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
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Operating activities
Loss for the year	(3,143)	(1,337)	(1,647)	(1,338)
Taxation	-	(167)	-	(167)
Profit on sale of assets	(4)	(38)	(4)	(38)
Finance costs	326	187	299	187
Amortisation of intangible assets	116	53	53	53
Depreciation of property, plant and equipment	297	210	210	210
Depreciation of right-of-use assets	472	432	391	432
Share-based payments	206	170	206	170
Operating cash flows before movements in working capital	(1,730)	(490)	(492)	(491)
Increase in trade and other receivables	(1,146)	(359)	(3,344)	(374)
Increase in inventories	(1,336)	(530)	(86)	(530)
Increase/(Decrease) in trade and other payables	2,380	1,149	(286)	1,149
Cash (outflow)/inflow from operations	(1,832)	(230)	(4,208)	(246)
Tax received	-	510	-	510
Net cash (outflow)/inflow from operating activities	(1,832)	280	(4,208)	264
Investing activities
Purchase of property, plant and equipment net of intercompany transfers	(1,293)	(262)	155	(262)
Purchase of development expenditure	(833)	(136)	(112)	(136)
Proceeds from the sale of property, plant and equipment	4	42	4	42
Net cash used in investing activities	(2,122)	(356)	47	(356)
Financing activities
Proceeds from issue of ordinary shares	6,590	-	6,590	-
Share issue transaction costs	(485)	-	(485)	-
Finance costs paid	(326)	(187)	(294)	(187)
Loan repayment	(536)	(503)	(536)	(503)
Repayment of lease liabilities capital	(455)	(366)	(320)	(351)
Net cash generate in financing activities	4,788	(1,056)	4,955	(1,041)
Net Increase/(Decrease) in cash and cash equivalents	834	(1,132)	794	(1,133)
Cash and cash equivalents at 01 November	2,344	3,476	2,337	3,470
Cash and cash equivalents at 31 October	3,178	2,344	3,131	2,337

 

 

Notes to Financial Statements

1.         General information

Velocity Composites plc (the 'Company') is a public limited company incorporated and domiciled in England and Wales. The registered office of the Company is AMS Technology Park, Billington Road, Burnley, Lancashire, BB11 5UB, United Kingdom. The registered company number is 06389233.

 

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 form 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 consolidated financial statements of Velocity Composites plc have been prepared in accordance with UK-adopted international accounting standards and International Financial Reporting Interpretations Committee (IFRIC) interpretations.

 

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 years presented, unless otherwise stated. The financial statements are presented in sterling and have been rounded to the nearest thousand (£'000).  References to "FY23" refer to the year ended 31 October 2023, whilst references to "FY22" are in respect of the year ended 31 October 2022.

 

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 and are made up to 31 October 2023. Subsidiaries are consolidated from the date of acquisition, using the purchase method.

 

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 IFRS standards.

 

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 losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

The accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in the consolidated financial statements.

 

There are no new accounting standards or interpretations that are not yet fully effective that could be expected to have a material impact on the Group.

 

Going concern

 

Management continues to undertake a significant level of cash flow forecasting and detailed financial projections for the following 24 month rolling period to 31 October 2025 have been prepared. A number of sensitivities have been performed to understand the cash flow impact of various scenarios and even in the most severe down-side scenario modelled, the business had sufficient liquidity to continue trading as a going concern.

 

The aerospace sector lends itself to long-term planning due to the nature and length of customer programmes, typically a minimum of three years, but often five years or more. This has enabled the business to fully model the period to 31 October 2025 and undertake more strategic, longer-term planning for growth and full recovery emerging from the pandemic.

 

The cash flow forecasts are, however, reviewed monthly through Management's Integrated Business Planning (IBP) process and the assumptions updated for any new knowledge to ensure there is no change in the Group's liquidity outlook. This is linked in with Management's monthly risk review and should the outlook change significantly with no mitigating actions the Group's liquidity risk rating on the risk register will be adjusted to reflect this and subsequently discussed at Board through the Audit Committee's quarterly risk register review.

 

In preparing the latest two-year forecasts, Management has included revenue projections based on current contracted demand, the newly signed Work Package Agreement with GKN in the US. The cost base included in the projections is reflective of the significant cost reductions that have already taken place in the Group, but also realistic about the investment required to implement the growth.

 

It is the investment in growth and technological advancements throughout FY23, and which is anticipated to continue in FY24, that has resulted in the forecasts indicating that the Group's Invoice Discounting Facility, secured against Trade Debtors, will be utilised during certain months within the going concern period. Whilst this facility is designed to be short-term and can be withdrawn with 3 months' notice, the latest discussions have reflected the bank's support for Velocity's growth strategy and as such we expect this facility will remain available for the foreseeable future. Utilisation of the facility is forecast to be temporary during periods of FY24.However, should alternative financing be required, the Group would preserve cash by delaying certain investment activities until longer-term funding could be implemented, such as asset-based financing against new capital expenditure or equity funding.

 

Alongside the robust forecasting and governance process, the Group has demonstrated strong cash flow management through the Covid-19 pandemic, successfully reducing inventory levels and navigating through right-sizing efforts to deliver significant reductions to administrative overheads.

 

Having due regard for these recent deliverables and latest projections, with available cash at 31 October 2023 of £3.2m, an invoice discount facility where the Group can borrow up to £3m dependent on debtor levels, access to an invoice discounting facility with one of our major customers, and continued support from our banks and shareholders, it is the opinion of the Board that the Group has adequate resources to continue to trade as a going concern.

 

Revenue recognition

Revenue is recognised as performance obligations are satisfied as control of the goods and services are 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.

 

The Group generates revenue from the sale of structural and consumable materials for use within the aerospace industry. This is the sole revenue stream of the Group.

 

At contract inception (which is upon receipt of a purchase order from a customer), an assessment is completed to identify the performance obligations in each contract. Performance obligations in a contract are the goods that are distinct.

 

At contract inception, the transaction price is determined, being the amount that the Group expects to receive for transferring the promised goods - this is a fixed price with no variable consideration. The transaction price is allocated to the performance obligations in the contract based on their relative standalone selling prices - this reflects the agreed price as per purchase order for each product. The Group has determined that the contractually stated price represents the standalone selling price for each performance obligation.

 

Revenue from sale of goods and services is recognised when a performance obligation has been satisfied by transferring the promised product to the customer at a point in time, usually when legal title passes to the customer and the business has the right to payment, for example, on delivery. Standard payment terms are in place for each customer.

 

Inventory

Inventory is stated at the lower of costs incurred in bringing each product to its present location and condition compared to net realisable value as follows:

 

·   Raw materials, consumables and goods for resale - purchase cost on a first-in/first-out basis.

·  Work in progress and finished goods - costs of direct materials and labour plus attributable overheads based on a normal level of activity.

 

Net realisable value is based on an estimated selling price less any further costs expected to be incurred for completion and disposal.

 

Expenditure

Expenditure is recognised in respect of goods and services received when supplied in accordance with contractual terms.  Goods or services supplied in a foreign currency are recognised at the exchange rate ruling at the time of accounting for this expenditure.

 

Provisions

A provision is made when an obligation exists for a future liability relating to a past event and where the amount of the obligation can be reliably estimated.

 

Retirement benefits: defined contribution schemes

Contributions to defined contribution pension schemes are charged to the statement of comprehensive income in the year to which they relate.

 

Short-term employee benefits

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the year the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

Research and development expenditure

Research expenditure - expenditure on research activities is recognised as an expense in the year in which it is incurred.

 

Development expenditure - An internally generated intangible asset arising from the Group's own development activity is recognised only if all of the following conditions are met:

 

·    an asset is created that can be identified and is technically and commercially feasible;

·    it is probable that the asset created will generate future economic benefits and the Group has available sufficient resources to complete the development and to subsequently sell and/or use the asset created; and

·    the development cost of the asset can be measured reliably.

 

The amount recognised for development expenditure is the sum of all incurred expenditure from the date when the intangible asset first meets the recognition criteria listed above. This occurs when future sales are expected to flow from the work performed.  Incurred expenditure largely relates to internal staff costs incurred by the Group.

 

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment.

 

Amortisation

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives and is generally recognised in the statement of total comprehensive income. The estimated useful lives are based on the average life of a project as follows:

 

Development costs

5 years

 

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

 

Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over the expected useful economic lives. It is provided at the following methods and rates:

 

Land and buildings (right-of-use)		Over the term of the lease
Plant and machinery		15% straight line
Motor vehicles		25% straight line
Fixtures and fittings		15% straight line
Leasehold improvements		Over the term of the lease

 

Foreign currency translation

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('its functional currency'). The consolidated financial statements are presented in sterling, which is Velocity Composites plc's functional and presentation currency.

 

Foreign currency translation (continued)

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates the transactions occur. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the consolidated comprehensive statement of income.

 

The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency, on consolidation, as follows:

 

·  assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of the statement of financial position;

·  income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates; and

· all resulting exchange differences are recognised immediately in the Consolidated comprehensive statement of income.

 

Impairment of non-financial assets

The carrying values of non-financial assets are reviewed for impairment when there is an indication that assets might be impaired, and at the end of each reporting year. When the carrying value of an asset exceeds its recoverable amount, the asset is written down accordingly.

 

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash generating unit (i.e. the smallest grouping of assets in which the asset belongs for which there are separately identifiable cash flows).

 

Impairment charges are included in the income statement, except to the extent they reverse previous gains recognised in the statement of comprehensive income.

 

Financial instruments

All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors encapsulating the normal day to day trading of the Group. The Group does not use derivative financial instruments such as forward currency contracts, or similar instruments. The Group does not issue or use financial instruments of a speculative nature.

 

Bank borrowings

Interest-bearing loans are recorded initially at their fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges are recognised in the statement of comprehensive income over the term of the instrument using an effective rate of interest. Finance charges are accounted for on an accrual's basis to the statement of comprehensive income.

 

The Group has current borrowings of CBIL loans and can utilise its invoice discounting facility in support of its working capital requirements.

 

Financial assets

The Group classifies its financial assets into the categories discussed below and based upon the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity.

 

Trade and other receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transactions costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest method, less provision for impairment.

 

The Group's loans and receivables comprise trade and other receivables included within the statement of financial position.

 

 

Financial assets (continued)

 

Cash and cash equivalents

Cash and cash equivalents include cash held at bank, bank overdrafts and marketable securities of very short-term maturity (typically three months or less) which are not expected to deteriorate significantly in value until maturity. Bank overdrafts are shown within loans and borrowings in current liabilities in the statement of financial position.

 

Impairment of financial assets

Impairment provisions are recognised through the expected credit losses model (ECL). IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses - the 'expected credit loss (ECL) model'.

 

The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.

 

Trade and other payables

The Group classifies its financial liabilities as comprising trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

 

Share capital

Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Group's ordinary shares are classified as equity instruments.

 

Share premium

Share premium represents the excess of the issue price over the par value on shares issued less costs relating to the capital transaction arising on the issue.

 

Share-based payment

The Group operates an equity-settled share-based compensation plan in which the Group receives services from Directors and certain employees as consideration for share options. The fair value of the services is recognised as an expense over the vesting period, determined by reference to the fair value of the options granted.

 

Leased assets

 

Leases

The Group makes the use of leasing arrangements principally for the buildings and motor vehicles. The rental contracts for offices are typically negotiated for terms of 5 and 10 years and some of these have extension terms. The Group does not enter into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain a wide variety of different terms and conditions.

 

The Group assesses whether a contract is or contains a lease at inception of the contract. A lease conveys the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a period of time in exchange for consideration.

 

Measurement and recognition

At lease commencement date, the Group recognises a right-of-use asset and a lease liability in its consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, and any lease payments made in advance of the lease commencement date.

 

The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist.

 

Leased assets (continued)

 

Measurement and recognition (continued)

At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the Group's incremental borrowing rate because as the lease contracts are negotiated with third parties it is not possible to determine the interest rate that is implicit in the lease.

 

The incremental borrowing rate is the estimated rate that the Group would have to pay to borrow the same amount over a similar term, and with similar security to obtain an asset of equivalent value. This rate is adjusted should the lessee entity have a different risk profile to that of the Group.

 

Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated between repayments of principal and finance costs. The finance cost is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability.

 

The lease liability is reassessed when there is a change in the lease payments. Changes in lease payments arising from a change in the lease term or a change in the assessment of an option to purchase a leased asset. The revised lease payments are discounted using the Group's incremental borrowing rate at the date of reassessment when the rate implicit in the lease cannot be readily determined. The amount of the remeasurement of the lease liability is reflected as an adjustment to the carrying amount of the right-of-use asset. The exception being when the carrying amount of the right-of-use asset has been reduced to zero then any excess is recognised in profit or loss.

 

Payments under leases can also change when there is either a change in the amounts expected to be paid under residual value guarantees or when future payments change through an index or a rate used to determine those payments, including changes in market rental rates following a market rent review. The lease liability is remeasured only when the adjustment to lease payments takes effect and the revised contractual payments for the remainder of the lease term are discounted using an unchanged discount rate. Except for where the change in lease payments results from a change in floating interest rates, in which case the discount rate is amended to reflect the change in interest rates.

 

The remeasurement of the lease liability is dealt with by a reduction in the carrying amount of the right-of-use asset to reflect the full or partial termination of the lease for lease modifications that reduce the scope of the lease. Any gain or loss relating to the partial or full termination of the lease is recognised in profit or loss. The right-of-use asset is adjusted for all other lease modifications.

 

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. These leases relate to property security. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

 

See the accounting policy on Property plant and equipment for the depreciation methods and useful lives for assets held under lease.

 

 

Government grants

Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received, and the Group will comply with all attached conditions. Government grants relating to cost are deferred and recognised in the profit or loss by deducting from the related expense over the period necessary to match them with the costs that they are intended to compensate.

 

Current taxation

The tax currently payable is based on the taxable profit of the year. Taxable profit differs from profit as reported in the Consolidated statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using rates that have been enacted or substantively enacted by the statement of financial position date.

 

R&D tax credit

R&D tax credits are recognised at the point when claims have been quantified relating to expenditure within current or previous years and recovery of the asset is virtually certain, these tax credits relating to R&D are recognised within the tax on profit line of the income statement.

 

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the statement of financial position differs from its tax base, except for differences arising on:

 

·    the initial recognition of goodwill;

 

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax balances are not discounted.

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either the same taxable Company; or different Company entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be settled or recovered.

 

Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the executive directors. The Chief Operating Decision Makers have been identified as the Chief Executive Officer and the Chief Financial Officer. The Group supplies a single type of product into a single industry and so has a single operating segment. Additional information is given regarding the revenue receivable based on geographical location of the customer.

 

No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial information.

 

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including the expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Provisions for inventory

Provisions are made for obsolete, out of life and slow-moving stock items. In estimating the provisions, the group makes use of key management experience, precedents and specific contract and customer issues to assess the likelihood and quantity. Stock is accounted for on a first in, first out basis.

 

The provision percentage is applied to various aging categories dependent on stock type, this is a key estimate made by management based on judgement and if change is applied to the percentage for the aged stock, then the outcome of the value of the provision would differ.

 

Sensitivity analysis

A 5% increase in the levels of the current stock provision would lead to and finance impact of an increase in stock provision of £10k.

 

3.         Financial instruments and risk management

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. The Group reports in Sterling. All funding requirements and financial risks are managed based on policies and procedures adopted by the Board of Directors. The Group does not use derivative financial instruments such as forward currency contracts, or similar instruments. The Group does not currently issue or use financial instruments of a speculative nature but as described in the strategic report, management may consider the potential utilisation of such instruments in the future. The Group utilises an invoice discounting facility with its bankers to assist in its cash flow management. In accordance with the terms of the current facility (which is available on demand) the risk and management of trade debtors is retained by the Group.

 

Financial instruments	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Current assets
Trade and other receivables	3,282	2,238	2,532	2,238
Trade and other receivables - prepayments	385	283	291	281
Amounts due from subsidiary undertakings	-	-	3,090	50
	3,667	2,521	5,913	2,569
Cash and cash equivalents - loans and receivables	3,178	2,344	3,131	2,337
Total loans and receivables	6,845	4,865	9,044	4,906
Current liabilities
Trade and other payables	4,053	1,750	1,587	1,750
Trade and other payables - accruals	534	457	334	457
	4,587	2,207	1,921	2,207
Loans	503	503	503	503
Obligations under lease liabilities	487	405	344	313
Total current liabilities	5,577	3,115	2,768	3,023

           

For non-current liabilities please see notes 18 and 19.

 

Risk management

The Group's activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Risk management is carried out by the Board and their policies are outlined below.

 

a)         Market risk

 

Foreign exchange risk

The Group is exposed to transaction foreign exchange risk in its operations both within the UK and overseas. Transactions are denominated in Sterling, US Dollars and Euros. The Group has commercial agreements in place which allow it to transact with its customers in the currency of the material purchase, thereby allowing a large element of the transactional currency risk to pass through the Group.

 

The Group is also exposed to translation foreign exchange risk on consolidation of US operations, which are translated into Sterling from US dollars.  This can impact the consolidated income statement and also create a movement in reserves from movements in the US balance sheet items.

The carrying value of the Group's foreign currency denominated assets and liabilities comprise the trade receivables in note 16, cash in note 17 and trade payables in note 18.

 

Foreign exchange risk (continued)

The Group's financial assets are held in both Sterling and US dollars, the assets are converted to the presentation currency Sterling assets held in US dollars are in relation to the US subsidiary, movements in the exchange rate of the US Dollar or Euro against Sterling do have an impact on both the result for the year and equity. The Group's assets and liabilities that are held in US Dollar or Euro are held in those currencies for normal trading activity in order to recover funds from customers or to pay funds to suppliers. 

 

The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount of monetary financial instruments.

 

As at 31 October 2023	US Dollar	Euro	Total
	£'000	£'000	£'000
Trade debtors	2,685	75	2,760
Cash and cash equivalents	204	118	322
Trade payables	(3,328)	(31)	(3,359)
Balance sheet exposure	(439)	162	(277)

 

 

 

As at 31 October 2022

	US Dollar	Euro	Total
	£'000	£'000	£'000
Trade debtors	1,729	163	1,892
Cash and cash equivalents	1,352	249	1,601
Trade payables	(750)	(32)	(782)
Balance sheet exposure	2,331	380	2,711

 

Sensitivity analysis

A 5% strengthening of the following currencies against the pound sterling at the balance sheet date would have reduced the loss by the amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had to be applied to risk exposures existing at that date.

 

		31 October	31 October
		2023	2022
		£'000	£'000
US dollar		28	117
Euro		(8)	19

 

This analysis assumes that all other variables, in particular other exchange rates and interest rates remain constant. A 5% weakening of the above currencies against pound sterling in any year would have had the equal but opposite effect to the amounts shown above. Included in the US dollar value is £78k relating to the US Subsidiary (2022: £Nil).

 

Interest rate risk

The Group carries borrowings from leases and CBILS loans. Lease borrowings are at a fixed rate of interest whilst the interest on the CBILS loans is a combination of fixed rate and Bank of England base rate plus 3.96%. The Directors do not consider there to be a significant interest rate risk on the element of loans linked to movements in the Bank of England base rate. The Group also has access to an invoicing discounting facility that carries a fixed monthly charge plus interest at a fixed rate of 5.25%.

a)         Credit risk

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. In order to minimise this risk, the Group endeavours only to deal with companies which are demonstrably creditworthy and this, together with the aggregate financial exposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstanding amount.

 

Supply of products by the Group results in trade receivables which the management consider to be of low risk, other receivables are likewise considered to be low risk. However, four of the customers comprise in excess of 10% of the revenue earned by the Group (see note 4). Credit risk on cash and cash equivalents is considered to be small as the counterparties are all substantial banks with high credit ratings. The maximum exposure is the amount of the deposit.

 

b)         Liquidity risk

 

The Group currently holds cash balances in Sterling, US Dollars and Euros to provide funding for normal trading activity. Trade and other payables are monitored as part of normal management routine. The Group also has access to banking facilities including invoice finance which it utilises when needed in order to manage its liquidity risk.

 

As at 31 October 2023

	Within 1 year	One to two years	Two to five years	Over five years
	£'000	£'000	£'000	£'000
Loan	503	503	467	-
Obligations under lease liabilities	487	508	1,079	-
Trade payables	3,786	-	-	-
Accruals	534	-	-	-
Other payables	15	-	-	-
Invoice discounting facility	68	-	-	-

 

 

As at 31 October 2022

	Within 1 year	One to two years	Two to five years	Over five years
	£'000	£'000	£'000	£'000
Loan	503	503	1,003	-
Obligations under lease liabilities	405	419	1,373	-
Trade payables	1,134	-	-	-
Accruals	457	-	-	-
Other payables	174	-	-	-
Invoice discounting facility	175	-	-	-

 

c)         Capital risk management

 

For the purpose of the Group's capital management, capital includes issued capital, and all other equity reserves attributable to the equity holders of the Group.  The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other members. The Group will also seek to minimise the cost of capital and attempt to optimise the capital structure.

 

4.         Segmental analysis

 

The Group supplies a single type of product into a single industry and so has a single reportable segment. Additional information is given regarding the revenue receivable based on geographical location of the customer.  An analysis of revenue by geographical market is given below:

 

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Revenue
United Kingdom	14,350	11,906
Europe	41	10
US	1,967	-
Rest of the World	53	43
	16,411	11,959

 

During the year four customers accounted for 91.9% (2022: 92.7%) of the Group's total revenue for the year ended 31 October 2023. This was split as follows; Customer A - 34.5% (2022: 43.10%), Customer B - 34.9% (2022: 33.4%), Customer C - 10.49% (2022: 11.44%) and the fourth customer a customer of Velocity Composite Aerospace Inc 11.99%, previously Customer D - 3.58% (2022: 4.70%).

 

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 2023 and year ended 31 October 2022 as the site operates as an Engineering Support Office for the Group. The US subsidiary started to trade in April 2023, revenue of £1,967k has been generated since the US subsidiary was incorporated.

 

5.         Operating loss

 

The operating loss is stated after charging / (crediting):

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Staff costs (see note 6)	3,700	3,090
Cost of inventories	11,687	8,079
Foreign exchange (gain)/loss	57	(259)
Amortisation of development costs	116	53
Depreciation:
Owned assets	297	210
Property, plant and equipment under right-of-use assets	472	432
Profit on disposal of assets	(5)	(38)
Auditor's remuneration:
Audit of the accounts of the Group	75	59
Other audit related services (relating to interim review)	12	14

                                                                                                                     

 

 

6.         Staff costs

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Wages, salaries and bonuses	3,049	2,575
Social security costs	348	261
Defined contribution pension costs	97	84
Share-based payments	206	170
	3,700	3,090

The average monthly number of employees including directors, during the year was as follows:

 

	Year ended	Year ended
	31 October	31 October
	2023	2022
	Head count	Head count
Manufacturing	55	40
Administration	47	39
	102	79

 

7.         Directors' costs

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Directors' remuneration included in staff costs:
Wages, salaries and bonuses	505	343
Defined contribution pension costs	21	22
	526	365
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees	190	121
Defined contribution pension costs	12	12
	202	133

                                                                       

 

 

 

 

 

 

 

 

 

 

 

 

8.         Exceptional administrative expenses

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Fees associated with newly issued shares	120	-
	120	-

 

Exceptional expenses incurred during the year are in relation to the costs associated with the cash fundraise through the placing and subscription of the New Ordinary Shares. Total costs incurred were £120,000 and £485,000 charged to the share premium as being directly related to newly issued shares.

 

No exceptional costs were recognised in the previous year.

 

 

 

9.         Finance income and expenses

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Finance expense
Finance charge from lease liabilities	120	81
Other interest and invoice discounting charges	206	106
	326	187

 

10.       Income tax

Company	Year ended	Year ended
	31 October	31 October
	2023	2022
	£'000	£'000
Current tax income
UK corporation tax on income for the year	-	-
UK corporation tax adjustment in respect of prior years - R&D	-	(167)
Total tax income	-	(167)

 

 

 

 

 

 

 

 

 

 

 

 

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to the loss for the year are as follows:

 

Tax rate	22.00%	19.00%
Loss for the year before tax	(3,143)	(1,504)
Expected tax credit based on corporation tax rate	(691)	(286)
Expenses not deductible for tax purposes	(17)	112
Adjustment in respect of prior year - R&D	-	(167)
Different tax rates in other countries	232	-
Adjustment in respect of prior year - tax losses	-	(51)
Tax losses not recognised	476	225
Total tax income	-	(167)

 

On 3 March 2021, the Chancellor of the Exchequer announced that the corporation tax rate would increase to 25% from 1 April 2023. It was substantively enacted on 24 May 2021.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised, based on tax law and the corporation tax rates that have been enacted, or substantively enacted, at the Statement of Financial Position date. As such, the deferred tax rate applicable at 31 October 2023 is 25% and deferred tax had been re-measured at this date.

 

11.       Loss per share

	Year ended	Year ended
	31 October	31 October
	2023	2022
	£	£
Loss for the year	(3,143,000)	(1,337,000)
	Shares	Shares
Weighted average number of shares in issue	38,410,094	36,371,065
Weighted average number of share options	1,348,066	2,110,897
Weighted average number of shares (diluted)	39,758,160	38,481,962
Loss per share (£) (basic)	(£0.08)	(£0.04)
Loss per share (£) (diluted)	(£0.08)	(£0.04)

 

Share options have not been included in the diluted calculation as they would be anti-dilutive with a loss being recognised.

 

 

 

 

 

 

 

 

12.       Intangible assets

 

Group	Development
	costs	Total
	£'000	£'000
Cost
At 31 October 2021	638	638
Additions	136	136
Disposals	(199)	(199)
At 31 October 2022	575	575
Additions	833	833
At 31 October 2023	1,408	1,408
Amortisation
At 31 October 2021	548	548
Charge for the year	53	53
Disposals	(199)	(199)
At 31 October 2022	402	402
Charge for the year	116	116
At 31 October 2023	518	518
Net book value
At 31 October 2021	90	90
At 31 October 2022	173	173
At 31 October 2023	890	890
Company	Development costs	Total
	£'000	£'000
Cost
At 31 October 2021	638	638
Additions	136	136
Disposals	(199)	(199)
At 31 October 2022	575	575
Additions	112	112
At 31 October 2023	687	687
Amortisation
At 31 October 2021	548	548
Charge for the year	53	53
Disposals	(199)	(199)
At 31 October 2022	402	402
Charge for the year	53	53
At 31 October 2023	455	455
Net book value
At 31 October 2021	90	90
At 31 October 2022	173	173
At 31 October 2023	232	232

 

Impairment

The Group reviews the Development costs at each reporting year for indicators of impairment. An indication of impairment can be generated from the loss of a customer, or contracted sales.  No impairment was judged to be required for either year. 

13.       Property, plant and equipment

           

Group	Leasehold improve-ments	Plant & machinery	Motor vehicles	Fixtures & fittings	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 31 October 2021	491	1,891	23	417	2,822
Additions	137	87	-	38	262
Disposals	-	(123)	-	-	(123)
At 31 October 2022	628	1,855	23	455	2,961
Additions	367	528	-	398	1,293
At 31 October 2023	995	2,383	23	853	4,254
Depreciation
At 31 October 2021	99	1,385	23	264	1,771
Charge for the year	50	116	-	44	210
Disposals	-	(119)	-	-	(119)
At 31 October 2022	149	1,382	23	308	1,862
Charge for the year	73	150	-	74	297
At 31 October 2023	222	1,532	23	382	2,159
Net book value
At 31 October 2021	392	506	-	153	1,051
At 31 October 2022	479	473	-	147	1,099
At 31 October 2023	773	851	-	471	2,095

 

Company	Leasehold improve-ments	Plant & machinery	Motor vehicles	Fixtures & fittings	Total
	£'000	£'000	£'000	£'000	£'000
Cost
At 31 October 2021	491	1,891	23	417	2,822
Additions	137	87	-	38	262
Disposals	-	(123)	-	-	(123)
At 31 October 2022	628	1,855	23	455	2,961
Transferred to subsidiary	(132)	(57)	-	(37)	(226)
Additions	14	57	-	-	71
Disposals	-	-	-	-	-
At 31 October 2023	510	1,855	23	418	2,806
Depreciation
At 31 October 2021	99	1,385	23	264	1,771
Charge for the year	50	116	-	44	210
Disposals	-	(119)	-	-	(119)
At 31 October 2022	149	1,382	23	308	1,862
Charge for the year	50	118	-	42	210
Disposals	-	-	-	-	-
At 31 October 2023	199	1,500	23	350	2,072
Net book value
At 31 October 2021	392	506	-	153	1,051
At 31 October 2022	479	473	-	147	1,099
At 31 October 2023	311	355	-	68	734

 

14.       Investment in subsidiaries

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Subsidiary undertakings	-	-	-	-
	-	-	-	-

 

A list of all the investment in subsidiaries is as follows:

 

Name of company	Registered office	Country of registration	Type of shares	Proportion of shareholding and voting rights held	Nature of business
Directly owned
Velocity Composites SDN. BHD	Pentagon Suite, ES-04, Level 3, Wisma Suria, Jalan Teknokrat 6, Cyber 5, 63000, Cyberjaya, Selangor	Malaysia	Ordinary	100%	Provider of engineering composite services for the aerospace sector non trading
Velocity Composites Aerospace, Inc.	Corporation Trust Center, 1209 N. Orange St, Wilmington, Delaware 19801	United States of America	Ordinary	100%	Manufacturer of composite material products for the aerospace sector

 

15.       Inventories

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Raw materials & consumables	1,830	1,114	1,023	1,114
Finished goods	913	293	470	293
	2,743	1,407	1,493	1,407

 

Inventories totalling £2,743,000 (2022: £1,407,000) are valued at the lower of cost and net realisable value. The Directors consider that this value represents the best estimate of the fair value of those inventories net of costs to sell. The increase of inventories provision during the previous year amounted to £53,000 Velocity Composites PLC and £113,000 for Velocity Composites Aerospace Inc, in 2022 the release was £56,000 for Velocity Composites PLC.

 

The inventory at 31 October 2023 is after a stock provision of £374,000 (2022: £208,000). The provision reflects the aged stock profile consistent with FY22, as well as specific provisions related to slow moving stock as a result of reduced demand.

 

Inventories recognised as an expense during the year ended 31 October 2023 amounted to £11,687,000 (2022: £8,079,000), and these were included in cost of sales.

 

16.       Trade and other receivables

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Trade receivables	3,187	2,227	2,489	2,227
Prepayments	385	283	291	281
Other receivables	95	11	43	11
Amounts due from subsidiary undertakings	-	-	3,090	50
	3,667	2,521	5,913	2,569

 

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within an average of 71 days (2022: 68 days) and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost. Details about the Group's impairment policies and credit risk are provided in note 3. No Trade receivables (Group and Company) were overdue over three months at the year end (2022: £Nil).

 

The overall expected credit loss is trivial (2022: trivial). There is no movement in allowance of impairment of trade receivables during each year.

 

Trade receivables (Group and Company) held in currencies other than sterling are as follows:

 

	31 October	31 October
	2023	2022
	£'000	£'000
Euro	75	165
US Dollar	2,685	1,742
	2,760	1,907

 

17.       Cash and cash equivalents

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Cash at bank	3,178	2,344	3,131	2,337
	3,178	2,344	3,131	2,337

 

18.       Trade and other payables

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Trade payables	3,786	1,134	1,322	1,134
Accruals and deferred income	534	457	334	457
Other taxes and social security	184	267	183	267
Other payables	15	174	14	174
Invoice discounting facility	68	175	68	175
	4,587	2,207	1,921	2,207

 

Book values approximate to fair values.

 

19.       Bank loans

	Group	Group	Company	Company
	31 October	31 October	31 October	31 October
	2023	2022	2023	2022
	£'000	£'000	£'000	£'000
Not later than one year	503	503	503	503
One to two years	503	503	503	503
Two to five years	467	1,003	467	1,003
	1,473	2,009	1,473	2,009

 

In FY20 the Company took out a Coronavirus Business Interruption Loan for £2.0m and on 19 January 2021 the term of this loan was extended to 6 years.  Repayment by instalment commenced in August 2021, with the final instalment due in August 2026. The loan was interest free for the initial 12 months, followed by an interest rate of 3.96% above the Bank of England base rate which was 5.25% as at 31 October 2023.  Therefore the rate payable at 22 January 2024 is 9.21%.

 

During FY21, the Company took out a further Coronavirus Business Interruption Loan for £0.45m secured against owned non-current assets. This is being repaid over 5 years with the first payment made in July 2021 and the final instalment due in June 2026.  The loan was interest free for the initial 12 months, followed by an interest rate of 7.75% per annum. 

 

           

 

                                   

20.       Leases

Right-of-use-assets

Group	Land & buildings	Plant & machinery	Motor vehicles	Total
	£'000	£'000	£'000	£'000
Cost
Balance at 31 October 2021	1,641	561	110	2,312
Additions	1,013	-	-	1,013
Disposals	(221)	-	-	(221)
Balance at 31 October 2022	2,433	561	110	3,104
Additions	232	-	100	332
Disposals	-	-	(5)	(5)
Balance at 31 October 2023	2,665	561	205	3,431
Depreciation
Balance at 31 October 2021	399	190	35	624
Depreciation charge for the year	300	104	28	432
Disposals	(221)	-	-	(221)
Balance at 31 October 2022	478	294	63	835
Depreciation charge for the year	363	81	28	472
Disposals	-	-	(5)	(5)
Balance at 31 October 2023	841	375	86	1,302
NBV
At 31 October 2021	1,242	371	75	1,688
At 31 October 2022	1,955	267	47	2,269
At 31 October 2023	1,824	186	119	2,129

 

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 statement of financial position as at 31 October 2023.

 

Company	Land & buildings	Plant & machinery	Motor vehicles	Total
	£'000	£'000	£'000	£'000
Cost
Balance at 31 October 2021	1,641	561	110	2,312
Additions	556	-	-	556
Disposals	(221)	-	-	(221)
Balance at 31 October 2022	1,976	561	110	2,647
Additions	-	-	100	100
Disposals	-	-	(5)	(5)
Balance at 31 October 2023	1,976	561	205	2,742
Depreciation
Balance at 31 October 2021	399	190	35	624
Depreciation charge for the year	300	104	28	432
Disposals	(221)	-	-	(221)
Balance at 31 October 2022	478	294	63	835
Depreciation charge for the year	282	81	28	391
Disposals	-	-	(5)	(5)
Balance at 31 October 2023	760	375	86	1,221
NBV
At 31 October 2021	1,242	371	75	1,688
At 31 October 2022	1,498	267	47	1,812
At 31 October 2023	1,216	186	119	1,521

 

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 statement of financial position as at 31 October 2023.

 

Right-of-use lease liabilities

 

	Group	Company
	£'000	£'000
At 31 October 2022	2,197	1,755
Repayment	(506)	(372)
Additions to right-of-use assets in exchange for increased lease liabilities	332	105
Interest and other movements	51	52
At 31 October 2023	2,074	1,540

 

 

Analysis by length of liability         

                                               

Group	Land & buildings	Plant & equipment	Motor vehicles	Total
	£'000	£,000	£'000	£'000
Current	420	42	25	487
Non-current	1,375	113	99	1,587
	1,795	155	124	2,074
Number of right-to-use assets leased	6	5	2
Range of remaining term	1-10 years	1-10 years	1-4 years

   

Company	Land & buildings	Plant & equipment	Motor vehicles	Total
	£'000	£,000	£'000	£'000
Current	277	42	25	344
Non-current	984	113	99	1,196
	1,261	155	124	1,540
Number of right-to-use assets leased	5	5	2
Range of remaining term	1-10 years	1-10 years	1-4 years

 

Reconciliation of minimum lease payments to present value

 

Group	Minimum lease payments	Interest	Present value
	£'000	£'000	£'000
31 October 2023
Not later than one year	585	98	487
Later than one year and not later than two years	589	81	508
Later than two years and not later than five years	1,209	130	1,079
	2,383	309	2,074
31 October 2022
Not later than one year	505	100	405
Later than one year and not later than two years	505	86	419
Later than two years and not later than five years	1,545	172	1,373
	2,555	358	2,197

 

 

Reconciliation of minimum lease payments to present value (continued)

 

Company	Minimum lease payments	Interest	Present value
	£'000	£'000	£'000
31 October 2023
Not later than one year	424	80	344
Later than one year and not later than two years	430	64	366
Later than two years and not later than five years	927	97	830
	1,781	241	1,540
31 October 2022
Not later than one year	400	87	313
Later than one year and not later than two years	400	72	328
Later than two years and not later than five years	1,248	134	1,114
	2,048	293	1,755

 

Low value leases

The Group leases comprise both office and assembly space, under low value leases.  The total value of the minimum lease payments due is payable is £Nil (2022: £Nil).

 

 

Low value leases not classed as right-of-use assets due to the minimal value of the lease, 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. Payments made under such leases are expensed on a straight-line basis.

 

 

21.       Deferred tax

 

Deferred tax is calculated in full on temporary differences under the liability method using tax rates appropriate for the year. The movement on the deferred tax account is as shown below:

 

The movement on the deferred tax (asset)/liability is shown below:

 

Company	31 October	31 October
	2023	2022
	£'000	£'000
Unrecognised deferred tax in respect of losses brought forward Corporation tax loss adjustments in respect of prior year	(1,401) -	(840) (51)
Corporation tax losses arising during the year	(229)	(174)
Adjustment for movement in corporation tax rate	-	(336)
Unrecognised deferred tax in respect of losses carried forward	(1,630)	(1,401)

 

The Group has unused tax losses which were incurred by the holding company. A deferred tax asset of £1,774,000 (2022: £1,401,000) is not recognised in these accounts. Corporation tax losses can be carried forward indefinitely and can be offset against future profits which are subject to UK corporation tax.

 

 

22.       Reconciliation of liabilities arising from financing activities

 

Group	Lease liabilities < one year	Other short-term borrowings	Lease liabilities > one year	Other long-term borrowings	Total
	£'000	£'000	£'000	£'000	£'000
At 31 October 2021	309	514	1,240	1,998	4,061
Cash flows
Repayment	(457)	(503)	-	-	(960)
Non-cash
Other differences	-	-	92	-	92
Increase to lease liabilities	-	-	1,013	-	1,013
Transfer from long-term to short term borrowings	553	492	(553)	(492)	-
At 31 October 2022	405	503	1,792	1,506	4,206
Cash flows
Repayment	(506)	(536)	-	-	(1,042)
Non-cash
Other differences	-	-	332	-	332
Increase to lease liabilities	-	-	51	-	51
Transfer from long-term to short term borrowings	588	536	(588)	(536)	-
As at 31 October 2023	487	503	1,587	970	3,547

 

 

22.       Reconciliation of liabilities arising from financing activities (continued)

 

Company	Lease liabilities < one year	Other short-term borrowings	Lease liabilities > one year	Other long-term borrowings	Total
	£'000	£'000	£'000	£'000	£'000
At 31 October 2021	309	514	1,240	1,998	4,061
Cash flows
Repayment	(442)	(503)	-	-	(945)
Non-cash
Other differences	-	-	92	-	92
Increase to lease liabilities	-	-	556	-	556
Transfer from long-term to short term borrowings	446	492	(446)	(492)	-
At 31 October 2022	313	503	1,442	1,506	3,764
Cash flows
Repayment	(372)	(536)	-	-	(908)
Non-cash
Other differences	-	-	52	-	52
Increase to lease liabilities	-	-	105	-	105
Transfer from long-term to short term borrowings	403	536	(403)	(536)	-
As at 31 October 2023	344	503	1,196	970	3,013

 

23.       Share capital

	31 October	31 October
	2023	2022
	£	£
Share capital issued and fully paid
53,393,368 (2022: 36,458,997) Ordinary shares of £0.0025 each	133,483	91,147

 

Ordinary shares have a par value of 0.25p. 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.

 

Movements in share capital	Nominal value	Number of shares
	£
Ordinary shares of £0.0025 each
At the beginning of the year	91,147	36,458,997
Exercising of share options	1,154	461,788
Allotted, issued and fully paid in the year	41,182	16,472,583
Closing share capital at 31 October 2023	133,483	53,393,368

 

On 17 March 2023, the Company issued 305,856 new ordinary shares of £0.0025 each to satisfy the exercise of options granted under the Group's 2022 Share Option Scheme.

 

On 27 March 2023, the company issued a further 155,932 new ordinary shares of £0.0025 each to satisfy the exercise of options granted under the Group's 2022 Share Option Scheme.

 

During the year ended 31 October 2023, 16,472,583 new ordinary shares were issued. The shares issued had a nominal value of £0.0025 each and were issued at £0.40 each.

 

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 year, is set out in note 25.

 

24.       Share premium

	31 October	31 October
	2023	2022
	£'000	£'000
At the beginning of the year	9,727	9,727
Shares issued net of transaction costs	6,063	-
Reduction of Share Premium Account	(10,920)	-
At the end of the year	4,870	9,727

25.       Share-based payments

 

The Group's employees are granted option awards under the Velocity Composites Limited Enterprise Management Incentive and Unapproved Scheme.

 

The share options dated 13 March & 17 October 2017 have no attached performance conditions and have vested as a resulted of continued employment. The options may be exercised at any point up to the tenth anniversary of the grant date.

 

The 225,000 share options dated 29 October 2019 have no attached performance conditions and vest subject only to continued employment. They vest after 3 years, or earlier if a vesting event occurs as defined in the rules of the Scheme. They were awarded in relation to joining senior management, providing an equity incentive around the performance of the business. 125,000 of these share options had lapsed due to people leaving the business.

 

Share options dated 29 October 2019 in the year have lapsed, the options have attached performance conditions linked to adjusted EBITDA. They vest after two years, or earlier if a vesting event occurs in the rules of the Scheme. The options may be exercised at any point up to the tenth anniversary grant date. There were 1,480,000 originally issued and as of the year ended 31 October 2022, 1,480,000 of these share options had lapsed due to people leaving the business.

 

The 155,932 remaining shares options dated 30 October 2020 have no attached performance conditions and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.

 

The 28,805 shares options dated 1 April 2021 have no attached performance conditions and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.

 

The 250,000 shares options dated 1 April 2021 have no attached performance conditions and vest subject only to continued employment. They vest after 3 years, or earlier if a vesting event occurs as defined in the rules of the Scheme. They were awarded in relation to joining senior management, providing an equity incentive around the performance of the business.

 

The 479,999 shares options dated 26 January 2022 have no attached performance conditions and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.

 

The 20,940 shares options dated 29 March 2022 have no attached performance conditions and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.

 

During the year ended 31 October 2023, further share options were granted as follows:

 

807,200 shares options dated 28 March 2023. These options have no attached performance conditions and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.

 

Vesting events are defined within the rules of the Scheme as a reorganisation, takeover, sale, listing (except on AIM), asset sale or death of the Option holder.

 

There were no cancellations or modifications to the awards in the year.

 

The following options were outstanding as at 31 October 2023:

 

Scheme and grant date	Exercise price (£)	Vesting date	Expiry date	Vested	Not vested	Total
13 March 2017	0.0025	13 Mar 2019	13 Mar 2027	95,676	-	95,676
17 October 2017	0.6926	17 Oct 2019	17 Oct 2027	25,000	-	25,000
29 October 2019	0.2065	29 Oct 2022	29 Oct 2031	100,000	-	100,000
29 October 2019	0.2065	29 Oct 2021	29 Oct 2031	-		-
30 October 2020	0.2065	01 Nov 2021	01 Nov 2026	155,932	-	155,932
01 April 2021	0.0025	01 Apr 2021	01 Apr 2026	28,805	-	28,805
01 April 2021	0.1300	01 Apr 2021	01 Apr 2026	-	125,000	125,000
01 April 2021	0.1580	01 Apr 2021	01 Apr 2026	-	-	-
26 January 2022	0.0025	26 Jan 2023	01 Nov 2027	321,411	-	321,411
29 March 2022	0.0025	29 Mar 2023	01 Nov 2027	20,940	-	20,940
28 March 2023	0.0025	28 Mar 2023	01 Nov 2023	75,000	549,467	624,467
				822,764	674,467	1,497,231

 

The Group recognised a cost of £206,000 (2022: £170,000) relating to share-based payment transactions which are all equity settled, an equivalent amount being transferred to share-based payment reserve. This reflects the fair value of the options, which has been derived through use of the Black-Scholes model.

 

The cost of share-based payments is included in "Administrative expenses" within the Statement of total comprehensive income.  The share-based payments reserve is used to recognise the grant date fair value of options issued to employees but not exercised. The table below sets out the movement to the share-based payment reserves in the year.

Movement in share options

 

Scheme and grant date	As at 1 Nov 2022	Issued	Expired	Exercised	Vested	As at 31 Oct 2023
	£'000	£'000	£'000	£'000	£'000	£'000
1 January 2017	264	-	-	-	(264)	-
13 March 2017	55	-	-	-	-	55
17 October 2017	22	-	(10)	-	(2)	10
29 October 2019	107	-	(27)	-	(64)	16
30 October 2020	72	-	-	-	(48)	24
01 April 2021 01 April 2021 01 April 2021	7 14 14	- - -	(7) - (6)	- - -	- - -	- 14 8
26 January 2022 26 January 2022 29 March 2022	94 31 4	- - -	(14) (7) -	- - -	(33) - -	47 24 4
28 March 2023	-	276	-	-	-	276
	684	276	(70)	-	(412)	478

 

 

26.       Related party transactions

 

Balances and transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation. However, the key transactions with the Company are disclosed as follows:

 

The Group has previously engaged IN4.0 Access Limited, which provides consulting services.  One of the directors of IN4.0 Talent Recruitment Limited is a director of Velocity Composites plc. The Group paid £Nil (2022: £37,270) to IN4.0 Talent Recruitment Limited during the year and had £Nil outstanding at the year end (2022: £Nil). The services related to a specialist software engineer and were at arm's length market rates for such expertise, with the fees being passed directly on to the consultant, less an administration fee.

 

During the year the Group engaged Northwest Aerospace Alliance, which provides membership and subscription services for the Aerospace Industry.  One of the directors of Northwest Aerospace Alliance Limited is a director of Velocity Composites plc. The Group paid £2,009 (2022: £5,775) to Northwest Aerospace Alliance during the year and had £Nil outstanding at the year end (2022: £1,000).

 

The following balances existed at year end with related parties (payable)/receivable:

 

	31 October	31 October
	2023	2022
	£'000	£'000
Related parties	-	(1)

 

 

27.       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.

 

28.       Capital commitments

 

At 31 October 2023 the Group had £Nil (2022: £582,000) of capital commitments relating to the purchase of leasehold improvements, plant and machinery and fixture and fittings.

 

29.       Pension commitments

 

The Group makes contributions to defined contribution stakeholder pension schemes. The contributions for the year of £97,191 (2022: £84,488) were charged to the Consolidated Income statement. Contributions outstanding as at 31 October 2023 were £13,595 (2022: £14,107).

 

30.       Contingent liabilities

 

As at 31 October 2023 the Group had in place bank guarantees of £Nil (2022: £Nil) in respect of supplier trade accounts.

 

As at 31 October 2023, National Westminster Bank plc hold a debenture that provides a fixed and floating charge on the assets of the Company.

 

31.       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 and adjusted for share-based payments. Share-based payments are added back to make the share-based payment charge clear to stakeholders.

 

	Year ended	Year ended
	31 October	31 October
	2023	2022
Reconciliation from operating loss	£'000	£'000
Operating loss	(2,817)	(1,317)
Add back:
Share-based payments	206	170
Depreciation of property, plant and equipment	297	210
Amortisation	116	53
Depreciation of right-of-use assets under IFRS 16	472	432
Exceptional Administration expenses	120	-
Adjusted EBITDA	(1,606)	(452)