TIDMVEL
RNS Number : 7242I
Velocity Composites PLC
09 August 2023
THIS ANNOUNCEMENT (INCLUDING THE APPIX) (TOGETHER "THIS
ANNOUNCEMENT") AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED
AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES,
AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR ANY OTHER
JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
WOULD BE UNLAWFUL. PLEASE SEE THE IMPORTANT INFORMATION SECTION AT
THE OF THIS ANNOUNCEMENT.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN VELOCITY COMPOSITES PLC OR ANY
OTHER ENTITY IN ANY JURISDICTION WHERE TO DO SO WOULD BREACH ANY
APPLICABLE LAW OR REGULATION. NEITHER THIS ANNOUNCEMENT NOR THE
FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON
IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF VELOCITY
COMPOSITES PLC.
THIS ANNOUNCEMENT SHOULD BE READ IN ITS ENTIRETY. IN PARTICULAR,
YOU SHOULD READ AND UNDERSTAND THE INFORMATION PROVIDED IN THE
APPIX WHICH CONTAINS THE TERMS AND CONDITIONS OF THE PLACING.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF THE MARKET ABUSE REGULATION (EU) 596/2014 WHICH FORMS PART OF UK
LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK
MAR"). IN ADDITION, MARKET SOUNDINGS (AS DEFINED IN UK MAR) WERE
TAKEN IN RESPECT OF CERTAIN OF THE MATTERS CONTAINED IN THIS
ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF
SUCH INSIDE INFORMATION, AS PERMITTED BY UK MAR. UPON THE
PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL
THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.
9 August 2023
VELOCITY COMPOSITES PLC
("Velocity or the "Company")
Proposed Placing of and Subscription for 15,500,000 New Ordinary
Shares to raise GBP6.2 million
Proposed REX Retail Offer to raise up to GBP0.5 million
and
Recommended proposal for the cancellation of the Share Premium
Account
Velocity Composites plc (AIM: VEL), the leading supplier of
composite material kits to aerospace and other high-performance
manufacturers , is pleased to announce that it has conditionally
raised GBP1.2 million (before expenses) through the issue of
1,900,000 Firm Placing Shares and 1,100,000 Subscription Shares at
the Issue Price of 40 pence per New Ordinary Share, and has also
conditionally raised GBP5 million (before expenses) through the
issue of 12,500,000 EIS/VCT Placing Shares at the Issue Price.
Furthermore, the Company announces a retail offer to raise up to
GBP0.5 million (before expenses) through the issue of 1,250,000 new
Ordinary Shares (the "Retail Offer Shares") at the Issue Price (the
Firm Placing, the Subscription, the Retail Offer and the EIS/VCT
Placing together defined as the "Fundraising") . A separate
announcement will be made shortly by the Company regarding the
Retail Offer and its terms. Those investors who subscribe for
Retail Offer Shares will do so pursuant to the terms and conditions
of the Retail Offer contained in that announcement.
Key features of the Fundraising
-- Conditional Firm Placing of 1,900,000 new Ordinary Shares and
Subscription for 1,100,000 new Ordinary Shares to raise GBP1.2
million (before expenses) at the Issue Price with new and existing
investors;
-- Conditional EIS/VCT Placing of 12,500,000 new Ordinary Shares
at the Issue Price with new and existing investors to raise GBP5
million (before expenses). The EIS/VCT Placing is conditional,
inter alia, on the cancellation of the Share Premium Account and
Shareholder approval;
-- Retail Offer to raise up to an additional GBP 0.5 million is
being made through the REX Retail Offer at the Issue Price to
existing shareholders of the Company through certain
intermediaries. A separate announcement will be made shortly
regarding the REX Retail Offer and its terms;
-- The Issue Price of 40 pence per New Ordinary Share represents
a 13.0 per cent. discount to the closing middle market price of
46.0 pence per Ordinary Share on 8 August 2023 , the last business
day prior to the announcement of the Fundraising;
-- The Company has the authority to issue and allot the Firm
Placing Shares, the Subscription Shares and the Retail Offer Shares
pursuant to certain existing shareholder authorities granting such
powers to the Directors at the Company's Annual General Meeting
held on 28 February 2023.
-- First Admission of the Firm Placing Shares, the Subscription
Shares and the Retail Offer Shares to trading on AIM is expected to
occur no later than at 8.00 a.m. on 15 August 2023.
Use of proceeds
The net proceeds of the Fundraising will be used for:
-- Capital expenditure;
-- People (engineering, software and business development); and
-- Working capital for expansion
General meeting
The EIS/VCT Placing is conditional, inter alia, upon Shareholder
approval at the General Meeting, which will be held at 11.00 a.m.
on 29 August 2023 at the offices of the Company at AMS Technology
Park, Billington Road, Burnley, Lancashire, BB11 5UB.
The Company will shortly be posting a Notice of General Meeting
and an accompanying circular (the "Circular") to existing
Shareholders following this announcement. All relevant documents
will also be available to download from the Company's website at
https://www.velocity-composites.com/investors .
Subject to, inter alia, the passing of Resolutions 1, 2 and 6 at
the General Meeting, Second Admission of the EIS/VCT Placing Shares
to trading on AIM is expected to occur no later than 8.00 a.m. on 6
October 2023 .
Andy Beaden, Chairman, Velocity, said
"This well subscribed fundraise is a key step forward in the
development of Velocity into a substantial business. The funds
enable us to grow faster and add additional skilled staff in the
aerospace composites market. The Board is delighted at the positive
response received from investors and their backing of our growth
plans at this exciting time."
Enquiries:
Velocity
Andy Beaden, Chairman
Jon Bridges, Chief Executive Officer
Adam Holden, Chief Financial Officer +44 (0) 1282 577577
Cenkos (Nominated Adviser and Broker)
Katy Birkin
Ben Jeynes
George Lawson +44 (0)20 7397 8900
SEC Newgate (Financial PR) +44 (0)7540 106 366
Robin Tozer velocitycomposites@secnewgate.co.uk
George Esmond
Harry Handyside
BACKGROUND TO, AND REASONS FOR, THE FUNDRAISING
Velocity business overview
Velocity manufactures advanced carbon fibre and ancillary raw
material kits for use in the production of aircraft (civil and
defence). The Company operates from a purpose built facility in
Burnley, Lancashire and adapted new build facilities in Fareham,
Hampshire as well as the Company's recently purposely refurbished
facility in Tallassee, Alabama in the United States ("Alabama
Advanced Manufacturing Facility"). The Company uses its process
knowledge, business processes and proprietary software (which it
markets as Velocity Resource Planning ("VRP") and includes a
digital manufacturing cell) to reduce the amount of material
required by its customers and to also reduce the associated
material waste when making aircraft parts. In turn, this reduces
the aircraft manufacturer's costs, with the raw material kits
delivered on time and in the required form to allow Velocity's
customers to more readily meet significant increases in aircraft
build rates as forecasted by Airbus and Boeing.
The challenges for composite part manufacturers when they
perform the kitting process in-house are:
-- materials are expensive and on long, fixed lead times (2 - 6
months) from single source approved suppliers. Any demand changes
during lead times needs to be managed to prevent stock outs or
overstocking/life expiry risk;
-- raw material contains uncured resin which has a shelf life
and so required to be kept frozen at -18degC until needed to make
shelf life usable;
-- a kit contains multiple materials and so any supply impact on
one material will affect the consumption of the other materials,
and the overall kit availability;
-- highly regulated process with global approvals and batch/life
traceability requirements from material receipt to kit
delivery;
-- material order book needs to match kit demand, with life and
batch traceability needing to be maintained; and
-- not considered core business by Velocity's customers with low appetite for investment.
Velocity offers a more efficient, outsourcing option by:
-- investing in advanced, real-time proprietary technology and
digital processes to deliver kits of all raw materials with a focus
on traceability and material efficiency;
-- holding all approvals needed from Airbus, Boeing and the
National Aerospace and Defense Contractors ("NADCAP");
-- enabling customers to outsource all relevant processes to
Velocity who can deliver one kit, with one batch number with
everything needed to build the part, just in time;
-- detailing all cost savings in a 'Total Cost of Ownership'
business case for customers to explain all cost savings compared to
an in-house service;
-- allowing customers to focus on their core business of
aerostructure part manufacturing;
-- driving customer savings through efficiency and growth and sales for Velocity; and
-- once transitioned, customers face investment, time and cost to repatriate.
Velocity's technology drives efficient management and use of raw
materials, aimed at providing at least 10% material cost saving and
20% time cost saving to customers.
The Company's customers include GKN Aerospace, Safran, BAE
Systems, Spirit and Aernnova. In the highly regulated global
aerospace industry, the Directors believe that the provision of its
services has barriers to entry including the Company's global
approval with Airbus, Boeing NADCAP. Velocity's main competitors
are customers performing similar services to Velocity, in-house. By
using Velocity's proprietary services and technology, manufacturers
reduce costs and free up resource to focus on their core
business.
Composites and Market Drivers
Composite materials comprise of a matrix (thermosetting resin)
and a reinforcement (fibres) which, when combined, produce
properties which are superior to the properties of the individual
components. Composites are lighter, stronger, more corrosion
resistant and more fatigue resistant when compared with metals. In
the aerospace sector, this results in an increased flight range and
reduced flying costs. To manufacture parts from composites, the raw
material is produced on rolls of fibres/fabric pre-impregnated with
uncured resin. Complex shapes are cut from the rolls that are
defined at the part design stage and applied to a tool in many
layers in order to create a laminate of uncured, multilayer
material. When complete, this is cured under vacuum to produce a
fixed structure in a one-shot process i.e. once cured, the
structure cannot be reworked. Given the uncured nature of the raw
material it has to be batch controlled and stored at -18degC in
airtight packaging before being fully thawed just prior to kit
cutting. The materials are specified and manufactured to order from
a single source with lead times of between 4 and 26 weeks meaning
the supply chain needs to be managed effectively, and controlled so
that material is available for kit production when needed by the
part manufacturers.
Composites play an important role in light weighting all new
aircraft platforms in both civil and defence. The aerospace sector
has a clear strategy to achieve net zero by 2050 and demand for
composites is expected to grow as older aircraft are retired for a
new generation of aircraft including the A220, A320neo, A330neo,
A350 and A380 manufactured by Airbus and the 737max, 777x and 787
aircraft manufactured by Boeing. Currently, only 20% of the 20,000
passenger aircraft in service are regarded as 'new generation' and
by 2041, this 'new generation' of passenger aircraft are expected
to represent at least 95% of an expected fleet of 45,000
aircraft.
The Company has a contracted order book for FY24 of new and
existing business in Europe and North America which is expected to
be between 2.5 and 3 times larger than FY22 revenues. Longer-term,
carbon fibre composite material usage is generally expected to grow
significantly in civil aircraft and other transportation modes. The
benefits of its relative light weight will play an important role
in reducing the use of fossil fuels through greater fuel efficiency
in conventional jet engine technology. Wider adoption of composite
material technologies will also continue, with light weighting and
composite strength being critical to all electrification, hydrogen
fuel developments and urban vertical mobility transportation.
Velocity's strategy is to be a key advanced manufacturing solutions
provider to these important growth markets and it already has some
business in the development stages of these new initiatives.
As a result, and further to the Company's announcement on 20
December 2022 of the establishment of the Alabama Advanced
Manufacturing Facility, there are increased levels of international
interest in Velocity's services and VRP digital supply chain
system, which form an important part of the Company's intellectual
property. Velocity's engineering staff, along with the Company's
VRP solution, help to eliminate material production wastage, speed
up customer production cycles and increase inventory turns, to
enable better production planning and ordering of expensive
materials, which have long lead times from material
manufacturers.
Velocity - recent progress and opportunity
Demand is steadily returning to pre-pandemic levels, building on
the momentum reported in the Company's recent results as the global
aerospace industry recovers and original equipment manufacturer
("OEM") forecast production rates grow. The Company's UK sales
growth was stronger than initially expected, accelerating in the
latter few months of the period ended 30 April 2023 ("H1
FY23").
Contracted business growth will come from the Alabama Advanced
Manufacturing Facility, which is now complete with AS9100 quality
approvals granted in November 2022. In April 2023, the Alabama
Advanced Manufacturing Facility manufactured the first production
kits at the site to support the five-year work package agreement
announced in December 2022 with GKN Aerospace ("GKN") (the "GKN
Agreement"). The GKN Agreement is expected to be worth in excess of
US$100 million in revenue over five years, with GKN confirming
strong end-user demand for its parts into 2024.
Significant operational progress has been made at the Alabama
Advanced Manufacturing Facility to qualify it for the new
programmes being onboarded for the GKN Agreement, although sales
only started at the end of H1 FY23 with GBP0.1m of revenue
recognised in the period, due to the rigorous nature of the First
Article Inspection ("FAI") process. The FAI process provided
verification by GKN that the site infrastructure, capability,
trained processes, quality and transfer plans presented by Velocity
exceeded the required standard. The ramp-up of sales to GKN remains
on track to achieve market expectations for FY24, with all the new
programmes targeted to be at the contracted production levels by
the start of FY24.
The challenging macroeconomic conditions in H1 FY23 put pressure
on margins. However, by the latter part of H1 FY23, price increases
had been successfully agreed with key customers, and this will
provide a larger benefit for H2 FY23. With much of the Company's
revenue secured through pass-through mechanisms on any raw material
price increases, inflation risk impacts added value areas only,
hence the need for the additional price increases. Furthermore,
Velocity's new digital manufacturing cell increased automation and
helped secure the Company's longer-term global margin
objectives.
The working capital required to support the GKN Agreement is
provided by supply chain finance lines mandated by GKN, helping to
provide a self-funding mechanism until the profit from the GKN
Agreement can then fund the work under it in the longer-term.
As well as delivering the GKN Agreement, there has been a focus
on using the Alabama Advanced Manufacturing Facility to target the
wider US composite materials market, which is significantly larger
than the European market. The Alabama Advanced Manufacturing
Facility has been constructed so that it can double again in
capacity.
Outside the US, there also remain significant opportunities for
growth through international sites of current UK customers and
increased usage of the Company's established European manufacturing
capability.
The Company has already contracted UK and US business which,
when in full production (at current OEM run rates), will
significantly increase revenue from current levels. The value of
contracted business is currently estimated to be worth between
GBP30 million to GBP36 million per annum at OEM planned production
rates. On some programmes, these rates are still below pre-pandemic
production levels and include a growing amount from military
programmes, with additional growth forecasted as NATO countries
increase investment in their defence capabilities. The
manufacturing capacity of the current UK and US manufacturing
facilities is being expanded to meet this significant increase in
order book and with the Alabama Advanced Manufacturing Facility
setup, could be doubled again in manufacturing capacity, to meet
further new business and contracted volume growth, of up to GBP70
million. The establishment of the Alabama Advanced Manufacturing
Facility also demonstrates the Company's proven ability to add
further facilities in other locations, if or when required in the
future. Independent market analysis shows the potential size for
Velocity's services in Europe and the US is significantly larger
than current contracted business and facility capacities.
BACKGROUND TO, AND REASONS FOR, THE CANCELLATION
The Company had accumulated losses of GBP7,102,000 shown by its
audited accounts for the period to 31 October 2022. The Company's
interim accounts for the six months ended 30 April 2023 show
accumulated losses at that date as GBP1,539,000 and GBP9,727,158
standing to the credit of its Share Premium Account.
The Company's Share Premium Account will be increased on the
issue of the Firm Placing Shares. The exact amount of the Share
Premium Account following the issue of the Firm Placing Shares is
expected to be approximately GBP10,919,658.
It is proposed to cancel the Company's Share Premium Account.
This will not only eliminate the Company's accumulated losses but
also create positive distributable reserves equal to the amount by
which the Share Premium Account cancelled exceeds the accumulated
deficit.
Whilst the Board and management remain focussed on the continued
execution of the Company's stated growth strategy as the primary
means of delivering shareholder value in the near term and has no
current intention of declaring dividends, the proposed Cancellation
would provide greater scope to do so in the future if the Board
determined that the declaration of dividends were appropriate.
In addition, the Cancellation would provide the Board with the
option of purchasing the Company's own Ordinary Shares pursuant to
the power granted at the Company's annual general meeting on 28
February 2023, which requires sufficient distributable reserves to
do so.
FURTHER DETAILS ON THE CANCELLATION PROCEDURE
Under the Act, a company limited by shares may reduce its share
premium account, as long as it is not restricted from doing so by
its articles of association, by obtaining the approval of its
shareholders by special resolution and the confirmation of the
Court.
The Company is not restricted in any way by its articles of
association from carrying out the cancellation of Share Premium
Account and is, therefore, seeking approval of its shareholders to
the Cancellation. Please see the Notice of General Meeting, which
sets out the Reduction Resolution (resolution 6), at the end of the
Circular.
If the Shareholders approve the Reduction Resolution at the
General Meeting, the Board intends to make an application to the
Court to obtain its approval to the Cancellation as soon as
possible following the General Meeting.
Provisional dates have been obtained for the required Court
hearings of the Company's application, but they are subject to
change and dependent on the Court's timetable. If the hearings go
ahead on the provisional dates, the present timetable provides that
the final hearing, at which it is hoped that the Court will make an
order confirming the Cancellation, will take place on 20 September
2023.
Prior to confirming the Cancellation, the Court will need to be
satisfied that the creditors of the Company will not be adversely
affected. The Company is satisfied, having taken advice, that it
will be able to satisfy the Court in that regard.
The Cancellation does not take effect until the Court's order is
filed with and registered by Companies House. The Board intends to
file the required documentation with Companies House as soon as
possible following the final Court hearing and, subject to
compliance with all procedural requirements, Companies House will
usually register the documents within 10 Business Days. On the
present timetable, which is subject to change and dependent on the
Court's timetable, this would mean that the Cancellation would take
effect on or before 29 September 2023.
CURRENT TRADING
As detailed in the interim results announcement dated 11 August
2023, the Board confirmed revenue for H1 FY23 increased to GBP7.0
million, up 19% compared to H1 FY22. During H1 FY23, there was
significant investment, including approximately GBP0.5 million of
costs relating to the development of the Alabama Advanced
Manufacturing Facility. As a result, the Company reported an EBITDA
loss of GBP0.9 million for H1 FY23 (H1 FY22: GBP0.2 million loss).
These costs should be recovered in H2 FY23 as the Alabama Advanced
Manufacturing Facility increases production towards the contracted
full rates. The Group's cash position, as at 30 April 2023, was
GBP1.2 million and net debt was GBP1.8 million.
On 26 July 2023, the Company announced the following Trading
Update:
"As previously announced, Velocity is progressing the first
article inspection ("FAI") process and production ramp up of the
US$100 million, five-year Work Package Agreement ("the Agreement")
announced in December 2022. The development of the Company's
Advanced Manufacturing Facility in Alabama, US (the "Site")
continues with further manufacturing cells being installed, and
additional workers being recruited and trained.
The first two launch programmes for the Customer at the Site,
which account for 49% of expected revenues for the year ending 31
October 2024 ("FY2024"), have successfully completed the FAI
process. The first programme is at volume production and the
second, the largest, is expected to be up to the full rate of
production by August 2023, once the Customer has signed off on the
final FAI kits as they are built into finished parts.
Further to the announcement dated 18 April 2023, an updated FAI
timeline for the remaining programmes has now been agreed with the
Customer, with the FAI process for the third group of programmes
(12% of FY24 revenue) expected to commence in September 2023, the
fourth group (26% of FY24 revenue) in October 2023, and the fifth
group (8% of FY24 revenue) in March 2024.
The FAI process is extremely complicated and has required
extensive time and work on both sides. The Customer and Velocity
are in discussions for the five-year term of the Agreement
announced in December 2022, with the term initially expected to
commence in March 2023, to now start on 1 January 2024, when all
the critical kits have been outsourced. All other contractual
terms, including the full-term revenue under the Agreement of
US$100m, are expected to remain unchanged, at the underlying base
of US$20m per annum based on current programme production rates.
Using current exchange rates of GBP1:US$1.30, this is worth
approximately GBP15.4m of revenue to Velocity for each year of the
Agreement.
As a result of the updated FAI timeline, revenue that was
expected to be realised in the ramp up stage of production in the
US for the year ending 31 October 2023 ("FY2023") has been reduced
to GBP2.2m from GBP5.0m. However, any FY2023 revenue achieved under
the Agreement is in addition to the US$20m per annum for the
five-year period of the Agreement and therefore has no commercial
impact on the value of that contract long term. Once the programme
transfer from the Customer to Velocity is completed, revenues under
the Agreement will be more predictable, as they will follow the
platform run rates required by the Customer.
For FY2023, with the adjustment to FAI process sales estimates
and changes in exchange rates, the Group is now expecting to report
revenue of between GBP15m to GBP17m, and an EBITDA loss of between
GBP1.2m to GBP1.6m (subject to finalising the capitalisation of
certain costs in the US).
In FY2024, once the contract extension is in place, the
Agreement term is expected to commence at volume rates in January
2024, with a renewal due by the end of calendar year 2028, though
the contract can be subject to further annual extensions. As a
result, FY2024 revenue is expected to be between GBP30m and GBP36m,
and EBITDA profit of between GBP1.7m to GBP2.5m, including
additional investment to fund further growth opportunities as they
emerge.
The Board is pleased to announce that it is in advanced
discussions with a large, global Tier 1 composites manufacturer
with multiple sites in the US on another agreement. Further
announcements will be made, as appropriate.
In the UK, demand is growing. In FY2023, growth of at least 15%
is expected compared to FY2022. In FY2024, Velocity is planning for
extra work from a UK manufacturer seeking to expand its capacity to
meet growing demand. With expected UK growth and the start of the
full rate production under the Agreement in the US, the Company can
deliver profitability in FY2024.
To accommodate the planned growth in the US and the UK, the
Company is pleased to announce the appointment of Kevin Hickey as
Group Chief Operating Officer (a non-Board position). Kevin
previously worked at the Company between early 2017 and late 2020,
where he was responsible for the establishment, ramp up and ongoing
management of the Company's production facility in Fareham, UK.
Prior to this, Kevin held a range of senior operational management
roles both in the UK and internationally at GE Aviation and brings
a wealth of experience in the industry and the Company's processes
as Velocity's existing facilities grow, and new facilities are
established."
USE OF PROCEEDS
The Company has conditionally raised gross proceeds of
approximately GBP6.20 million by way of the Placing and the
Subscription, and any funds raised in the REX Retail Offer will be
in addition to this amount. The net proceeds of the Placing and the
Subscription will be used as follows:
Use of funds GBPm
CAPEX 1.2
-----
People (engineering, software and business development) 1.5
-----
Working capital for expansion 3.0
-----
Total 5.7
-----
Additional amounts raised from the REX Retail Offer will be used
to further strengthen the balance sheet.
THE PLACING
The Company has conditionally raised gross proceeds of GBP5.76
million through a placing of 14,400,000 Placing Shares at the Issue
Price with institutional and other investors, comprising 1,900,000
Firm Placing Shares and 12,500,000 EIS/VCT Placing Shares. The
Issue Price represents a discount of 13.0 per cent. to the closing
mid-market price of 46.0 pence per Ordinary Share on 2023 (being
the last practicable date prior to the date of the announcement 8
August of the Fundraising). The Placing Shares represent 39.0 per
cent. of the Existing Ordinary Shares and will, when issued, rank
pari passu with the Existing Ordinary Shares.
As part of the Placing, the Company is seeking to raise funds
through the EIS/VCT Placing by the issue of the EIS/VCT Placing
Shares to investors either seeking the benefit of relief under the
EIS or seeking the benefit of tax relief through VCTs. The EIS/VCT
Placing Shares will be issued to the relevant Placees at Second
Admission so that Placees investing as part of the EIS/VCT Placing
shall be able to benefit from tax advantages available to Venture
Capital Trusts and pursuant to the Enterprise Investment Scheme as
governed by HMRC.
The Company has applied for, and received on 10 July 2023,
advanced assurance from HMRC that the EIS/VCT Placing Shares will
be able to benefit from the tax advantages available for the
purposes of the Enterprise Investment Scheme, subject to the
Company first undertaking the Cancellation such that the
accumulated losses become less than half of the subscribed share
capital. In addition, the Company has received advice that, based
on the EIS advance assurance received, subject to certain
conditions, including the Cancellation taking place before VCTs
make their investment, a subscription for EIS/VCT Placing Shares by
a VCT would be regarded as qualifying holdings for the purposes of
Part 6 of the Income Tax Act 2007 and would be regarded as
"eligible shares" as defined in section 285(3A) of that Act,
provided that the investment by the VCT (including any existing
investment in the Company) will not exceed 15% by value of its
total investments at the date of the investment.
However, none of the Company, the Directors or any of the
Company's advisers give any warranty or undertaking that reliefs
will be available and not withdrawn at a later date.
Pursuant to a placing agreement between the Company and Cenkos
dated 9 August 2023 (the "Placing Agreement"), Cenkos has
conditionally agreed to use its reasonable endeavours to procure
subscribers for the Placing Shares at the Issue Price. Cenkos has
conditionally placed the Placing Shares with certain new and
existing institutional and other investors at the Issue Price.
In addition to the Placing, the Company has conditionally raised
GBP0.44 million by the issue of 1,100,000 new Ordinary Shares at
the Issue Price by way of a direct subscription by a certain
private subscriber. The Subscription Shares represent 3.0 per cent.
of the Existing Ordinary Shares and will, when issued, rank pari
passu with the Existing Ordinary Shares.
The Placing has not been underwritten by Cenkos or any other
party. The Company has the authority to issue and allot the Firm
Placing Shares and the Subscription Shares pursuant to certain
existing shareholder authorities granting such powers to the
Directors at the Company's annual general meeting held on 28
February 2023.
The Firm Placing and the Subscription are conditional, inter
alia, on:
-- the Placing Agreement not having been terminated in
accordance with its terms prior to First Admission; and
-- First Admission of the Firm Placing Shares, the Subscription
Shares and the Retail Offer Shares becoming effective by no later
than 8.00 a.m. on 15 August 2023 or such later time and/or date as
the Company and Cenkos may agree (being no later than 8.00 a.m. on
31 August 2023).
The EIS/VCT Placing is conditional, inter alia, on:
-- the Placing Agreement not having been terminated in
accordance with its terms prior to Second Admission;
-- First Admission having taken place;
-- Resolutions 1, 2 and 6 (including the Reduction Resolution)
being passed which will provide shareholder authority for the issue
by the Company of the EIS/VCT Placing Shares on a non-pre-emptive
basis; and
-- Admission of the EIS/VCT Placing Shares becoming effective by
no later than 8.00 a.m. on 6 October 2023 or such later time and/or
date as the Company and Cenkos may agree (being no later than 8.00
a.m. on 20 October 2023).
Shareholders should note that the expected dates for the
confirmation of the Cancellation by the Court, the Cancellation
becoming effective and Second Admission are based on provisional
dates that have been obtained for the required Court hearings of
the Company's application. These provisional hearing dates are
subject to change and dependent on the Court's timetable.
Completion of the Retail Offer is conditional, inter alia, upon
the completion of the Firm Placing and the Subscription. Completion
of the Firm Placing and Subscription are not conditional on the
completion of the Retail Offer. Completion of the Firm Placing and
the Subscription are inter-conditional.
The Placing Agreement contains customary warranties given by the
Company in favour of Cenkos in relation to, amongst other things,
the accuracy of the information in the Circular and other matters
relating to the Group and its business. In addition, the Company
has agreed to indemnify Cenkos (and their respective affiliates) in
relation to certain liabilities which they may incur in respect of
the Placing. Under the Placing Agreement, the Company has agreed to
pay to Cenkos a fixed sum and/or commissions based on the aggregate
value of the Placing, and the costs and expenses incurred in
relation to the Placing.
Cenkos has the right to terminate the Placing Agreement in
certain circumstances prior to First Admission and/or Second
Admission, in particular, in the event of breach of the warranties,
the occurrence of a material adverse change or if the Placing
Agreement does not become unconditional.
THE REX RETAIL OFFER
The Company has separately agreed to use the REX Platform to
undertake an intermediaries offer of New Ordinary Shares at the
Issue Price, alongside the Placing, to existing retail investors of
the Company. For the avoidance of doubt, the REX Retail Offer
Shares are not part of the Placing and do not form part of the
Placing Shares.
In recognition of their continued support to the Company, the
Board believes that the REX Retail Offer provides the Company's
longstanding and supportive retail Shareholders with an opportunity
to participate in the Fundraising. Assuming full take up for an
aggregate of up to 1,250,000 REX Retail Shares, the REX Retail
Offer will raise gross proceeds of up to approximately GBP0.5
million at the Issue Price.
Pursuant to the terms of the Intermediaries Agreement, the
Company has made the REX Retail Offer to holders of Existing
Ordinary Shares only through Intermediaries via the REX Platform.
The obligations of the Intermediaries under the Intermediaries
Agreement are conditional in all respects upon: (a) the Placing
Agreement becoming unconditional and not having been terminated in
accordance with its terms; and (b) Admission. Under the
Intermediaries Agreement, the Company has agreed to pay the
provider of the REX Platform and the Intermediaries fees based on
the aggregate value of the REX Retail Offer. It is a term of the
REX Retail Offer that the total value of the REX Retail Offer
Shares available for subscription at the Issue Price does not
exceed the Sterling equivalent of EUR8 million.
The REX Retail Offer has not been underwritten and has been
offered in the United Kingdom under the exemption against the need
to publish a prospectus approved by the FCA in section 86(1)(e) of
FSMA. The REX Retail Offer has not been made into any jurisdiction
other than the United Kingdom.
ADMISSION, SETTLEMENT, DEALINGS AND TOTAL VOTING RIGHTS
The New Ordinary Shares will, when issued, be credited as fully
paid up and will rank pari passu in all respects with the Existing
Ordinary Shares, including the right to receive all dividends and
other distributions declared, made or paid on or in respect of the
Ordinary Shares after the date of issue of he New Ordinary Shares,
and will on issue be free of all claims, liens, charges,
encumbrances and equities.
Application will be made to the London Stock Exchange for the
admission of the New Ordinary Shares to trading on AIM. First
Admission of the Firm Placing Shares, the Subscription Shares and
the Retail Offer Shares to trading on AIM is expected to occur at
8.00 a.m. on 15 August 2023 (or such later times(s) and/or date(s)
as Cenkos and the Company may agree).
Second Admission of the EIS/VCT Placing Shares to trading on AIM
is expected to occur at 8.00 a.m. on 6 October 2023 (or such later
times(s) and/or date(s) as Cenkos and the Company may agree).
Following First Admission, the total number of Ordinary Shares
in the capital of the Company in issue (assuming full take up of
the Retail Offer) is expected to be 41,170,785 with each Ordinary
Share carrying the right to one vote. There are no Ordinary Shares
held in treasury and therefore the total number of voting rights in
the Company is expected to be 41,170,785. The above figure may be
used by Shareholders in the Company as the denominator for the
calculations by which they will determine if they are required to
notify their interest in, or a change to their interest in, the
share capital of the Company under the FCA's Disclosure, Guidance
and Transparency Rules.
DIRECTORS' RECOMMATION AND IRREVOCABLE UNDERTAKINGS
The Directors consider the Fundraising and Cancellation to be in
the best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors recommend unanimously that Shareholders
vote in favour of the Resolutions to be proposed at the General
Meeting, as they intend to do in respect of their own
shareholdings, which total 6,084,404 Existing Ordinary Shares,
representing approximately 16.48 per cent. of the Existing Ordinary
Shares.
The Company has received irrevocable undertakings to vote in
favour of the Resolutions in respect of, in aggregate, 15,021,315
Ordinary Shares, representing approximately 40.69 per cent. of the
Existing Ordinary Shares.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2023
Announcement of the Placing and publication 7.00 a.m. on 9
and posting of this document and the Form of August
Proxy
Announcement of the REX Retail Offer 7.01 a.m. on 9
August
Announcement of the results of the Retail Offer 14 August
First Admission effective and dealings in 8.00 a.m. on 15
the Firm Placing Shares, Subscription Shares August
and Retail Offer Shares expected to commence
on AIM
CREST accounts credited in respect of the Firm 15 August
Placing Shares, Subscription Shares and Retail
Offer Shares to be held in uncertificated form
(subject to First Admission)
Where applicable, expected date for dispatch within 10 Business
of definitive share certificates for Firm Placing Days following
Shares, Subscription Shares and Retail Offer First Admission
Shares to be held in certificated form
Latest time and date for receipt of completed 11.00 a.m. on 24
Forms of Proxy and receipt of electronic proxy August
appointments via the CREST system
General Meeting 11.00 a.m. on 29
August
Announcement of result of General Meeting 29 August
Expected date for final hearing and confirmation 20 September
of the Cancellation by the Court
Expected date that the Cancellation become 29 September
effective
Second Admission effective and dealings in 8.00 a.m. on 6
the EIS/VCT Placing Shares expected to commence October
on AIM
CREST accounts credited in respect of the EIS/VCT 6 October
Placing Shares to be held in uncertificated
form (subject to Second Admission)
Where applicable, expected date for dispatch within 10 Business
of definitive share certificates for EIS/VCT Days following
Placing Shares to be held in certificated form Second Admission
DEFINITIONS AND GLOSSARY
The following de nitions and glossary apply throughout the
Circular (including the Notice of General Meeting) and the Form of
Proxy unless the context otherwise requires:
"Act" the Companies Act 2006 (as amended);
"Admission" means First Admission and Second Admission;
"AIM" the market of that name operated by the
London Stock Exchange;
"AIM Rules for Companies" the AIM Rules for Companies, as published
and amended from time to time by the
London Stock Exchange;
"Australia" the Commonwealth of Australia, its states,
territories and possessions;
"Board" or "Directors" the directors of the Company as at the
date of the Circular, whose names are
set out on page 6 of the Circular;
"Business Day" any day (excluding Saturdays and Sundays)
on which banks are open in London for
normal banking business and the London
Stock Exchange is open for trading;
"Canada" Canada, its provinces, territories and
all areas subject to its jurisdiction
and any political sub-division thereof;
"Cancellation" the proposed cancellation of the Company's
capital by the cancellation of the Share
Premium Account, as described in the
Circular;
"Cenkos Securities" Cenkos Securities plc, a public limited
company incorporated in England and Wales
under registered number 05210733 and
having its registered office at 6.7.8
Tokenhouse Yard, London, EC2R 7AS, the
Company's nominated adviser and broker;
"certificated" or "in an ordinary share recorded on a company's
certificated form" share register as being held in certificated
form (namely, not in CREST);
"Chairman" the chairman of the Board;
"Circular" the circular posted to Shareholders on
9 August 2023;
"Company" or "Velocity" Velocity Composites plc, a company registered
in England and Wales with registered
number 06389233;
"Court" the High Court of England and Wales;
"CREST" the relevant system (as defined in the
CREST Regulations) for paperless settlement
of share transfers and holding shares
in uncertificated form, in respect of
which Euroclear UK & International is
the operator (as defined in the CREST
Regulations);
"CREST Manual" the rules governing the operation of
CREST as published by Euroclear;
"CREST member" a person who has been admitted by Euroclear
as a system member (as defined in the
CREST Regulations);
"CREST participant" a person who is, in relation to CREST,
a system-participant (as defined in the
CREST Regulations);
"CREST participant ID" shall have the meaning given in the CREST
Manual;
"CREST Regulations" the Uncertificated Securities Regulations
2001 (SI 2001/3755) including any enactment
or subordinate legislation which amends
or supersedes those regulations and any
applicable rules made under those regulations
or any such enactment or subordinate
legislation for the time being in force;
"CREST sponsor" a CREST participant admitted to CREST
as a CREST sponsor;
"CREST sponsored member" a CREST member admitted to CREST as a
CREST sponsored member;
"Disclosure, Guidance the disclosure, guidance and transparency
and Transparency Rules" rules made by the FCA under Part V of
the FSMA from time to time;
"EIS" Enterprise Investment Scheme;
"EIS/VCT Placing" the conditional placing of the EIS/VCT
Placing Shares at the Issue Price by
Cenkos as described in the Circular;
"EIS/VCT Placing Shares" 12,500,000 new Ordinary Shares to be
issued pursuant to the EIS/VCT Placing,
to EIS or VCT investors;
"Enlarged Share Capital" the entire issued share capital of the
Company on Second Admission following
completion of the Fundraising and assuming
full take up under the Retail Offer;
"Euroclear" Euroclear UK & International Limited;
"EUWA" European Union (Withdrawal) Act 2018
(as amended);
"Existing Ordinary Shares" the 36,920,785 Ordinary Shares in issue
at the date of the Circular;
"FCA" the UK Financial Conduct Authority;
"Firm Placing" the conditional placing of the Firm Placing
Shares at the Issue Price by Cenkos as
described in the Circular;
"Firm Placing Shares" 1,900,000 new Ordinary Shares to be issued
pursuant to the Firm Placing, under the
Company's existing authorities granted
at the Company's Annual General Meeting
on 28 February 2023;
"First Admission" admission of the Firm Placing Shares,
the Subscription Shares and the Retail
Offer Shares to trading on AIM;
"First Article Inspection" a supplier surveillance process which
provides for the verification of a supplier's
first article, including physical verification
of individual characteristics as deemed
necessary by the manufacturer, to ensure
all engineering, design and specification
requirements have been fulfilled;
"Form of Proxy" the form of proxy for use by Shareholders
in relation to the General Meeting, enclosed
with the Circular;
"FSMA" the Financial Services and Markets Act
2000 (as amended);
"Fundraising" together, the Placing, Subscription and
the Retail Offer;
"FY22" the financial year ended 31 October 2022
of the Company;
"FY23" the financial year ended 31 October 2023
of the Company;
"FY24" the financial year ended 31 October 2024
of the Company;
"General Meeting" or the General Meeting of the Company convened
"GM" for 11.00 a.m. on 29 August 2023 or any
adjournment thereof, notice of which
is set out at the end of the Circular;
"GKN Agreement" the five-year work package agreement
announced in December 2022 between the
Company and GKN Aerospace expected to
be worth in excess of US$100 million
in revenue over five years;
"Group" the Company and its subsidiaries (as
defined in the Act);
"HMRC" HM Revenue & Customs;
"Intermediaries" any financial intermediary appointed
by the Company in connection with the
REX Retail Offer and "Intermediary" shall
mean any one of them;
"Intermediary Agreements" the agreements entered between each of
the Intermediaries, the Company and Peel
Hunt LLP containing terms and conditions
in relation to the REX Retail Offer;
"Issue Price" 40 pence per New Ordinary Share;
"ITA" UK Income Tax Act 2007;
"Japan" Japan, its cities and prefectures, territories
and possessions;
"London Stock Exchange" London Stock Exchange Group plc;
"New Ordinary Shares" the Placing Shares, Subscription Shares
and/or the Retail Offer Shares (as the
context permits);
"Notice of General Meeting" the notice convening the General Meeting
as set out at the end of the Circular;
" Official List " the Official List of the FCA;
"Ordinary Shares" the ordinary shares of 0.25p each in
the capital of the Company in issue from
time to time;
"PDMR" a person discharging managerial responsibilities
as defined in Article 3(25) of UK MAR;
"Placees" subscribers for the Placing Shares;
"Placing" the conditional placing of the Placing
Shares at the Issue Price by Cenkos as
described in the Circular, comprising
the Firm Placing and the EIS/VCT Placing;
"Placing Agreement" the conditional placing agreement dated
9 August 2023 between Cenkos and the
Company, details of which are set out
in paragraph 7 of the Circular;
"Placing Shares" 14,400,000 new Ordinary Shares to be
issued, in aggregate, pursuant to the
Placing, comprising 1,900,000 Firm Placing
Shares and 12,500,000 EIS/VCT Placing
Shares;
"Prospectus Regulation the prospectus regulation rules of the
Rules" Financial Conduct Authority made under
Part VI of FSMA;
"Prospectus Rules" the rules made by the FCA under Part
VI of FSMA in relation to offers of transferable
securities to the public and admission
of transferable securities to trading
on a regulated market;
"Reduction Resolution" the special resolution (resolution 6)
relating to the Cancellation to be proposed
at the General Meeting;
"Registrar" Equiniti Limited, the Company's registrar;
"Regulatory Information a service approved by the FCA for the
Service" distribution to the public of regulatory
announcements and included within the
list maintained on the FCA's website;
"Republic of South Africa" the Republic of South Africa, its territories
and possessions;
"Resolutions" the resolutions to be proposed at the
General Meeting, details of which are
set out in the Notice of General Meeting,
and each being a "Resolution";
" Retail Offer " or the proposed offer of REX Retail Offer
"REX Retail Offer" Shares having an aggregate value, at
the Issue Price, of up to GBP0.5 million
to retail investors who are Shareholders
by the Company through Intermediaries
using the REX Platform and on the basis
of the terms and conditions set out in
the REX Retail Offer Announcement and
Intermediaries Agreements;
"REX Platform" Peel Hunt's Retail Capital Markets platform;
" REX Retail Offer Announcement the announcement dated 9 August 2023
" giving details, inter alia, of the REX
Retail Offer;
"REX Retail Offer Shares" the up to 1,250,000 new Ordinary Shares
or "Retail Offer Shares" to be issued for cash at the Issue Price,
pursuant to the REX Retail Offer;
"Second Admission" admission of the EIS/VCT Placing Shares
to trading on AIM;
"Securities Act" US Securities Act of 1933 (as amended);
"Shareholders" the holders of Existing Ordinary Shares,
and the term "Shareholder" shall be construed
accordingly;
"Share Options" share options granted under the Velocity
Composites plc Enterprise Management
Incentive and Unapproved Scheme, to subscribe
for new Ordinary Shares;
"Share Premium Account" the share premium account of the Company
from time to time (including as enlarged
by the issue of the Firm Placing Shares
and the Subscription Shares);
"Subscription" the subscription by certain private subscribers
for the Subscription Shares at the Issue
Price;
"Subscription Shares" the 1,100,000 new Ordinary Shares to
be issued and allotted pursuant to the
Subscription;
"uncerti cated" or "uncerti means recorded on the relevant register
cated form" or other record of the share or other
security concerned as being held in uncerti
cated form in CREST, and title to which,
by virtue of the CREST Regulations, may
be transferred by means of CREST;
"United Kingdom" or "UK" the United Kingdom of Great Britain and
Northern Ireland;
"United States" or "US" the United States of America, each State
thereof, its territories and possessions
(including the District of Columbia)
and all other areas subject to its jurisdiction;
"USE" Unmatched Stock Event;
"USE Instructions" an Unmatched Stock Event instruction
in CREST;
"US Facility" Velocity's new advanced manufacturing
facility in Tallassee, Alabama, United
States;
"GBP", "pounds sterling", the lawful currency of the United Kingdom;
"sterling" "pence" or
"p"
"US dollar" or "US$" the lawful currency of the United States;
and
"VCT" Venture Capital Trust.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IOENKCBKKBKKNFK
(END) Dow Jones Newswires
August 09, 2023 02:00 ET (06:00 GMT)
Velocity Composites (LSE:VEL)
Historical Stock Chart
From Apr 2024 to May 2024
Velocity Composites (LSE:VEL)
Historical Stock Chart
From May 2023 to May 2024
