Velocity Composites PLC Trading Update (4799M)
30 April 2018 - 4:01PM
UK Regulatory
TIDMVEL
RNS Number : 4799M
Velocity Composites PLC
30 April 2018
30 April 2018
Velocity Composites plc
("Velocity" or the "Company")
Trading Update
Velocity Composites plc ("Velocity" or "the Company"), the
leading supplier of advanced composite material kits, providing
engineering value-solutions for the global aerospace industry,
today provides a trading update for the six months ending 30 April
2018.
Since the Company's last trading update on 27 February 2018, the
Company has continued to make progress, including some small
contract wins, and is experiencing growing revenues on a monthly
basis with March 2018 seeing revenue of GBP2.1 million. The Company
has seen a continued recovery in its gross margin and the amount of
work to discharge over the remainder of FY18 through to the end of
FY20, without any new business wins, has increased to GBP54
million.
The Company expects to report revenue for the half year to 30
April 2018 to be over GBP11 million, a 20 per cent. increase on the
same period last year. The Company has seen a further increase to
approximately GBP13 million of revenue contracted for the remainder
of this current financial year (provided there are no further
fluctuations in demand signals from customers) with further
revenues agreed in principle of approximately GBP4 million. The
current visibility reflects that whilst there has been strong
growth in the global aerospace market, some programmes that the
Company has been working on have seen short term reductions in
demand signals and these fluctuations have affected some rates of
growth with existing customers.
In addition to the above revenues agreed in principle, at the
time of the last trading update, the Company had included
approximately GBP3 million in relation to one of Velocity's largest
customers who have subsequently undergone a significant degree of
corporate change. These contracts remain in final negotiation and,
if they had been signed on the timescale initially expected, would
have been worth approximately GBP5 million in revenues for the
current financial year and are expected to be worth GBP8 million in
revenues on an annualised basis. Even though Velocity is currently
a key supplier for this customer, with a master framework agreement
already in place, onboarding of each new programme and additional
customer site can only begin once a formal contract is in place for
each specific line of work. These contracts will result in work on
several additional customer sites and across a wide range of
programmes. The Company remains confident that signed contracts
will be entered into, but continued delays in signing these
contracts will affect the revenue outturn for the current financial
year. The Company is working closely with the customer to be ready
to onboard this business as soon as these contracts are signed.
Given the above factors, the Board believes that revenues and
profitability for the full year will be below market forecasts and
that this will have a reduced knock-on effect in future years, as
contracts will achieve full production later than anticipated.
Despite some of these short-term headwinds, the underlying
long-term position and increasing run rate from existing contracts
remains encouraging. As noted above, gross margin continues to
improve through this financial year and, in addition, the cash
position continues to be closely managed and remains sufficient for
all existing plans and visible opportunities.
During this half year, an increasing proportion of the Company's
new business has been secured from European customers. The Company
has elected to provide manufacturing for these European customers
from the UK until there is sufficient volume from one geographic
location to justify additional resource in proximity to one or more
customers. In addition, progress continues to be made with larger
opportunities outside of Europe and the Company will provide an
update on progress in respect of an international site alongside
the publication of its half year results, which are expected to be
released in the week commencing 25 June 2018.
Jon Bridges, Chief Executive Officer of Velocity Composites
said:
"The first half of the current financial year has seen continued
trading momentum. Whilst it is frustrating that certain contracts
have taken longer to close than envisaged by both Velocity and our
customer, with the resultant reduced impact on expected revenues
for this year, we continue to demonstrate that our customers can
make significant savings and that we help to improve build rates.
We remain wholly confident that this remains a timing issue rather
than anything more fundamental. Our customers appreciate our
efforts to help them to reduce costs and the Company has made
substantial progress and is now producing kits with a value of over
GBP2 million per month, up from just over GBP1 million per month 18
months ago, with both visibility and confidence that this value
will increase substantially alongside continued improvements in our
gross margins.
"We also continue to progress the strategic expansion of
Velocity outside of Europe and are looking to leverage existing
relationships where possible. An example of this is the winning of
a tactical project worth GBP0.7 million which includes the supply
of structural material kitting for an engine which is used on the
Airbus A320 aircraft to a global Tier 1 sub-contractor to Airbus
and Boeing. This tactical position presents an opportunity for
Velocity to build upon its position in Europe and the potential to
strengthen its presence in the Asian and North American
markets.
It is important to be adding a leading global Tier 1
subcontractor to our customer base and we look forward to working
closely with that new customer and aiding them in further
operational synergies which Velocity can provide as we continue to
grow our offerings. The customer, a leading global Tier 1
sub-contractor with sites in Europe, North America and Asia will
initially be supplied from the Company's Fareham production
facility."
Mark Mills, Non-Executive Chairman of Velocity Composites
added:
"This is a timing issue. At the time of flotation, the Company
calculated its visibility of future revenues in accordance with our
customers' demand signals, the Company's previous experiences and
through the contracts it held. At the present time, the amount of
revenue Velocity will ultimately derive from its customers has
increased and the run rate is increasing, but the timing for
delivery of this revenue is delayed as it has taken longer to
secure customers than anticipated. Whilst today's announcement is
frustrating, the Board are confident that revenues, profitability
and gross margins will continue to improve substantially owing to
the focused sales effort undertaken in the last six months and we
look forward to updating the market on progress."
Ends
CONTACT DETAILS:
Velocity c/o Camarco
Jon Bridges, CEO Tel: 020 3757
Alan Kershaw, CFO 4980
finnCap (Nominated Adviser and Broker) Tel: 020 7220
Adrian Hargrave / Scott Mathieson / Kate Bannatyne 0500
(Corporate Finance)
Tim Redfern (Corporate Broking)
Camarco (Financial PR) Tel: 020 3757
Georgia Edmonds / Owen Roberts / James Crothers 4980
About Velocity Composites
Velocity Composites is a manufacturer of advanced composite
material kits for the aerospace industry, delivering engineered
waste reduction solutions for its customers to build aircraft
components using less time and material. The Company's customers
include multi-national manufacturers of composite parts and
assemblies, who in turn deliver to the world's leading civil and
military aircraft manufacturers. The Airbus A320, A330, A350, A380,
Eurofighter Typhoon, F35 Joint Strike Fighter and Boeing 737, 787
and V22 Osprey are all constructed using parts manufactured from
Velocity's kits. The Company's business model reduces the operating
costs of preparing composite materials ahead of their usage in the
construction of an aircraft part and as such, its offering is
disposed to being self-financing for aircraft parts' manufacturers.
Velocity's services are seeing increased demand as the global
aircraft industry enters a more-for-less era. Velocity currently
has customers in the UK, Denmark, France and Belgium.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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