Strategy

The Company has successfully grown since inception through a combination of deepening existing client relationships, as well as winning new customer orders. The Company has identified key areas that it believes can be future profitability drivers:

  • Business acquisition around diversified aircraft programmes with ascending production rates
  • Improved internal material efficiencies
  • Increased capacity utilisation
  • Economies of scale for back office and management costs
  • Aggregation of material supply for multiple customers as scale increases and specifications allow

The Company’s approach to customer targeting is well defined and the Board intends to accelerate the rate of customer wins following Admission. In addition to the ongoing growth, the Board believes that the Company’s growth can be accelerated as described below.


New Additional Customers and Sites

Velocity’s manufacturing business model is replicable and the Company has identified a number of key potential aerospace manufacturing main hubs and satellite hubs in Europe and beyond. Velocity follows a well-defined process to replicate its hubs and, if required, Velocity will replicate its manufacturing facilities to within close proximity of the customer if there is sufficient demand within the area. An example of this in use is the opening of Velocity’s Fareham site where a key customer, with increased capacity requirements, accepted the savings proposed by Velocity and entered into a new 5 year contract in 2016. Velocity’s business model is predicated on serving clients in close proximity to Velocity’s facilities, given the nature of the product which must be stored at a controlled temperature and is transported in refrigerated vehicles under strict controls with a finite life once it has been through Velocity’s manufacturing process. The replicable nature of Velocity’s satellite sites provides the Company with significant potential for expansion, both domestically and abroad, relatively quickly. Tactically, the Company is seeking additional approvals to do so and facilitate growth in new territories.


Approvals and Growing Aircraft Programmes

There is considerable data outlining the backlog in orders of the Primes, including but not limited to Boeing and Airbus, and currently, a new aircraft, when ordered, can be delivered over 9 years later. The Company already has Airbus approval and is working on obtaining Boeing approvals, which will substantially increase its addressable market. The Company has shifted its focus over the previous two years to engage with manufacturers who are actively involved in aircraft programmes with increasing production profiles for example the A350 and F35.


Increasing Amount of Composites used in Manufacture of Aircraft

Composite materials exhibit enhanced properties when compared to their metal counterparts. These enhanced properties include: better weight saving, increased strength/stiffness, corrosion resistance and fatigue resistance. In addition, there is a commercial desire to make aircraft lighter and use less fuel. In turn this results in the aircraft having greater range and being less expensive to operate, which then drives passenger numbers and permits direct flights to an increased number of destinations. Composites are increasingly used within the manufacture of aircraft and aircraft have seen a shift in the split of the materials used in its structure. This trend has affected the large, twin aisle aircraft to date but will also apply to smaller, single aisle aircraft as platforms are replaced. The Directors believe that there is significant pressure on the aerospace supply chain, including the raw material providers, as production volumes increase, and also composite use increases across multiple aircraft platforms. The Directors believe that Velocity is well positioned to take advantage of this pressure and increasing market opportunity. This has been enhanced through referrals by composite suppliers to Velocity in order to create efficiencies in the supply chain.


Market Trend

In addition to the increased use of composites described above, the Directors believe that the aerospace industry is entering a period where the focus for the Primes (and hence the Tier 1’s) is around aircraft productivity. With the introduction of new platforms such as A380, B787 and A350, the Primes have now completed a sustained period of design innovation and technology introduction, and hence their focus on productivity. Along with the significant order books and backlogs for new aircraft, it is clear that Primes are looking to increase their production rates and to reduce the cost of manufacture in order for them to realise returns after this period of investment. It is in this environment where the Directors believe that Velocity’s services will be in high demand as manufacturers look to introduce a leaner supply chain, and consolidate the supply base to bring focus, reduce waste and outsource non-core business to increase capacity. This is particularly attractive to customers of Velocity as increased productivity can be achieved whilst at the same time reducing the cost of manufacture.


R&D

In order for Velocity to provide its total service with any material from any supplier delivered lineside in the form of use, Velocity must develop for each customer, at each specific customer site, a unique approach to its service offering. This requires appropriate research and development to deliver these new products utilising new processes for each customer location. To further grow and to innovate Velocity’s total service offering to preserve its market position, Velocity intends to open a global research and development centre in North West England where all new product development, process development and new product innovation can be performed under the rigorous environmental controls needed for aerospace composite manufacture.