TIDMVEL
RNS Number : 8329M
Velocity Composites PLC
26 January 2021
26 January 2021
VELOCITY COMPOSITES PLC
("Velocity", the "Company" or the "Group")
FINAL RESULTS FOR THE YEARED 31 OCTOBER 2020
Velocity Composites plc (AIM: VEL.L), the leading supplier of
advanced composite material kits, announces its audited results for
the year ended 31 October 2020 ("FY20").
Highlights
-- Revenue down at GBP13.6m (FY19: GBP24.3m) impacted by industry-wide effects of Covid-19
-- Gross margin decreased to 17.1% for FY20 (FY19: 21.7%) due to
provisions made for slow-moving stock reflecting significantly
reduced demand on existing contracts
-- Operating loss for FY20 of GBP3.1m (FY19: Loss GBP0.6m),
after charging GBP0.3m (FY19: GBP0.7m) of exceptional restructuring
costs
-- Adjusted EBITDA(*) loss for FY20 of GBP1.9m (FY19: Profit
GBP0.8m) due to significant reduction in sales demand of existing
contracts and time needed to right-size the business
accordingly
-- Cash at Bank at 31 October 2020 of GBP3.3m (FY19: GBP3.4m)
-- Confirmed extension of existing GBP2.0m Coronavirus Business
Interruption Loan (CBIL) term extended from 2 to 6 years (post
year-end)
-- Appointment of Margaret Amos as an Independent Non-Executive
Director and Chris Williams as Chief Financial Officer to the
Velocity Board
Andy Beaden, Chairman of Velocity, said:
"2020 was a uniquely challenging time for our industry, however,
we have used this period to right-size our own business, develop,
refocus our senior management team and consolidate our
relationships within the supply chain. This has been done
successfully and prepares Velocity well for recovery when the
sector begins to improve. The recovery will happen, but
realistically this will not be until 2022. Though top-line revenue
has been compressed, by the reduction in OEM build rates, we are
now securing new business and the long term value of our contracts
will grow significantly in the years ahead. The pipeline of new
opportunities also remains strong, with our existing customers
showing their commitment to Velocity's unique offering."
Summary & Outlook
It has been a challenging year for all in the aerospace sector,
including Velocity, but whilst 2020 has seen significant impact due
to Covid-19, it is with a cautious optimism we look to 2021, and
beyond, for signs of recovery. Since our last trading update, the
business has successfully completed the right-sizing of its cost
base in line with latest demand forecasts, whilst continuing its
new business focus and maintaining sufficient liquidity for the
foreseeable future.
Through a number of new initiatives the business has now reduced
the cost-base in line with a GBP13.5m turnover breakeven business
and is in a good position to take advantage of operational gearing
as recovery begins, though this is not expected until the second
half of 2021.
The new customer proposition is continuing to be rolled and is
being received very positively by both new and existing customers.
Our major customers have all expressed support through engaging in
new contract extensions and the opportunity for additional lines of
business, starting in 2021. We will be reporting on the progress of
these in the next few months. We remain on track to be achieving a
break-even position in adjusted-EBITDA(*) in the second half of
this new financial year, as announced in November 2020. As airline
travel returns, the industry then expects increases in production
rates going into 2022 and beyond, enabling the opportunity for
profitable growth at Velocity.
Velocity finishes the year with relatively strong liquidity.
With the final year end numbers reflecting a positive net cash
position, resulting from efforts to release cash from slow-moving
stock and, through extensive forecasting and scenario testing. Post
year-end we have also secured an extension to the term of the
existing GBP2.0m CBIL facility, from 2 to 6 years.
* Adjusted EBITDA defined as earnings before finance charges,
tax, amortisation, depreciation, impairment, share based payments
and exceptional restructuring costs. During the year the Group has
applied IFRS 16 using the modified retrospective approach and
therefore the comparative information has not been restated and
continues to be reported under IAS 17. In the adjusted EBITDA for
2019 the rent payments for those assets now accounted for as Right
of Use assets under IFRS 16 have been added back so that both years
can be compared. The rent payments are not significantly different
to the depreciation charge.
CHAIRMAN'S REPORT
We will all remember 2020 as a year of extraordinary events and
in the Aerospace industry it has been one of the most challenging
in living memory. For Velocity Composites plc, we entered the year
with the objectives of securing new business and developing our
strategy around being seen as the leading supplier of composite
kitting technology in our industry.
Despite the immense challenges, we have still advanced
significantly in developing a full package of solutions for the
composite aerospace sector around our core offering of Velocity
Resource Planning. This has led to us winning new business and
developing our relationships with the major composite aerospace
manufacturers.
The pandemic has resulted in significant reductions in the
manufacturing volumes of all civil aircraft frames by the primary
manufacturers Airbus and Boeing. The dramatic impact across the
airline industry has resulted in a series of lockdowns and
temporary plant closures forced upon our customers and resulted
directly to lower order levels for the Company. Revenues in the
second half of our financial year were GBP4.1m, compared to
GBP12.2m in H2 FY2019. As a result revenues for the full year were
GBP13.6m (FY2019: GBP24.3m).
In response to prevailing macro and industry conditions,
Velocity reacted swiftly to right size its business. In doing so,
we sadly had to reduce our staffing levels from 132 at the start of
the financial year to 70 by the end, and we utilised U.K.
government support packages. We have also focussed attention on
reducing inventory levels, working closely with both suppliers and
customers in this area. While this has resulted in an improvement
in working capital, the full benefit of the inventory reduction
process will be realised in 2021.
In anticipation of a sharp fall in sales, the Board has been
acutely focussed on ensuring that the Company maintained, and
continues to maintain, sufficient financial liquidity. In this
regard during the year we received support from our bank and the
U.K. Government through the Coronavirus Business Interruption Loan
scheme and secured GBP2.0m of new debt funding. This was repayable
over two years from July 2020, with repayments starting in August
2021, but with the continued uncertainty we have recently agreed to
extend this to a six year period. The interest cost is favourable
and covenants are minimal, with no cost to the Company in the first
year. The company also secured Government grants under the
Coronavirus Job Retention Scheme of GBP0.4m. This support, plus
cost reductions, utilisation of HMRC salary furlough credits and
inventory management, have meant we have controlled our cash
position. Even with the new debt, we have retained a net positive
cash position and expect to generate further cash through inventory
reduction in 2021.
As a result of the effects of the pandemic, customer and
Velocity shutdowns and some inventory obsolescence, the Company
recorded an adjusted EBITDA loss in the year of GBP1.9m. Further
details can be found in Note 4, with adjusted EBITDA being defined
as earnings before finance charges, taxation, depreciation,
amortisation, impairment, share-based payments and exceptional
restructuring costs. As we enter 2021, the level of these losses
has been narrowed, as a result of the cost reduction programme, and
the Board anticipates that going forward the Company will be EBITDA
break-even at FY2020 levels of revenues. Given the disruption in
early 2021, the realistic objective is for the Company to be EBITDA
breakeven by the second half of 2021. 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.
The Board is making no rash assumptions as to the recovery of
build rates in the civil aircraft industry to pre-COVID levels, but
Velocity is fortunate to have been awarded a series of new
programmes with existing customers, who see our technology as a
contributor to greater cost efficiency and improved margins in
their own front end production processes. This new business, which
will take time to qualify and ramp up, is expected to result in a
significant improvement in sales for 2022 and beyond. It also means
when we eventually do see the upturn in primary aircraft production
rates, that upturn should push us above the pre-COVID sales levels.
We also continue to pursue a number of further new business
opportunities, including in the USA.
We have radically restructured our operations, with a focus on
Industry 4.0 technology and customer service, as well as changes to
our management team with the introduction of some new highly
skilled individuals, particularly strengthening our commercial and
financial functions. Colleagues have worked tirelessly in the
demanding period and our push towards being seen as a leading
engineering technology provider in our sector continues. This has
been funded via the EIS money raised at the IPO and everyone at
Velocity is energised by the exciting opportunities opening up for
the business.
During the period we were also pleased to welcome Margaret Amos
and Chris Williams to the Board. Margaret Amos brings with her
nearly 30 years aerospace and financial management expertise. She
has been appointed as our Audit Chair, along with supporting us in
governance and strategy Chris Williams, was appointed as the
Company's new permanent CFO in August 2020 and brings a diverse
range of systems and commercial finance skills.
In summary, the industry wide demand reductions are
disappointing, but with the prudent financial management and
strategic re-alignment, we remain very confident of the long-term
prospects. The business has gone through a major restructuring and
is leaner than before, but better skilled for the future demands in
our industry.
The Board is, and I am personally, extremely proud of Velocity's
employees and the dedication they have shown throughout 2020 and
the Company remains grateful for the ongoing support and backing
received by customers and suppliers during the year.
CEO REPORT
Market
The civil aerospace industry has gone through a large amount of
uncertainty over the past 10 months as the immediate and severe
effects on global flight schedules caused both Airbus and Boeing to
reduce aircraft production rates to minimal levels as the long-term
effects were understood. This in turn was replicated at the
customers of Velocity as they adjusted the production rates of
their sub-assemblies and the associated supply chains.
Both Airbus and Boeing publish detailed market outlook forecasts
annually, usually with clear correlations between the two
companies:
Airbus -
www.airbus.com/aircraft/market/global-market-forecast
Boeing -
www.boeing.com/commercial/market/commercial-market-outlook
At the time of writing only Boeing has updated its forecast
taking into account COVID-19 effects, with both companies expecting
to publish detailed updates by summer 2021. From this intermediate
report it is clear that despite the picture remaining dynamic and
the unprecedented disruption to the industry, the long-term growth
drivers and fundamentals for air travel remain. In support of this,
Boeing sets out a three-stage outlook for near term, medium term
and long term recovery and growth:
Near Term: Demand Focused on Fleet Renewal
Over the last decade, growth in passenger air travel averaged
6.5% per year, well above the long-term average of 5%. In this
business environment, many of the world's airlines grew their
fleets through deliveries of new airplanes and often delayed
airplane retirements to accommodate passenger demand.
The current downturn is likely to lead to the replacement of
many older passenger airplanes. This accelerated replacement cycle
will position airlines for the future by improving the efficiency
and sustainability of today's fleet.
Medium Term: Aviation Has Proven Resilient
While aviation has seen periodic demand shocks since the
beginning of the Jet Age, our industry has recovered from these
downturns every time. Boeing currently believe it will likely take
about three years for air travel to return to 2019 levels, and it
will be a few years beyond that for the industry to return to
long-term growth trends. Aviation remains an integral part of
transportation systems around the world. The maturation of many
emerging market economies will further increase consumer spending's
share of economic activity, bolstering demand for air travel. In
addition, coming out of every crisis, the industry has innovated by
improving service and value for the traveling public.
Long Term: Emphasis on Fleet Versatility
The current market disruption will shape airline fleet
strategies long into the future as airlines make decisions to renew
their fleets and resume growth. Airlines will focus on building
versatile fleets that provide future network flexibility,
maximizing capability while minimizing risk, and improving
efficiency and sustainability as the industry moves towards
de-carbonises by electrification and hydrogen power.
What this means for Velocity is that production rates are
expected to recover over the next 3 years, led by single aisle
platforms (A220, A320, B737) followed by the newer twin aisle
platforms (A350, B777X, B787). Capacity has been lost due to the
early retirement of predominantly metallic airframes and so
airlines will be looking to replace these with newer, more fuel
efficient/sustainable aircraft which all utilise higher volumes of
composite materials, both now and with future hydrocarbon free
power technologies.
Regarding military platforms these have been less effected by
rate reductions as they are not subject to the same commercial
pressures. The outlook for both production rates and composite
content on these platforms remains strong.
Strategy
Taking the market forecasts into account the long-term
fundamentals of Velocity remain compelling, albeit subject to
short-term disruption caused by production rate demand reductions,
customer response to the demand reductions, travel restrictions for
business development and general uncertainty in the aerospace
market.
What the disruption has demonstrated is that despite the effects
of a global pandemic (i.e. immediate one year of flight groundings
followed by three years of production rate recovery) not being part
of industry planning, the procedures, manufacturing processes and
technology of Velocity facilitated an orderly and data driven
transition for all customers and suppliers through the disruption
in 2020. Once stabilised, the technology, IP and flexible service
offering of Velocity has also allowed for newer, more relevant
solutions to be developed for customers to help them reduce costs,
right-size and manage the disruption through their manufacturing
areas until production rates recover. This reaffirms the need of
Velocity to remain at the forefront of raw material management,
material utilisation and lean manufacturing integration, whilst
having the flexibility to adapt to how the customer wants to use
Velocity's IP to reduce their own costs. To this end Velocity will
utilise the disruption period to focus on the following:
- Continued investment in digital technology, utilising the
fully open Advanced Technology Centre on the Burnley, UK site, to
further develop in-house Industry 4.0 solutions around material
nesting, real time vision system process augmentation, real time
material resource planning technology (including AI), real time
tracking of all life-managed raw materials using cloud computing
and RFID, rapid prototyping using 3D scanning technology.
- The integration of the above technology into the in-house
developed "VRP System" managing all aspects of the company's
services.
- Development of alternative service models utilising the
licensing of the above technology for customers who want a more
phased adoption of Velocity's model. This would be controlled by
Velocity centrally, but deployed in a more flexible way to permit
new customers to transition to Velocity by the sub-licence of
Velocity technology and serviced without immediate resource
intensive changes to their operational set-up.
- Investigations, with Velocity's industry partners (both supply
chain and material suppliers), of alternative markets where the
above technology can be deployed e.g. wind energy, surface
transport, light weighting for electrification of road transport,
medical, personal urban air vehicles and unmanned air vehicles.
The above developments have been planned and budgeted as part of
the company's Integrated Business Plan for FY21. Recent headcount
changes were structured to protect business development and
technology development personnel and bring forward longer term
development plans into a focussed and targeted plan for FY21 to
deliver the above benefits.
It is expected that accelerated development and completion of
the above plans will assist in the potential new-business pipeline
of GBP50m over the next three financial years, by bringing further
benefits and flexibility to existing customers, whilst creating a
unique system of software tools, manufacturing technology and
digital solutions to meet the global need in the advanced
composites industry.
So much has changed in the world during the last year that
Velocity's annual report unsurprisingly reflects two very distinct
periods, being the period before the effects of COVID-19 became
globally apparent and the time since. The year started with two key
executive recruitment goals, to appoint both a new Customer
Programmes Director and full time CFO, the latter of which had
previously been filled (by Andrew Hebb) on an interim basis.
Despite the onset of the COVID-19 pandemic during these processes,
I am pleased to announce that both roles were filled by the
preferred candidates, with James Eastbury taking up the position of
Head of Customer Programmes in May 2020 and Chris Williams joining
as Chief Financial Officer in August 2020. Both James and Chris
bring significant and valuable skills and experience to their roles
as the Company meets the challenges of the COVID-19 pandemic and
plans for the recovery that will follow.
The year also started well in progressing the key strategic
targets of working with a focused number of key customers for new
business growth and utilising Velocity's technology to drive
further efficiencies in the composites supply chain. These targets,
however, were impacted by the onset of the COVID-19 pandemic, which
led to an immediate and unprecedented reduction in air travel, and
in turn, leading to the immediate reduction in aircraft production
rates and the associated reduction in demand seen by Velocity's
customers.
The response from Velocity was swift, based around the safety of
our staff and the need to align the raw material supply chain with
the new customer demand, inside of the usual extended lead times.
From the onset of the pandemic, and through the summer months, the
demand from customers was changing on a daily basis. Our industry
sought to respond to the unprecedented circumstances, and the work
to align the raw material supply chain with customer demand
involved considerable real time planning and dynamic scenario
modelling utilising Velocity's bespoke technology. During this
period customer manufacturing plants were also closed for several
intervals and at different times, as each customer utilised
furlough schemes to help with the reduced demand build rates. The
immediate reductions also lead to higher raw material stock levels
for material that was already purchased by the Company, including
stock positions put in place to mitigate any effects of Brexit
disruption. As such, the Company continues to work collaboratively
with customers to consume these stocks, whilst managing the wider
supply chain effects of the COVID-19 pandemic.
During this period of maximum disruption, I am pleased to report
that Velocity's sites remained open and responsive to customers
along with home working and utilising the furlough scheme. As
reported, the Company agreed terms for a GBP2.0m CBIL during this
period to provide further headroom as the disruption was better
understood. The term of this loan has since been extended post
year-end, from 2 to 6 years. As this period concluded, and the
longer term effects of the pandemic were better understood, it
became clearer that production rates would not recover in the
short-term and government intervention around furlough support was
limited in duration, so plans were enacted to right size both the
direct and indirect headcount of the business based on the current
demand, whilst protecting the delivery of products to current
customers and the ability of the business to progress and respond
to new business activities. Regrettably, this involved the
reduction in headcount from 132 to 70 and I would like to
personally thank all staff members involved in these difficult
decisions for dealing with this restructuring in a professional and
understanding way.
Looking forward there is still not a definitive picture around
aircraft production rate recovery as both Boeing and Airbus are
awaiting the return of air travel numbers before committing rates
to the market, communicated publicly in their Market Forecast
documents. Whilst there has been some recent exciting developments
around vaccines and airport testing the industry needs demand to
recover in air travel before this translates into new aircraft
sales and aircraft part production. What is widely accepted is that
single aisle rate recovery will be faster than twin aisle rate
recovery and so along with military applications the company
continues to review its new customer portfolio to target the higher
demand for its services.
During the year the government supported the company with the
Coronavirus Job Retention Grants of GBP0.4m, the company also
applied for a GBP2m Coronavirus Business Interruption Loan which
was received in July 2020.
The Company has also worked closely with its existing customers
to ensure that the service offering remains compelling during and
after the disruption and rate reductions. Clearly this is a
challenging time for the whole industry and customers have had to
revisit their entire industrial strategy as capacity created during
previous growth years becomes available due to rate reductions.
Significant work has been undertaken to work with customers to
align future service with the new requirements, utilising
Velocity's technology to identify enhanced efficiencies to assist
customers. This has resulted in an extended long-term agreement
with one key customer and additional packages of work with another.
Work continues with our third key customer as part of a planned
contract renewal exercise.
As the industry stabilises around the new production rates the
company has a revised strategy to emerge more resilient from the
unprecedented effects of the COVID-19 pandemic. Clearly like for
like sales of existing business has been significantly reduced and
so our priority in FY21 is to continue the cost reductions and new
business growth to return the business to profit during the second
half of the year. The company is still working through a new
business sales opportunity pipeline of GBP50m over the next three
financial years, and utilising our technology, proven service
levels and geared operational capacity we expect the new
proposition process to form an important part of our customers
response to the new production rates.
The Company has also accelerated activities to utilise our
industry partners in both Europe and North America to investigate
new composite markets where our technology can be applied, for
example ground transportation, urban air vehicles, wind energy,
hydrogen power and military and transport electrification. As part
of this, the Velocity model will be developed to enable our
technology to be licensed or deployed internally at new customers
to accelerate the adoption in a cash light way.
Whilst their appears to be a roadmap to undo the physical
restrictions of the COVID-19 pandemic, the effects, particularly in
aerospace, will be felt for several years to come. At Velocity, the
team are focused on dealing with those immediate effects, ensuring
the long term sustainability of the business whilst adapting our
technology and offering to meet the continued needs of our
customers.
FINANCIAL REVIEW
Statement of Comprehensive Income
Revenue for FY20 has understandably been impacted significantly
by the impact of COVID-19, as has the wider Aerospace sectors. We
have remained operational throughout the period, but with
intermittent customer shutdowns and heavily reduced underlying
demand on existing programmes, we have finished the period with
sales 44% lower year-on-year at GBP13.6m (FY19: GBP24.3m) and had
to adjust the business accordingly.
This sales decline was nearly all attributable to the last 7
months of the year, as the pandemic hit hard across the industry.
As a result, sales for the first 5 months of the year were in-line
with management's expectations at GBP8.7m and continuing to display
healthy demand. From March 2020 however, underlying aircraft
production rates dropped significantly, flowing directly through
into our demand with sales of GBP4.9m in the final 7 months.
International sales and expansion has also paused over this period
as international borders were closed and business commuting
restricted, though the business is in a positive position to
continue this once travel is once again permitted.
Whilst this position has picked up to some extent in the final
months of the year, we expect underlying volumes with existing
programmes to remain suppressed into FY21 and starting to recover
in FY22 and beyond. In addition, the business continues to seek out
new contracts to deliver some of the identified pipeline
opportunities.
The gross margin has declined to 17.1% (FY19: 21.7%), but this
has been driven by one-off stock provisions reflecting a prudent
stance regarding slow-moving stock caused by the disruption in the
supply chain. Excluding these, the margin is in line with
management's expectations given the movement in sales mix during
the year. Year-on-year overheads have significantly reduced and the
full-year-effect of management's right-sizing efforts will be seen
as we go into FY21. This, combined with a strong pipeline of sales
will enable Velocity to positively leverage its high operational
gearing from H2 FY21 going into FY22 and beyond.
As explained above, increased stock provisions required for
slow-moving stock have reduced our overall gross margin to 17.1%
(FY19: 21.7%). Discussions are ongoing with customers to resolve
these, but with high uncertainty in the current climate, we have
taken a prudent position. Excluding the impact of slow-moving
stock, and despite the lower volumes, underlying gross margin was
in line with management's expectations, with a slight decline
reflecting our movement in sales mix. The gross margin can be
impacted by the mix between structural composite materials and
lower cost process materials, which is 2020 led to a slightly
negative margin impact.
The government supported the company with the Coronavirus Job
Retention Grants of GBP0.4m, the company received a GBP2m
Coronavirus Business Interruption Loan in July 2020.
Administrative expenses (excluding depreciation and share based
payments) for the year have decreased by GBP0.4m to GBP4.3m (FY19:
GBP4.7m) as the business has right-sized its cost base with the
latest demand forecast. Despite utilising the government furlough
scheme, the business has needed to undertake two rounds of
restructuring. As a result people costs have reduced by GBP0.8m in
the year with headcount being reduced 47% from 132 to 70. In
addition a Cost Improvement Plan has been successfully implemented,
bringing the overhead cost-base of the business down to a GBP13.5m
sales revenue breakeven sales level. Further cost reductions plans
are ongoing into FY21 to continue the work done in this area.
The Company has benefitted from being 70% naturally hedged from
both US Dollar and Euro foreign exchange movements, with both
revenues and direct material purchases now being aligned
contractually into the same currency where applicable.
On a consistent basis with last year, adjusted EBITDA amounted
to a GBP(1.9)m loss for the year (FY19: GBP0.8m profit). This
excludes share-based payments and exceptional administrative costs
relating to restructuring in response to the pandemic. The adjusted
EBITDA has been impacted adversely by the dramatic sales fall,
combined by some one-off costs in inventory valuation. The
restructuring benefits will start to show through in the first part
of 2021, with the full benefit seen by the second half of 2021.
Adjusted EBITDA(1)
31 October 31 October
2020 2019
Reconciliation from Operating Loss GBP'000 GBP'000
----------- -----------
Operating Loss (3,149) (594)
Add back:
Share-based payments 120 66
Depreciation & Amortisation 445 431
Impairment of Intangible assets 72 18
Depreciation on Right of Use assets under
IFRS 16 (equivalent
2019 rent payments) 246 221
Exceptional Administrative costs 341 692
Adjusted EBITDA(1) (1,925) 834
=========== ===========
(1) Adjusted EBITDA defined as earnings before finance charges,
tax, amortisation, depreciation, impairment, share based payments,
exceptional restructuring costs. During the year the Group has
applied IFRS 16 using the modified retrospective approach and
therefore the comparative information has not been restated and
continues to be reported under IAS 17. In the adjusted EBITDA for
2019 the rent payments for those assets now accounted for as Right
of Use assets under IFRS 16 have been added back so that both years
can be compared. The rent payments are not significantly different
to the depreciation charge.
Cashflow and Capital Investment
The year-end cash and cash equivalents reduced by GBP0.1m to
GBP3.3m (FY19: GBP3.4m). Cash utilised from operations of GBP(0.8)m
(FY19: GBP0.3m) in the year was driven by the GBP(1.9)m EBITDA
offset partly by GBP1.3m favourable working capital position as the
business right-sized. Cash used in Investing Activities of
GBP(2.4)m (FY19: GBP(0.2)m) primarily related to the capitalisation
of Right Of Use (leased) assets (GBP1.4m) as well as property,
plant and equipment as the new business premises and Technology
R&D centre were completed. Financing activities generated GBP3m
over the period (FY19: GBP(0.8)m) with the benefit of the GBP2.0m
CBIL facility agreed during the year, offset by GBP(0.5)m payments
towards Hire Purchase commitments and Invoice Discounting
arrangements. The Invoice Discounting facility was not being
utilised at 31 October 2020.
The cash balance at 31 October 2020 of GBP3.3m includes GBP2.0m
Coronavirus Business Interruption Loan (CBIL) proceeds and GBP0.7m
remaining EIS funds to be utilised in establishing a production
facility in the USA and to invest further in developing our
mainland European activities when international travel resumes. Our
focussed stock reduction programme is expected to yield additional
cash upside as we continue through FY21.
Despite the loss in the year, the business remains in a net cash
position at year end, with GBP0.9m net cash (FY19: GBP3.1m). This
includes Cash at bank, EIS, and CBIL proceeds offset by the
outstanding CBIL balance and hire purchase liabilities.
Year ended Year ended
31 October 31 October
2020 2019
GBP'000 GBP'000
------------ ------------
Cash 3,264 3,424
Cash Loans (excluding right to use assets):
CBIL Loan (2,000) -
Hire Purchase (358) (290)
Invoice discounting facility 2 (4)
Net Cash/(Debt) (Note 1) 908 3,130
============ ============
Note 1: The net cash/(debt) calculation is designed to explained
the level of financial debt, net of cash at bank. It does not
include the IFRS 16 presentation changes around property rental
agreements and similar short-term operating rental lease
agreements, where the rental liability and an equal asset right are
both now recognised for the contract life, on the balance
sheet.
Working capital
Inventory levels decreased at the year-end by GBP(1.3)m to
GBP1.9m (FY19: GBP3.2m) reflecting our increased stock provision
and additional stock reduction efforts in-year as underlying demand
has reduced.
Trade and other receivables reduced significantly during the
year by GBP1.7m to GBP2.5m as a result of the reduced sales and
continuing robust controls around debt collection improved monthly
routines to manage the collection of debts. Debtor days have
therefore decreased slightly to 44 days (FY19: 45 days).
Trade and other payables also reduced during the year by GBP1.7m
to GBP1.5m due to reduction in Trade Creditors of GBP1.7m as the
business utilises existing material stock.
Going concern
Under the current climate, Management have undergone a
significant level of cash flow forecasting and scenario modelling.
This work also supported the application for our CBIL and its
extension. Detailed financial projections for the following 24
month rolling period were prepared, and then extended annually for
a further 5 years. The Aerospace sector lends itself to this kind
of long-term planning due to the nature and length of customer
programmes, typically a minimum of 3 years, but often 5 years or
more. This has enabled the business to fully model the impact of
Covid-19 and the expected recovery period. Post year end the CBIL
facility term has been extended from 2 to 6 years to better reflect
the cash flow needs of the business and ongoing support from our
bank.
As the pandemic unfolded and continued to gather pace, our
initial forecasts illustrated the need for cost reductions to be
made, which unfortunately meant restructuring and several rounds of
redundancies, this has put the business once again on a stable
footing for FY21, with positive operational gearing to leverage
once growth resumes. Further scenario tests included losing major
customers, failure to utilise slow-moving stock under new demand
levels and not receiving additional CBIL support or extension of
terms. Even in the worst of these cases, with all three downside
scenarios happening, Management's mitigation plans, meant the
business could navigate the forecast period utilising its net cash
position and existing facilities, albeit with some shorter-term
decisions needed to be made. This recovery has been made possible
by a combination of existing contracts recovering to pre-COVID-19
run rates over the 5 to 7 year period, as well as new contracts
being won from the significant pipeline of opportunities being
targeted.
Continued monthly monitoring of this forecast model is ongoing
over a rolling 36 month period, with the business adopting a new
Integrated Business Planning approach in January 2021. As a result,
any departures from budget or future requirements for cash flow
will be identified early on. Key cash flow projects within this,
such as the stock reduction programme, have been flagged as
priorities in the Velocity strategy, with project leads, KPIs and
reporting mechanisms into the Board. Any gaps against forecast will
be caught in this process and a recovery plan put in place to
ensure delivery of results.
Having due regard to these projections and available cash at 31
October 2020 of GBP3.3m, an invoice discount facility where we can
borrow up to GBP5m dependent on debtor levels, and the continued
the support of our bank, customers and shareholders during these
difficult circumstances, it is the opinion of the Board that the
Group has adequate resources to continue to trade as a going
concern.
CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE INCOME
Year ended Year ended
31 October 31 October
2020 2019
Note GBP'000 GBP'000
------------ ------------
Revenue 3 13,561 24,316
Cost of sales (11,237) (19,047)
------------ ------------
Gross profit 2,324 5,269
Administrative expenses excluding exceptional
costs (5,132) (5,177)
Exceptional administrative expenses (341) (692)
Other operating income - 6
Operating loss (3,149) (594)
------------------------------------------------ ----- ------------ ------------
Operating loss analysed as:
Adjusted EBITDA 4 (1,925) 834
Depreciation & Amortisation (445) (431)
Impairment of Intangible assets (72) (18)
Depreciation on Right of Use assets under (246) *(221)
IFRS 16 (equivalent
2019 rent payments)
Share based payments (120) (66)
Exceptional administrative expenses 5 (341) (692)
Finance income and expense (98) (58)
------------ ------------
Loss before tax from continuing operations (3,247) (652)
Income tax income 117 16
Loss for the period and total comprehensive
loss (3,130) (636)
============ ============
Loss per share - Basic (GBP) from continuing 6 (GBP0.08) (GBP0.02)
operations
============ ============
Loss per share - Diluted (GBP) from continuing 6 (GBP0.08) (GBP0.02)
operations
============ ============
There were no discontinued operations in the current or prior
period.
There is no other comprehensive income.
* The consolidated statement of total comprehensive income is
not restated but to aid comparability the alternative performance
measure adjusted EBITDA has been restated following implementation
of IFRS 16 for further details see Note 4.
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
Group Group Company Company
----------- ----------- ----------- -----------
31 October 31 October 31 October 31 October
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 167 318 167 318
Property, plant and equipment 1,723 1,061 1,723 1,061
Right-of-use assets 1,127 - 1,127 -
----------- ----------- ----------- -----------
Total non-current assets 3,017 1,379 3,017 1,379
----------- -----------
Current assets
Inventories 1,908 3,177 1,908 3,177
Trade and other receivables 2,464 4,149 2,490 4,178
Corporation tax - 75 - 75
Cash and cash equivalents 3,268 3,424 3,265 3,416
----------- ----------- ----------- -----------
Total current assets 7,640 10,825 7,663 10,846
-----------
Total assets 10,657 12,204 10,680 12,225
----------- ----------- -----------
Current liabilities
Loans 500 - 500 -
Trade and other payables 1,504 3,223 1,499 3,223
Grant income deferred - - - -
Net obligations under finance
leases 411 121 411 121
----------- ----------- ----------- -----------
Total current liabilities 2,415 3,344 2,410 3,344
----------- ----------- -----------
Non-current liabilities
Loans 1,500 - 1,500 -
Deferred tax liabilities - - - -
Net obligations under finance
leases 1,060 169 1,060 169
----------- ----------- ----------- -----------
Total non-current liabilities 2,560 169 2,560 169
-----------
Total liabilities 4,975 3,513 4,970 3,513
Net assets 5,682 8,691 5,710 8,712
Equity attributable to equity
holders of the company
Share capital 91 90 91 90
Share premium account 9,727 9,727 9,727 9,727
Share-based payments reserve 490 537 490 537
Retained earnings (4,626) (1,663) (4,598) (1,642)
----------- ----------- -----------
Total equity 5,682 8,691 5,710 8,712
=========== =========== =========== ===========
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and not presented its own
statement of profit and loss in these financial statements. The
loss for the year was (GBP3,123,000).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-based
Share Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------------- --------- ------------ --------
As at 31 October 2018 89 9,727 (1,091) 536 9,261
Loss for the year - - (636) - (636)
-------- -------------- --------- ------------ --------
89 9,727 (1,728) 536 8,624
-------- -------------- --------- ------------ --------
Transactions with shareholders:
Share-based payments - - - 66 66
Transfer of share option
reserve on vesting of
options and issue of equity 1 - 65 (65) 1
As at 31 October 2019 90 9,727 (1,663) 537 8,691
======== ============== ========= ============ ========
Share-based
Share Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------------- --------- ------------ --------
As at 31 October 2019 90 9,727 (1,663) 537 8,691
Loss for the year - - (3,130) - (3,130)
-------- -------------- --------- ------------ --------
90 9,727 (4,793) 537 5,561
-------- -------------- --------- ------------ --------
Transactions with shareholders:
Share-based payments - - - 120 120
Transfer of share option
reserve on vesting of options
and issue of equity 1 - 167 (167) 1
As at 31 October 2020 91 9,727 (4,626) 490 5,682
======== ============== ========= ============ ========
COMPANY STATEMENT OF CHANGES IN EQUITY
Share-based
Share Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------------- --------- ------------ --------
As at 31 October 2018 89 9,727 (1,062) 536 9,290
Loss for the year - - (645) - (645)
-------- -------------- --------- ------------ --------
89 9,727 (1,707) 536 8,645
-------- -------------- --------- ------------ --------
Transactions with shareholders:
Share-based payments - - - 66 66
Transfer of share option
reserve on vesting of options
and issue of equity 1 - 65 (65) 1
As at 31 October 2019 90 9,727 (1,642) 537 8,712
======== ============== ========= ============ ========
Share-based
Share Share premium Retained payments Total
capital account earnings reserve equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------------- --------- ------------ --------
As at 31 October 2019 90 9,727 (1,642) 537 8,712
Loss for the year - - (3,123) - (3,123)
-------- -------------- --------- ------------ --------
90 9,727 (4,765) 537 5,589
-------- -------------- --------- ------------ --------
Transactions with shareholders:
Share-based payments - - - 120 120
Transfer of share option
reserve on vesting of options
and issue of equity 1 - 167 (167) 1
As at 31 October 2020 91 9,727 (4,598) 490 5,710
======== ============== ========= ============ ========
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
Group Group Company Company
------------ ------------ ------------ ------------
Year ended Year ended Year ended Year ended
31 October 31 October 31 October 31 October
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------
Operating activities
Loss for the year (3,130) (636) (3,123) (645)
Taxation (117) (16) (117) (16)
Loss on disposal of assets - (11) - (11)
Finance costs 98 58 98 58
Amortisation of intangible assets 118 116 118 116
Impairment of Intangible assets 72 18 72 18
Depreciation of property, plant
and equipment 327 315 327 315
Depreciation of right to use assets 246 - 246 -
Share-based payments 120 65 120 65
Grant income amortisation - (6) - (6)
------------ ------------ ------------ ------------
Operating cash flows before movements
in working capital (2,266) (97) (2,259) (106)
Decrease in trade and other receivables 1,685 1,579 1,688 1,588
Decrease/(Increase) in inventories 1,269 (433) 1,269 (433)
Increase/(Decrease) in trade and
other payables (1,526) (1,363) (1,531) (1,363)
------------ ------------
Cash generated from operations (838) (314) (833) (314)
Income taxes received - 54 - 54
------------ ------------ ------------ ------------
Net cash (Outflow) from operating
activities (838) (260) (833) (260)
Investing activities
Purchase of property, plant and
equipment (991) (156) (991) (156)
Development expenditure capitalised (39) (89) (39) (89)
Proceeds from the sale of property,
plant and equipment 3 15 3 15
Net cash used in investing activities (1,027) (230) (1,027) (230)
Financing activities
Loan received 2,000 - 2,000 -
Finance lease proceeds 211 - 211 -
Finance costs paid (98) (58) (98) (58)
Increase/(Decrease) in invoice
discounting - (612) - (612)
Repayment of finance lease capital (404) (142) (404) (142)
Net cash generated from financing
activities 1,709 (812) 1,709 (812)
------------ ------------ ------------ ------------
Net (Decrease) in cash and cash
equivalents (156) (1,302) (151) (1,302)
Cash and cash equivalents at 01
November 3,424 4,726 3,416 4,718
------------ ------------ ------------ ------------
Cash and cash equivalents at 31
October 3,268 3,424 3,265 3,416
============ ============ ============ ============
Notes
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.
In order to prepare for future expansion in the Asia region, the
Company established a wholly owned subsidiary company, Velocity
Composites Sendirian Berhad, which is domiciled in Malaysia. The
subsidiary company commenced trading on 18 April 2018. The Company
also established a wholly owned subsidiary company, Velocity
Composites Aerospace Inc. to prepare for future expansion in the
United States of America. These subsidiaries together with Velocity
Composites plc, now forms the Velocity Composites Group ('the
Group').
The Group's principal activity is that of the sale of kits of
composite material and related products to the aerospace
industry.
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).
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and not presented its own
statement of profit and loss in these financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiary undertakings made up
to 31 October 2020. Subsidiaries are consolidated from the date of
acquisition, using the purchase method (see "Business combinations"
below).
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group. The Group's subsidiaries
have prepared their statutory financial statements in accordance
with Adopted IFRS, as from 1 May 2015.
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights. The acquisition date is the date on which control is
transferred to the acquirer. The financial statements of
subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control
ceases.
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of
the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
New Standards adopted at 1 November 2019
IFRS 16 Accounting for leases has become applicable for the
current reporting period, and the Group had to change its
accounting policy as a result. The impact of the adoption of the
leasing standard and the new policies are disclosed below.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in the
consolidated financial statements.
Going concern
Under the current climate and the business need for CBIL and
furlough support, Management have invested a lot of time during the
year in cash flow forecasting and scenario modelling. Detailed
financial projections for the following 24 month rolling period
were prepared, and then extended annually for a further 5 years.
The Aerospace sector lends itself to this kind of long term
planning due to the nature and length of customer programmes,
typically a minimum of 3 years, but often 5 years or more. This has
enabled the business to fully model the impact of Covid-19 and the
expected recovery period.
Initial forecasts illustrated the need for further cost
reduction, which unfortunately meant additional restructuring, but
has put the business once again on a stable footing for FY21, with
positive operational gearing to leverage once growth resumes.
Further scenario tests included losing major customers, failure to
utilise slow-moving stock under new demand levels and not receiving
CBIL support or extension of terms. Even in the worst of these
cases, with all three downside scenarios happening, Management's
mitigation plans, meant the business could navigate the forecast
period utilising its net cash position and existing facilities,
albeit with some shorter-term decisions needed to be made. This
recovery has been made possible by a combination of existing
contracts recovering to pre-COVID-19 run rates over the 5-7 year
period, as well as new contracts being won from the significant
pipeline of opportunities being targeted.
Continued monthly monitoring of this forecast model is ongoing
over a rolling 36 month period, with the business adopting the
latest Integrated Business Planning approach in January 2021. As a
result, any departures from budget or future requirements for cash
flow will be identified early on. Key cash flow projects within
this, such as the stock reduction programme, have been flagged as
key priorities in the Velocity strategy, with project leads, KPIs
and reporting mechanisms into Board. Any gaps against forecast will
be caught in this process and a recovery plan put in place to
ensure delivery of results.
Having due regard to these projections and available cash at 31
October 2020 of GBP3.3m, an invoice discount facility where we can
borrow up to GBP5m dependent on debtor levels, and continued the
support of our bank, customers and shareholders during these
difficult circumstances, it is the opinion of the Board that Group
has adequate resources to continue to trade as a going concern.
Changes in accounting policies
The Group has applied the following accounting standards and
amendments for the first time for their annual reporting period
commencing on the 1 November 2019:
IFRS 16 'Leases'
The Group has applied IFRS 16 using the modified retrospective
approach and therefore the comparative information has not been
restated and continues to be reported under IAS 17. This note
explains the impact of the adoption of IFRS 16 on the Group's
financial statements and discloses the new accounting policies that
have been applied from 1 November 2019. The Group has adopted IFRS
16 retrospectively from 1 November 2019 but has not restated the
comparative for the 2019 reporting period, as permitted under the
specific transactional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening balance sheet on 1
November 2019.
On adoption of IFRS, the Group recognised lease liabilities in
relation to leases which had previously been
Classified as 'operating leases' under the principles of IAS 17
Leases. These liabilities were measured at present value of the
remaining lease payments, discounted using the Group's incremental
borrowing rates as at 1 November 2019. The weighted average
incremental borrowing rate applied to the lease liabilities on 1
November 2019 was 5.2%. In applying IFRS 16 for the first time, the
Group has used the following practical expedients permitted by the
standard:
- the use of a single discount rate to a portfolio of leases
with reasonably similar characteristics
- reliance on the previous assessments on whether leases are onerous;
- the accounting of operating leases with a remaining lease term
of less than 12 months as at 1 November 2020 as short term
leases;
- the exclusion of initial direct costs for the measurement of
the right -of-use asset at the date of initial application; and
- the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
Impact of transition to IFRS 16
On the transition date of 1 November 2019, the Group recognised
the following transactions:
GBP'000
Right of use assets:
Land and buildings 479
Motor Vehicles 13
--------
492
Lease liability (492)
Further recognition during the financial year of GBP885k related
to the addition of Unit 5 at the Burnley site.
The change in accounting policy affected the above items in the
balance sheet on 1 November 2020. The net impact on retained
earnings at 1 November 2020 was GBPNil. For the year ending 31
October 2020 operating lease rentals of GBP307k have been restated
as deprecation GBP246k and finance costs of GBP47k, EBITDA has
increased by GBP293k whereas profit before tax has reduced by
GBP47k.
Further analysis of the impact of IFRS 16 is provided in note
7.
Further recognition during the financial year of GBP885k related
to the addition of Unit 5 at the Burnley site.
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 Group.
Revenue Recognition
From the 1 November 2019, the Group has applied IFRS 15 "Revenue
from Contracts with Customers". The new standard requires clear
identification of separate performance obligations and the revenue
associated with those obligations with each new contract entered
into is reviewed for consistency with the standard.
Revenue arises mainly from the sale of structural and consumable
materials for the use within the Aerospace industry.
To Determine whether to recognise revenue, the Group follows a
5-step process:
1 Identifying the contract with a customer
2 Identifying the performance obligations
3 Determining the transaction price
4 Allocating the transaction price to the performance obligations
5 Recognising revenue when/as performance obligations are satisfied
Performance obligations
Upon approval by the parties to a contract, the contract is
assessed to identify each promise to transfer a series of distinct
goods or services that are substantially the same and have the same
pattern of transfer to the customer. Goods and services are
distinct and accounted for as separate performance obligations in
the contract if the customer can benefit from them either on their
own or together with other resources that are readily available to
the customer and they are separately identifiable in the
contract.
The Group provides warranties to its customers to give them
assurance that its products and services will function in line with
agreed -- upon specifications. Warranties are not provided
separately and, therefore, do not represent separate performance
obligations
Recognition
Revenue is recognised as performance obligations are satisfied
as control of the goods and services is transferred to the
customer. Contracts are satisfied over a period of time, with the
dispatch of goods at a point in time. Revenue is therefore
recognised when control is transferred to the customer, which is
usually when legal title passes to the customer and the business
has the right to payment, for example, on delivery.
3. Segmental analysis
The Group supplies a single type of product into a single
industry and so has a single reportable segment. The Group's
subsidiary company, Velocity Composites Sendirian Berhad, is
located in Malaysia. 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 ended Year ended
31 October 31 October
2020 2019
GBP'000 GBP'000
------------ ------------
Revenue
United Kingdom 12,337 21,850
Europe 1,224 2,435
Rest of the World - 31
13,561 24,316
============ ============
During the year four customers accounted for 94.0% of the
Group's total revenue for the year ended 31 October 2020. This was
split as follows; Customer A - 43.6% (2019: 50.9%), Customer B -
27.2% (2019: 19.9%), Customer C - 12.9% (2019: 16.1%) and Customer
D - 10.3% (2019: 9.5%). 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.
During the current and previous year, the Group operated in
Asia. No revenue was generated in Asia during the year ended 31
October 2020 and year ended 31 October 2019 as the site operates as
an Engineering Support Office for the Group.
4. Adjusted EBITDA
EBITDA is considered by the Board to be a useful alternative
performance measure reflecting the operational profitability of the
business. Adjusted EBITDA is defined as earnings before finance
charges, taxation, depreciation, amortisation, impairment,
share-based payments and exceptional restructuring costs.
Adjusted EBITDA 31 October 31 October
2020 2019
Reconciliation from Operating Profit GBP'000 GBP'000
----------- -----------
Operating Loss (3,149) (594)
Add back:
Share-based payments 120 66
Depreciation & Amortisation 445 431
Impairment of Intangible assets 72 18
Depreciation on Right of Use assets
under IFRS 16 (equivalent 2019 rent
payments) 246 *221
Exceptional Administrative costs 341 692
(1,925) 834
=========== ===========
* In the adjusted EBITDA for 2019 the rent payments for those
assets now accounted for as Right of Use assets under IFRS 16 have
been added back so that both years can be compared. The rent
payments are not significantly different to the depreciation
charge.
5. Exceptional administrative expenses
Year ended Year ended
31 October 31 October
2020 2019
GBP'000 GBP'000
------------------ ------------------
Restructuring costs 341 692
341 692
================== ==================
The exceptional items reported in 2020 GBP0.3m consist of cost
of restructuring and redundancy costs in the year due to COVID
-19.
Prior year costs GBP0.7m were in relation to the resignations
of the previous chairman and non-executive directors, settlement
of a dispute with the founding shareholders, and various other
associated costs relating to the restructuring of the board.
6. Loss per share
Year ended Year ended
31 October 31 October
2020 2019
GBP GBP
------------ ------------
Loss for the year (3,130,000) (636,000)
Shares Shares
------------ ------------
Weighted average number of shares in issue 35,995,289 35,860,652
Weighted average number of share options 2,143,440 587,101
------------ ------------
Weighted average number of shares (diluted) 38,138,729 36,447,753
Loss per share (GBP) (basic) (GBP0.08) (GBP0.02)
============ ============
Loss per share (GBP) (diluted) (GBP0.08) (GBP0.02)
============ ============
Share options have not been included in the diluted calculation
as they would be anti-dilutive with a loss being recognised.
7. Leases
In the current year, the Company adopted IFRS 16 and applied the
modified retrospective approach. The reclassifications and the
adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 1 November 2019.
Right-of-use-assets
Group and Company
Land and
property Motor Vehicles Total
GBP'000 GBP'000 GBP'000
---------- --------------- --------
Cost
Balance as at 1 November 2019 - - -
Adjustment on transition to IFRS
16 on 1 November 2019 479 9 488
Additions 885 - 885
Balance at 31 October 2020 1,364 9 1,373
Depreciation and amortisation
Balance as at 1 November 2019 - - -
Adjustment on transition to IFRS - - -
16 on 1 November 2019
Depreciation charge for the year 238 8 246
Balance at 31 October 2020 238 8 246
Net book value
At 31 October 2020 1,126 1 1,127
========== =============== ========
The associated right-of-use assets for property leases and other
assets were measured at the amount equal to the lease liability,
adjusted by the amount of any prepaid or accrued lease payments
relating to that lease recognised in the balance sheet as at 31
October 2020.
There is no impact on deferred tax. From the 1 November 2019,
the assets will be classified for capital allowances, with interest
based on a discount factor being allowable for corporation tax
purposes.
Right-of-use lease liabilities
GBP'000
At 1 November 2019 488
Repayment (307)
Additions to right-of-use assets in exchange for increased lease
liabilities
885
Other lease movements 47
At 31 October 2020 1,113
======
Land and Motor Vehicles Total
Analysis by length of liability property
GBP'000 GBP'000 GBP'000
---------- --------------- --------
Current 259 - 259
Non-current 854 - 854
Total 1,113 - 1,113
Number of right-to-use assets leased 5 2
Range of remaining term 1-10 years less than 1 year
Finance leases and right to use
The Group leases plant and equipment under finance leases which
are secured against the assets. Future lease payments are due as
follows these include the above split of right-of use lease
liabilities:
Minimum lease
payments Interest Present value
31 October 2019
Not later than one year 135 14 121
Later than one year and not later
than two years 123 13 110
Later than two years and not later
than five years 66 7 59
Later than five years - - -
-------------- --------- --------------
324 34 290
============== ========= ==============
31 October 2020
Not later than one year 480 69 411
Later than one year and not later
than two years 317 51 266
Later than two years and not later
than five years 899 105 794
Later than five years - - -
-------------- --------- --------------
1,696 225 1,471
============== ========= ==============
Operating leases
The Group 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:
Group 31 October 31 October
2020 2019
GBP'000 GBP'000
----------- -----------
Motor vehicles
Not later than one year - 5
Later than one year and not later than two
years - 2
- 7
=========== =============
Land and buildings
Not later than one year 23 360
Later than one year and not later than two
years 4 360
Later than two years and not later than five
years - 443
Later than five years - 578
----------- -------------
27 1,741
=========== =============
Company 31 October 31 October
2020 2019
GBP'000 GBP'000
------------- -------------
Motor vehicles
Not later than one year - 5
Later than one year and not later than two
years - 2
- 7
============= =============
Land and buildings
Not later than one year 23 360
Later than one year and not later than two
years 4 360
Later than two years and not later than five
years - 443
Later than five years - 578
------------- -------------
27 1,741
============= =============
Operating leases not classed as right of use assets, relate to a
building security contract, all other prior year operating leases
have been classed as right-to-use asset on transition to IFRS
16.
8. Share capital
31 October 31 October
2020 2019
GBP GBP
----------- -----------
Share capital issued and fully paid
36,227,379 Ordinary shares of GBP0.0025 each 90,569 89,791
=========== ===========
Ordinary shares have a par value of 0.25p and an exercise price
of GBP0.39 as at 31 October 2020. They entitle the holder to
participate in dividends, and to share in the proceeds of winding
up the Company in proportion to the number of and amounts paid on
the shares held.
On a show of hands every holder of ordinary shares present at a
meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote. The Company does not have
a limited amount of authorised capital.
Options
Information relating to the Velocity Composites plc Employee
Option Plan, including details of options issued, exercised and
lapsed during the financial year and options outstanding at the end
of the reporting period, is set out in the Annual Report.
Nominal Number
Movements in share capital value of shares
GBP
Ordinary shares of GBP0.0025 each
At the beginning of the year 89,791 35,916,179
Exercising of share options 778 311,200
-------- -----------
Closing share capital at 31 October 2020 90,569 36,227,379
======== ===========
On 20 February 2020, the Company issued 70,000 new ordinary
shares of GBP0.0025 each to satisfy the exercise of options granted
under the Group's 2017 Share Option Scheme.
On the 15 September 2020, the company issued a further 241,200
new ordinary shares of GBP0.0025 each to satisfy the exercise of
options granted under the Group's 2017 Share Option Scheme.
9. 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 Group.
10. Capital commitments
At 31 October 2020 the Group had GBPnil (2019: GBP445,369) of
capital commitments relating to the purchase of leasehold
improvements, plant and machinery and fixture and fittings.
11. Pension commitments
The Group makes contributions to defined contribution
stakeholder pension schemes. The contributions for the year of
GBP131,761 (2019: GBP115,654) were charged to the Consolidated
Income statement. Contributions outstanding at 31 October 2020 were
GBP22,142 (2019: GBP24,374).
12. Contingent liabilities
At 31 October 2020 the Group had in place bank guarantees of
GBPnil (2019: GBPnil) in respect of supplier trade accounts
13. Report & Accounts
This preliminary announcement, which has been agreed with the
auditors, was approved by the Board of Directors on 26 January
2021. It is not the Group's statutory accounts. Copies of the
Group's audited statutory accounts for the year ended 31 October
2020 will be available at the Company's website shortly and a
printed version will be despatched to shareholders on the 28
January 2021.
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END
FR DKPBBCBKDDDB
(END) Dow Jones Newswires
January 26, 2021 02:00 ET (07:00 GMT)
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