TIDMVEL
RNS Number : 5021F
Velocity Composites PLC
17 November 2020
17 November 2020
VELOCITY COMPOSITES PLC
("Velocity" or the "Company")
Trading update
Velocity Composites plc (AIM: VEL), the leading supplier of
advanced composite material kits to the aerospace sector, provides
the following trading update in relation to the year to 31 October
2020.
As reported by the Company in its interim results for the six
months ended 30 April 2020, trading for the first four months of
the year to 31 October 2020 was in line with management
expectations, but the remainder of the year has been impacted
adversely by the COVID-19 pandemic. This has impacted on Velocity
in the short-term through customer shut-downs and an industry-wide
reduction in build-rates. Prospects for the current year remain
subdued with no imminent indications of significant increases to
build rates on major civil aircraft programmes as set by the
primary manufacturers Boeing and Airbus.
The Company has responded swiftly to the reduced level of
activity through implementation of a significant cost reduction
programme, including approximately 40% reduction in staffing
numbers and a restructuring of the remaining management and staff.
Senior executives and the Directors have also agreed to a 20%
deferment of cash base salaries, with the deferred payments
intended to be settled by way of the issue of share options of a
similar value to the foregone salary. A further announcement will
be made in this regard in due course.
The Company anticipates that sales revenues for the year to 31
October 2020 will be approximately GBP13.6m (FY2019: GBP24.2m) and
expects to report an adjusted EBITDA Loss(1) for the year of
approximately GBP1.8m (FY2019:Adjusted EBITDA GBP0.6m).
As a result of the cost restructuring exercise undertaken the
Board anticipates that going forward the Company would be EBITDA
break-even at FY2020 levels of revenues. The Company is now highly
operationally geared, such that any significant recovery in
activity, even if only to below pre-pandemic levels, will have a
strong positive impact on future profitability.
Current activity levels are challenging, and H1 2021 has begun
and is expected to continue with revenues similar to those in H2
2020 assuming additional lockdowns and short-term customer
shutdowns through the winter months. The Company has, however, in
place a robust level of liquidity and funding to support the
Company during this disruptive period and the Board is cautiously
optimistic as to the prospects for future growth.
Despite current challenges Velocity has made excellent progress
in its new business development, particularly with its long-term
customers and reduced revenues have been as a result of lower
levels of end client activity, not by virtue of client losses .
Even with a slow recovery in build rates, and with further
disruption throughout this winter, it is now once again realistic
to foresee growth in the future.
As reported at the half year, a new commercial proposition has
been rolled out to customers to aid their own cost reduction
objectives and this is supporting a significant number of new
business programmes commencing in 2021, some of which have now been
confirmed. These take time to agree and implement, with some
qualifications required, but even based on the very subdued
industry build rates, new business initiatives would aid recovery
in the second half of 2021 and lead to a significant recovery in
both revenues and profitability in 2022.
The new business also means that when the longer-term build
rates recover on new civil aircraft platforms, the potential upside
to Velocity is significantly higher even than the pre-COVID-19
position.
To support the Company during this period of disruption and
recovery, our corporate bankers have agreed to extend the repayment
schedule of our Coronavirus Business Interruption Loan ("CBIL") of
GBP2.0m from over two years to six years, starting in July 2021 and
ending July 2026. The Company also retains its Invoice Discounting
Facility ("IDF"), which can fund up to GBP5.0m of receivables. As
at 31 October 2020, the Company maintained cash at bank of GBP3.3m,
being GBP0.8m of EIS designated funds and GBP2.5m of free cash. As
at the same date, the Company was in a net cash position of
GBP0.9m, net of the GBP2.0m CBIL liability and GBP0.4m hire
purchase agreement liabilities, with the IDF undrawn
To further aid liquidity, an inventory reduction programme has
also been implemented. This is in co-operation with suppliers and
customers, to minimise any inventory write-offs. The programme is
on-going and is expected to yield a further GBP0.5m of cash by
mid-2021.
Recent positive developments regarding a possible widely
available vaccine for Covid-19 suggests that as economies recover,
demand for air travel will return to the benefit of the entire
aerospace sector. There is also long-term demand for new aircraft
to replace older fleets, a number of which have been retired early
during the pandemic, for both environmental and economic efficiency
reasons. These newer aircraft have higher composite material
content, increasing the industry demand for Velocity's kitting
technology.
Jon Bridges, Chief Executive Officer of Velocity, said:
"Clearly 2020 has been an unprecedented year in the aerospace
industry due to the global 70% reduction in air travel and the
OEM's immediate reduction in aircraft production rates to minimal
levels. Our collaborative approach between Velocity, our customers
and the raw material suppliers has sought to mitigate the impact of
this. We continue to work with all parties to ensure Velocity is
rightsized to deliver on our current programmes whilst continuing
to respond to new business opportunities to support our customers
as they look even harder to reduce costs. Whilst the immediate
disruption is painful, our customer proposition is even more
relevant and there are positive signs that the recovery will start
in 2021 and through 2022. The changes we have made allow us to
weather the disruption and be in a stronger position as both
production rates and new business combine to return the company to
pre-pandemic levels with a resilient and focused team".
Andy Beaden, Chairman of Velocity, said:
"As a Board, our pandemic priority has been ensuring that the
business has more than adequate liquidity, along with supporting
our customers and suppliers. Difficult decisions have had to made,
with significant and swift staffing reductions, but the business is
now leaner and better focussed to aid the recovery and growth cycle
within the industry in 2021, 2022 and beyond. Retaining and winning
new business in such a business environment underlines the
value-add of the superb Velocity Composites team."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
(1) EBITDA adjusted for restructuring exceptional items and shared based payments
Enquiries:
Velocity
Andy Beaden, Chairman
Jon Bridges, Chief Executive Officer
Chris Williams, Finance Director +44 (0) 1282 577577
Cenkos (Nominated Adviser and Broker) +44 (0)20 7397 8900
Russell Cook +44 (0)20 7397 1977
Ben Jeynes +44 (0)20 7397 1974
Belvedere Communications (Financial VelocityPR@belvederepr.com
PR) +44 (0) 7715 769 078
Cat Valentine +44 (0) 7967 816 525
Keeley Clarke
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