30 March 2020
Velocity Composites plc
("Velocity" or the "Company")
Trading Update and COVID-19
Velocity Composites plc (AIM: VEL.L), the leading supplier of advanced composite material kits to the aerospace market, provides an update to shareholders regarding current and future trading performance of the Company and the immediate and foreseeable impact of the COVID-19 pandemic.
As announced in the Company's 2019 Final Results in January 2020, the current financial year ending 31 October 2020 ("FY20") had started well with the Group achieving good strategic progress on milestones around contract renewals and new aerospace qualifications. Trading until the end of February was in line with the Board's expectations with order book visibility showing a heavy H2 performance weighting. The Company had announced earlier in the year that it had won new business with a major Boeing parts supplier and has been working closely with several large customers on new business opportunities.
The Company continues to operate effectively, with its facilities open, but short-term demand has begun to be significantly impacted by the unprecedented disruption caused by the COVID-19 pandemic. This disruption is affecting the global aerospace industry and other manufacturing businesses across the supply chain. While many of Velocity's customers are still manufacturing, this is now at a much-reduced rate, as necessary action is taken to ensure the wellbeing of employees, a priority throughout the industry. As a result, short term demand for Velocity's products has now decreased significantly and these reduced levels of activity are expected to continue in the short term. The Company's new business development activities in the US, Europe and the UK continue remotely but timings on projects are expected to be delayed by prevailing travel restrictions.
The scale and nature of the pandemic is changing constantly and there is, as yet, no clear understanding of the likely duration of the necessary restrictions and the timing of a recovery back to normal production activities. The Board is, therefore, unable to comment on the likely financial performance of the Group for FY20 and, given the typically long industry contract lead times, for FY21.
Velocity is a prudently managed, debt free business with current unaudited cash balances of £2.7m at 27 March 2020 and the availability of additional liquidity through a committed, currently unused, invoice discounting facility of £5.0m, though the Company's ability to drawdown on this facility is tied to the level of the Company's receivables. At current levels of receivables, Velocity is able to draw down up to £2.6m under this facility. The long-term market for composites products in the aerospace industry remains strong and is forecasted to grow and the Company's flexible business model allows for rapid revisions to be made to both materials and labour directly reflecting customer demand. As a result, the Board believes that Velocity is currently well placed to withstand the disruption of COVID-19 but will also seek to fully utilise the UK government's help for businesses, to further support cash liquidity.
COVID-19 management strategy
Velocity has taken rapid action in relation to COVID-19, implementing a management strategy to protect its people and to manage cash, including:
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At risk employees moved to working from home, social distancing measures in place for remaining staff and increased cleansing at all sites; |
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Daily management meetings focused on the COVID-19 pandemic; |
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Increased use of existing telephony and video-conferencing infrastructure mitigating the loss of 'face time' with existing and potential customers; |
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Furloughing staff as near-term demand reduces, utilising the governments employment retention scheme; |
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Raw material stock and deliveries, unaffected to date, now being managed strictly in line with customer demand; |
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Business development expenditure reduced, as travel and event restrictions prevent face to face meetings. Full engagement with existing and prospective customers being maintained; |
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Planned US expenditure postponed to conserve cash with only essential capital expenditure undertaken; and |
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Utilisation of other UK Government support measures, where they make sense, including VAT payment holiday and PAYE deferral if required, while the Company evaluates additional bank funding via Governmental guarantee schemes. |
Jon Bridges, Chief Executive of Velocity, commented:
"These are undoubtedly challenging times and the wellbeing of employees of Velocity and our customers and suppliers are our primary concern. However, our healthy liquidity position, combined with the flexibility in our model to adapt to changing customer demand, and the inherent long-term demand for composite products in our markets give the Board confidence in the Group's ability to weather this unparalleled storm.
I am pleased to report that we are still receiving new business enquires and remain active in responding to new business RFQs of significant size. New bids that were in development prior to the global lockdown continue to be progressed and submitted. Our customers are planning for the recovery and demand signals from the aerospace primary OEMs, particularly Airbus, remain strong.
We are working very hard to also support our supply chain, aiding customers and suppliers to plan and rebalance their demand requirements, and managing inventory requirements, which has always been part of Velocity's special service offering to the industry.
On behalf of the Board, I thank our people for their dedication and resilience, along with our customers and suppliers who are fully supportive, and also ask our investors for their patience, until the landscape becomes clearer."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
Enquiries:
Velocity Jon Bridges, Chief Executive Officer Andy Beaden, Chairman |
+44 (0) 1282 577577 |
Cenkos (Nominated Adviser and Broker) Russell Cook Ben Jeynes |
+44 (0)20 7397 8900 +44 (0)20 7397 1977 +44 (0)20 7397 1974 |
Belvedere Communications (Financial PR) Cat Valentine Keeley Clarke |
[email protected] +44 (0) 7715 769 078 +44 (0) 7967 816 525 |
About Velocity
Velocity Composites is a manufacturer of composite material kits for the aerospace industry, delivering engineered kits for its customers to build component parts. The Company's clients include multi-national manufacturers of composite parts and assemblies, who in turn deliver to the world's leading civil and military aircraft manufacturers. The Airbus A320, A330, A350, A380, Eurofighter Typhoon, F35 Joint Strike Fighter, Boeing 737 and V22 Osprey are all constructed using parts manufactured from Velocity's kits. The Company's business model reduces the operating costs of preparing composite materials ahead of their usage in the construction of an aircraft part and as such, its offering is disposed to being self-financing for aircraft parts' manufacturers. Velocity Composites also exports to Europe and North America.
