen and includes Andy Beaden and Margaret Amos. The committee met once prior to the appointment of Margaret Amos.