TIDMVEL
RNS Number : 1751H
Velocity Composites PLC
26 July 2023
The information contained within this announcement is deemed to
constitute inside information as stipulated under the UK Market
Abuse Regulation (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
26 July 2023
VELOCITY COMPOSITES PLC
("Velocity, the "Company" or the "Group")
Trading Update
Velocity Composites plc (AIM: VEL), the leading supplier of
composite material kits to aerospace and other high-performance
manufacturers, provides 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.
Andy Beaden, Chairman, Velocity, said :
"Velocity is focused on successfully completing the FAI with the
Customer, enabling it to achieve operational success in its
projects. Collaboration with the Customer has been close knit,
working together on what is one of the largest composite kit supply
FAI processes ever conducted in the industry.
The last year has been one of transition and investment. The
investments we have made will be repaid many times through the new
contracted business we have already won and the new business we can
now target. In the next financial year, we will see a
transformational upturn in annual revenue at Velocity. We have
built a significant asset in the US in terms of production
capability and engineering resource, which with organic growth in
the UK, will make the Company profitable.
We will continue to invest in skills and technical engineering
abilities to drive business development and project implementation.
The appointment of Kevin Hickey as COO will help the team in our
next exciting growth phase. We remain confident that more contracts
can be won as the use of composites grows as part of the next
generation of aircraft, and as other industries look to use
composites to deliver their net zero goals. We expect our
investment in people and technology to be fully rewarded in the
coming years as we expand at scale."
Enquiries:
Velocity Tel: +44 (0) 1282
577577
Andy Beaden, Chairman
Jon Bridges, Chief Executive Officer
Adam Holden, Chief Financial Officer
Cenkos (Nominated Adviser and Broker) Tel: +44 (0)20 7397
8900
Katy Birkin
Ben Jeynes
George Lawson
SEC Newgate (Financial Communications) Tel: +44 (0)7540
Robin Tozer 106 366
George Esmond Email: velocity@secnewgate.co.uk
Harry Handyside
About Velocity Composites
Based in Burnley, UK, Velocity Composites is the leading
supplier of composite material kits to aerospace and other
high-performance manufacturers, that reduce costs and improve
sustainability. Customers include Airbus, Boeing, and GKN.
By using Velocity's proprietary technology, manufacturers can
also free up internal resources to focus on their core business.
Velocity has significant potential for expansion, both in the UK
and abroad, including into new market areas, such as wind energy,
urban air mobility and electric vehicles, where the demand for
composites is expected to grow.
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
TSTSEDFUIEDSEEW
(END) Dow Jones Newswires
July 26, 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
