TIDMVEL
RNS Number : 5949C
Velocity Composites PLC
23 January 2018
23 January 2018
Velocity Composites plc
("Velocity" or "the Company")
Final Results
Velocity Composites plc, the leading supplier of advanced
composite material kits, providing engineering value-solutions for
the global aerospace industry, is pleased to announce its maiden
audited results as a public company for the financial year ended 31
October 2017.
Jon Bridges, Chief Executive Officer of Velocity, commented:
"2017 was a truly transformational year for the business,
including our IPO on AIM. Since the IPO we have accelerated our
growth, resulting in a 30% increase in half on half revenues and we
expect rapid growth to continue in the new financial year.
"Our IPO has increased our profile and status significantly
within the aerospace community and we have received Request for
Quotations ("RFQs") by a range of large, global potential customers
ahead of our anticipated timetable. Given the strong underlying
performance and growth in our UK and European business, we have
decided that it is the right time to invest in accelerating our
growth in other regions alongside our European expansion plans,
which will allow us to create a larger international business,
faster.
"We look forward to the year ahead and beyond with confidence,
underpinned by our strong visibility on revenues and detailed
planning discussions with respect to a new facility in Europe. We
look forward to updating investors in respect of our operations and
corporate development in the coming months, as we address the
global market opportunity available to us."
Highlights
Financial
-- Strong revenue growth up 46% to GBP21.4m (2016: GBP14.6m)
o 2H revenues of GBP12.1m, an increase of more than 30% on 1H
revenues of GBP9.3m
o Significant increase reflects new contracts and success of new
Fareham facility
-- Underlying* operating profit of GBP0.9m (2016: GBP0.3m) in line with expectations
o Additional investments made in response to enquiries from new
regions of GBP0.4m
o Exceptional share issue costs of GBP0.9m
o Reported operating loss of GBP0.5m
-- Underlying* EBITDA of GBP1.1m (2016: GBP0.6m)
o Lower gross margin than anticipated from ramp up of new
product lines, offset by increased operational efficiencies and new
business generation
-- Underlying* earnings per share increased to 2.39p
o Reported loss per share of 2.47p
-- Successful IPO onto AIM in May 2017 raising GBP10.4 million before expenses
-- Cash on balance sheet of GBP5.4m as at 31 October 2017
* "Underlying" measures exclude the exceptional expenses and
future growth expenditure (2016: BREXIT related foreign exchange
costs).
Operational
-- Significant new wins with both existing and new customers
-- Successful opening of second site at Fareham in March 2017
-- Significant increase in exposure internationally, leading to
incoming customer requests from Asia and the Americas
-- Strengthening of senior management team to provide foundation for global growth
Outlook
-- Steady growth continuing with revenue and profit profile remaining weighted to 2H18
-- At detailed planning stage for next site in Europe in close proximity to new customers
-- 75% of 2018 revenues on contract, with 85% visibility overall
-- Additional team focused on accelerating our growth in Asia
and the Americas to capitalise on the large market opportunity
CONTACT DETAILS:
Velocity c/o Camarco
Jon Bridges, CEO Tel: 020
Alan Kershaw, CFO 3757 4980
Tel: 020
finnCap (Nominated Adviser and Broker) 7220 0500
Adrian Hargrave / Scott Mathieson
/ Kate Bannatyne (Corporate Finance)
Tim Redfern / Sultan Awan (Corporate
Broking)
Camarco (Financial PR) Tel: 020
Georgia Edmonds / Owen Roberts / 3757 4980
James Crothers
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014
About Velocity Composites
Velocity Composites is a manufacturer of advanced composite
material kits for the aerospace industry, delivering engineered
waste reduction solutions for its customers to build aircraft
components using less time and material. The Company's customers
include multi-national manufacturers of composite parts and
assemblies, who in turn deliver to the world's leading civil and
military aircraft manufacturers. The Airbus A320, A330, A350, A380,
Eurofighter Typhoon, F35 Joint Strike Fighter and Boeing 737, 787
and V22 Osprey are all constructed using parts manufactured from
Velocity's kits. The Company's business model reduces the operating
costs of preparing composite materials ahead of their usage in the
construction of an aircraft part and as such, its offering is
disposed to being self-financing for aircraft parts' manufacturers.
Velocity's services are seeing increased demand as the global
aircraft industry enters a more-for-less era.
The Company's Annual Report and Accounts for the year ended 31
October 2017 will be posted to shareholders later today and are
available in the 'Investors' section of the Company's website at
https://www.velocity-composites.com/investors/reports/
Chairman's Statement
For the year ended 31 October 2017
I am pleased to report that our results for the year ending
31(st) October 2017 are in line with expectations and ahead of the
same period last year.
The transition from private ownership to a publicly listed
company listed on the Alternative Investment Market (AIM) of the
London Stock Exchange, including the raising of net cash proceeds
of GBP9.2m by the issue of new shares in order to replicate the
business model outside of the UK, has offered both challenges and
opportunities to the business, with customers and suppliers
becoming understanding of our position and responsibilities to a
wider shareholder group. Many negotiations and discussions are
ongoing with a wide range of customers who are becoming more
familiar with Velocity's service offering as a result of the
publicity generated around and since the flotation.
The company's strategy of targeting customers where Velocity can
generate savings in material and labour costs alongside other
tangible benefits to aerospace parts' manufacturers provides strong
contractual visibility of future potential revenue.
Financial Highlights
The revenue outturn for the twelve months ending 31(st) October
2017 is GBP21.4m (2016: GBP14.6m) representing an increase of 46%
and gross profit of GBP3.9m (2016: GBP3.5m). Gross profit in the
period was affected by customers who were onboarded but who
initiated subsequent changes, slowing their contracted programmes
from reaching full rates as soon as expected. Subsequently rate
increases have occurred which gives us confidence for the future
and we have refined the financial evaluation of our "learner curve"
going forward. Loss before tax is GBP0.6m (2016 GBP0.4m) and EPS
has fallen slightly to GBP(0.02) (2016 GBP(0.01)), reflecting the
investment into the Company in preparation for the Initial Public
Offering ("IPO") and for the opening of our second site in Fareham,
Hampshire (UK).
Significant costs were incurred during the IPO process in May
2017 which raised net cash proceeds of GBP9.2m and within these
proceeds GBP0.4m has been used in the period on developing the
business in new areas. As expected, the time taken to identify and
secure new business is considerable but worth the effort as
contracts tend to be for multiple years and across multiple
aircraft platforms.
Taking the above capital transaction into account, the impact of
non-recurring share-based payments and the subsequent expenditure
on developments both in the UK and overseas, the Company trading
can be more fairly reflected by an Adjusted Profit before tax of
GBP0.7m (2016 GBP(0.4m), and Adjusted EPS of GBP0.02 (2016
GBP(0.01)) (see Note 28).
To that end, the amount of activity with customers and
engagement with them keep the Board confident that Velocity can
achieve its growth ambitions whilst saving customers material, cost
and time. Whilst the company's transition from private ownership to
a publicly listed company on the London Stock Exchange has only
relatively recently taken place, the credibility and authority is
already being felt amongst our team, customers and suppliers with
additional opportunities presenting themselves which are under
careful consideration.
Market
Undoubtedly, it has been a year of evolution in the aerospace
market which culminated in Airbus's acquisition of Bombardier's
C-Series following the announcement by the USA of import duties on
Bombardier aircraft. In recent weeks, Emirates' selection of Boeing
for 40 new 787 Dreamliner aircraft was unexpected and Emirates have
announced the purchase of a further 36 A380 aircraft from Airbus.
The Rolls Royce Trent 700 engine has also been subject to volume
reductions which have affected some of our customers, but we expect
this demand reduction to be reversed in one way or another during
the next financial year. BAE Systems have also secured an order for
24 Typhoon aircraft from Qatar worth GBP5bn.
Airbus and Boeing both continue to have significant backlogs of
civil aircraft orders and Velocity's model helps manufacturers to
meet rates more quickly. Lockheed Martin, responsible for the F-35
military aircraft reported increased demand from the US government
stating that it would buy over 2,400 F-35 jets.
Business Model
The market for Velocity's products and services remains strong
and the company is using the flotation proceeds in accordance with
its business plan as outlined during the listing process and
expects to expand its facilities, to incorporate a Research and
Development Centre and add additional satellite facilities in close
proximity to new customers as new contracts are signed. It is
important to note that Velocity's business model only commits the
company to the opening of a new site once a customer contract of
import has been agreed and only where latent demand for more
efficient composite kit provision can be contracted on an aircraft
platform which is growing in terms of build rates.
Board and People
The Board is committed to operating to high standards of
corporate governance, as we believe that doing so will contribute
to the delivery of long term shareholder value. The aerospace
market also requires the Company to operate on a Right First Time
Every Time basis and our status as a listed company has solidified
our commitment to governance, quality and transparency and as
importantly, further improved the perception of Velocity in our
customers' and potential customers' eyes
We further strengthened the team in the period with the
appointment of Matthew Archer and Fred Hinnekens who joined us
respectively from GKN, one of our key customers, and Solvay Cytec,
one of our key suppliers. I always take this opportunity to thank
the whole Velocity team for their efforts during the period and on
this occasion, I would like to underline the Board's gratitude to
the whole team for their efforts in a busy and transitional year. I
look forward to working with the team as we continue to grow the
business and provide opportunities for new and more challenging
roles in the business.
Outlook
We have excellent and committed staff, a high-quality client
base, operate on growing aircraft platforms within the growing
composites market and with our clear focus on growth and with our
supportive shareholder base, the Board looks to the future with
confidence.
Mark Mills
Chairman
22 January 2018
Chief Executive Officer's Report
For the year ended 31 October 2017
Overview
I am delighted to report our first published full year results
as a listed company for the year ending 31 October 2017. The period
has continued to be a transformational time for the Company,
including the latest five months as a public company following the
successful IPO in May 2017. We continued to successfully execute
our growth strategy building on the opening of our second
manufacturing facility in Fareham, Hampshire (UK) to deliver new
contract wins with both existing and new customers as we transition
from a single site private company to a multi-site, multi-region
public company.
We continue to see strong demand for our services as the
aerospace composites industry enters a clear "make more-for-less"
period, and our customers look for new ways to reduce the cost of
manufacture, both in the supply chain and in their own
manufacturing areas.
Strategy
At Velocity, we use our industry knowledge, business processes
and proprietary software to reduce the amount of raw material and
process time needed by our customers to manufacture composite
parts, whilst at the same time allowing our customers to outsource
a significant area of non-value added activity from their business.
This in turn makes the supply chain more efficient and less
expensive for our customers within the aerospace composites
industry and allows them to focus on their core business of
manufacturing, testing and assembling composite structures. This
subsequently enables aircraft manufacturers to reduce costs and
increase production rates, allowing our customers to more readily
meet the significant increases in aircraft build rates.
Our strategic growth plans involve identification of key
aerospace manufacturing clusters where we believe we can replicate
our business model. Engagement with these potential customers then
enables a long term engagement plan to be agreed, with Velocity
able to assess where its strategic manufacturing facilities should
be located.
Since the IPO a large number of potential customers have been
visited both in Europe and further afield and long term plans are
being agreed, with a supporting Velocity site roll-out plan as each
engagement develops in each cluster. In addition to the work in
Europe, IPO funds have also been used to engage with local partners
in both North America and Asia in order to identify potential
customers and clusters in these regions.
Operational review
Trading review
Trading has been in line with management expectations and
revenue has increased by 46% from the last financial year as new
programmes and new facilities begin to deliver revenue to the
business. The increased costs experienced in the previous year due
to exchange rate variance have been significantly reduced following
the implementation of updated commercial arrangements with
customers, although the additional costs relating to customer
changes, the listing on AIM and the international expansion
opportunities have affected our reported profit figures.
Opening of our Fareham facility
We started the period predominantly serving regional UK
customers in North West England and had identified a number of key
aerospace manufacturing customers in the south of England where we
could replicate our business model, capitalising on growth in the
aerospace composites sector. This resulted in key customer wins and
the opening of our facility in Fareham.
Velocity acquired a new site in September 2016 in Fareham to
service these additional customers within Southern England and also
to offer its services to mainland northern Europe. The 10,000 sq ft
facility is a replica of the Company's facility in Burnley and has
the capability of manufacturing all types of aerospace kits under
composite cleanroom conditions, whilst engineering, finance and
quality functions remain based at the Burnley facility.
Production at Fareham commenced in March 2017 after the site was
granted both AS9100 and Airbus approvals in January and February
2017, respectively. Whilst the customer onboarding took longer than
planned owing to customer changes beyond Velocity's control, the
site is now operating a two shift system with further investment in
staffing levels, kit cutting equipment and material management
systems allowing for growth in existing and new customer
programmes.
New regulatory / manufacturer approvals
We continue to make excellent progress towards maintaining and
securing internationally recognised, site specific, quality
standard approvals. This is a requirement of aerospace
manufacturers and during the period our Fareham production facility
obtained the necessary approvals to match those held by our Burnley
facility, a process which allowed for significant learning and will
be repeated as new sites are opened. During the period the
certification of all sites to the new AS9100 Rev. D standard has
commenced or been undertaken.
Order book / pipeline
We continue to see strong customer demand for our unique
proposition from leading tier 1 aerospace manufacturers and are
confident that the use of the proceeds of the IPO will expand the
territorial footprint of the business from a predominantly UK
business to a pan-European business with facilities in at least one
of the major European aerospace composite clusters. I am also
pleased to announce that following my discussions with existing
customers to explain the company strategy and direction the IPO was
very well received and seen as a strengthening of the business,
offering long term security and evidencing the good governance for
Velocity as a key supplier in their supply chain.
Recruitment
To support our growth plans we identified prior to the IPO the
need to strengthen key areas of the business, namely the new
customer acquisition teams and the new business implementation
teams. I am pleased to announce that we have expanded these key
teams by 100% in the period and as previously announced we have
made senior appointments in a Chief Commercial Officer, a European
Programmes Manager, a Head of Corporate Development and an
Information Systems Manager. This in turn has enabled the business
to respond to a significant amount of proposals and RFQ's in line
with the demand from both existing and new customers and
programmes. Coupled with the recruitment due to programme growth
this has led to a total headcount increase from 85 to 116 in the
financial year, in line with expectations.
Scalability
Following the IPO, and in addition to the staff recruitment
activities, we have further developed our plans and processes to
support the growth and scalability of the business to realise these
in line with expectations. This has focused on several key areas,
including:
-- Customer Acquisition - Enabling us to process enquiries
faster and deliver programme wins quicker
-- Commercial Focus - The continuous improvement of existing
business and the protection of our expansion and roll out plans
-- New Geographical Markets - Regionalisation of key resources
and market research of target locations
These projects have progressed well with a clear focus on
automation, centralisation, information security and continuous
improvement and will continue to yield benefits as the business
grows.
Financial performance overview
-- Revenue continued to strengthen, up 46% to GBP21.4m (2016:
GBP14.6m) and gross profit was up 13% to GBP3.9m (2016:
GBP3.5m).
-- Operating loss of GBP0.5m (2016: GBP0.3m) and loss before tax
of GBP0.6m (2016: GBP0.4m) incorporated the Company's investment in
its preparation for the IPO and in the new facility at Fareham, and
the impact of non-recurring share-based payments.
-- Net assets have strengthened from GBP0.6m (October 2016) to GBP10.1m (October 2017).
-- Development costs capitalised as intangible asset (GBP0.4m)
Risk
In preparing these financial statements, management are required
to make accounting assumptions and estimates. The assumptions and
estimation methods have been consistently applied throughout the
period. The principal risks and uncertainties that may have a
material impact on activities and results of the Company remain as
set out on Page 12 of the Strategic Report.
For many businesses, the negotiations between the United Kingdom
and European Union for its future relationship give cause for
uncertainty and concern. Whilst the ongoing uncertainty is a
natural cause for concern, the aerospace sector is a global market
which unlike many other sectors is largely tariff free. The UK is
the second largest aerospace market in the world and works in
global alliance on long term projects which last for many years.
For Velocity, its strategy remains to be country agnostic and to
co-locate in aerospace clusters alongside its customers, which
helps to mitigate some of the risk that Brexit may otherwise bring
to the Company.
As the global growth opportunity continues to be explored by the
Company, we will seek the most appropriate funding route available
for both the investment into those new territories and in
particular the support of our cash flow to facilitate the purchase
of materials for kitted supply to our customers.
Outlook
The customer and aircraft programme pipeline remains strong as
customers look to reduce costs and simplify the supply chain. The
Board is seeing a stronger message from the industry around waste
and cost reduction as the primes look to be able to deliver
'more-for-less' in order to meet the order backlog and market
dynamics and this has delivered an increase in discussions at the
appropriate management level taking place with both existing and
potential new customers, in both existing and new territories.
As the customer base increases and the number of multi-site
customers grow the Board sees further opportunity to meet customers
requirement wherever they operate and to offer intra-customer
optimisation across all their sites wherever they are located.
Velocity is in a unique position to integrate this into our normal
service offering and in turn realising a greater magnitude of
benefits both to our customers and our investors.
This year has been a transformative one for Velocity, and the
five months since IPO have continually accelerated the growth and
change required to continue the pace of growth across
multi-regions. We are building the right team, strategy and
offering to strengthen our market leading position as supplier of
total composite material kits to the aerospace sector and to create
value for all of our investors and customers.
Jonathan Bridges
Chief Executive Officer
22 January 2018
Strategic Report
For the year ended 31 October 2017
The following pages should be read in conjunction with the
Chairman and Chief Executive Officer's Reports which form a part of
this Strategic Report.
Overview
The Company supports the aerospace manufacturing supply chain by
providing composite material and related kitted products. Whilst
the Company's income is predominantly derived from activities
conducted in the UK, an increasing number of our customers are
situated worldwide.
Strategy
The Company's strategic focus is on delivering our kitted
products to our customers to meet their increasing demand levels
thereby eliminating process waste, and also growing our business
through new opportunities with our existing and prospective
customers.
Financial key performance indicators
The Company monitors its financial performance using a number of
appropriate indicators. These are:
2017 2016 Comments
GBPm GBPm
------------------- ------- ------- -------------------------------
Revenue grew in line with
expectations with growing
demand on existing platforms
as well as new customer
Revenue 21.37 14.61 wins.
------------------- ------- ------- -------------------------------
Gross profit has reflected
some delays in customer
demand coming to full
Gross profit 3.93 3.48 rate.
------------------- ------- ------- -------------------------------
The ongoing investment
into the growth of the
Net loss for business has resulted
the period (0.70) (0.27) in a small net loss position.
------------------- ------- ------- -------------------------------
Underlying profits have
Adjusted profit been managed in line with
/ (loss) before expectations. (see Note
tax 0.75 (0.36) 28)
------------------- ------- ------- -------------------------------
Proceeds from the share
issue have contributed
Total assets 16.23 6.13 to the total assets.
------------------- ------- ------- -------------------------------
Trade liabilities have
continued to be closely
managed following the
Total liabilities 6.14 5.52 IPO.
------------------- ------- ------- -------------------------------
Future outlook
The Board is pleased with the recent progress made in moving the
Company towards our strategic goals, and in particular its
successful listing in May 2017. We will look to continue to expand
the business in a controlled manner, and by doing so enable us to
be well positioned to meet the needs of our customers in the
aerospace manufacturing supply chain in the short, medium and long
term.
Financial risk management
The Company uses financial instruments including loans, cash and
other items such as trade receivables and trade payables that arise
directly from its operations. The main purpose of these financial
instruments is to raise finance for the Company's operations.
The existence of these financial instruments exposes the Company
to a number of financial risks. These are liquidity risk, credit
risk, interest rate risk and exchange rate risk. The Directors
review and agree policies for managing each of these risks and they
are summarised below.
Liquidity risk
The Company seeks to manage financial risk by ensuring
sufficient liquidity is available to meet foreseeable needs, by the
use of invoice discounting, loans and other bank facilities, and to
invest cash assets safely and profitably. In addition since the
IPO, the Company has a cash injection of GBP9.2m and the ability to
seek additional funds from the equity markets if necessary.
Credit risk
The Company's trade receivables relate to amounts owed by
aerospace supply chain manufacturers. Given the size and stability
of the core receivables, the Directors do not believe that credit
risk to the Company is significant. The Directors monitor any
default risk on a regular and ongoing basis.
Interest rate risk
The Company seeks to manage its interest rate risk through
minimising its exposure wherever possible and by regularly
reviewing the interest rates available within the financial
marketplace.
Exchange rate risk
The Company seeks to manage the exposure to exchange rate
fluctuation it experiences with purchasing raw materials in
Sterling, US Dollars and Euros and selling finished kits in the
same currency. The Directors monitor the future projected exchange
rates and look to mitigate any significant exposure by matching
receipts and payments in currency where possible and utilising
currency exchange facilities where not, and will engage derivate
financial instruments such as forward currency contracts if
appropriate.
Principal risks and uncertainties
The principal activity risks and uncertainties of the business
are considered to be the loss of key contracts. Demand has remained
firm in the short term despite the ongoing uncertainty arising in
the UK economy regarding BREXIT, and the Company's view remains
that the demand levels within aerospace manufacturing will continue
to increase due to the global aircraft production backlogs which
currently are estimated to be between five and ten years, and the
increasing use of composites within aerospace manufacturing.
Despite this, the business has been able to continue to grow its
customer base, and to win additional business with its existing
customers.
The Board is also conscious of the risk of exclusively operating
in the aerospace sector, foregoing many offers from automotive
manufacturers for example, and is comfortable that the risk is
mitigated by the forward order books of the aircraft manufacturers
and strength of the growing aerospace market. Similarly, going
forward in particular in new territories, there will be exposure to
foreign currencies and the Company will seek to mitigate the effect
of exchange rate fluctuations where it can.
Alan Kershaw
Chief Financial Officer
22 January 2018
Statement of total comprehensive income
Year ended Year ended
31 October 31 October
2017 2016
Note GBP'000 GBP'000
------------ ------------
Revenue 4 21,369 14,614
Cost of sales (17,438) (11,135)
------------ ------------
Gross profit 3,931 3,479
Administrative expenses excluding
exceptional costs (3,481) (3,770)
Exceptional administrative
expenses 7 (931) -
Other operating income 21 22
Operating loss 5 (460) (269)
Finance expense 8 (167) (86)
------------ ------------
Loss before tax from continuing
operations (627) (355)
Income tax (expense)/income 9 (73) 81
Loss for the period and total
comprehensive loss (700) (274)
============ ============
Loss per share - Basic (GBP) 10 (GBP0.02) (GBP0.01)
from continuing operations
============ ============
Loss per share - Diluted (GBP) 10 (GBP0.02) (GBP0.01)
from continuing operations
============ ============
Statement of financial position
31 October 31 October
2017 2016
Note GBP'000 GBP'000
Non-current assets
Intangible assets 11 317 -
Property, plant and equipment 12 1,083 773
----------- -----------
Total non-current assets 1,400 773
----------- -----------
Current assets
Inventories 13 3,266 2,345
Trade and other receivables 14 6,148 2,942
Corporation tax - 29
Cash and cash equivalents 15 5,414 39
----------- -----------
Total current assets 14,828 5,355
Total assets 16,228 6,128
----------- -----------
Current liabilities
Trade and other payables 16 5,623 5,187
Grant income deferred 17 22 43
Corporation tax 35 -
Net obligations under finance
leases 18 145 92
----------- -----------
Total current liabilities 5,825 5,322
----------- -----------
Non-current liabilities
Deferred tax liabilities 19 106 97
Net obligations under finance
leases 18 211 106
----------- -----------
Total non-current liabilities 317 203
Total liabilities 6,142 5,525
Net assets 10,086 603
Equity attributable to equity
holders of the company
Share capital 20 89 -
Share premium account 20 9,727 -
Share-based payments reserve 367 -
Retained earnings (97) 603
----------- -----------
Total equity 10,086 603
=========== ===========
Statement of changes in equity
Share Share-based
Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- --------- ------------ --------
As at 31 October
2015 - - 916 - 916
Loss for the year - - (274) - (274)
- - 642 - 642
-------- --------- --------- ------------ --------
Transactions with
shareholders:
Dividend payment - - (39) - (39)
As at 31 October
2016 - - 603 - 603
======== ========= ========= ============ ========
Share Share-based
Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- --------- --------- ------------ --------
As at 31 October
2016 - - 603 - 603
Loss for the year - - (700) - (700)
-------- --------- --------- ------------ --------
- - (97) - (97)
-------- --------- --------- ------------ --------
Transactions with
shareholders:
Issue of ordinary
share capital 30 10,471 - - 10,501
Bonus issue of
ordinary share
capital 59 (59) - - -
Share-based payments - - - 367 367
Costs associated
with issue of equity
(from the AIM listing) - (685) - - (685)
As at 31 October
2017 89 9,727 (97) 367 10,086
======== ========= ========= ============ ========
Statement of cash flows
Year ended Year ended
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Operating activities
Loss for the year (700) (274)
Taxation 73 (81)
(Profit)/ Loss on disposal of
assets (3) 1
Finance costs 167 86
Amortisation of intangible assets 80 -
Depreciation of property, plant
and equipment 263 281
Share-based payments 367 -
Grant income amortisation (21) (22)
------------ ------------
Operating cash flows before
movements in working capital 226 (9)
(Increase)/Decrease in trade
and other receivables (3,206) (908)
(Increase)/Decrease in inventories (921) (940)
Increase/(Decrease) in trade
and other payables 1,461 294
------------ ------------
Cash generated from operations (2,440) (1,563)
Income taxes received/ (paid) - (240)
------------ ------------
Net cash (Outflow)/ inflow from
operating activities (2,440) (1,803)
Investing activities
Purchase of property, plant
and equipment (271) (120)
Development expenditure capitalised (397) -
Proceeds from the sale of property, 4 -
plant and equipment
Net cash used in investing activities (664) (120)
Financing activities
Proceeds from issue of shares 10,501 -
Payments of share issue costs (685) -
Finance costs paid (167) (86)
(Decrease) / Increase in invoice
discounting (1,025) 2,040
Repayment of finance lease capital (145) (114)
Dividends paid - (39)
------------
Net cash generated from financing
activities 8,479 1,801
Net increase/ (decrease) in
cash and cash equivalents 5,375 (122)
Cash and cash equivalents at
01 November 39 161
Cash and cash equivalents at
31 October 5,414 39
============ ==============
Notes to the 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.
The Company's principal activity is that of the sale of kits of
composite material and related products to the aerospace industry.
The Company re-registered from a private limited company to a
public limited company on 27 April 2017, and its shares were
admitted to trading on the Alternative Investment Market (AIM) of
the London Stock Exchange on 18 May 2017 (see note 20).
2. Accounting policies
Basis of preparation
The financial statements have been prepared in compliance with
the measurement and recognition criteria of IFRS as adopted by the
European Union.
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 periods
presented, unless otherwise stated. The financial statements are
presented in sterling and have been rounded to the nearest thousand
(GBP'000).
Going concern
Having made reasonable enquiries, the Directors are of the
opinion that the Company has sufficient resources to continue in
operational existence for the foreseeable future and hence these
financial statements have been prepared on a going concern basis.
This assessment has been supported by the preparation and
consideration of detailed forecasts for the three years to 31
October 2020 to project the future growth of the Company, and
flexing these forecasts through sensitivity analyses.
The forecasts include consideration of the cash position of the
Company and the appropriate utilisation of the various facilities
available for funding this growth. We have also discussed with our
bankers and other financial advisers the resultant trading
performance and they have indicated a strong desire to continue to
support the funding of these growth activities.
Changes in accounting policies
New standards, amendments and interpretations issued and not
applied to these financial statements:
The International Accounting Standards Board (IASB) and the IFRS
Interpretations Committee (IFRS IC) have issued the following
standards which are yet to be applied by the Company:
-- IFRS 15 'Revenue from Contracts with Customers'. This
standard is effective for accounting periods beginning on or after
1 January 2018 and will be required to be first applied to the
Company's financial reporting for the year ending 31 October 2019.
The directors are undertaking an assessment of the potential impact
of IFRS 15.
-- IFRS 16 'Leases'. This standard was issued on 13 January 2016
and is effective for accounting periods beginning on or after 1
January 2019 and will first apply to the Company's financial
reporting for the year ending 31 October 2020. The standard
requires lessees to recognise assets and liabilities for all leases
with lease terms of more than 12 months, unless the underlying
asset is of low value. The directors are undertaking an assessment
of the potential impact of IFRS 16.
There are no other IFRSs or IFRIC interpretations that are not
yet fully effective that could be expected to have a material
impact on the Company.
Revenue Recognition
Revenue is derived from the engineering and sale of goods and is
measured at the fair value of the consideration received or
receivable excluding discounts, VAT and other sales taxes or duty.
The Company recognises revenue when the engineered goods are
delivered to the customer, at which stage the risks and rewards
have transferred to the customer and it is probable that future
economic benefits will flow to the entity. Invoices raised by the
Company are incorporated into the invoice discounting facility
provided by the Company's bankers. The asset or liability arising
is recognised within the statement of financial position.
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.
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. Goods or services supplied in a foreign
currency are recognised at the exchange rate ruling at the time of
accounting for this expenditure.
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.
Research and development expenditure
Research expenditure - Expenditure on research activities is
recognised as an expense in the period in which it is incurred.
Development expenditure - An internally generated intangible
asset arising from the Company'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 Company 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.
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:
Plant and machinery 15% straight line
Motor vehicles 25% straight line
Fixtures and fittings 15% straight line
Exceptional items
Items which are both material and non-recurring are presented as
exceptional items within the relevant income statement category.
The separate reporting of exceptional items helps provide a better
indication of the Company's underlying business performance.
Foreign currency translation
Transactions entered into by the Company in a currency other
than Sterling, the currency of the primary economic environment in
which it operates (the "functional currency") are recorded at the
rates ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
Statement of Financial Position date. Exchange differences arising
on the retranslation of unsettled monetary assets and liabilities
are recognised immediately in profit or loss.
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. 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 Company. The
Company does not use derivative financial instruments such as
forward currency contracts, interest rate swaps or similar
instruments. The Company does not issue or use financial
instruments of a speculative nature.
Financial assets
The Company classifies its financial assets into the categories
discussed below, and based upon the purpose for which the asset was
acquired. The Company has not classified any of its financial
assets as held to maturity.
Loans and 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 Company's loans and receivables comprise trade and other
receivables included within the statement of financial
position.
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 provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Company will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable. For trade receivables, which are reported net, such
provisions are recorded in a separate allowance account with the
loss being recognised within administrative expenses in the income
statement. On confirmation that the trade receivables will not be
collectable, the gross carrying value of the asset is written off
against the associated provision. The Company does not currently
carry a provision for uncollectable receivables.
Financial liabilities
The Company 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. The Company
does not currently have any borrowings, and utilises invoice
discounting in support of its working capital requirements.
Share Capital
Financial instruments issued by the Company are treated as
equity only to the extent that they do not meet the definition of a
financial liability. The Company'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 Company operates an equity-settled share-based compensation
plan in which the Company 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
Finance Lease
Where substantially all the risks and rewards incidental to
ownership of a leased asset have been transferred to the Company (a
'finance lease') the asset is treated as if it had been purchased
outright. The amount initially recognised as an asset is the lower
of the fair value of the leased asset and the present value of the
minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease
payments are analysed between capital and interest. The interest
element is charged to the statement of comprehensive income over
the period of the lease and is calculated so that it represents a
constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.
Operating Lease
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Company (an 'operating
lease'), the total rentals payable under the lease are charged to
the statement of comprehensive income on a straight line basis over
the lease term. The aggregate benefit of lease incentives is
recognised as a reduction of the rental expense over the lease term
on a straight-line basis.
Current taxation
The tax currently payable is based on the taxable profit of the
period. Taxable profit differs from profit as reported in the
Statement of Comprehensive income because it excludes items of
income and expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Company's liability for current tax is calculated using rates
that have been enacted or substantively enacted by the statement of
financial position date.
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;
- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting nor taxable profit.
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 Company
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 chief operating decision-maker.
The chief operating decision-maker has been identified as the Board
of Directors. The Company supplies a single type of product into a
single industry and so has a single 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
Company financial information.
Critical accounting estimates and judgements
The Company 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.
Judgements and accounting estimates and assumptions
Useful lives of depreciable assets - Management reviews the
useful lives of depreciable assets (both tangible and intangible)
at each reporting date. At the reporting date management assesses
that the useful economic lives represent the expected life of the
assets to the Company. Actual results, however, may vary due to
unforeseen events.
3. Financial instruments & Risk Management
The Board has overall responsibility for the determination of
the Company'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 Company's
competitiveness and flexibility. The Company reports in Sterling.
All funding requirements and financial risks are managed based on
policies and procedures adopted by the Board of Directors. The
Company does not use derivative financial instruments such as
forward currency contracts, interest rate swaps or similar
instruments. The Company 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 Company 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 Company.
Financial instruments
Year ended Year
31 October ended
Financial instruments by category 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Current assets
Trade and other receivables - loans
and receivables 5,921 2,728
Trade and other receivables - non
financial assets 227 214
------------ ------------
6,148 2,942
============ ============
Cash and cash equivalents - loans
and receivables 5,414 39
Total loans and receivables 11,335 2,767
============ ============
Current liabilities
Trade and other payables - at amortised
cost 5,045 4,815
Trade and other payables - non
financial liabilities 578 372
------------ ------------
5,623 5,187
============ ============
Risk Management
The Company'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 Company's overall
risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects
on the Company's financial performance. Risk management is carried
out by the Board and their policies are outlined below.
a) Market risk
Foreign exchange risk
The Company 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 Company has
commercial agreements in place which allow it to transact with its
customers in the currency of the material purchase, thereby
allowing currency risk to pass through the Company.
The carrying value of the Company's foreign currency denominated
assets and liabilities comprise the inventories in Note 13, trade
receivables in Note 14, cash in Note 15 and trade payables in Note
16.
Whilst the majority of the Company's financial assets are held
in Sterling, 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 Company'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 Company does not speculatively hold
positions in US Dollar or Euro, and therefore the Company considers
the residual risk at the year end to be insignificant.
Interest rate risk
The Company carries no significant borrowings apart from leases.
Therefore with the exception of the invoice discounting facility
which attracts an interest rate of 2.25%, the directors consider
that there is no significant interest rate risk.
b) Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company. In order to minimise this risk the Company 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 Company results in trade receivables
which the management consider to be of low risk, other receivables
are likewise considered to be low risk. However, three of the
customers comprise in excess of 10% of the revenue earned by the
Company (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 Company 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 Company also has access to banking facilities
including invoice finance which it utilises when needed in order to
manage its liquidity risk.
2016 Within One Two Over
1 year to two to five five
years years years
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- --------- --------
Finance lease liability 118 92 39 -
Trade payables 2,327 - - -
Accruals 288 - - -
Other payables 31 - - -
Invoice discounting facility 2,169 - - -
2017 Within One Two Over
1 year to two to five five
years years years
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- --------- --------
Finance lease liability 172 137 103 -
Trade payables 3,421 - - -
Accruals 480 - - -
Other payables - - - -
Invoice discounting facility 1,144 - - -
The finance lease liability is shown gross, inclusive of
interest payments.
c) Capital risk management
For the purpose of the Company's capital management, capital
includes issued capital and all other equity reserves attributable
to the equity holders of the Company. The Company's objectives when
managing capital are to safeguard the Company's ability to continue
as a going concern in order to provide returns for shareholders and
benefits for other members. The Company will also seek to minimise
the cost of capital and attempt to optimise the capital
structure.
4. Segmental analysis
The Company supplies a single type of product into a single
industry and so has a single 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 Year
ended ended
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Revenue
United Kingdom 21,225 14,517
Europe 144 97
21,369 14,614
============ ============
During the year three customers accounted for 78.3% of the
Company's total revenue for the year ended 31 October 2017. This
was split as follows; Customer A - 53.9%, Customer B - 13.7% and
Customer C - 10.7%. 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.
5. Loss from operations
The operating loss is stated after charging / (crediting):
Year ended Year ended
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Staff costs (see Note 6) 3,634 2,512
Foreign exchange losses 8 635
Amortisation of development costs 80 -
Depreciation:
Owned assets 158 152
Assets held under finance leases 105 129
(Profit)/ Loss on disposal of
assets (3) 1
Grant income amortisation (21) (22)
Operating lease payments 226 143
Auditor's remuneration:
Audit of the accounts of the Company 37 29
Taxation compliance services 3 3
Other taxation advisory services 51 -
Other non-audit services (relating
to interim review) 9 -
Other assurance services (relating
to IPO) 134 -
============ ============
6. Staff costs
Year ended Year
31 October ended
31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Wages, salaries and bonuses 2,931 2,253
Social security costs 329 259
Pension costs 39 -
Share-based payments 335 -
------------ ------------
3,634 2,512
============ ============
The average monthly number of employees during the period was as
follows:
Year ended Year
31 October ended
31 October
2017 2016
Head
Head count count
------------ ------------
Manufacturing 74.5 61.5
Administration 31.5 28.0
106.0 89.5
============ ============
Directors costs
Year ended Year
31 October ended
31 October
2017 2016
GBP'000 GBP'000
Directors' remuneration included
in staff costs:
Wages, salaries and bonuses 613 482
Pension costs 12 -
Share-based payments 232 -
------------ ------------
857 482
============ ============
In addition to the remuneration above, the non-executive
directors have submitted invoices for their fees as follows:
18 98
=== ===
Remuneration of the highest paid director(s):
Wages, salaries and bonuses
or fees 241 111
==== ====
7. Exceptional administrative expenses
Year Year
ended ended
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Fees associated with AIM Listing 667 -
Share-based payments 264 -
------------ ------------
931 -
============ ============
Exceptional expenses incurred during the year
are in relation to costs of converting the Company
from a private limited company to a public limited
company and the subsequent admission of the Company
to trading on AIM during the year. Total costs
incurred were GBP1,352,000 with GBP685,000 charged
to share premium as being directly related to
newly issued shares. In addition, shares were
issued to Mark Mills, Matthew Turner and Nigel
Turner in January 2017 (as per Note 20) which
resulted in an exceptional charge of GBP264,000.
8. Finance income and expenses
Year Year
ended ended
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Finance expense
Finance charge from Finance leases 55 32
Other interest & invoice discounting
charges 112 54
167 86
============ ============
9. Income tax
Year ended Year
31 October ended
31 October
2017 2016
GBP'000 GBP'000
------------ ------------
Current tax (income)/expense
Current tax on profits for the period 70 -
Adjustment for under provision in
prior periods (6) (29)
------------ ------------
64 (29)
------------ ------------
Deferred tax expense
Origination and reversal of temporary
differences 9 (29)
Adjustments in respect of prior
periods - (1)
Rates adjustment - (22)
------------ ------------
9 (52)
------------ ------------
Total tax (income)/expense 73 (81)
============ ============
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 profit for the year as follows:
Tax rate 19.50% 20.00%
(Loss) for the year before tax (627) (355)
======= =======
Expected tax credit based on corporation
tax rate (122) (71)
Expenses not deductible for tax
purposes 198 10
Other differences 3 (2)
Rate adjustment - (17)
Prior year adjustment (6) (1)
Total tax (income)/expense 73 (81)
======= =======
The UK corporation tax rate was 20% between the period 1 April
2015 to 31 March 2017. The rate reduced to 19% with effect from 1
April 2017 and will reduce to 17% with effect from 1 April 2020.
This will reduce the Company's future current tax credit/charge
accordingly. The deferred tax liability as at 31 October 2017 has
been calculated based on a rate of 17% based on when the Company
expects the deferred tax liability to reverse.
10. (Loss)/earnings per share
Year ended Year ended
31 October 31 October
2017 2016
GBP GBP
------------ ------------
(Loss) for the year (700,000) (274,000)
Shares Shares
------------ ------------
Weighted average number of shares
in issue 28,378,444 20,077,200*
Share options 638,200 -
------------ ------------
Weighted average number of shares
(diluted) 29,016,644 20,077,200*
Loss per share (GBP) (basic) (GBP0.02) (GBP0.01)
============ ============
Loss per share (GBP) (diluted) (GBP0.02) (GBP0.01)
============ ============
Share options have not been included in the Diluted calculation
as they would be anti-dilutive with a loss being recognised.
* restated in accordance with the provisions of IAS33 to reflect
the impact of the bonus issue and subdivision of shares on 06 March
2017 (see Note 20).
11. Intangible assets
Development Total
Costs
GBP'000 GBP'000
------------ --------
Cost
At 31 October 2016 - -
Additions 397 397
At 31 October 2017 397 397
------------ --------
Amortisation
At 31 October 2016 - -
Charge for the year 80 80
At 31 October 2017 80 80
------------ --------
Net book value
At 31 October 2016 - -
------------ --------
At 31 October 2017 317 317
============ ========
12. Property, plant and equipment
Plant
Leasehold & Motor Fixtures Total
Improvements machinery vehicles & Fittings
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ---------- --------- ----------- --------
Cost
At 31 October
2015 - 1,117 136 157 1,410
Additions 57 47 - 16 120
Disposal - (1) - - (1)
------------- ---------- --------- ----------- --------
At 31 October
2016 57 1,163 136 173 1,529
Additions 114 358 19 83 576
Disposal - - (9) - (9)
At 31 October
2017 171 1,521 146 256 2,096
------------- ---------- --------- ----------- --------
Depreciation
At 31 October
2015 - 382 45 48 475
Charge for the
year - 198 42 41 281
At 31 October
2016 - 580 87 89 756
Charge for the
year 12 192 32 27 263
Disposal - - (8) - (8)
At 31 October
2017 12 772 111 116 1,011
------------- ---------- --------- ----------- --------
Net book value
At 31 October
2015 - 735 91 109 935
------------- ---------- --------- ----------- --------
At 31 October
2016 57 583 49 84 773
------------- ---------- --------- ----------- --------
At 31 October
2017 159 749 35 140 1,083
============= ========== ========= =========== ========
Net book value of assets under finance lease agreements:
GBP000's
At 31 October 2015 390
At 31 October 2016 330
At 31 October 2017 506
====
13. Inventories
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Raw materials & consumables 2,792 2,158
Finished goods 474 187
----------- -----------
3,266 2,345
=========== ===========
Inventories totalling GBP3,266k (2016 - GBP2,345k) 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 write off of
inventories during the year is not material.
14. Trade and other receivables
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Trade receivables 4,647 2,606
Prepayments and accrued income 227 214
Other receivables 1,274 122
6,148 2,942
=========== ===========
No trade and other receivables were due in greater than one
year.
Trade receivables overdue by:
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Not more than 3 months 565 578
More than 3 months but not more than
6 months 56 4
More than 6 months but not more than
1 year 42 -
More than 1 year 4 -
667 582
=========== ===========
No receivables have been impaired as none are considered to be
uncollectable.
Trade receivables held in currencies other than sterling are as
follows:
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Euro 891 3
US Dollar 2,316 52
3,207 55
=========== ===========
15. Cash and cash equivalents
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Cash at bank 5,414 39
5,414 39
=========== ===========
Of the total cash balance, GBP4,534,000 relates to cash to be
used in compliance with the conditions relating to the EIS
investment i.e. new product development and investment into new
overseas territories.
16. Trade and other payables
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Current
Trade payables 3,421 2,327
Accruals 480 288
Other tax and social security 578 372
Other payables - 31
Invoice discounting facility 1,144 2,169
5,623 5,187
=========== ===========
Book values approximate to fair values.
17. Grant income deferred
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Opening balance 43 65
Grant income amortisation (21) (22)
----------- -----------
Closing balance 22 43
=========== ===========
18. Leases
Operating leases
The Company leases motor vehicles and property, comprising both
offices and assembly space, under operating leases. The total value
of minimum lease payments due is payable as follows:
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Motor vehicles
Not later than one year 20 27
Later than one year and not later
than two years 10 17
Later than two years and not later
than five years - 9
Later than five years - -
----------- -----------
30 53
=========== ===========
Land and buildings
Not later than one year 219 109
Later than one year and not later 219 -
than two years
Later than two years and not later 559 -
than five years
Later than five years - -
----------- -----------
997 109
=========== ===========
Finance leases
The Company leases plant and equipment under finance leases
which are secured against the assets. Future lease payments are due
as follows:
Minimum
lease Present
payments Interest value
31 October 2016
Not later than one year 118 26 92
Later than one year and not
later than two years 92 18 74
Later than two years and not
later than five years 39 7 32
Later than five years - - -
---------- --------- --------
249 51 198
========== ========= ========
31 October 2017
Not later than one year 172 27 145
Later than one year and not
later than two years 137 18 119
Later than two years and not
later than five years 103 11 92
Later than five years - - -
---------- --------- --------
412 56 356
========== ========= ========
19. Deferred Tax
Deferred tax is calculated in full on temporary differences
under the liability method using tax rates appropriate for the
period. The movement on the deferred tax account is as shown
below:
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Deferred tax liability
Opening balance 97 149
Recognised in profit and loss 9 (52)
----------- -----------
Closing balance 106 97
=========== ===========
The deferred tax liability has arisen due to the temporary
differences on accelerated capital allowances.
20. Share capital
31 October 31 October
2017 2016
GBP GBP
------------ -----------
Share capital issued and fully paid
35,795,539 Ordinary shares of GBP0.0025 89,489 -
each
============ ===========
99 Ordinary shares of GBP1 each - 99
============ ===========
Ordinary shares carry the right to one vote per share at general
meetings of the Company and the rights to share in any distribution
of profits or returns of capital and to share in any residual
assets available for distribution in the event of a winding up.
On 13 January 2017, the Company issued seven new GBP1 ordinary
shares to Mark Mills and three new GBP1 ordinary shares each to
Nigel Turner and Matthew Turner (being sons of Peter Turner). The
shares were issued at nominal value. The Company has received a
deed of indemnification from Mark Mills and Peter Turner for all
taxation costs (excluding employer's National Insurance) arising
from the allotment of the shares.
On 14 February 2017, the Company issued a further two new GBP1
ordinary shares to Mark Mills and a further one new GBP1 ordinary
share each to Nigel Turner and Matthew Turner. The shares were
issued at nominal value with consideration at market value,
resulting in a share premium account of GBP71,429.
On 02 March 2017, the Company passed a resolution to reduce the
share premium account by GBP58,696. On 06 March 2017 passed a
resolution to apply such sum in paying up in full 58,696 ordinary
shares of GBP1 each, and allot and issue 58,696 new shares to the
existing shareholders. The resolution resulted in a net share
premium account of GBP12,733, and the Company then subdivided its
entire issued share capital such that 58,812 issued ordinary shares
of GBP1 each became 23,524,800 ordinary shares of GBP0.0025 nominal
value each.
On 18 May 2017, the Company issued 12,270,739 GBP0.0025 ordinary
shares for admission to Alternative Investment Market (AIM) of the
London Stock Exchange for a cash consideration of GBP0.85 per
share. Total placing proceeds were GBP14,430,128 which included the
sale of existing shareholders shares.
A share premium of GBP10,399,452 arose on the issue of new
shares and GBP685,022 of advisers' fees have been debited to the
share premium account resulting in a closing share premium account
of GBP9,727,163, a net increase of GBP9,714,430. The remaining
GBP546,000 of the advisers' fees were charged to the Statement of
Comprehensive Income. Further listing fees of GBP121,000 were
incurred in the year and charged to the Statement of Comprehensive
Income, and therefore total exceptional expenditure relating to AIM
listing fees of GBP667,000 were charged to the Statement of
Comprehensive Income (Note 7).
The Placing proceeds were discharged as follows:
GBP'000
Selling Shareholders 4,000
Advisers fees 1,188
Company net proceeds 9,242
--------
Total proceeds 14,430
========
Nominal Number
Movements in share capital value of shares
At the beginning of the year GBP
-------- -----------
99 Ordinary shares of GBP1 each 99 99
Shares issued during the year
Issues of shares for consideration 17 17
Bonus issue of Ordinary shares of
GBP1 each 58,696 58,696
Subdivided GBP1 Ordinary shares
into GBP0.0025 shares - 23,465,988
Placing of new shares 30,677 12,270,739
-------- -----------
Closing share capital at 31 October
2017 89,489 35,795,539
======== ===========
21. Share-based payment
The Company's employees are granted option awards under the
Velocity Composites Limited Enterprise Management Incentive and
Unapproved Scheme. The share options have no attached performance
conditions and vest subject only to continued employment. They vest
after 2 years, or earlier if a vesting event occurs as defined in
the rules of the Scheme. Once vested, options may be exercised at
any point up to the 10(th) Anniversary of the grant.
Vesting events are defined within the rules of the Scheme as a
reorganisation, takeover, sale, listing (except on AIM), asset
sales or death of the Option holder.
The company recognised a cost of GBP367,472 (2016 - NIL)
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.
There were no cancellations or modifications to the awards in
2017.
The following options were outstanding as at 31 October
2017:
Scheme and Exercise
grant date price Vesting Expiry
GBP date date Vested Not vested Total
13 Mar 13 Mar
13 March 2017 0.0025 2019 2027 - 603,200 603,200
17 October 17 Oct 17 Oct
2017 0.6926 2019 2027 - 35,000 35,000
--------- ------------- --------
- 638,200 638,200
========= ============= ========
The cost of share-based payments is included in "Administrative
expenses" within the Statement of total comprehensive income.
As set out in Note 20, shares were issued to Mark Mills and to
Matthew Turner and Nigel Turner (Peter Turner's sons) the costs
attributed to which (GBP267,000) are also treated as share-based
payments, and included in Exceptional administrative expenses (Note
7).
22. Related party transactions
Compensation of key management personnel:
31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Short term employment benefits 841 637
Share-based payments 326 -
----------- -----------
1,167 637
=========== ===========
Dividends were paid to the following shareholders:
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ -----------
J K Bridges - 13
G A Johnson - 13
C Banks - 13
------------ -----------
Dividend payments - 39
============ ===========
The following transactions took place with related parties
(purchases or dividends)/sales:
31 October 31 October
2017 2016
GBP'000 GBP'000
-------------- -------------
Dividends to shareholders - (39)
============== =============
On 13 January 2017, the Company issued three new
GBP1 ordinary shares each to Nigel Turner and Matthew
Turner (being sons of Peter Turner) at nominal value
(see note 21), and on 14 February 2017, issued them
a further one new GBP1 ordinary share each, which
were issued at nominal value with consideration
at market value, resulting in a share premium account
of GBP71,429.
The Company engages Abode Services Limited, which
provides graphic design services. One of the directors
of Abode is Christopher Banks (director / key management
personnel during the period). The Company paid GBP5,076
(2016: GBPNIL) to Abode during the year, and had
GBPNIL outstanding at the year end.
The following balances existed at periods end with related
parties (payable)/receivable:
31 October 31 October
2017 2016
GBP'000 GBP'000
------------ -----------
Dividends to shareholding directors - (16)
============ ===========
23. 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 Company.
24. Events after the reporting date
On 1 November 2017 and 2 November 2017, the Company was notified
that Mark Mills and Peter Turner purchased a further 58,824 and
55,555 ordinary shares at a price of GBP0.85 & GBP0.90 per
ordinary share, resulting in a beneficial interest of 5.26% and
0.16% respectively. Further details can be found on the Company's
website.
25. Capital commitments
At 31 October 2017 the Company had GBP90,320 (2016: GBP186,099)
of capital commitments relating to the purchase of plant and
machinery (2016: relating to the establishment of the Fareham
premises).
26. Pension commitments
The Company makes contributions to defined contribution
stakeholder pension schemes. The contributions for the year of
GBP39,007 (2016: NIL) were charged to the Income statement.
Contributions outstanding at 31 October 2017 were NIL.
27. Contingent liabilities
At 31 October 2017 the Company had in place bank guarantees of
GBP250,000 (2016: NIL) in respect of supplier trade accounts. The
company is not aware of any conditions which would realise these
contingent liabilities.
28. Reconciliation of Reported and Adjusted Profit
The reported results have been adjusted for exceptional items
and for the additional expenditure on future growth within the UK
and Overseas.
Profit before tax 31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Reported profit before tax (627) (355)
Adjustments:
Exceptional IPO related administrative 667 -
expenses
Exceptional share-based payments 264 -
Future growth expenditure relating 446 -
to UK and overseas
Adjusted profit before tax 750 (355)
=========== ===========
Earnings per share 31 October 31 October
2017 2016
GBP'000 GBP'000
----------- -----------
Adjusted profit before tax 750 (355)
Income tax (expense) / income (73) 81
----------- -----------
Adjusted Profit / (Loss) for the
year 677 (274)
=========== ===========
Shares Shares
----------- -----------
Weighted average number of shares
in issue 28,378,444 20,077,200
Share options 638,200 -
----------- -----------
Weighted average number of shares
(diluted) 29,016,644 20,077,200
Adjusted earnings / (loss) per GBP0.02 (GBP0.01)
share (GBP) (basic)
=========== ===========
Adjusted earnings / (loss) per GBP0.02 (GBP0.01)
share (GBP) (diluted)
=========== ===========
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKBDDDBKBADB
(END) Dow Jones Newswires
January 23, 2018 02:00 ET (07:00 GMT)
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