Half Year Results
Velocity Composites plc, the leading supplier of advanced composite material kits to the aerospace market, announces its unaudited half-year results for the six months ended 30 April 2020.
Velocity Composites Investor Presentation can be viewed on the Reports & Presentations page.
Andy Beaden, Non-Executive Chairman, said:
“The effects of the COVID-19 pandemic and resulting lockdowns on the aerospace industry have been dramatic and unprecedented. Whilst we are not where we expected to be right now, our vision and strategy for Velocity’s growth are unchanged. The increased challenges facing our industry provide an even more meaningful commercial rationale for Velocity’s technology and services, as the industry drives for even greater efficiencies in their production programmes.
“The Company’s financial liquidity remains robust and the Board believes it has adequate cash and banking facilities to work through this disruption. With this in mind, the Board is confident that Velocity is well placed to benefit as production levels pick up and that the prospects for the Company in the mid- to long-term remain positive.”
- Revenue of £9.5m (H1 FY19: £12.2m)
- Gross margin of 20.5% (H1 FY19: 20.9%)
- Operating loss of £0.7m (H1 FY19: loss £0.4m after exceptional administrative expenses of £0.4m)
- Adjusted EBITDA (1) loss of £0.3m (H1 FY19: profit of £0.2m)
- Loss per ordinary share of 1.7p (H1 FY19: loss 1.2p)
- Cash at Bank at 30 April 2020 of £2.8m including £1.2m of EIS funds (2)
1) Adjusted EBITDA defined as earnings before finance charges, tax, amortisation, depreciation, share based payments, exceptional restructuring costs. 2) EIS funds earmarked for EIS/VCT qualifying expenditure and is deemed to be ‘employed’ for those purposes in accordance with the relevant regulations.
- Approval from Boeing in January 2020 to supply structural composite material kits for its single aisle aircraft platform. Whilst production on 737 Max is currently frozen, this remains a strategically important step for the Company when it returns to service.
- NADCAP Merit approval now achieved for all special processes at all Velocity production facilities.
- Margaret Amos appointed to the Board as Independent Non-executive Director bringing extensive world class aerospace engineering, strategic finance, and supply chain experience.
- Business development and customer programmes management team reorganised, strengthened with more senior aerospace expertise and over £30m pipeline of tangible opportunities being developed.
Impact of COVID-19
- Management acted swiftly to the significant reduction of circa 75% in near-term customer demand, as COVID-19 air travel restrictions negatively impacted aircraft production due to airline confidence.
- Circa 60% of the workforce were furloughed, with funding secured through the UK Government’s employment retention scheme.
- Production of personal protective equipment (“PPE”) for NHS workers commenced in April 2020, providing additional work for staff.
- Significant raw material inventory reduction programme was implemented, utilising supply chain management systems, which will also benefit customers, through strict alignment of raw material supply and demand schedules.
- The actions above and other cash conservation measures demonstrate the robustness of the business and management.
Post half year end
- Appointment of experienced Customer Programmes Director in May 2020 to support identified strategic growth opportunity with global customers.
- Accelerated Customer Benefits Proposal formulated and deployed swiftly to take advantage of opportunities arising from COVID-19.
- Coronavirus Business Interruption Loan (“CBIL”) secured in May 2020, providing an additional £2.0m facility to support any short-term liquidity requirements.
- Further update on LTA: Major customer extends existing agreement with Velocity until 31 December 2020, whilst the longer-term demand requirements of its customers are established - purchase order cover is in place until mid-2021.
Current trading and outlook
- Lower levels of customer demand expected to continue for at least the duration of the lockdown and until the OEMs issue longer-term demand schedules to the Tier 1 manufacturers.
- Velocity expects that restructuring in the industry as a result of the impact of COVID-19 will present immediate and longer-term opportunities for its cost-reducing service offering.
- Strong proposition and pipeline of new business opportunities, totalling circa £30m on a full year basis.
- Robust liquidity position with cash balances of £2.2m at 22 June 2020 (no invoice discounting used) and debt facilities of up to £7m, adequate resources to withstand likely modelled recovery scenarios.
- Management will continue to take the necessary actions needed to ensure that the wellbeing of the Company’s people is prioritised, its business capabilities are preserved, and cost and performance are optimised.
- The Board remains confident in the long-term prospects of the Company.
- Financial performance guidance for FY20 and FY21 remains withdrawn, until the Board has greater visibility on market activity.