VEL Velocity Composites Plc

22 May 2024

Velocity Composites plc

("Velocity" or the "Company")

Trading Update & Notice of Results

Velocity Composites plc (AIM: VEL.L), the leading supplier of advanced composite material kits to the aerospace market, is pleased to announce the following trading update for the six months ended 30 April 2024 ("H1 FY24"). The Company expects to publish its H1 FY24 results on 9 July 2024.

The Board is pleased to confirm that trading in H1 FY24 has continued to be strong, and in line with management forecasts. The Company expects to report H1 FY24 revenue of £10.7m (H1 23: £7.0m) and an EBITDA loss of £0.2m (H1 FY23: loss of £0.9m). Cash at bank as at 30 April 2024 was £1.8m (H1 FY23: £1.2m) and net cash of £0.6m (H1 FY23: net debt of £1.8m).

The Group guidance for FY24 remains unchanged with H2 revenue growing through inflationary price rises for existing contracts taking effect and production rates increasing on the Company's initial major US contract (the "US Contract"). As previously stated, the Company expects to be profitable and cash generative in H2 FY24.

In line with the Company's announcement on 20 December 2022, the US Contract is worth £79m in revenue over the next five years since its commencement on 1 January 2024.  Since completing the construction of the Company's new US-facility in Alabama in 2023, Velocity has been undertaking the extensive onboarding of new business for the US Contract. This lengthy process requires a detailed qualification procedure known as First Article Inspection ("FAI").

As announced on 11 March 2024, the Company received OEM approval for phase 4 of the FAI process. As at 22 May 2024, Velocity has completed FAIs which enable the Company to satisfy 90% of FY24 US revenue and 77% of FY25 US revenue, with the remainder expected to be completed in FY24.

Across the global aerospace industry, production rates continue to recover. Airbus has announced a doubling of A350 production rates through to 2027. The Company is continuing to work on securing additional contracts and has live bids in with customers in the US and in Europe.

Although progress has slowed in some cases in the US due to the well publicised issues with Boeing, these issues have no impact on the Company's contracted revenues for FY24 or FY25. Confidence remains high that once the current regulatory issues are cleared, Boeing will recommence with previously planned rate increases in key programmes including the B737, B777x and B787. Velocity has a balanced pipeline of current and prospective contracts and is focusing on non-Boeing customer engagement in the short term.

Jon Bridges, CEO, Velocity, said: "The first half has been one of progress, especially in the US. We are on track to deliver FY24 expectations and ongoing growth in the coming years as aircraft production rates continue to recover. Velocity is capitalising on the growing use of composites within aerospace as manufacturers look to reduce carbon emissions and costs by outsourcing non-core processes. These trends have led to our current qualified pipeline of £200m. We are well placed to deliver future growth in this highly regulated and rapidly growing sector."

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About Velocity Composites plc

Based in Burnley, UK, Velocity 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.