2019 Annual Report &
Financial Statements
For the year ended 31 October 2019
Registered No. 06389233
Contents
1. Strategic Report
Highlights .......................................................................................... 3
Chairman’s Report ........................................................................... 4
Business Strategy ............................................................................ 7
CEO Report .................................................................................... 12
Financial Review ............................................................................. 16
Principal Risks & Uncertainties ........................................................ 20
2. Governance
Statement of Corporate Governance ............................................. 24
Board of Directors ........................................................................... 30
Director’s Report ............................................................................. 31
Director’s Remuneration Report .................................................... 34
3. Financial Statements
Independent Auditor’s report ........................................................... 36
Consolidated Statement of Total Comprehensive Income .............. 43
Consolidated and Company Statement of Financial Position ......... 44
Consolidated and Company Statement of Changes in Equity ....... 45
Consolidated and Company Statement of Cash Flows .................. 47
Notes to the Financial Statements ................................................... 48
4. Shareholder Information
Advisors ........................................................................................... 73
Notice of General Meeting .............................................................. 74
Notes to General Meeting ............................................................... 77
Strategic Report Highlights
Our Mission
To revolutionise aerospace composites manufacturing
by enabling our customers to reduce waste/costs whilst
meeting increased global demand by creating a lean and
scalable supply chain in a more-for-less era, delivering real
value for all stakeholders.
Financial Highlights
Revenue
stable
International Sales
up by £2.0m to
Gross Margin %
up to
£24.3m
£2.5m
21.7%
EBITDA 1
positive to
£0.6m
Operating Loss
reduced to
£0.6m
Net Cash
of
£3.4m
1 Earnings before Interest, Tax, Depreciation, Amortisation, adjusted for exceptional
administrative costs and share based payments
3
Strategic Report Chairman’s Report
Chairman’s Report
Andy Beaden Executive Chairman
Our focus in 2020 is firmly on
the development of new sales
opportunities, which will benefit the
top line in future years and establishing
a strong foothold in the US civil
aerospace market, as well as growing
our sales in Europe.
This is my first report to
shareholders since taking
over as the Chairman of
the Board of Directors of
Velocity Composites plc. I
am pleased to report that
my first months at Velocity
have more than confirmed
that this is an exciting and
ambitious business with
talented staff who are focused
on creating shareholder value
through revenue growth and
lean manufacturing-based
operational excellence.
Revenue for the 12 months
ended 31 October 2019 was
broadly in line with the previous
year at £24.3m (FY18: £24.5m),
however, gross margin improved
significantly to 21.7% (FY18:
18.3%) through a continued
focus on operational excellence.
The improvement on gross
margins, combined with careful
cost management, enabled
the Group to achieve Adjusted
EBITDA of £0.6m (FY18: loss
£0.2m). The reported operating
loss of £0.6m (FY18: loss
£1.1m) includes an exceptional
administrative charge of £0.7m,
without which the Group would
have achieved breakeven.
Board and Management
Rob Soen and I were appointed
directors of the Company in July,
following a period of significant
disruption at board level. Mark
Mills, Brian Tenner, Meera Parma
and Alan Kershaw all resigned
as directors during the last
year, along with Alan Kershaw
resigning as Company Secretary.
We also saw the departure of two
of Velocity Composites founders,
Gerry Johnson and Chris Banks,
from their roles as executive
managers. Both Gerry and
Chris are deeply respected in the
business for what they achieved
establishing the business from
scratch alongside Jon Bridges
and other early stage employees.
The Board thanks everyone who
has left the Company during the
year and wishes them well.
Since joining the Board, Rob
and I have set out to stabilise the
leadership of Velocity, re-establish
4
good corporate governance,
evaluate the strategy with the
input of key management and
assess the health and status
of the business. Jon Bridges,
who was acting CEO in a non-
board capacity, was immediately
reappointed to the Board. We
believe it is vital that senior
management are represented
directly at board level. Rob
and I have now formed a close
working relationship with the
senior management team,
with whom we have regular
direct consultation and open
communication. This has helped
restore and build confidence
within the business and empower
all staff to achieve the future
growth and operational targets
our stakeholders have been
supporting for some time.
Equally important is strengthening
the new Board further. We have
begun the search for a new
suitably experienced independent
Non-Executive Director. This
process is underway, and we look
forward to updating shareholders
in due course. This year, we have
benefited from a very experienced
interim CFO, Andrew Hebb. It
is our intention to hire a new
permanent Chief Financial Officer
in 2020 to continue his good work
developing our financial systems
and people.
Strategy
The strategy has been re-aligned
with a new business development
plan focused on key larger
customer opportunities, deeper
development of partnering within
the supply chain and exploiting
multiple opportunities available
through penetration into the
US and mainland European
aerospace markets. Asia remains
a longer-term target for growth.
Europe remains our home base,
however, it is entering the US
market where Velocity’s best in
class value-engineered kitting
services can immediately add
value in the composite aerospace
sector. This is a very large
market and our entry strategy
is to work with our world class
partner, Wesco, and leverage our
own blue-chip customer base,
established over many years
within Europe.
Our year end cash balance
of £3.4m, combined with our
Invoice Discounting facility of up
to £5.5m, gives us the financial
resources necessary to make
the next stage investments in
facilities, people and working
capital.
Growth requires investment
in both facilities and, critically,
business development and
operations people and the
potential for high returns on
those investments is tangible.
New satellite facilities run on a
lean-manufacturing basis and,
when filled with new business,
will generate a significant return
on capital employed. We are
also developing a number of
approaches for deploying our
services on a flexible basis, which
will include customer onsite
kitting, as well as from separate
facilities nearby. The strategic
driver for this approach
is to help the customer
ensure maximum waste
reduction, inventory
optimisation and labour
efficiency, but it will be
implemented with an
eye of driving return
on capital too.
Strategic Report Chairman’s Report
Our sales cycle is often an
extended one. A detailed
professional approach is
required to pitch and agree the
gains customers can achieve
through our services, followed
by the onboarding process and
regulatory approval maintenance.
The benefits of this approach are
longer term contracts, visibility on
demand and barriers to entry for
a competitor.
As part of our refreshed strategy,
technology will play a central
role in advancing operational
excellence and, critically, in
improving customer service. We
continue to invest in the software
platform we use for our nesting
calculations, which in turn enables
us to reduce wastage in materials.
We also need to develop
systems which support our
international expansion and multi-
site approach. We are
investing in our research
and development
capabilities to improve
further our offering to
customers and support
their growth ambitions.
5
Strategic Review Chairman’s Report
Strategic Review Chairman’s Report
Summary and Outlook
The new financial year has started
well, and the team has made
good progress strategically with
milestones being achieved around
contract renewals and new
aerospace qualifications. We are
carrying additional inventory to
protect our customers from any
Brexit disruption, but hopefully, we
will be able to reduce inventory
stocks as the UK’s exit plan from
the EU becomes clearer later in
the year.
Our focus in 2020 is firmly on
the development of new sales
opportunities, which will benefit
the top line in future years and
establishing a strong foothold in
the US civil aerospace market,
as well as growing our sales in
Europe. We aim to maintain a
strong profile and presence in
the geographic homes of the
two major OEMs of Europe and
the North America in seeking
to secure further orders in what
is anticipated to be a period
of exceptional growth for the
industry. We have already
announced extended terms to
our largest, long-term supply
agreement with a UK customer
and expanded another supply
agreement to include Boeing
higher value structural composite
kits. The Group now has
approvals in both the Airbus and
Boeing supply chains, along with
a number of other key aerospace
approvals, for both civil and
military aircraft platforms. We
are particularly pleased with our
growing relationship with Airbus
directly. Though we know the
737 Max programme has some
current issues around production
levels, being qualified for Boeing is
of immense strategic significance
for Velocity.
To further align staff to
shareholder values, we are
changing the way we reward
staff. All our people will be part
of a new annual cash reward
plan linked to our internal budget
targets on profitable growth.
In 2020 all staff will be able to
participate in a new HMRC
Velocity Share Investment
Plan; management rewards for
profitable growth will be through
both cash and equity. We want all
staff to be aligned and rewarded
in growing shareholder value.
As a new Board, we would like
to thank all our staff, investors,
customers, advisers and suppliers
for their support during this year
of change. By working together,
we believe the best years for
Velocity Composites plc lie ahead.
Andy Beaden
Chairman
27 January 2020
Velocity HQ, Burnley, Lancashire, UK
6
Strategic Report Business Strategy
Business Strategy
The aerospace market operates
on very long-time frames, where
materials are often specified for
up to 20 years in the component
part manufacturing process. The
industry has good visibility of
the long-term future production
patterns, and Velocity facilitates
the smoothing of short-term
demand fluctuations for its
customers. The customer
proposition offers strong cash
flow characteristics, based on
decent aerospace margins,
attractive working capital terms
and relatively low equipment
and capital requirements.
The Group has seen steady
growth and remains focused
on the UK, European and USA
markets. Asia will not be an
immediate area of focus unless
an opportunity arises with one
of our current customers or the
work can be undertaken from
our facilities in the UK. The
potential market opportunity
across all of these regions will
allow the Group’s business
model to easily be replicated,
and provide the added value
outlined above throughout the
global aerospace manufacturing
supply chain.
The Company took the
decision in the past to invest
in a subsidiary operation
based in Malaysia (Velocity
Composites Seridian Berhad) to
enable it to establish an Asian
presence providing it with a
foothold for meeting customer
opportunities in the region, and
also to introduce an offshore
base to support a “follow the
sun model” of support to its
customers. This decision has
proven to be beneficial with an
operating model experiencing
lower costs than the UK having
a minimal impact on the Group’s
results and with the additional
capacity provided augmenting
the service provision. However,
we believe the major areas of
new business opportunities in
the near term remain in Europe
and the USA, and this is where
we are focusing in 2020.
The Expanded Group
Velocity has continued its
growth trajectory from its
inception in 2007 through its
admission to AIM in 2017 to its
position today as a strategically
important and unique interface
between the chemical
manufacturers of composite raw
materials and the aerospace
structural component makers,
eliminating waste and providing
essential logistics and supply
chain efficiencies to its customer
base.
Velocity offers a compelling
business proposition to its
customers in the aerospace
supply chain and can offer,
through its growing scale, an
efficient outsourced solution.
This market has traditionally
been served through a diverse
production process often in
non-core factory functions,
experiencing low efficiency,
material waste and long delivery
times. Velocity offers kits
delivered in “the form of use”
giving attractive material and
efficiency cost savings to its
customers, who are typically
Tier 1 manufacturers, looking
to reduce costs by outsourcing
this area of the supply chain to
Velocity.
7
Strategic Report Business Strategy
Composite Materials in Aerospace
The use of composites has
rapidly increased over recent
years, and this is set to
continue as the single aisle
airframes are upgraded to
composite materials to follow
the lead taken by the twin
aisle airframes. The use of
composites in the aerospace
sector is driven by the need
to reduce cost per passenger
mile (reducing weight,
increasing range) as well as
the requirement to reduce
emissions.
The recent introduction of
ultra-long-range flights from
Australasia and the Far East to
Europe and North America has
been driven by the introduction
of these materials. Composites
now form nearly half of the
airframe by weight of the Boeing
787, compared with 12% in its
predecessor the Boeing 777.
The Airbus A350 also contains
just over 50% composite content
by weight, and all new airframe
variants from both Boeing and
Airbus are heavily dominated by
composite materials.
Composites have important
demand drivers such as:
• The use of composites in
structural and non-structural
airframe parts achieves a
significant weight saving as
compared with aluminium
(20% according to Boeing).
• Lower weight enables a
reduction in fuel usage and
therefore assists aerospace
manufacturers and airlines
to achieve their emissions
reduction targets whilst also
offering improved economics.
• Composites require lower
maintenance costs than
aluminium. The Boeing 777
composite tail is 25% larger
than the 767’s aluminium
tail but needs 35% fewer
scheduled maintenance hours,
with reduced risk of fatigue
and corrosion. Airbus has
increased the service interval
in the A350 to 12 years from 6
years for its predecessor the
A330. Similarly, Airbus says
the high carbon fibre content
on the A350 will reduce
fatigue and corrosion related
maintenance by 60%.
• Composites are expected
to have a longer lifespan.
This, coupled with the other
attributes mentioned above,
should lead to higher residual
values over time and therefore
improve the economics of
plane aircraft leasing.
Commercial aircraft carbon fibre content with entry into service dates
t
h
g
e
W
i
l
a
r
u
t
c
u
r
t
S
y
b
e
t
i
s
o
p
m
o
C
%
60%
50%
40%
30%
20%
10%
50%
50%
53%
37%
25%
10%
11%
13%
14%
3%
3%
1%
5%
5%
BA 747 BA 737NG BA 737
1970
1997
-300
1984
A300
-600
1988
BA 737
Max
2017
A320ceo
BA 777
1988
1995
A330
/340
1994
A320
neo
2014
A380
A400M BA 787 BA 777X
2007
2013
2011
2020
A350
XWB
2015
SOURCE: COMPANY INFORMATION JEFFERIES
8
Strategic Report Business Strategy
The aerospace market for
carbon fibre is forecast for rapid
growth. The aerospace supply
chain enjoys a high-quality
earnings stream, which derives
from a relatively small number
of large and highly professional
manufacturers, with long-term
design and production cycles,
long-term visibility of high-level
production schedules and high
regulatory and quality thresholds.
Composite materials have
provided an answer to major
environmental and efficiency
issues, and composite parts
are recognised as robust and
durable.
The entire aerospace composites
industry is facing a challenge
to scale up its production as
components transition from niche
batch-built parts towards volume
manufacture. The composites
supply chain and logistics will
need investment to enable this
growth. Velocity is in a unique
position in this supply chain to
deliver its solution enabling the
supply chain to scale up and
meet this demand.
We have seen some challenges
in the introduction of new
platforms, such as the issues
around the 737 Max, which
is a strategically important
programme for the composite
aerospace industry, but it should
be noted those issues are not
related to the increased use of
composite materials. Though
disruption in the production of
this high volume single aisle
plane will impact demand in
the composite supply chain,
strategically there is very
significant demand for such
new aircraft and their advanced
efficiency. This means Velocity
Composites will continue to seek
to penetrate the supply chain of
such programmes, where we
believe the long-term growth
can be transformational for the
business.
Carbon Fibre Demand ($MM) for Key Commercial & Military Platforms
$450
$400
$350
$300
$250
$200
$150
$100
$50
Commercial
Military
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
E
9
1
0
2
E
0
2
0
2
SOURCE: COMPANY INFORMATION JEFFERIES
9
Strategic Report Business Strategy
Air Traffic Growth Is Decoupled from
CO2 Emissions Growth
Passenger traffic
5.9% per year
CO2 emissions
2.4% per year
1998
2003
2008
2013
2018
Note: CO2 growth estimated for 2017 & 2018
SOURCE: ICAO, BOEING ANALYSIS
Sustainability
Landfill Reduction
Carbon Fibre Waste
12 tonnes
per year
CO2
Emission Reduction
15 tonnes
per year due to
solar panel use
Velocity’s aim is to reduce waste
from the aerospace composites
supply chain in all forms for our
customers, so that more of the raw
materials manufactured end up
flying on an aircraft and less non-
value added time is needed by our
customers. We perform our role
mindful of the impact of our actions
on the environment and ensure
we positively contribute to the
sustainability of the whole industry.
Action we take internally include basing
ourselves in modern, energy efficient
buildings using air source heat pumps
for all our heating and air conditioning.
We use solar power to augment the
local supply and feed excess power
back into the grid. We consolidate
shipping of raw material to ensure there
are less journeys and fuller loads. We
recycle all packaging and look for ways
to reduce packaging as shipments are
reduced.
Every square meter of material we save
results not only in lower costs for our
customers, but also less raw material
manufacturing costs, less shipping cost,
less refrigeration costs and less disposal
costs, all with less waste energy, less
CO2 production and the associated
waste.
Lets not forget composite aircraft are
allowing longer journeys with less
emissions, and Velocity has proved
that the supply chain has an important
part to play in the sustainability for the
current and future aviation industry.
200%
150%
100%
50%
e
u
a
V
l
)
8
9
9
1
(
r
a
e
Y
e
s
a
B
m
o
r
f
h
t
w
o
r
G
10
Strategic Report Business Strategy
Our place in the market
The aerospace composites
market currently has the strongest
market outlook for a decade.
Airbus and Boeing both continue
to have significant backlogs of
civil aircraft orders and Velocity’s
model helps manufacturers to
meet rates more quickly, therefore
it is imperative that we secure
and onboard customers. In
addition, military aircraft demand
is forecast to grow, particularly
the F-35 and also on other military
platforms on a smaller scale,
but which remain significant to
Velocity, such as the Typhoon.
Velocity’s business model
is to commit the Group to a
US showroom facility where
significant demand is available
in the region supporting the site,
which can then be expanded
to a full production facility when
a customer has committed
contractually. This can either
positioned onsite at a customer or
offsite. In the USA the partnership
with Wesco enables us to expand
our reach with a reduced level of
operational risk.
The aerospace composite market
remains strong as customers
look to reduce costs and simplify
supply chains, with strong
indicators around waste and cost
reduction, whilst order backlogs
and market capacity challenges
exist.
Air Travel Resilience Despite Financial & Geopolitical Challenges
5000
4000
3000
2000
1000
)
s
n
o
i
l
l
i
m
(
s
r
e
g
n
e
s
s
a
P
l
a
u
n
n
A
Global
Financial
Crisis
Recession
Gulf War II
SARS
Asian
Fianancial
Crisis
Gulf War 1
Recession
2nd Oil
Shock
Recession
1st Oil
Shock
Recession
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
GRAPH: BOEING COMMERCIAL MARKET OUTLOOK 2019-2038 SOURCE: ICAO / IATA DECEMBER 2018
11
CEO Report
Strategic Report CEO Report
Jon Bridges Chief Executive
“I have great confidence in the direction
and prospects of the Company. With
improving margins, profitable operations,
good capital reserves…coupled with
the re-energised executive management
team and a clear strategic plan.”
Having returned to the Board
in July 2019, I am pleased to
report that full year revenue
and Adjusted EBITDA are in
line with market expectations.
This has been achieved
despite a period of significant
change at the board level and
product churn, associated
with our customers’ A320 and
A330 programmes changing
from the CEO (current engine
option) to NEO (new engine
option) variants. This resilient
performance is testament
to the hard work of all the
great people within Velocity
and their commitment to
the vision and values of the
company.
Board and People
I would like to welcome Andy
Beaden and Rob Soen to the
Board. They bring a broad and
unique mix of experience, and
their full profiles can be read later
in this report. In the final three
months of the financial year,
following their appointment, the
new Board and executive team
worked to develop and reshape
the business in order to meet
the significant opportunities
and challenges of the global
aerospace composites industry.
These changes have been
focused on two key areas: new
business growth and operational
excellence. These are now
embedded in a new Integrated
Business Plan (IBP), developed
and embraced by the executive
and management teams, who are
working together to deliver the
budgeted strategic objectives.
During the year, we made a
number of senior hires, including a
new Quality Manager, Programme
Manager and HR Manager. We
are in the process of recruiting a
third Non-Executive Director and
seeking hires to our business
development and customer
programmes management team.
Andrew Hebb has provided
excellent support as interim Chief
Financial Officer during the last
12 months but the Board is now
seeking a permanent CFO to join
12
the Board in 2020.
With the new team in place the
Company is well placed to enter
the next phase of growth with
the strong aerospace focused
executive and experienced non-
executive leadership needed.
Trading
Revenues in the financial year
were broadly unchanged on the
previous year at £24.3m (FY18:
£24.5m). The majority of revenue
during the financial year was
delivered from current contracts
that were in place at the start
of the year, which included a
significant amount of programme
churn due to changes in
customer demand and new, lower
cost materials being introduced
by customers, rather than volume
changes. Much of which related
to the Airbus transition from CEO
to NEO variants as mentioned
earlier.
Strategic Report CEO Report
more efficient as the aerospace
composites industry drives to
meet the affordability targets of
the two global OEM’s on both
current and future platforms.
The Board believes that this
can be achieved with a strong
return on capital, as we develop
our operating model with our
partners and scale up and fill
existing production areas.
Operationally, we improved
our performance during the
year, leading to improved
gross margin of 21.7% (FY18:
18.3%) and therefore achieving
an adjusted EBITDA of £0.6
compared to a loss in the
previous financial year (FY18:
loss £0.2m). This was mainly
achieved through continuing
focus on gross margin, which
showed consistent improvement
during the year. Administrative
expenses, excluding non-
recurring restructuring costs,
were 3% lower at £5.2m
(FY18: £5.3m). Improving the
Company’s internal efficiency
through operational excellence
is a key pillar of the new
integrated business plan. This
has involved improvements
to the real time data analysis
of manufacturing operations,
not only to ensure internal
compliance to efficiency
targets, but also to measure
the effects of continuous
improvement activities and
drive improvements through all
aspects of our operations. To
achieve this we have invested
further in our proprietary
software to allow us to utilise
real time data extracted from
our freezer storage, cutting
machines and inspection areas,
coupled with real time analysis
and reporting on manufacturing.
Further improvements are
planned, as we build and
integrate our data analysis,
whilst incorporating it with the
wider ERP/MRP system across
all sites, based on industry 4.0
technologies. All these initiatives
are aimed at maintaining and
improving customer service,
which in turn provides the
platform for growth through new
business wins.
Critically, we have a strong
pipeline of new business
opportunities and have
now prioritised around new
business growth concentrated
on a smaller number of larger
opportunities, leveraging
established global partners
where there is a benefit
to capitalise on existing
relationships, existing
infrastructure and addressing
any perceived risk around the
Company’s relative size. This
also allows our internal teams
to focus on these opportunities
and bring customers through the
sales cycle on a more focused
and controlled basis. The
addressable market is sizeable
and is growing, with Velocity
playing a key role in helping its
blue-chip customers become
13
Strategic Report CEO Report
Regulatory
This year has also contained
sobering reminders within our
industry as to why the focus
on quality, traceability, process
adherence and a relentless
push for product excellence
are linked to the safety of airline
passengers. Velocity’s operations
are entirely focused upon the
aerospace market and, therefore,
our processes and systems have
been designed from the ground
up to meet the most stringent
industry standards. I am pleased
to report that we have maintained
all of our industry approvals with
highly complementary feedback
from every third-party audit
team tasked with reporting on
all aspects of our operations.
In pursuing new business
opportunities, we will be required
to obtain further approvals and
are confident that the processes
we have developed, and continue
to develop, will ensure that
Velocity and our customers
remain fully aligned with global
industry standards. After the
year end we were very proud
to achieve key new Boeing
approvals which then opened up
the opportunity of new business
starting in 2020.
Research and Development
The construction of our new
Technical Centre is nearing
completion and when open will
allow the business to enhance
its current service offerings and
develop the next generation of
products and processes, with all
trials and new business activities
being performed separately from
the day-to-day operations. As
Velocity continues to exploit key
Industry 4.0 technologies and
bring benefits to the composites
Advanced vision systems to verify production processes
our customers process and
we are working together with
our customers and technology
partners to work collaboratively
to deliver these products and
service offerings, both existing
and new, as we invest to become
the long term supplier of choice
for our customers.
supply chain, our focus will be
around enhanced data analytics,
automated optical verification,
advanced real-time nesting, 3D
rapid prototyping and paperless
traceability. As we develop and
integrate these technologies into
our systems, it will allow us to
remove further waste and non-
value-added activity from our
processes, allowing us to create
even more compelling business
cases for our customers. In
addition, several new products
and processes have already been
identified which allow Velocity to
integrate further vertically within
14
Strategic Report CEO Report
Governance and Risk
Outlook
The principal risks and
uncertainties are detailed in the
Governance section of this report.
With regards to Brexit the Group
has undertaken various risk
mitigation activities which include
maintaining higher than usual
stock levels over the past nine
months of the financial year. This
remains the position, but we do
intend to reduce these to more
normal levels over the coming
financial year.
The production issues around
the 737 Max have not impacted
us in the year under review to
any significant degree, but as we
have explained earlier, this high
volume programme is strategically
important to us as we win new
business in the Boeing supply
chain.
The Board has reaffirmed its
previously decision to adhere to
the Quoted Companies Alliance
(QCA) Corporate Governance
Code for small and mid-
size quoted companies, and
further details can be found
in the Statement of Corporate
Governance on pages 24 to 29,
and on the Group’s website at
www.velocity-composites.com.
The Health and Safety of all our
staff is a priority item for the Board
and management team and is
reviewed on a monthly basis at
both Board meetings and the
Operational review meeting. In the
year under review, we had only
one reportable accident, which
resulted from a slip by a member
of staff. We actively encourage
staff to report near misses so
that we can ensure appropriate
remedial action is taken.
Following the substantial changes
made to the Group and its
management over the last six
months, I have great confidence
in the direction and prospects
of the Company. With improving
margins, profitable operations,
good capital reserves and the
VCT/EIS spending committed
and approved, coupled with
the re-energised executive
management team and a clear
strategic plan embedded through
the whole organisation, we
believe that Velocity has a solid
platform from which to exploit the
substantial growth forecast in the
civil aerospace industry. We are
well placed to deliver extensive,
long term, stable commercial
propositions to our customers
and growth for all stakeholders.
We look forward to the remainder
of FY20 and beyond with renewed
confidence and energy.
One of Velocity’s advanced cleanroom manufacturing areas
Jonathan Bridges
Chief Executive Officer
27 January 2020
15
Financial Review
Statement of
Comprehensive Income
We achieved a similar level of
revenue to last financial year
without the beneficial impact of
any significant new contracts.
Our current customers saw
a considerable change to a
number of their programmes,
which we were required to
accommodate through change
requests, including the move to
better priced material types in
some cases. Overall revenue was
down slightly by 0.7% during the
year ended 31 October 2019 to
£24.3m (FY18: £24.5m), but this
can be explained by the change
in value of composite materials.
The Company benefited from
both the dollar and euro strength,
particularly in the last quarter of
FY19, with a positive impact of
£0.1m (FY18: £0.1). International
sales increased to £2.5m (2018:
£0.5m) through work contracted
with a customer in continental
Europe. We expect sales from
customers in regions outside
the UK and Europe to increase
significantly over the next few
years, as we target new business
in the USA and eventually Asia.
The key financial success in this
last year was in the stabilisation
of operating margins, with great
work from our operations team.
This meant gross profit at £5.3m
was an increase of 17% over
2018 at£4.5m. Gross margin was
much more stable throughout
the year improving further in the
2H to 22.4% compared to 20.9%
in H1, with an overall margin of
21.7%. We have worked hard
to reset contractual positions so
we can minimise both material
Strategic Report Financial Review
price risk and FX risks to protect
our margins. This means some
70% of revenues and direct costs
relating to material purchases are
naturally hedged which helps to
minimise the effects of exchange
rate fluctuation.
Administrative expenses excluding
exceptional items decreased
during the year by £0.2m
due to a focus on a general
reduction in other costs. We have
continued to invest in our people
though, including training and
development, as we seek to build
an international growth-oriented
business.
The Company presents certain
items as Exceptional that are
non-recurring and significant.
These relate to items which, in
the Board’s judgement, need to
be disclosed by virtue of their size
and incidence in order to obtain
16
Strategic Report Financial Review
a meaningful understanding of
the underlying trading position.
The exceptional items reported
in 2019 of £0.7m (FY18: £0.3m)
consist of costs in relation to
the resignations of the previous
chairman and non-executive
directors, settlement of a dispute
with the founder shareholders,
and various other associated
costs relating to the restructuring
of the Board.
Before exceptional items, the
Company produced a profit
before tax of £0.1m compared to
a loss of £0.7m in FY18.
The statutory disclosed Operating
Loss was £0.6m (2018: Loss
£1.1m) for the full year. From
the Adjusted EBITDA of £0.6m
costs of restructuring of £(0.7)m,
Amortisation and Depreciation
of £(0.4) m and Finance charges
£(0.1)m leave Operating Loss at
£0.6m.
Historically the Company has
used Adjusted profit before tax
as an alternate performance
measure to reflect adjustment
for expenditure on growth
opportunities in the UK and
Overseas and exceptional
restructuring costs. Growth is at
the heart of our strategic plan so
we will continue to invest every
year in achieving this ambition.
Going forward we will focus upon
Adjusted EBITDA as a better key
performance measure to reflect
the operational performance of
the business. In addition, we
propose to comment on specific
large investments in production
facilities that in year could have
a material impact on Adjusted
EBITDA.
Adjusted EBITDA amounted to
£0.6m, an increase of £0.9m over
the prior year due to improved
gross margins and a reduction
in overheads. EBITDA margin
improved to 2.5% (FY18: loss
1.0%).
Adjusted EBITDA
31 October
2019
31 October
2018
Reconciliation from Operating Profit
£’000
£’000
Operating Loss
(594)
(1,072)
Add back:
Share-based payments
Depreciation & Amortisation
Exceptional Administrative costs
Adjusted EBITDA 1
66
449
692
613
169
413
252
(238)
1 Adjusted EBITDA defined as earnings before finance charges, tax,
amortisation, depreciation, share based payments, exceptional restructuring
costs.
17
Strategic Report Financial Review
Working Capital
Inventory levels increased at the
year-end by £0.5m to £3.2m
reflecting additional stock levels in
relation to the Company’s Brexit
strategy.
Trade and other receivables
reduced significantly during the
year by £1.7m to £4.2m as a result
of improved monthly routines to
manage the collection of debts.
Debtor days have therefore also
decreased significantly to 52 days
(2018: 72 days), with less than
£0.1m beyond terms.
Trade and other payables also
reduced during the year by £2.0m
to £3.2m due to reduction in
Trade Creditors of £1.4m and the
reduction in the invoice discounting
facility £0.6m which was undrawn
at the year end.
Cashflow and
Capital Investment
The year-end cash and cash
equivalents reduced by £1.3m
to £3.4m (2018: £4.7m). Cash
utilised from operations of £0.3m
(2018: generated from operations
£0.5m) in particular due to an
improvement in cash collection
and a significant reduction in
overdue debts, offset by an
increase in inventories and a
reduction in trade creditors. Cash
used in Investing activities of
£(0.2)m (2018: £(0.4)m) primarily
related to property, plant and
equipment and development
expenditure capitalised. Financing
activities utilised £0.8m including a
decrease in the use of our Invoice
Discounting facility by £0.6m. The
Invoice Discounting facility was not
utilised at 31 October 2019 (2018:
£0.6m), reflecting the reduced use
during the financial year, thanks
mainly to tighter credit control
systems now implemented.
The cash balance at 31 October
2019 of £3.4m included £1.61m
being the balance remaining from
the money raised to be invested
in EIS activities. The Company
has to date spent the EIS funds
on its research and development
activities and on its exploration
of new territories in Europe, USA
and Asia. The board intends
that the remaining EIS funds will
be deployed on establishing a
production facility in the USA,
due to open in 2020; buying
equipment for the new R&D centre
due to open in H1 2020; and to
investment further in developing
further our Central European
activities.
Financial Key Performance Indicators (KPI’s)
The board have monitored the
performance of the Company with
particular reference to the relevant
key performance indicators (KPI’s)
which are set out below.
During the year several of our
key performance indicators
showed improvements which
was encouraging including the
improvement in gross margins
and the positive EBITDA.
Year ended
31 October
2019
Year ended
31 October
2018
(0.7%)
400.0%
21.7%
2.5%
(2.4)%
14.5%
2.0%
18.3%
(1.0)%
(4.1)%
Revenue growth
Revenue growth International markets
Gross Margin
Adjusted EBITDA
Operating Margin
The Board use the above KPI’s to represent the strategic targets it has set to grow the business to a
sustainably higher level of revenue and profits arising from the replication of its UK business model into the
USA and continental Europe. The board will review both the financial and non-financial KPI’s to ensure that
the Company is focused upon and properly targets measurement of the key drivers for the business. Longer
term the Company intends to also monitor return on capital and earnings per share.
18
Strategic Report Financial Review
Going concern
The Group has prepared
financial projections for the
following two years, year one
reflecting the budget. The
forecasts include revenue
projections based on current
demand plus a weighting of
opportunities in the pipeline.
Capital expenditure has
been included to reflect the
establishment of a site in the
USA in 2020 and Europe in 2021.
This expenditure can be flexed if
required along with operational
spend if revenue was to fall
short of forecast. Having due
regard to these projections and
available cash at 31 October
2019 of £3.4m, and an invoice
discounting facility where we
can borrow up to £5.5m
dependent on debtor levels, it is
the opinion of the Board that the
Group has adequate resources
to continue to trade as a going
concern.
The Strategic Report as set out
in the Chairman’s Report, CEO
Report, Business Strategy and
the Financial Review on pages 4
to 23 has been approved by the
Board.
Andrew Hebb
Interim Chief Financial Officer
27 January 2020
Financial Highlights
Revenue
stable
International Sales
up by £2.0m to
Gross Margin %
up to
£24.3m
£2.5m
21.7%
EBITDA
positive to
Operating Loss
reduced to
Net Cash
of
£0.6m
£0.6m
£3.4m
1 Earnings before Interest, Tax, Depreciation, Amortisation, adjusted for exceptional
administrative costs and share based payments
19
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
Principal Risks
and Uncertainties
The Board is committed to
operating to high standards
of corporate governance, as
we believe that doing so will
contribute to the delivery of long-
term shareholder value. The
aerospace market also requires
the Group to operate on a Right
First Time Every Time basis and
the Company’s listed status
has solidified our commitment
to governance, quality and
transparency and as importantly,
further improved the perception
of Velocity in our customers’ and
potential customers’ eyes.
For many businesses, the
negotiations between the
United Kingdom and European
Union for its future relationship
give cause for uncertainty and
concern. Opening a production
unit in the USA will bring a larger
international revenue mix. Whilst
the ongoing uncertainty is a
natural cause for concern, the
aerospace sector is a global
market which unlike many other
sectors is largely tariff free.
The UK is the second largest
aerospace market in the world
and works in global alliance on
long term projects which last
for many years. For Velocity, its
strategy remains to be country
agnostic and to co-locate in
aerospace clusters alongside
its customers, which helps to
mitigate some of the risk that
Brexit may otherwise bring to the
Group.
In addition, the Group has
undertaken various risk mitigation
activities which included planning
to hold additional stock levels
during the Brexit transition dates
to mitigate any supply chain
issues, undertaking other capacity
planning assessments with
customers and suppliers, ensuring
any tariff and tax changes are
fully covered in our contracts and
liaising with Government bodies
to be prepared for the different
outcomes which may come to
pass. Supplier risks are detailed
below.
The Board is also conscious of
the risk of exclusively operating in
the aerospace sector, foregoing
many offers from automotive
manufacturers for example,
and is comfortable that the
risk is mitigated by the forward
order books of the aircraft
manufacturers and strength of the
growing aerospace market.
The Group’s principal risks and
our actions to mitigate these
risks is set out in the table below.
These are the risks that we feel
are most material to the business
and which might prevent us from
achieving the Group’s strategic
objectives.
20
Strategic Report Principal risks and uncertainties
Principal Risk
Impact
Mitigation
STRATEGIC RISKS
Loss of Key
Contracts
The loss of any of the company’s major
contracts may have a material impact
on the company’s business, prospects,
financial condition or operations.
Airworthiness
issues
Changes in demand due to
airworthiness issues, regulatory issues,
safety issues with aircraft platforms
International
Expansion
Winning a
Large customer
contract
Our strategy is to expand our
production facilities into new markets
that cannot be serviced from our UK
production facilities. We have started
planning to open a new production unit
in the SE USA in 2020. The successful
implementation could lead to five or six
such plants servicing the geographical
clusters across the USA with
opportunities in Canada and Mexico.
In addition, new business development
in Europe could offer up the need for a
production unit. International expansion
has inherent risks, along with potential
delays in setting up new facilities.
The winning of a large customer
contract in the UK could absorb the
capacity headroom and lead to supply
issues if not closely managed. It could
also be a distraction to management.
21
We nurture relationships with all our customers
in order to understand our customers business
and identify further opportunities to support them
and win new business. We work very hard to
deliver excellent customer service levels. We are
actively developing our business development
pipeline to secure new contracts. The demand
for aircraft is increasing each year and the
use of composites within aircraft manufacture
is also growing. When a contractual period
comes to an end, unless the customer invokes
the termination clause, the supply of product
continues on the basis of 4-week firm demand
commitment and 12-month forward demand
forecast against which the company places
orders on material suppliers with purchase order
cover. Customers are contractually committed
to any material orders within lead time placed on
their behalf.
If the demand forecast is reduced due to one
of these issues, then it has the potential to have
an impact on the company’s revenues until
resolved or alternative contracts can be won.
The best way the Company can mitigate this
risk is through a diversified set of customers and
aircraft programmes.
We are developing partnerships with larger
supply chain businesses, for example to
develop the North American market we are
working with Wesco. We are taking a measured
approach by investing in our first production
facility to support customers in SE USA region.
Expansion into other markets i.e. Europe will be
timed to manage the risks around cash flow,
management time and bandwidth.
We will aim to optimise the performance of
our production units by working on efficiency
improvements and using our space more
effectively and scheduling the work in the most
efficient way. Technology investments will also
make a difference. We currently have about one
third of expandable capacity in our UK plants. We
have a good structure of Executive and second
line management to support additional demand.
Strategic Report Principal risks and uncertainties
Principal Risk
Impact
Mitigation
STRATEGIC RISKS
Research and
Development
The company invests in R&D projects
in order to develop innovative new
products.
R&D projects are reviewed by the Board and
development opportunities are carefully reviewed
by management at various stages to minimise
any potential losses.
Not sufficient demand
Exclusively
operating in
the aerospace
sector
Risk is mitigated by the forward order books of
aircraft manufacturers and the strength of the
growing aerospace market.
OPERATIONAL RISKS
Principal Risk
Impact
Mitigation
Dependence
on Third Party
Supply
The company’s business depends on
products and services provided by third
parties. Any interruption to the supply of
products or services by third parties or
problems maintaining quality standards
and delivering product to specification,
or problems in upgrading such products
or services, the company’s business will
be adversely affected. Appropriate stock
levels maintained to meet customer
contractual requirements.
The Group manages its relationships with
suppliers through the commercial and
operational teams. Many products are single
sourced for Airplane frames, the product type
being defined by Airbus/Boeing. We place
orders according to the supplier delivery
schedule, pay on time and maintain contractual
buffer stocks to ensure that we do not run out of
stock.
Reliance on Key
Individuals
The success of the Group will depend
largely upon the expertise and
relationships of the Board and other
senior employees. The loss of any of the
key individuals could impact the Group’s
ability to deliver its strategic goals.
Salary and benefit levels are competitive and
reviewed on a regular basis. In, addition the
business has bonus and equity schemes to
reward longer term performance. The company
has a clear set of values which it promotes.
We have invested in a strong second tier
management team. Annual performance reviews
and development plans take place.
Material Price
Material price changes are flowed
through to customers
Ensure any material price changes are flowed
through from supplier to customer through
contract.
22
Strategic Report Principal risks and uncertainties
FINANCIAL AND COMPLIANCE RISKS
Principal Risk
Impact
Mitigation
Treasury
and Foreign
Exchange Risk
The company has an approved Treasury
policy which is managed and monitored
by the CFO. As the company purchases
and sells product on a global basis, it is
exposed to foreign exchange gains and
losses linked to US$ and Euros. Group
policy is to naturally hedge wherever
possible and approximately 70% of our
activity is naturally hedged. Cash deposits
are maintained within the policy limits.
Liquidity Risk
In-sufficient cash to meet the needs of the
business
Credit Risk
Unable to collect due receivables from
customers
Interest rate risk
Retention of
the company’s
certificates and
other licences
IT Systems
reliance
The aerospace industry Is highly regulated
and each country in which the company
operates is subject to a stringent legal
and regulatory regime. Regulatory
approvals are required to sell the kit and
consumable products to our clients. The
Group has stringent internal controls in
order to comply with the relevant legal
and regulatory conditions. Maintenance of
Airbus, Boeing and NADCAP approvals are
critical to our operations.
Disruption in critical IT systems could
have a negative impact on production
and important business processes. The
Company has intellectual property that It
needs to protect, this can be in the form
of new products, new ideas, marketing
specifications, customer requirements,
cutting and nesting technology and
financial data relating to the profitability of
the company.
23
Monitor short term purchase forecasts and
debtor levels and sell surplus currency according
to a board agreed Treasury policy. Match
revenue and purchases with all new contracts
wherever possible.
The company seeks to manage this risk by
ensuring sufficient liquidity is available to meet
foreseeable needs, by the use of cash forecasts,
invoice discounting, loans and other bank
facilities.
The Company’s trade receivables relate to
amounts owed by aerospace supply chain
companies who by their nature are very
large. Given the size and stability of its core
receivables, the Directors do not believe that the
credit risk to the company is significant. Overdue
debts are monitored on a weekly basis and
action taken to resolve any issues.
The Company seeks to manage its interest
rate risk through minimising exposure wherever
possible and regularly reviewing interest rates
available in the marketplace.
The Group has stringent internal controls
to comply with all legal and regulatory
requirements. The Group has a dedicated
quality department to monitor compliance in
the business and liaises with the regulatory
authorities.
Manage the upgrade paths to both software and
hardware systems to ensure safe implementation
across the business. Maintain a clear IT policy
to ensure users do not put the business at risk.
Ensure the Group’s business continuity plan is in
place and tested regularly. Ensure all intellectual
property is protected by licence and encryption.
Governance Statement of Corporate Governance
Statement of Corporate Governance
All members of the Board
believe strongly in the value
and importance of good
corporate governance and
in our accountability to all
of Velocity’s stakeholders,
including investors, staff,
customers and suppliers.
The Board has adopted the
Quoted Companies Alliance
(QCA) Corporate Governance
Code. The Board believes
that the QCA Code is most
appropriate for the size, risks,
complexity and operations of
the Company and is reflective
of the Group’s values. Details
of the Group’s compliance
with the ten principles of the
Code are set out here:
1. Establish a strategy and
business model which
promotes long-term value
for the shareholders
2. Seek to understand
and meet shareholder
needs and expectations
Velocity’s strategy is to supply
Prime and Tier 1 aerospace
manufacturers with composite
kits and consumables to eliminate
waste and provide essential
logistics and supply chain
efficiencies to its customer base.
These arrangements are almost
exclusively based on long-term
contracts with our customers,
typically for a three to five-year
period.
Our business strategy and
business model are included
in the strategic report section
of the Annual Report. Our key
performance indicators set out
in the Finance Review measure
growth and profitability reflecting
our business model.
Under the new Board structure
Velocity is seeking to engage
in regular dialogue with its
shareholders through a structured
Investor Relations programme.
The Company seeks to provide
effective communications
through the Interim and Annual
reports, as well as regular trading
updates through Regulatory
News Service announcements.
Information is also made available
to shareholders through the
Company’s website (www.
velocity-composites.com).
We offer to meet with those
institutional and major private
investors that wish to do so at
least twice a year in the results
period. These meetings include a
presentation of the latest financial
24
Governance Statement of Corporate Governance
performance, a wider business
update and discussion of the
longer-term plan. These meetings
are normally attended by the Chief
Executive Officer and Interim Chief
Financial Officer. The presentation
given at these meetings is also
made available on the Company’s
website.
We welcome engagement with
our other key shareholders. The
Chairman and other executives
meet both private and institutional
shareholders from time to time.
The Annual General Meeting
presents a further opportunity
for all shareholders to meet the
Board and other senior managers
from across the business.
3. Take into account
wider stakeholder and
social responsibilities
and their implications
for long-term success
The Board and senior
management seek to engage
with all stakeholders including
our employees, clients, suppliers,
shareholders, industry bodies
and local communities in a way to
promote the longer-term success
of the business.
The main mechanisms for wider
stakeholder engagement and
feedback can be summarised as
follows:
Customers
We have dedicated staff in the
businesses that are responsible
for customer relationships. In
addition, the technical support
and development teams will
regularly engage with customers
as a fundamental part of
delivering ongoing services.
Through these well-established
channels, Velocity seeks to ensure
that the needs of our customers
are fully understood. We are
then well positioned to initiate
appropriate actions in response.
Suppliers
The third-party supply base can
be the key to the success of
the Velocity business. As such,
there are processes in place
within the business to actively
manage supplier relationships in
the normal course of business,
taking appropriate feedback and
developing actions as necessary.
Employees
We are an equal opportunity
employer regardless of race,
religion, gender, age, disability or
sexual orientation. With our staff
we have implemented firm wide
half yearly briefings following our
results announcements, monthly
departmental staff briefings,
a quarterly staff newsletter as
well as completing an annual
engagement survey.
Industry Bodies
We are members of industry
bodies such as Northwest
Aerospace Alliance (‘NWAA’)
and the National Aerospace and
Defence Contractors NADCAP
who are influential in how the
Group is perceived by clients.
Community
We actively participate in the
community through our Social
Engagement Team and participate
in apprenticeship and other
schemes to provide opportunities
for young people. We are firm
believers in supporting the local
economies in which we operate
and therefore always look to
employ local people and engage
local trades where possible.
25
Governance Statement of Corporate Governance
4. Embed effective risk
management, considering
both opportunities and
threats, throughout
the organisation
The Board has overall
responsibility for the Group’s
system of internal control. The
Board recognises that it has
overall responsibility for ensuring
that the Group maintains proper
accounting records and a system
of internal control to provide
it with reasonable assurance
regarding effective and efficient
operations, internal financial
control and compliance with laws
and regulations. The system of
internal control is designed to
manage rather than eliminate the
risk of failure to achieve business
objectives. In pursuing these
objectives, internal controls can
only provide reasonable and
not absolute assurance against
material misstatement or loss. As
expected, a key control during
the period was the day-to-day
supervision of the business by the
Executive Directors.
The Board performs a regular
review of the effectiveness of the
system of internal control and
takes action as necessary to
remedy any significant failings
or weaknesses identified in
the review. The processes
used by the Board to review
the effectiveness of the system
of internal control include the
following:
• An ongoing process of risk
assessment to identify,
evaluate and manage
business risks;
• Management structure with
clearly defined responsibilities
and authority limits;
• A comprehensive system of
reporting financial results to
the Board;
• The Audit Committee reviews
the effectiveness of the
Group’s risk management
process and significant risk
issues are referred to the
Board for consideration;
• Appraisal and authorisation
of capital expenditure and
research and development
projects;
• Dual signatories on all bank
accounts.
26
5. Maintain the board as a
well-functioning, balanced
team led by the chair
At the date of this report the
Board comprises of the Chairman,
Executive Director and one Non-
Executive Director. In the first half
of the financial year Mark Mills
resigned as Executive Chairman.
Brian Tenner and Meera Parmar
resigned from the Board as Non-
Executive Directors in July 2019.
In the same month And Beaden
was appointed Chairman and
Rob Soen as Non-Executive
Director. Andrew Hebb has been
Company Secretary and Interim
Chief Financial Officer since the
resignation of Alan Kershaw
on the 31 January 2019. An
additional Non-Executive Director
is planned for 2020.
The Chairman has overall
responsibility for corporate
governance and in promoting high
standards throughout the Group.
He leads and chairs the Board,
ensuring that the committees are
properly structured and reviewed
on a regular basis, leads in the
development of strategy and
setting objectives, and oversees
Governance Statement of Corporate Governance
communication between the
Group and its shareholders.
The Board meets on a regular
(usually monthly) basis to deal
with matters reserved for its
decision. These include agreeing
and monitoring strategic plans
and financial targets, major
decisions on resource, overseeing
management of the Group and
ensuring processes are in place
to manage major risks, treasury
matters, changes in accounting
policy, corporate governance
issues, litigation and reporting to
Shareholders.
The monthly Board meetings
have a regular agenda with
standing items of Health and
Safety, Chief Information Officer
report, Chief Operating Officer
report, Chief Commercial Officer
report, Chief Programmes
Officer report, Chief Financial
Officer report and management
accounts. The Board also
receives committee updates on
a regular basis. To enable the
Board to discharge its duties all
Directors receive appropriate and
timely information. Briefing papers
are distributed by the Company
Secretary to all Directors in
advance of the meetings.
There are three formal
Board committees that meet
independently of Board meetings
and one additional executive and
senior management committee:
Audit Committee
The Audit Committee currently
The Audit Committee currently
has two members, Andy Beaden
(Chair) and Rob Soen. The
Interim Chief Financial Officer
and external auditors attend by
invitation. The Audit Committee
responsibilities include the
review of the scope, results and
effectiveness of the external audit,
the review of the Interim and
Annual accounts, and the review
Our engineers developing highly efficient nests
Beaden (Chair), Jon Bridges
and Rob Soen. The Nomination
Committee meets as required
and is responsible for proposing
candidates for appointment to
the Board and the structure and
composition of the Board as a
whole, as well as succession
planning. The Committee’s
responsibilities were discussed
as a part of the Board meetings
during the year.
Executive Committee
The Executive Committee handles
the implementation of the Group
strategy on behalf of the Board.
The Committee comprises of the
Executive Directors and other
senior managers. It focuses on the
long-term vision and strategy for
the Group. Primary responsibilities
include the oversight of the
development, maintenance and
implementation of the strategy,
management of the overall
financial results for the Group,
directing operational management
and managing shareholder,
corporate governance and
growth.
of the Group’s risk management
and internal control systems.
The Audit Committee advises
the Board on the appointment
of the external auditors and
monitors their performance.
The Audit Committee met on
three occasions during the year.
It is intended a new additional
independent non-executive
director will be appointed to chair
the Audit Committee in 2020
onwards.
Remuneration Committee
The Remuneration Committee
has two members, Rob Soen
(Chair) and Andy Beaden.
The Committee is responsible
for setting the remuneration
arrangements, short term bonus
and long-term incentives for
the Executive Directors and
senior management. In addition,
the committee oversees the
creation and implementation of
all employee share plans. The
Committee met on one occasion
during the year.
Nomination Committee
The Nomination Committee
has three members, Andy
27
Governance Statement of Corporate Governance
A summary of the attendance at board and committee meetings by the directors who served during the
year is set out below.
No Meetings in Year
Andrew Beaden ****
Robert Soen ****
Brain Tenner ***
Meera Parmar ***
Mark Mills **
Alan Kershaw *
Jon Bridges *****
Board
Meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
10
3
3
8
7
4
4
3
3
1
1
2
1
1
1
n/a
1
1
1
0
0
0
n/a
n/a
1
1
1
0
0
0
n/a
0
* resigned as Company Secretary and Director on 31 January 2019
** resigned as Director on 25 March 2019
*** resigned as Director on 24 July 2019
**** appointed as Director on 24 July 2019
*****appointed as Director on 26 July 2019
n/a - indicates that a Director was not a member of a particular committee
Membership of the
Board on Committees:
Andrew Beaden
Robert Soen
Jonathan Bridges
Audit Committee (AC)
Interim Chair
RemunerationCommittee
Nominations Committee
Member
Chair
Member
Chair
Member
n/a
n/a
Member
non-members are invited to attend committees as appropriate
6. Ensure that between
them the directors
have the necessary up-
to-date experience,
skills and capabilities
Details on each of the directors,
and their respective roles within
the Company, are set out on page
30 of this report.
7. Evaluate board performance
based upon clear and
relevant objectives, seeking
continuous improvement
The last Board and management
evaluation process led by the
previous Chairman took place in
March 2018. As a result of the
process a number of refinements
to working practices were
identified and have been adopted.
The new Chairman will complete
an evaluation process during the
coming year. As the business
grows, the Executive Directors will
be challenged to identify internal
candidates who could potentially
occupy Board positions and set
out development plans for these
individuals.
In support of the QCA objective
of delivering growth in long term
shareholder value during the
year the Group undertook on
site Board discussions over the
Group’s short, medium, and long-
term strategic direction.
28
Governance Statement of Corporate Governance
8. Promote a culture
that is based on ethical
values and behaviour
Our long-term growth is
underpinned by our seven core
values:
i) We place our staff first, putting
ourselves in their shoes to
understand the current and future
needs of those who work with us.
ii) We value our customers
determining how to anticipate their
current and future needs and how
to exceed their expectations.
iii) We place importance on
our suppliers and pay invoices
promptly, are clear in negotiations
and have an ongoing dialogue.
iv) We communicate with our
shareholders and explain our
strategy clearly and the challenges
Velocity faces.
v) We are team players who
recognise that Velocity is a
company worth much more than
the sum of its parts and we are
committed to learning from one
another.
vi) We are committed to
innovation in what we do and how
we do it, and to working smarter
rather than harder to reduce
costs, increase efficiency and help
aircraft parts’ manufacturers to
increase build rates.
vii) We respect one another
and are courteous, honest and
straightforward in all our dealings,
we honour diversity, individuality
and personal differences, and
are committed to conducting
our business with the highest
personal, professional and ethical
standards.
The culture of the Group is
characterised by these values
which are communicated
regularly to staff through internal
communications and forums. The
core values are communicated
to prospective employees in the
Group’s recruitment programmes
and are considered as part of the
selection process.
The Board believes that a culture
that is based on the seven core
values is a competitive advantage
and consistent with fulfilment
of the Group’s mission and
execution of its strategy. It is the
responsibility of the executive
management committee to
evaluate how the company might
better achieve these objectives,
and reports to the Board on a
regular basis.
9. Maintain governance
structures and processes
that are fit for purpose and
support good decision-
making by the board
Details of the governance
structures and processes adopted
by the Company are set out on
the Company website.
10. Communicate how
the company is governed
and is performing by
maintaining a dialogue
with shareholders and
other relevant stakeholders
The Board believes that corporate
governance is more than just
a set of guidelines; rather it is
a framework which underpins
the core values for running
the business in which we all
believe. The Board has formal
responsibilities and agendas
and three sub-committees; in
addition, strong informal relations
are maintained between Executive
and Non-executive Directors.
Non-executive Directors meet
with other senior managers
and give advice and assistance
between meetings. Board dinners
are held from time to time to
provide opportunities for broader
discussions.
The Chairman, Chief Executive
Officer and the Interim
Chief Financial Officer make
presentations to institutional
shareholders and analysts each
year immediately following the
release of interim and full year
results. They also attend retail
shareholder events. The slides
used for such presentations are
made available on the Group’s
website under the Annual Reports
section. They also meet regularly
with the Group’s Nomad/broker
and discuss any shareholder
feedback – the Board is briefed
accordingly.
All Directors attend the Annual
General Meeting and engage
both formally and informally with
shareholders during and after
the meeting. The results of voting
at the AGM is communicated to
shareholders via RNS and on the
Group’s website.
The Group engages a professional
investor relations company to be
the main contact point for our
shareholders and to assist us with
communicating with and receiving
feedback from shareholders and
financial analysts.
Andy Beaden
Chairman
27 January 2019
29
Governance Board of Directors
Rob Soen
Robert joined Velocity in July
2019 as an Independent Non-
Executive Director. Mr Soen has
been appointed to the Board as
an independent Non-Executive
Director. He has worked
extensively in aerospace and
automotive supply chains, ending
his executive career as Senior
Vice President Supply Chain in
GKN Aerospace Services Limited.
Mr Soen is currently a Non-
executive Director of Nasmyth
Group Limited, a global precision
engineering and metal treatment
business.
Mr Soen is a Fellow of the Institute
of Purchasing and Supply.
Board of Directors
Jon Bridges
Jon co-founded Velocity
Composites in October 2007. Jon
has over 25 years’ experience
within the advanced composites
industry and is an experienced
composite engineer. Previously,
Jon was an Aerospace and Lean
Solutions Specialist at Cytec
Process Materials where he
was responsible for direct sales
support of UK and European
based clients.
From 2003 to 2005 Jon was
a manufacturing engineer for
Safran Nacelles where he was
responsible for the manufacturing
function for a growing, highly
loaded aerospace unit supplying
multiple assembly lines. Jon was
re-appointed to the Board as an
Executive Director in July 2019.
Mr Bridges has a BSc in Materials
Science from Coventry University.
Andy Beaden Chairman
Andy was appointed Non-
Executive Chairman of Velocity
in July 2019. He most recently
served as Group Finance
Director and a member of the
board of Luxfer Holding plc, a
developer and producer of highly
engineered advanced materials,
from 2011 to 2017, having joined
its predecessor British Aluminium
in 1997. Luxfer (LXFR) is listed on
the New York Stock Exchange.
Mr Beaden is a co-founder and
Chairman of IN4.0 Group Limited,
a company encouraging growth
through the use of industry 4.0
technologies.
Mr Beaden is a Chartered
Accountant, holds a degree in
economics and econometrics
from Nottingham University and
is a Fellow of the RSA (Royal
Society for the Encouragement
of the Arts, Manufactures and
Commerce).
Financial highlights Governance Directors’ Report
Directors’ Report
The directors present their report and the audited financial statements for the
year ended 31 October 2019.
Principal activities
Capital structure
The Group is a provider of
engineered composite material
kits to the aerospace industry.
Review of business and
future developments
The Board has continued the
development and growth of the
business, as referenced in the
Financial Review on pages 16
to 19 and is pleased with the
progress made in the past year.
Financial risk management
Details of the Board’s approach
to Financial risk management can
be found in the Financial Review
on pages 23.
Details of the Company’s share
capital, together with details of the
movements, are set out in Note
22 to the Consolidated Financial
Statements. The Company has
one class of Ordinary Share
which carry no right to fixed
income.
Research and Development
The Group continued to invest
in research and development, in
order to extend its geographical
reach and improve the
effectiveness of its technology.
During the year the Group
incurred costs in relation to the
development and expansion
of its activities totalling £0.7m
(2017: £0.4m) and capitalised
31
development costs of £0.2m
(2017: £0.4m) in line with the
Group’s accounting policy.
Basis of preparation of
the financial statements
The financial statements have
been prepared in accordance
with International Financial
Reporting Standards (IFRS) as
adopted by the European Union.
In accordance with IFRS, the
financial statements reflect the
results of the Group for the year
ended 31 October 2019. Further
details are provided in Note 2 to
the financial statements.
Directors
The Directors who held office at 31 October 2019 and their interest in
the shares of the Company were as follows:
Jonathan Karl Bridges (appointed 26 July 2019)
Andy Beaden (appointed 24 July 2019)
Rob Soen (appointed 24 July 2019)
1 Includes 50,000 shares in the name of Mrs S Beaden
Governance Directors’ Report
At
31 October
2019
5,515,929
400,000 1
-
%
Shareholding
15.36%
1.11%
-
Going concern
The Group has prepared financial
projections for the following
two years, year one reflecting
the budget. The forecasts
include revenue projections
based on current demand plus
a weighting of opportunities in
the pipeline. Capital expenditure
has been included to reflect
the establishment of a site in
the USA in 2020 and Europe
in 2021. This expenditure can
be flexed if required along with
operational spend if revenue was
to fall short of forecast. Having
due regard to these projections
and available cash at 31 October
2019 of £3.4m, and an invoice
discounting facility where we can
borrow up to £5.5m dependent
on debtor levels, it is the opinion
of the Board that the Group has
adequate resources to continue to
trade as a going concern.
Indemnification of Directors
The Group provides Directors
and Officers Insurance cover and
is contractually committed to
provide cover.
Substantial shareholdings
At 31 October 2019, notification had been received of the following interests which exceed a 3% interest in
the issued share capital of the Company, in addition to those of the Directors referred to above:
Number of
Ordinary Shares
% of issued
share capital
Gerard Antony Johnson
Christopher Banks
Cavendish Asset Management
Octopus Investment Management
Herald Investment Management
Mark Mills
Hargreaves Lansdown Asset Managers
Amati Global Investors
Charles Stanley Clients
13.72%
13.72%
7.24%
4.93%
3.98%
3.60%
3.35%
3.20%
3.14%
4,927,693
4,927,693
2,600,446
1,762,940
1,431,177
1,294,025
1,202,853
1,150,294
1,126,036
32
Governance Directors’ Report
the development and
performance of the business
and the position of the Group
and Company, together with
a description of the principal
risks and uncertainties that it
faces.
Disclosure of
information to auditor
Each of the persons who are
directors at the time when this
Directors’ report is approved has
confirmed that:
• so far as that director is
aware, there is no relevant
audit information of which the
Group’s auditor is unaware,
and
•
that director has taken all the
steps that they ought to have
taken as a director in order
to make themselves aware of
any relevant audit information
and to establish that the
Group’s auditor is aware of
that information.
Auditor
Grant Thornton UK LLP, having
expressed its willingness
to continue in office, will be
proposed for reappointment
for the next financial year at
the Annual General Meeting, in
accordance with section 489 of
the Companies Act 2006.
This report was approved by the
Board of Directors on 27 January
2020 and signed on its behalf by:
Andrew Hebb
Company Secretary
27 January 2020
Corporate governance
The Statement of Corporate
Governance on pages 24 to 29
sets out the Group’s approach to
good corporate governance.
Statement of directors’
responsibilities
The directors are responsible for
preparing the Strategic report, the
Directors’ report and the financial
statements in accordance with
applicable law and regulations.
Company law requires the
directors to prepare financial
statements for each financial year.
Under that law the directors have
prepared the financial statements
in accordance with International
Financial Reporting Standards as
adopted by the European Union
(IFRS). Under company law the
directors must not approve the
financial statements unless they
are satisfied that they give a true
and fair view of the state of affairs
of the company and the profit
or loss of the company for that
period. In preparing these financial
statements, the directors are
required to:
• select suitable accounting
policies and then apply them
consistently;
• make judgments and
accounting estimates that are
reasonable and prudent;
• state whether applicable
IFRSs have been followed,
subject to any material
departures disclosed and
explained in the financial
statements; and
• prepare the financial
inappropriate to presume that
the Group will continue in
business.
The directors are responsible for
keeping adequate accounting
records that are sufficient to
show and explain the Group’s
transactions and disclose with
reasonable accuracy at any
time the financial position of the
Group and enable them to ensure
that the financial statements
comply with the Companies Act
2006. They are also responsible
for safeguarding the assets
of the Group and hence for
taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The Directors are responsible for
the maintenance and integrity of
the Group’s website. Legislation
in the United Kingdom governing
the preparation and dissemination
of financial statements may
differ from legislation in other
jurisdictions.
The Directors consider that the
Annual Report and Financial
Statements, taken as a whole, is
fair, balanced and understandable
and provides the information
necessary for shareholders to
assess the Group and Company’s
performance, business model and
strategy.
Each of the Directors, whose
names and functions are listed in
the Directors Report confirm that
to the best of their knowledge:
• The Group Financial
Statements, which have been
prepared in accordance with
IFRSs as adopted by the
European Union, give a true
and fair view of the assets,
liabilities, financial position and
profit of the Group; and
statements on the going
concern basis unless it is
• The Directors’ Report
includes a fair review of
33
Governance Directors’ Remuneration Report
Directors’ Remuneration Report
This report covers the financial year ended 31 October 2019
Responsibilities
The Remuneration Committee
has two members with Robert
Soen (Chairman) and Andy
Beaden members since joining
the Board in July 2019. The
Committee is responsible
for setting the remuneration
packages for Executive team
as well as approving, where
appropriate the remuneration of
senior staff. The Committee sets
incentive plans for the Executive
team to align their interests
with those of the shareholders
and to encourage the strategic
development of the business.
and retains management of the
highest quality. The Board also
considers the link between the
individual’s remuneration package
and the Group’s long-term
performance.
Basic Salary
Salaries are reviewed annually
and are benchmarked against
businesses acting within the
aerospace manufacturing sector.
The review process is undertaken
having regard to the development
of the Group and the contribution
that individuals will continue to
make as well as the need to retain
and motivate individuals. The
Executive Directors and senior
management are also awarded
other benefits (for example
pension contributions) which are
commensurate with their position
within the Group and with the
competitive marketplace.
Executive Directors
The Board is committed to
maintaining high standards of
corporate governance and has
taken steps to comply with best
practice in so far as it can be
applied practically given the size
of the Group.
Remuneration Policy
The Board aims to ensure
that the total remuneration
for the Executive Directors
is soundly based, internally
consistent, market competitive
and aligned with the interests
of the shareholders. To design
a balanced package for the
Executive Directors and senior
management, the Board
considers the individual’s
experience and the nature and
complexity of their work in order
to pay a competitive salary and
benefits package that attracts
34
Governance Directors’ Remuneration Report
Share Options
Share options are awarded in
order to provide a long-term
incentive to the Executive
Directors and senior management
which aligns the interests of the
Group and of its shareholders,
with those of the individuals
tasked with delivering the Group’s
strategic aims. In October 2019
initial Options were issued to 2
members of the Executive team
and performance-based options
were issued to 3 members of the
Executive team and 11 members
of the management team. A total
of 1.7m Options were issued.
Non-Executive Directors
The salary of the Chairman is
determined by the Board and
the salaries of the Non-Executive
Directors are determined
by the Board following a
recommendation from the
Chairman. The Chairman and
Non-Executive Directors are
not involved in any discussions
or decisions about their own
remuneration.
Directors’ emoluments for the year ended 31 October 2019
(or period of service) are summarised below:
Year ended
31 October
2019
Year ended
31 October
2018
Executive
Jonathan Bridges (appointed 26 July 2019)
Alan Kershaw (resigned 31 January 2019)
Non-Executive
Andy Beaden (appointed Chairman 26 July 2019)
Rob Soen (appointed 24 July 2019
Mark Mills (resigned 25 March 2019)
Peter Turner (resigned 02 August 2018)
Brian Tenner (resigned 24 July 2019)
Meera Parmar (resigned 24 July 2019
TOTAL
154,144
47,851
139,121
180,338*
22,519
9,853
110,449*
-
60,257
34,807
-
-
122,000
43,946
8,808
4,750
439,880
498,963
* - Emoluments included exceptional costs
Directors’ share options for the year ended 31 October 2019 are summarised below:
120,640 options were exercised on the 10 April 2019 at an exercise price of £0.0025p. Based on the share price
that day the options had a fair value of £27,747, resulting in a gain for the respective former Director, Alan Kershaw
of £27,445
35
Financial statements Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Velocity Composites Plc
36
Financial statements Independent Auditor’s Report
Independent Auditor’s Report to the
Members of Velocity Composites Ltd
OPINION
Our opinion on the financial statements is unmodified
We have audited the financial statements of Velocity Composites plc (the ‘parent company’)
and its subsidiaries (the ‘group’ for the year ended 31 October 2019, which comprise
Consolidated Statement of Total Comprehensive Income, the Consolidated and Company
Statement of Financial Position, the Consolidated and Company Statement of Changes in
Equity, the Consolidated and Company Statement of Cash Flows and notes to the financial
statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion, the financial statements:
• give a true and fair view of the state of the group’s and of the parent company’s affairs as
at 31 October 2019 and of the group’s loss for the year then ended;
•
•
•
the group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
the parent company financial statements have been properly prepared in accordance
with IFRSs as adopted by the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are further described in
the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report.
We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
37
Financial statements Independent Auditor’s Report
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs
(UK) require us to report to you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material
uncertainties that may cast significant doubt about the group’s or the parent company’s
ability to continue to adopt the going concern basis of accounting for a period of at least
twelve months from the date when the financial statements are authorised for issue.
Overview of our audit approach
• Overall materiality: £243,000, which represents 1% of the company’s
total revenues; and
• Key audit matters were identified as the risk that the revenue cycle
includes fraudulent transactions.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial statements of the current period and include the
most significant assessed risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those that had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
38
Financial statements Independent Auditor’s Report
Key audit matter – group
and parent company
How the matter was addressed in the audit
– group and parent company
The revenue cycle includes
fraudulent transactions
• There is a risk that revenue
has been misstated
through fraudulent
entries, or entries made in
error. This is considered
to be a key audit risk
given the importance of
reported revenue to key
stakeholders. Under ISA
(UK) 240 ‘The Auditor’s
Responsibilities Relating
to Fraud in an Audit of
Financial Statements’, this
is also a presumed risk,
present in all entities. We
therefore identified this
risk as a significant risk,
which was one of the most
significant assessed risks
• We believe the risk of
fraudulent entries to
be heightened around
unpaid revenue and the
implementation of IFRS 15
‘Revenue from Contracts
with Customers’ and this is
where our work has been
focused.
• Our audit work included, but was not restricted to:
Assessing accounting policies to ensure
compliance with the financial reporting framework
(IFRS 15 ‘Revenue from Contracts with Customers’)
and in particular that revenue was recognised at
the point when the satisfaction of performance
obligations were fulfilled
Evaluating managements approach to assessing
the impact of IFRS 15
Testing of a sample of unpaid revenue transactions
in the year through agreement to source
documentation including signed delivery notes in
order to verify the sale and the point at which the
revenue was recognised
Testing a sample of revenue transactions pre and
post year end to ensure that the transactions have
been recorded within the correct financial year
Trend analysis and ratio analysis to identify any
potential unusual movements in revenue. Any
movements outside of our expectation were
investigated with management.
• The group’s accounting policy on revenue
recognition is shown in note 2 to the financial
statements and related disclosures are included in
note 4.
Key observations
Our work did not result in any indicators of fraud within
the revenue recorded for the year, and no adjustments
have been proposed for potential errors. We conclude
that the revenue policy as set out on page 49 is applied
in line with IFRS 15 ‘Revenue from Contracts with
Customers’. Disclosures included within the financial
statements have been tested to ensure they are free
from material misstatement.
39
Financial statements Independent Auditor’s Report
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes
it probable that the economic decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality in determining the nature, timing and extent of our
audit work and in evaluating the results of that work.
Materiality was determined as follows:
We determined materiality for the audit of the group financial statements as a whole to be
£243,000, which is 1% of the company’s total revenues. This benchmark is considered the
most appropriate because of the importance that management apply to this measure in relation
to the performance of the business, and the measure on which growth is monitored.
Materiality for the current year is higher than
the level that we determined for the year ended
31 October 2018.
We use a different level of materiality,
performance materiality, to drive the extent of
our testing and this was set at 75% of financial
statement materiality.
The graph here illustrates how performance
materiality interacts with our overall materiality
and the tolerance for potential uncorrected
misstatements.
OVERALL MATERIALITY
25%
Tolerance for potential
uncorrected misstatements
75%
Performance materiality
We also determine a lower level of specific materiality of £100,000 for assessing the level of
unadjusted misstatements, in order to consider such in line with the trading results for the year
ended 31 October 2019.
We determined the threshold at which we will communicate misstatements to the audit
committee to be £12,200. In addition we will communicate misstatements below that threshold
that, in our view, warrant reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the
group’s business, its environment and risk profile and in particular included:
• an evaluation of the group’s components and their significance to the financial statements.
Evaluation of such found no components significant to the group, as such we have
performed analytical reviews across all components at group level as required under ISA
(UK) 600.
• evaluation of the group’s internal controls environment including its IT systems and controls.
• an assessment of material accounting policies for compliance with the financial reporting
framework
• an evaluation of significant management estimates or judgements
• during the year, the company established a further wholly owned subsidiary in the US
(Velocity Composites Aerospace Inc) as part of its future growth strategy following the
establishment of the Malaysian subsidiary in the prior year (Velocity Composites Sendirian
Berhad). During our risk assessment stage we planned to take a targeted approach,
performing testing across all material balances. Following further review, we note that the US
subsidiary was dormant for the year and therefore its results were immaterial to the financial
statements. Therefore as the subsidiary was not material to the group financial statements
this had no significant impact on the scope of the audit and no targeted testing procedures
were performed.
40
Financial statements Independent Auditor’s Report
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report set out on pages 4 - 35, other than the financial
statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in
the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the Directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
the strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company
and its environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting
records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
41
Financial statements Independent Auditor’s Report
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 33, the
directors are responsible for the preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of group financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s
and the parent company’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located
on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we
might state to the company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
Michael Frankish
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Manchester
27 January 2020
42
Financial statements Consolidated statement of total comprehensive income
Consolidated statement of total
Velocity Composites plc
Financial statements for the year ended 31 October 2019
comprehensive income
Consolidated statement of total comprehensive
income
40
Revenue
Cost of sales
Gross profit
Administrative expenses excluding exceptional costs
Exceptional administrative expenses
Other operating income
Operating loss
Operating loss analysed as:
Adjusted EBITDA
Depreciation & Amortisation
Share based payments
Exceptional administrative expenses
Finance income and expense
Loss before tax from continuing operations
Income tax income/(expense)
Year ended
31 October
2019
Year ended
31 October
2018
24,316
(19,047)
24,478
(19,991)
5,269
(5,177)
(692)
6
4,487
(5,322)
(252)
15
(594)
(1,072)
613
(449)
(66)
(692)
(238)
(413)
(169)
(252)
(58)
(135)
(652)
16
(1,207)
213
Note
4
7
5
29
8
9
Loss for the period and total comprehensive loss
(636)
(994)
Loss per share - Basic (£) from continuing operations
10
(£0.02)
(£0.03)
Loss per share - Diluted (£) from continuing
operations
10
(£0.02)
(£0.03)
The notes on pages 45 to 69 form part of these financial statements.
The notes on pages 48 to 72 form part of these financial statements.
There were no discontinued operations in the current or prior period.
43
Financial statements Consolidated and Company statement of financial position
Consolidated and Company
Velocity Composites plc
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements for the year ended 31 October 2019
statement of financial position
Consolidated and Company statement of
Consolidated and Company statement of
financial position
financial position
41
41
Group
Group
31 October
31 October
2019
2019
Group
Group
31 October
31 October
2018
2018
Company
Company
31 October
31 October
2019
2019
Company
Company
31 October
31 October
2018
2018
Non-current assets
Non-current assets
Intangible assets
Intangible assets
Property, plant and equipment
Property, plant and equipment
Investment in subsidiaries
Investment in subsidiaries
Total non-current assets
Total non-current assets
Current assets
Current assets
Inventories
Inventories
Trade and other receivables
Trade and other receivables
Corporation tax
Corporation tax
Cash and cash equivalents
Cash and cash equivalents
Total current assets
Total current assets
Total assets
Total assets
Current liabilities
Current liabilities
Trade and other payables
Trade and other payables
Grant income deferred
Grant income deferred
Net obligations under finance leases
Net obligations under finance leases
Total current liabilities
Total current liabilities
Non-current liabilities
Non-current liabilities
Deferred tax liabilities
Deferred tax liabilities
Net obligations under finance leases
Net obligations under finance leases
Total non-current liabilities
Total non-current liabilities
Total liabilities
Total liabilities
Note
Note
11
11
12
12
13
13
14
14
15
15
16
16
17
17
18
18
19
19
20
20
19
19
318
318
1,061
1,061
-
-
1,379
1,379
3,177
3,177
4,149
4,149
75
75
3,424
3,424
10,825
10,825
12,204
12,204
3,223
3,223
-
-
121
121
3,344
3,344
362
362
1,080
1,080
-
-
1,442
1,442
2,744
2,744
5,727
5,727
113
113
4,726
4,726
13,310
13,310
14,752
14,752
5,197
5,197
7
7
116
116
5,320
5,320
-
-
169
169
169
169
3,513
3,513
8,691
8,691
-
-
171
171
171
171
5,491
5,491
9,261
9,261
318
318
1,061
1,061
1,379
1,379
3,177
3,177
4,178
4,178
75
75
3,416
3,416
10,846
10,846
12,225
12,225
3,223
3,223
-
-
121
121
3,344
3,344
-
-
169
169
169
169
3,513
3,513
8,712
8,712
22
22
22
22
Net assets
Net assets
Equity attributable to equity holders of
Equity attributable to equity holders of
the company
the company
Share capital
Share capital
Share premium account
Share premium account
Share-based payments reserve
Share-based payments reserve
Retained earnings
Retained earnings
Total equity
Total equity
The notes on Pages 45 to 69 form part of these financial statements.
The notes on Pages 45 to 69 form part of these financial statements.
The notes on pages 48 to 72 form part of these financial statements.
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act
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. The loss for the
2006 and not presented its own statement of profit and loss in these financial statements. The loss for the
year was (£645,000). The financial statements were approved and authorised for issue by the Board of
year was (£645,000). The financial statements were approved and authorised for issue by the Board of
Directors on 28 January 2020 and were signed on its behalf by
Directors on 28 January 2020 and were signed on its behalf by
Andrew Hebb
Andrew Hebb
Company Secretary
Company Secretary
Co No: 06389233
Co No: 06389233
90
90
9,727
9,727
537
537
(1,663)
(1,663)
8,691
8,691
89
89
9,727
9,727
536
536
(1,091)
(1,091)
9,261
9,261
90
90
9,727
9,727
537
537
(1,642)
(1,642)
8,712
8,712
44
362
362
1,080
1,080
-
-
1,442
1,442
2,744
2,744
5,758
5,758
113
113
4,718
4,718
13,333
13,333
14,775
14,775
5,191
5,191
7
7
116
116
5,314
5,314
-
-
171
171
171
171
5,485
5,485
9,290
9,290
89
89
9,727
9,727
536
536
(1,062)
(1,062)
9,290
9,290
Financial statements Consolidated and Company statement of changes in equity
Consolidated and Company
Velocity Composites plc
Financial statements for the year ended 31 October 2019
statement of changes in equity
Consolidated and Company statement of
changes in equity
Consolidated statement of changes in equity
42
Share
capital
Share
premium
account
Retained
earnings
Share-based
payments
reserve
Total
equity
As at 31 October 2017
Loss for the year
Transactions with shareholders:
Share-based payments
89
-
89
-
9,727
-
(97)
(994)
9,727
(1,091)
367
-
367
10,086
(994)
9,092
-
-
169
169
As at 31 October 2018
89
9,727
(1,091)
536
9,261
Share
capital
Share
premium
account
Retained
earnings
Share-based
payments
reserve
Total
equity
As at 31 October 2018
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options
89
-
89
-
1
9,727
-
(1,091)
(636)
9,727
(1,728)
-
-
-
65
536
-
536
66
(65)
9,261
(636)
8,624
66
1
As at 31 October 2019
90
9,727
(1,663)
537
8,691
The notes on Pages 45 to 69 form part of these financial statements
The notes on pages 48 to 72 form part of these financial statements.
45
Financial statements Consolidated and Company statement of changes in equity
Consolidated and Company
Velocity Composites plc
Financial statements for the year ended 31 October 2019
statement of changes in equity
Consolidated and Company statement of
changes in equity
Company statement of changes in equity
43
Share
capital
Share
premium
account
Retained
earnings
Share-based
payments
reserve
Total
equity
As at 31 October 2017
Loss for the year
Transactions with shareholders:
Share-based payments
89
-
89
-
9,727
-
(97)
(965)
9,727
(1,062)
367
-
367
10,086
(965)
9,121
-
-
169
169
As at 31 October 2018
89
9,727
(1,062)
536
9,290
Share
capital
Share
premium
account
Retained
earnings
Share-based
payments
reserve
Total
equity
As at 31 October 2018
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options
89
-
89
-
1
9,727
-
(1,062)
(645)
9,727
(1,707)
-
-
-
65
536
-
536
66
(65)
9,290
(645)
8,645
66
1
As at 31 October 2019
90
9,727
(1,642)
537
8,712
The notes on Pages 45 to 69 form part of these financial statements
The notes on pages 48 to 72 form part of these financial statements.
46
Financial statements Consolidated and Company statement of cash flows
Consolidated and Company
Velocity Composites plc
Financial statements for the year ended 31 October 2019
statement of cash flows
Consolidated and Company Statement of cash
flows
44
Operating activities
Loss for the year
Taxation
(Profit)/ loss on disposal of assets
Finance costs
Amortisation of intangible assets
Depreciation of property, plant and equipment
Share-based payments
Grant income amortisation
Operating cash flows before movements in
working capital
Decrease in trade and other receivables
(Increase)/Decrease in inventories
(Decrease)/Increase in trade and other payables
Cash generated from operations
Income taxes received/ (paid)
Net cash (Outflow)/ Inflow from operating
activities
Investing activities
Purchase of property, plant and equipment
Development expenditure capitalised
Proceeds from the sale of property, plant and
equipment
Group
Year ended
31 October
2019
Group
Year ended
31 October
2018
Company
Year ended
31 October
2019
Company
Year ended
31 October
2018
(636)
(16)
(11)
58
134
315
65
(6)
(994)
(213)
7
135
107
306
169
(15)
(645)
(16)
(11)
58
134
315
65
(6)
(965)
(213)
7
135
107
306
169
(15)
(97)
(498)
(106)
(469)
1,579
(433)
(1,363)
(314)
54
(260)
(156)
(89)
15
424
522
98
546
(40)
506
(220)
(152)
-
1,588
(433)
(1,363)
(314)
54
(260)
393
522
92
538
(40)
498
(156)
(89)
15
(220)
(152)
-
Net cash used in investing activities
(230)
(372)
(230)
(372)
Financing activities
Proceeds from issue of shares
Payments of share issue costs
Finance costs paid
Decrease in invoice discounting
Repayment of finance lease capital
-
-
(58)
(612)
(142)
-
-
(135)
(528)
(159)
Net cash generated from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at 01 November
(812)
(1,302)
4,726
(822)
(688)
5,414
-
-
(58)
(612)
(142)
(812)
(1,302)
4,718
-
-
(135)
(528)
(159)
(822)
(696)
5,414
Cash and cash equivalents at 31 October
3,424
4,726
3,416
4,718
47
Financial statements Notes to the Financial Statements
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Notes to the Financial Statements
Notes to the Financial Statements
45
General information
1.
Velocity Composites Plc
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 forms the Velocity Composites
Group (
The Group
aerospace industry.
2.
Accounting policies
kits of composite material and related products to the
Basis of preparation
The financial statements have been prepared in compliance with the measurement and recognition criteria
of IFRS as adopted by the European Union.
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 periods presented, unless otherwise stated. The financial
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 made up to 31 October 2019. Subsidiaries acquired during the year are
w).
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting
financial statements in accordance with Adopted IFRS, as from 1 May 2015.
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 gains arising from transactions with equity-accounted investees
are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of
impairment.
Going concern
Having made reasonable enquiries, the Directors are of the opinion that the Group has sufficient resources
to continue in operational existence for the foreseeable future and hence these financial statements have
been prepared on a going concern basis. This assessment has been supported by the preparation and
consideration of detailed forecasts for the two years to 31 October 2021 to project the future growth of the
Group and flexing these forecasts through sensitivity analyses.
48
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
46
Notes to the Financial Statements
2.
Accounting policies (continued)
The forecasts include
by its customers, consideration of the cash position of the Group and the appropriate utilisation of the
various facilities available for funding this growth. We have also discussed with our bankers and other
financial advisers the resultant trading performance and they have indicated a strong desire to continue to
support the funding of these growth activities.
Changes in accounting policies
The Group has applied the following accounting standards and amendments for the first time for their
annual reporting period commencing on the 1 November 2018:
applied from the 1 November 2018 and is reflected in the
G
The standard addresses the
accounting principles for the financial reporting of financial assets and financial liabilities, including
classification, measurement, impairment, derecognition and hedge accounting. Financial assets will
continue to be measure
event to have occurred before credit losses are recognised. As the Group activity monitors the ageing
profile of trade receivables, impairments are made where credit risk is apparent. There has been no
material impact to the accounts.
This standard applied from the 1 November 2018
. The Group had
to change its accounting policies following the adoption of IFRS 15. There was no material impact to
the accounts from transition.
New standards, amendments and interpretations issued and not applied to these financial statements:
The International Accounting Standards Board (IASB) and the IFRS Interpretations Committee (IFRS IC)
have issued the following standards which are yet to be applied by the Group:
beginning on or after 1 January 2019 and will first apply to the Group
ending 31 October 2020. The standard requires lessees to recognise assets and liabilities for all leases
with lease terms of more than 12 months, unless the underlying asset is of low value. The most
Fareham & Malaysia
in relation to material rent agreements. The Group does have other non-property related operating
leases, but these are not as significant as the property leases. A full assessment has been performed
and approved by the board, with further details on the impact of transition in note 19.
for accounting periods
There are no other IFRSs or IFRIC interpretations that are not yet fully effective that could be expected to
have a material impact on the Group.
Revenue Recognition
From the 1 November 2019, the Group h
There has been no restatement of the prior year figures. The new standard requires clear identification of
separate performance obligations and the revenue associated with those obligations
Performance obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer a
series of distinct goods or services that are substantially the same and have the same pattern of transfer
to the customer. Goods and services are distinct and accounted for as separate performance obligations
in the contract if the customer can benefit from them either on their own or together with other resources
that are readily available to the customer and they are separately identifiable in the contract.
The Group provides warranties to its customers to give them assurance that its products and services will
function in line with agreed upon specifications. Warranties are not provided separately and, therefore, do
not represent separate performance obligations
49
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
47
Notes to the Financial Statements
Accounting policies (continued)
2.
Recognition
Revenue is recognised as performance obligations are satisfied as control of the goods and services is
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.
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
Work in progress and finished goods costs of direct materials and labour plus attributable overheads
purchase cost on a first-in/first-out basis.
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. 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. Goods or services supplied in a foreign
currency are recognised at the exchange rate ruling at the time of accounting for this expenditure.
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.
Research and development expenditure
Research expenditure - Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
Development expenditure - An internally generated intangible asset arising from the Group
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
50
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
48
Notes to the Financial Statements
2.
Accounting policies (continued)
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:
Plant and machinery
Motor vehicles
Fixtures and fittings
Leasehold Improvements
15% straight line
25% straight line
15% straight line
10% straight line
Exceptional items
Items which are both material and non-recurring are presented as exceptional items within the relevant
income statement category. The separate reporting of exceptional items helps provide a better indication
of the Group
Foreign currency translation
consolidated financi
presentation currency.
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 balance sheet presented are translated at the closing rate at the date
of that balance sheet
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 period. 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
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, interest rate swaps or similar
instruments. The Group does not issue or use financial instruments of a speculative nature.
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.
51
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
49
Notes to the Financial Statements
2.
Accounting policies (continued)
Loans and 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 loans and receivables comprise trade and other receivables included within the statement of
financial position.
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 provisions are recognised through the expected credit losses model (ECL). IFRS 9 Financial
instruments is effective from 1 November 2018 for Velocity Composites Plc. IFRS 9 addresses the
classification and measurement of financial assets and liabilities and replaces IAS 39. Fundamentally, the
standard introduces a forward-looking credit loss impairment model whereby the Company needs to
Company applies a simplified approach for measuring and impairing financial assets. When an expected
credit loss is calculated, the amount is recorded in a separate account and recognised as an administrative
expense in the income statement.
Financial liabilities
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. The Group does not currently have any borrowings and utilises invoice
discounting in support of its working capital requirements.
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
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
Finance Lease
Where substantially all the risks and rewards incidental to ownership of a leased asset have been
transferred to the Group
amount initially recognised as an asset is the lower of the fair value of the leased asset and the present
value of the minimum lease payments payable over the term of the lease. The corresponding lease
commitment is shown as a liability. Lease payments are analysed between capital and interest. The interest
element is charged to the Consolidated statement of comprehensive income over the period of the lease
and is calculated so that it represents a constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.
52
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
50
Notes to the Financial Statements
2.
Accounting policies (continued)
Operating Lease
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group
Consolidated statement
of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease
incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
Current taxation
The tax currently payable is based on the taxable profit of the period. 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 periods and it further excludes items that are never taxable
liability for current tax is calculated using rates that have been enacted or
or deductible. The Group
substantively enacted by the statement of financial position date.
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;
- the initial recognition of an asset or liability in a transaction which is not a business combination and
at the time of the transaction affects neither accounting nor taxable profit.
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 chief
operating decision-maker. The chief operating decision-maker has been identified as the Board of
Directors. The Group supplies a single type of product into a single industry and so has a single 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.
Critical accounting judgements
Useful lives of depreciable assets
Management reviews the useful lives of depreciable assets (both tangible and intangible) at each reporting
date. At the reporting date management assesses that the useful economic lives represent the expected
life of the assets to the Group. Actual results, however, may vary due to unforeseen events.
53
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
51
Notes to the Financial Statements
2.
Accounting policies (continued)
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of
the impairment.
If the recoverable amount of an asset (or subsidiary) is estimated to be less than its carrying amount, the
carrying amount of the asset (is reduced to its recoverable amount. An impairment loss is recognised as
an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the
impairment loss is treated as a revaluation decrease.
Provisions
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.
Critical accounting estimates
Where a reasonably possible change in a key assumption could give rise to a change the amount reported,
this is disclosed within the relevant note to the accounts.
3.
Financial instruments & Risk Management
The Board has overall responsibility for the determination of the Group
policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible
itiveness and flexibility. The Group reports in Sterling. All
without unduly affecting the Group
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, interest rate swaps 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
Financial instruments by category
Current assets
Trade and other receivables
Trade and other receivables
loans and receivables
non financial assets
Cash and cash equivalents
loans and receivables
Total loans and receivables
Current liabilities
Trade and other payables
Trade and other payables
at amortised cost
non financial liabilities
Year ended
31 October
2019
Year ended
31 October
2018
3,912
312
4,224
3,424
7,648
2,691
532
3,223
5,571
269
5,840
4,726
10,297
4,688
509
5,197
Risk management
The Group
and interest rate risk), credit risk and liquidity risk. The Group
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
Group
below.
foreign exchange risk
54
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
52
Notes to the Financial Statements
3.
a)
Financial instruments & Risk Management (continued)
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, Euros and Ringgits. The Group has
commercial agreements in place which allow it to transact with its customers in the currency of the material
purchase, thereby allowing currency risk to pass through the Group.
The carrying value of the Group
inventories in Note 14, trade receivables in Note 15, cash in Note 16 and trade payables in Note 17.
and liabilities comprise the
held in Sterling, movements in the exchange rate of
Whilst the majority of the Group
the US Dollar, Euro or Ringgit against Sterling do have an impact on both the result for the year and equity.
, Euro or Ringgits are held in those currencies
The Group
for normal trading activity in order to recover funds from customers or to pay funds to suppliers. The Group
also mitigates foreign currency risk by arranging forward currency swaps to hedge the net currencies held
against any significant movements in exchange rates.
Interest rate risk
The Group carries no significant borrowings apart from leases. Therefore, with the exception of the invoice
discounting facility which attracts an interest rate of 2.25%, the Directors consider that there is no significant
interest rate risk.
Credit risk
b)
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.
Liquidity risk
c)
The Group currently holds cash balances in Sterling, US Dollars, Euros and Ringgits 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.
2018
Finance lease liability
Trade payables
Accruals
Other payables
Invoice discounting facility
Within 1
year
One to
two
years
Two to
five
years
Over five
years
134
3,251
804
17
616
82
-
-
-
-
111
-
-
-
-
-
-
-
-
-
55
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
53
Notes to the Financial Statements
3.
Financial instruments & Risk Management (continued)
2019
Finance lease liability
Trade payables
Accruals
Other payables
Invoice discounting facility
Within 1
year
One to
two
years
Two to
five
years
Over five
years
121
2,242
532
13
4
110
-
-
-
-
59
-
-
-
-
-
-
-
-
-
The finance lease liability is shown gross, inclusive of interest payments.
Capital risk management
c)
For the purpose of the Group
reserves attributable to the equity holders of the Group. The Group
are to safeguard the Group
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.
company, Velocity Composites Sendirian Berhad, is located in Malaysia. 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:
Revenue
United Kingdom
Europe
Rest of the World
Year ended
31 October
2019
Year ended
31 October
2018
21,850
2,435
31
23,984
494
-
24,316
24,478
s total revenue for the year ended 31
During the year four customers accounted for 82.8% of the
October 2018. This was split as follows; Customer A 50.91% (2018: 46.7%), Customer B 19.9% (2018:
9.5% (2018: 13.9%). The majority of
22.2%), Customer C
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.
16.1% (2018: 13.2%) and Customer D
During the current and previous year, the Group operated in Asia. No revenue was generated in Asia during
the year ended 31 October 2019 and year ended 31 October 2018 as the site operates as an Engineering
Support Office for the Group.
56
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
54
Notes to the Financial Statements
5.
Loss from operations
The operating loss is stated after charging / (crediting):
Staff costs (see Note 6)
Foreign exchange (gain)/ losses
Amortisation of development costs
Impairment of development costs
Depreciation:
Owned assets
Assets held under finance leases
(Profit)/ Loss on disposal of assets
Grant income amortisation
Operating lease payments
Audit of the accounts of the Group
Other audit related services (relating to interim review)
Taxation compliance services
Other taxation advisory services
Year ended
31 October
2019
Year ended
31 October
2018
4,431
(75)
116
18
214
101
(11)
(6)
272
52
8
4
12
4,475
(68)
96
11
184
122
7
(15)
260
43
8
4
19
57
Velocity Composites plc
Velocity Composites plc
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements for the year ended 31 October 2019
Financial statements for the year ended 31 October 2019
Notes to the Financial Statements
Notes to the Financial Statements
Notes to the Financial Statements
6.
6.
6.
Staff costs
Staff costs
Staff costs
Financial statements Notes to the Financial Statements
55
55
55
Wages, salaries and bonuses
Wages, salaries and bonuses
Wages, salaries and bonuses
Social security costs
Social security costs
Social security costs
Pension costs
Pension costs
Pension costs
Share-based payments
Share-based payments
Share-based payments
The average monthly number of employees during the period was as follows:
The average monthly number of employees during the period was as follows:
The average monthly number of employees during the period was as follows:
Year ended
Year ended
Year ended
31 October
31 October
31 October
2019
2019
2019
Year ended
Year ended
Year ended
31 October
31 October
31 October
2018
2018
2018
3,929
3,929
3,929
321
321
321
116
116
116
65
65
65
4,431
4,431
4,431
3,839
3,839
3,839
359
359
359
108
108
108
169
169
169
4,475
4,475
4,475
Year ended
Year ended
Year ended
31 October
31 October
31 October
2019
2019
Head count
2019
Head count
Head count
83
83
83
49
49
49
132
132
132
Year ended
Year ended
Year ended
31 October
31 October
31 October
2018
2018
Head count
2018
Head count
Head count
85
85
85
47
47
47
132
132
132
Year ended
Year ended
31 October
Year ended
31 October
31 October
2019
2019
2019
Year ended
Year ended
31 October
Year ended
31 October
31 October
2018
2018
2018
325
325
325
113
113
113
19
19
19
-
-
-
457
457
457
172
172
172
419
419
419
60
60
60
20
20
20
-
-
-
499
499
499
180
180
180
Manufacturing
Manufacturing
Manufacturing
Administration
Administration
Administration
Directors costs
Directors costs
Directors costs
Wages, salaries and bonuses
Wages, salaries and bonuses
Wages, salaries and bonuses
Compensation for retirement from office
Compensation for retirement from office
Compensation for retirement from office
Pension costs
Pension costs
Pension costs
Share-based payments
Share-based payments
Share-based payments
Remuneration of the highest paid director(s):
Remuneration of the highest paid director(s):
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees
Wages, salaries and bonuses or fees
Wages, salaries and bonuses or fees
58
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
56
Notes to the Financial Statements
7.
Exceptional administrative expenses
Restructuring costs
Year ended
31 October
2019
Year ended
31 October
2018
692
692
252
252
The exceptional items reported in 2019 of £0.7m (FY18: £0.3m) consist of costs in relation
to the resignations of the previous chairman and non-executive directors, settlement of a
dispute with the founder shareholders, and various other associated costs relating to the
restructuring of the board. The disputes has been fully resolved, all costs settled and there
are no further liabilities in relation to these matters.
8.
Finance income and expenses
Finance expense
Finance charge from Finance leases
Other interest & invoice discounting charges
Finance Income
Year ended
31 October
2019
Year ended
31 October
2018
21
60
(23)
58
29
106
-
135
59
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
57
Notes to the Financial Statements
9.
Income tax
Current tax (income)/expense
UK corporation tax: in respect of this year
UK corporation tax: in respect of prior years
Adjustment for under provision in prior periods
Deferred tax (income)/expense
Deferred tax in respect of this year
Adjustments in respect of prior periods
Rates adjustment
Total tax (income)/expense
Year ended
31 October
2019
Year ended
31 October
2018
-
(16)
-
(16)
-
-
-
(16)
(16)
(69)
(38)
-
(107)
(106)
-
-
(106)
(213)
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 profit for the year as follows:
Tax rate
(Loss) for the year before tax
19.0%
19.0%
(652)
(1,207)
Expected tax credit based on corporation tax rate
(124)
(229)
Expenses not deductible for tax purposes
Other differences
Tax effect of R&D credits
Timing differences
Total tax (income)/expense
124
-
(16)
-
(16)
39
-
(38)
15
(213)
The UK corporation tax rate reduced to 19% with effect from 1 April 2017 and will reduce to 17% with effect
from 1 April 2020. This will reduce the
future current tax credit/charge accordingly.
The UK corporation tax rate for the year ended 31 October 2019 and 31 October 2018 is calculated at
19% based upon 12 months at 19%.
60
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
58
Notes to the Financial Statements
10.
Loss per share
Loss for the year
Weighted average number of shares in issue
Weighted average number of share options
Weighted average number of shares (diluted)
Loss per share (£) (basic)
Loss per share (£) (diluted)
Year ended
31 October
2019
£
Year ended
31 October
2018
£
(636,000)
(994,000)
Shares
Shares
35,860,652
587,101
36,447,753
35,795,539
638,200
36,433,739
(£0.02)
(£0.03)
(£0.02)
(£0.03)
Share options have not been included in the Diluted calculation as they would be anti-dilutive with a loss
being recognised.
11.
Intangible assets
Group and Company
Development
Costs
Group
Total
Cost
At 31 October 2017
Additions
Disposal
At 31 October 2018
Additions
Disposal
At 31 October 2019
Amortisation
At 31 October 2017
Charge for the year
Impairment
Disposal
At 31 October 2018
Charge for the year
Impairment
Disposal
At 31 October 2019
Net book value
At 31 October 2017
At 31 October 2018
At 31 October 2019
397
152
(16)
533
89
(23)
599
80
96
11
(16)
171
116
18
(23)
282
317
362
318
397
152
(16)
533
89
(23)
599
80
96
11
(16)
171
116
18
(23)
282
317
362
318
Annual test for impairment
The Group tests Development costs at each reporting period for impairment in accordance with IAS 36
carrying value might be
impaired. An indication of impairment can be generated from the loss of a customer, or contracted sales.
The Board have provided an impairment of £18,000 (2018 - £11,000) relating to development costs
capitalised but where no future economic benefits are currently expected to be generated for the Group.
61
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
59
Notes to the Financial Statements
12.
Property, plant and equipment
Group and Company
Leasehold
Plant &
Improvements machinery
Motor
vehicles
Fixtures
& Fittings
Group
Total
Cost
At 31 October 2017
Additions
Disposal
At 31 October 2018
Additions
Disposal
At 31 October 2019
Depreciation
At 31 October 2017
Charge for the year
Disposal
At 31 October 2018
Charge for the year
Disposal
At 31 October 2019
Net book value
At 31 October 2017
At 31 October 2018
At 31 October 2019
171
11
-
182
16
-
198
12
15
-
27
19
-
46
159
155
152
1,521
223
(12)
1,732
188
-
1,920
772
227
(6)
993
240
-
1,233
749
739
687
146
-
-
146
51
(56)
141
111
25
-
136
12
(56)
92
35
10
49
Net book value of assets under finance lease agreements:
At 31 October 2017
At 31 October 2018
At 31 October 2019
13.
Investment in subsidiaries
256
75
(2)
329
45
(25)
349
116
39
(2)
153
44
(21)
176
140
176
172
2,094
309
(14)
2,389
300
(81)
2,608
1,011
306
(8)
1,309
315
(77)
1,547
1,083
1,080
1,061
£
506
457
421
Group
Company
31 October 31 October 31 October 31 October
Company
Group
Subsidiary undertakings
2019
2018
2019
2018
-
-
-
-
-
-
-
-
62
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
60
Notes to the Financial Statements
13.
Investment in subsidiaries (continued)
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
Velocity
Composites
Aerospace, Inc.
Pentagon Suite,
ES-04, Level 3,
Wisma Suria,
Jalan Teknokrat
6, Cyber 5,
63000,
Cyberjaya,
Selangor
Corporation Trust
Center, 1209 N.
Orange St,
Wilmington,
Delaware 19801
14.
Inventories
Malaysia
Ordinary 100%
Manufacturer of
composite material
products for the
Aerospace sector
Ordinary 100%
United
States of
America
Manufacturer of
composite material
products for the
Aerospace sector
Group
Company
31 October 31 October 31 October 31 October
Company
Group
2019
2018
2019
2018
Raw materials & consumables
Finished goods
2,230
947
2,129
615
2,230
947
2,129
615
3,177
2,744
3,177
2,744
Inventories totalling £3,177k (2018: £2,744k) 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 write off of inventories during the year is not material.
The inventory at 31 October 2019 is after a stock provision of £241k (2018: £89k).
Inventories recognised as an expense during the year ended 31 October 2019 amounted to £16,787k
(2018: £17,791k), and these were included in cost of sales.
15.
Trade and other receivables
Group
31 October
2019
Group
31 October
2018
Company
31 October
2019
Company
31 October
2018
Trade receivables
Prepayments and accrued income
Other receivables
Amounts due from subsidiary
undertakings
3,607
312
230
-
5,159
269
412
-
3,607
312
230
5,159
269
412
29
31
4,149
5,840
4,178
5,871
63
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
61
Notes to the Financial Statements
Trade and other receivables (Continued)
15.
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 45 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
credit risk are
provided in note 3.
Trade receivables overdue by:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than 1 year
31 October 31 October
2019
2018
22
-
8
-
30
831
65
25
-
921
No receivables have been impaired as none are considered to be uncollectable.
Trade receivables held in currencies other than sterling are as follows:
Euro
US Dollar
16.
Cash and cash equivalents
31 October
2019
31 October
2018
367
2,594
673
3,443
2,961
4,116
Group
Group
31 October 31 October
2019
2018
Company
31 October
2019
Company
31 October
2018
Cash at bank
3,424
4,726
3,416
4,718
3,424
4,726
3,416
4,718
Of the total cash balance, £1,613k (2018: £3,756k) relates to cash to be used in compliance with the
conditions relating to the EIS investment i.e. new product development and investment into new overseas
territories.
64
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
62
Notes to the Financial Statements
17.
Trade and other payables
Current
Trade payables
Accruals
Other tax and social security
Other payables
Invoice discounting facility
Book values approximate to fair values.
18.
Grant income deferred
Group
31 October
2019
Group
31 October
2018
Company
31 October
2019
Company
31 October
2018
2,242
532
432
13
4
3,251
804
509
17
616
2,242
532
432
13
4
3,223
5,197
3,223
3,251
798
509
17
616
5,191
Group
31 October
2019
Group
31 October
2018
Company
31 October
2019
Company
31 October
2018
Opening balance
Grant income amortisation
Closing balance
7
(7)
-
22
(15)
7
7
(7)
-
22
(15)
7
65
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
63
Notes to the Financial Statements
19.
Leases
Operating leases
The Group leases motor vehicles and property, comprising both offices and assembly space, under
operating leases. The total value of minimum lease payments due is payable as follows:
Group
31 October
2019
31 October
2018
Motor vehicles
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
Land and buildings
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
5
2
-
-
7
360
360
443
578
1,741
23
5
1
-
29
249
245
362
-
856
Company
31 October
2019
31 October
2018
Motor vehicles
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
Land and buildings
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
5
2
-
-
7
360
360
443
578
1,741
23
5
1
-
29
246
245
362
-
853
The Group and Company have committed to an operating lease in relation to a new building at its current
premises. This new lease represents the majority of change from 2018 to 2019.
As from 1 November 2019, the Group will apply IFRS 16 ‘Leases’. The accounting standard will replace IAS
The accounting standard will replace
17 “Leases” and will require lease liabilities and “right of use” assets to be recognised on the balance sheet
sheet for operating leases. This is expected to result in an increase in assets and liabilities as set out below.
for operating leases. This is expected to result in an increase in assets and liabilities as set out below.
66
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
64
Notes to the Financial Statements
19.
Leases (continued)
The cost of operating leases currently included within operating costs will be split and the financing element
of the operating charge will be reported within finance expenses. Velocity Composites plc will implement
IFRS 16 applying the modified retrospective approach, whereby the right of use asset will match the liability
on the transition date of 1 November 2019. As the leases are basic in nature, the net impact to the Income
statement is the interest charged based on a discount factor. Due to the nature in interest, the interest cost
at the start of the lease will be higher.
On the transition date of 1 November 2019, the Group will recognise the following transactions:
Right of use assets:
Land and buildings
Motor Vehicles
Lease liability
479
13
492
(492)
On the transition date, there is no impact on deferred tax. From the 1 November 2019, the assets will be
classified for capital allowances, with interest based on a discount factor being allowable for corporation
tax purposes.
The Group will also recognise the following for new operating leases committed to during this financial year,
but yet to commence:
Right of use assets:
Land and buildings
Lease liability
885
(885)
Finance leases
The Group leases plant and equipment under finance leases which are secured against the assets. Future
lease payments are due as follows:
31 October 2018
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
31 October 2019
Not later than one year
Later than one year and not later than two years
Later than two years and not later than five years
Later than five years
Minimum lease
payments
Interest
Present
value
172
137
103
-
412
135
123
66
-
324
27
18
11
-
56
14
13
7
-
34
145
119
92
-
356
121
110
59
-
290
67
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
65
Notes to the Financial Statements
Deferred Tax
20.
Deferred tax is calculated in full on temporary differences under the liability method using tax rates
appropriate for the period. The movement on the deferred tax account is as shown below:
Group and Company
Deferred tax liability
Opening balance
Recognised in profit and loss
Closing balance
The movement on the deferred tax (asset)/liability is shown below:
Group and Company
Excess of taxation allowances over depreciation of all non-current
assets
Share options
Corporation tax losses carried forward
Closing tax (asset)
31 October 31 October
2019
2018
-
-
-
106
(106)
-
31 October 31 October
2019
2018
113
(252)
(139)
117
-
(128)
(11)
The Group has unused tax losses which were incurred by the holding company. A net deferred tax asset
of £139,000 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.
68
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
66
Notes to the Financial Statements
21.
Reconciliation of liabilities arising from financing activities
Group and Company
Long-term
borrowings
Short-term
borrowings
Total
At 31 October 2017
211
1,289
1,500
Cash flows
Repayment
Proceeds
Non-cash
Foreign exchange differences
Transfer from Long-term to short term borrowings
At 31 October 2018
Cash flows
Repayment
Proceeds
Non-cash
Foreign exchange differences
Transfer from Long-term to short term borrowings
As 31 October 2019
22.
Share capital
Share capital issued and fully paid
35,916,179 Ordinary shares of £0.0025 each
-
76
(29,121)
28,454
(29,121)
28,530
-
(116)
171
(6)
116
732
(6)
-
903
-
119
(29,494)
28,784
(29,494)
28,903
-
(121)
169
(18)
121
125
(18)
-
294
31 October
2019
£
31 October
2018
£
89,791
89,489
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.
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
period, is set out in note 23.
Movements in share capital
Ordinary shares of £0.0025 each
At the beginning of the year
Exercising of share options
Closing share capital at 31 October 2019
Nominal
value
£
Number of
shares
89,489
302
89,791
35,795,539
120,640
35,916,179
On 18 April 2019, the Company issued 120,640 new ordinary shares of £0.0025 each to satisfy the
.
69
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
67
Notes to the Financial Statements
23.
Share-based payment
The Group
Management Incentive and Unapproved Scheme.
Enterprise
The share options dated 13 March and 17 October 2017 have no attached performance conditions and
vest subject only to continued employment. All options under these arrangements were vested during the
financial year. The options may be exercised at any point up to the 10th Anniversary of the grant date.
During the year ended 31 October 2019, share options were granted as follows:
225,000 shares 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.
1,480,000 share options dated 29 October 2019 have attached performance conditions linked to EBITDA.
They vest after 2 years, or earlier if a vesting event occurs as defined in the rules of the Scheme. The
options may be exercised at any point up to the 10th Anniversary of the grant date.
Vesting events are defined within the rules of the Scheme as a reorganisation, takeover, sale, listing (except
on AIM), asset sales or death of the Option holder.
The Group recognised a cost of £65,453 (2018 £168,745) 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.
There were no cancellations or modifications to the awards in the period.
The following options were outstanding as at 31 October 2019:
Scheme and grant
date
Exercise
price £
Vesting date Expiry date Vested Not vested
Total
13 March 2017
17 October 2017
29 October 2019
29 October 2019
0.0025
0.6926
0.2065
0.2065
13 Mar 2019 13 Mar 2027 120,640
-
17 Oct 2019 17 Oct 2027
-
29 Oct 2022 29 Oct 2031
-
29 Oct 2021 29 Oct 2031
482,560
35,000
225,000
1,480,000
603,200
35,000
225,000
1,480,000
The cost of share-
comprehensive income. The share-based payments reserve is used to recognise the grant date fair value
of options issued to employees but not exercised.
Movement in share options
120,640
2,222,560
2,343,200
Scheme and grant
date
As at Nov
2018
Issued
Expired Exercised
1 January 2017
13 March 2017
17 October 2017
29 October 2019
29 October 2019
264,178
-
265,150 59,070
6,383
-
-
6,638
-
-
535,966 65,453
-
-
-
-
-
-
-
-
-
-
-
-
Vested As at 31
Oct 2019
-
(64,844)
-
-
-
264,178
259,376
13,021
-
-
(64,844)
536,575
70
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
68
Notes to the Financial Statements
24.
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:
Compensation of key management personnel:
Short term employment benefits
Share-based payments
31 October
2019
31 October
2018
724
40
764
1,016
102
1,118
included within exceptional administration expenses in both the current and prior year.
The following transactions took place with related parties (purchases or dividends)/sales:
The Group engages IN4.0 Access Limited, which provides consulting services. One of the directors
of IN4.0 Access Limited is a director of Velocity Composites Plc. The Group paid £1,500 (£nil 2018)
to IN4.0 Access Limited during the year and had £nil outstanding at the year end.
The following balances existed at periods end with related parties (payable)/receivable:
31 October
2019
31 October
2018
Related parties
-
-
25.
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.
26.
Capital commitments
At 31 October 2019 the Group had £445,369 (2018: £78,500) of capital commitments relating to the
purchase of leasehold improvements, plant and machinery and fixture and fittings.
27.
Pension commitments
The Group makes contributions to defined contribution stakeholder pension schemes. The contributions
for the year of £115,654 (2018: £107,573) were charged to the Consolidated Income statement.
Contributions outstanding at 31 October 2019 were £24,374 (2018: £17,013).
28.
Contingent liabilities
At 31 October 2019 the Group had in place bank guarantees of £nil (2018: £250,000) in respect of supplier
trade accounts.
71
Velocity Composites plc
Financial statements for the year ended 31 October 2019
Financial statements Notes to the Financial Statements
69
Notes to the Financial Statements
29.
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, share-based payments and exceptional restructuring costs.
Adjusted EBITDA
Reconciliation from Operating Profit
31 October
2019
31 October
2018
Operating Loss
(594)
(1,072)
Add back:
Share-based payments
Depreciation & Amortisation
Exceptional Administrative costs
66
449
692
169
413
252
613
(238)
72
Shareholder Information Advisors
Advisors
Company registration number:
06389233
Company Secretary and
Registered office:
Nominated advisor and broker
Bankers:
Legal Advisor
Independent Auditor
Registrars
Financial PR
Andrew Hebb
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
Cenkos Securities Plc
6-8 Tokenhouse Yard
London
EC2R 7AS
National Westminster Bank
1 Hardman Boulevard
Manchester
M3 3AQ
Royal Bank of Scotland
1 Hardman Boulevard
Manchester
M3 3AQ
DWF LLP
1 Scott Place
2 Hardman Street
Manchester
M3 3AA
Grant Thornton UK LLP
Chartered Accountants & Statutory Auditor
4 Hardman Square
Spinningfields
Manchester
M3 3EB
Equiniti
Aspect House
Spencer Road
Lancing Business Park
West Sussex
BN99 6DA
Belvedere Communications Ltd
25 Finsbury Circus
London EC2M 7EE
73
Shareholder Information Notice of AGM
Notice of AGM
Notice is hereby given that the 2020 Annual General Meeting of Velocity Composites plc (the
“Company”) will be held at the offices of AMS Technology Park, Billington Rd, Burnley BB11 5UB on
25 February 2020 at 10.00am to consider, and if thought fit, pass the following resolutions. Resolutions
1 to 8 (inclusive) will be proposed as ordinary resolutions and resolutions 9 and 10 will be proposed as
special resolutions.
Ordinary business
Ordinary resolutions
1. To receive and adopt the Annual Report and Accounts of the Company for the period ended 31
October 2019 and the reports of the directors and independent auditors thereon.
2. To approve the Directors’ Remuneration Report contained within the Company’s Annual Report and
Accounts for the period ended 31 October 2019.
3. To re-appoint as a director Jonathan Karl Bridges who retires from office in accordance with the
Company’s Articles of Association and offers himself for re-appointment.
4. To re-appoint as a non-executive director Andrew Michael Beaden who retires from office in
accordance with the Company’s Articles of Association and offers himself for re-appointment.
5. To re-appoint as a non-executive director Robert Murray Soen who retires from office in accordance
with the Company’s Articles of Association and offers himself for re-appointment.
6. To re-appoint Grant Thornton UK LLP as independent auditors of the Company, from the conclusion
of this Annual General Meeting until the conclusion of the next general meeting of the Company at
which accounts are laid and to authorise the directors to determine the auditors’ remuneration.
Special business
Ordinary resolutions
7. To resolve that the directors be and are hereby generally and unconditionally authorised for the
purposes of Section 551 of the Companies Act 2006 (the “Act”), to exercise all the powers of the
Company to allot shares and grant rights to subscribe for, or convert any security into, shares:
7.1 up to a maximum nominal amount (within the meaning of Section 551(3) and (6) of the Act)
of £29,930.14 (such amount to be reduced by the nominal amount allotted or granted under
paragraph 7.2 below in excess of such amount); and
7.2 comprising equity securities (as defined in Section 560(1) of the Act) up to an aggregate
nominal amount (within the meaning of Section 551(3) and (6) of the Act) of £59,860.29 (such
amount to be reduced by any allotments or grants made under 7.1 above) in connection
with or pursuant to an offer by way of a rights issue in favour of holders of ordinary shares
in proportion (as nearly as practicable) to the respective number of ordinary shares held by
them on the record date for such allotment (and holders of any other class of equity securities
entitled to participate therein or if the directors consider it necessary, as permitted by the rights
of those securities), but subject to such exclusions or other arrangements as the directors
may consider necessary or appropriate to deal with fractional entitlements, treasury shares,
record dates or legal, regulatory or practical difficulties which may arise under the laws of, or
74
Shareholder Information Notice of AGM
the requirements of any regulatory body or stock exchange in any territory or any other matter
whatsoever,
these authorisations to expire at the conclusion of the next Annual General Meeting of the Company
(or if earlier on 24 February 2021), unless previously revoked or varied by the Company (save that
the Company may before such expiry make any offer or agreement which would or might require
shares to be allotted or rights to be granted after such expiry, and the directors may allot shares, or
grant rights to subscribe for or to convert any security into shares in pursuance of any such offer or
agreement as if the authorisations conferred hereby had not expired).
8. To resolve that:
8.1 the rules of the Velocity Composites plc UK Share Incentive Plan 2020 (UK SIP) (the principal
features of which are summarised in the explanatory notes of this document and a copy of
which will be produced to the meeting and initialled by the chairperson for the purposes of
identification) and that the directors be authorised to make such modifications to the UK SIP
as they may consider necessary to maintain its tax advantaged status and to take account of
best practice and to adopt the UK SIP as so modified; and
8.2 the directors to be authorised to do all acts and things which they may consider necessary or
expedient for the purposes of implementing and giving effect to the UK SIP.
Special resolution
9. To resolve that, subject to the passing of resolution 7 set out above, the directors be and are hereby
given power pursuant to Sections 570(1) and 573 of the Act to allot equity securities (as defined in
Section 560(1) of the Act) for cash pursuant to the authorisation conferred by that resolution, as if
Section 561 of the Act did not apply to any such allotment, provided that such authority be limited:
9.1
to the allotment of equity securities for cash in connection with or pursuant to an offer of,
or invitation to acquire, equity securities (but in the case of the authorisation granted under
resolution 7.2 above, by way of a rights issue only) in favour of holders of ordinary shares
in proportion (as nearly as practicable) to the respective number of ordinary shares held by
them on the record date for such allotment (and holders of any other class of equity securities
entitled to participate therein or if the directors consider it necessary, as permitted by the rights
of those securities) but subject to such exclusions or other arrangements as the directors may
consider necessary or appropriate to deal with fractional entitlements, record dates or legal,
regulatory or practical difficulties which may arise under the laws of or the requirements of any
regulatory body or stock exchange in any territory or any other matter whatsoever; and
9.2 to the allotment of equity securities (otherwise than under paragraph 9.1 above) up to an
aggregate nominal amount of £8,948.89,
such authority to expire at the conclusion of the next Annual General Meeting of the Company (or,
if earlier, on 24 February 2021), unless previously revoked or varied by the Company (save that the
Company may before such expiry make any offer or agreement that would or might require equity
securities to be allotted, or treasury shares to be sold, after such expiry and the directors may allot
equity securities, or sell treasury shares in pursuance of any such offer or agreement as if the power
conferred hereby had not expired).
75
Shareholder Information Notice of AGM
Notice of AGM
10. To authorise the Company generally and unconditionally for the purposes of section 701 of the Act
to make market purchases (within the meaning of section 693(4) of the Act) of any of the ordinary
shares in the capital of the Company on such terms and in such manner as the directors may from
time to time determine, such shares to be either held as treasury shares or cancelled as the board
may determine, provided that:
10.1 the maximum aggregate number of shares that may be purchased is 3,591,617;
10.2 the minimum price that may be paid for each ordinary share is the nominal amount of such
share which amount shall be exclusive of expenses, if any.
10.3 the maximum price (exclusive of expenses) which may be paid for each ordinary share is an
amount equal to the higher of:
10.3.1 105 per cent of the average of the middle market quotations for the ordinary shares
of the Company (as derived from the AIM Appendix to the Daily Official List of
London Stock Exchange plc) for the five business days immediately preceding the
day on which such share is contracted to be purchased; and
10.3.2 the higher of the price of the last independent trade and the highest current
independent bid on the London Stock Exchange as stipulated by the Commission-
adopted Regulatory Technical Standards pursuant to article 5(6) of the Market Abuse
Regulation;
10.4 the Company may, before this authority expires, make a contract to purchase ordinary shares
that would or might be executed wholly or partly after the expiry of this authority, and may
make purchases of ordinary shares pursuant to it as if this authority had not expired; and
10.5 unless previously renewed, revoked or varied, this authority shall expire on 24 February 2021,
or if earlier, at the conclusion of the next annual general meeting of the Company.
By order of the Board
Andrew Hebb
Company Secretary
27 January 2020
Registered Office: AMS Technology Park, Billington Road, Burnley, Lancashire, BB11 5UB
Registered in England and Wales No. 06389233
76
Shareholder Information Notes to the AGM
Notes to the AGM
1.
2.
3.
4.
5.
6.
All members who hold ordinary shares are entitled to attend and vote at the meeting. A member
who is entitled to attend and vote may appoint one or more proxies to attend and vote instead of
him/her, and a proxy need not also be a member. A form of proxy accompanies this notice and the
notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold
their vote. If you do not intend being present at the meeting please sign and return it so as to reach
the Company’s registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex,
BN99 6DA, by no later than 10.00am on Friday 21 February 2020. The return by a member of a duly
completed form of proxy will not preclude any such member from attending in person and voting at
the meeting. If you wish to attend the meeting in person, we advise arriving at least 15 minutes prior
to the meeting.
You may appoint more than one proxy provided that each proxy is appointed to exercise the rights
attached to different shares. You may not appoint more than one proxy to exercise rights attached
to any one share. To appoint more than one proxy, please return a separate form in relation to each
proxy to the Company’s registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West
Sussex, BN99 6DA, clearly indicating next to the name of each proxy the number and class of
shares in respect of which he is appointed. Failure to specify the number of shares to which each
proxy appointment relates or specifying a number in excess of those held by the shareholder will
result in the proxy appointment being invalid. If you submit more than one valid proxy appointment
in respect of the same shares, the appointment received last before the latest time for the receipt of
proxies will take precedence.
The register of directors’ interests in the shares of the Company and copies of the directors’ service
contracts and letters of appointment, other than those expiring or determinable without payment of
compensation within one year, are available for inspection at the registered office of the Company
during the usual business hours on any weekday (Saturdays, Sundays and public holidays excluded)
from the date of this notice until the Annual General Meeting and will be available for inspection at
the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only those shareholders
registered in the register of members of the Company by 6.30pm on Friday 21 February 2020 shall
be entitled to attend and vote at the Annual General Meeting in respect of the number of shares
registered in their name at that time. Any changes to the register of members after such time shall
be disregarded in determining the rights of any person to attend or vote at the meeting.
There are set out below notes to the resolutions to be passed at the AGM. If you require further
guidance you should contact your solicitor or financial adviser.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST
message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear
UK & Ireland Limited’s specifications and must contain the information required for such instructions,
as described in the CREST Manual. The message must be transmitted so as to be received
by Equiniti Limited (ID: RA19) not later than 48 hours before the time fixed for the AGM. For this
purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to
the message by the CREST Applications Host) from which Equiniti is able to retrieve the message by
enquiry to CREST. After this time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means. Euroclear UK & Ireland Limited
does not make available special procedures in CREST for any particular messages and normal
system timings and limitations will apply in relation to the input of a CREST Proxy Instruction. It is
the responsibility of the CREST member concerned to take such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system by any particular time. The
Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
77
Shareholder Information Notes to the AGM
Explanatory Notes to the Resolutions to be proposed at the Annual General Meeting
Resolution 1
Report and accounts
The directors will present the audited financial statements of the Company for the period ended 31
October 2019 together with the directors’ report and the auditor’s report on those financial statements.
Resolution 2
Remuneration report
The directors will present the remuneration report for the period ended 31 October 2019 for approval. This
vote is not mandatory but is considered best practice.
Resolutions 3 to 5 inclusive
Re-election of directors
Under the articles of association of the Company, all directors appointed by the Board after the first annual
general meeting shall retire at the annual general meeting following appointment and shall then be eligible
for re-election and at least one third of the total number of directors shall retire at the annual general
meeting and shall then be eligible for re-election.
Resolution 6
Re-appointment of auditors and fixing of auditors’ remuneration
At every Annual General Meeting at which accounts are laid before shareholders, the Company is
required to appoint an auditor to hold office from the end of the meeting until the next such meeting. This
Resolution 6 proposes that Grant Thornton UK LLP be re-appointed as the Company’s auditors to hold
office until the next Annual General Meeting and that the directors be authorised to set their remuneration.
Resolution 7
General authority to allot new shares
Resolution 7, if passed, will grant authority for the directors to issue new shares within the best practice
limits set by The Investment Association. The authority set out in paragraph 7.1 would permit allotments
of new shares up to approximately one-third of the current issued share capital. The authority set out in
paragraph 7.2 would permit allotments of new shares up to approximately two-thirds of the current issued
share capital but would apply only in the case of an allotment of shares made pursuant to a rights issue
(pre-emptive offer).
78
Shareholder Information Notes to the AGM
Resolution 8
Resolution 8, which is proposed as an ordinary resolution, has been included as the Company is seeking
shareholder approval to adopt the Velocity Composites plc UK Share Incentive Plan 2020 (UK SIP).
The UK SIP is an all employee share incentive plan designed to be a tax advantaged which complies
with schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (Schedule 2). The UK SIP will be
administered by the Company’s Board of Directors or a duly authorised committee of the Board
The UK SIP, which will need to be registered with HM Revenue & Customs, offers up to four ways in which
an employee of the Company can acquire shares in the Company which benefits from tax advantaged
status (subject to a minimum holding period):
(a) By an issue of free shares with a market value of £3,600;
(b) By an acquisition of partnership shares with a market value of up to a maximum of the lesser of
£1,800 per year and 10% of pay from pre-tax salary;
(c) By an issue of matching shares, of a maximum of two shares for every one partnership share
acquired; and
(d) By acquiring dividend shares by using dividends paid out on the above shares to acquire further
shares.
No cash alternatives are permitted to encourage employees to acquire shares in the Company. It is at the
discretion of the Company’s Board of Directors whether any or all of these are available to the Company’s
employees at all times or at some times.
Resolution 9
General disapplication of pre-emption rights
Resolution 9, which is proposed as a special resolution, will, if passed, disapply the statutory pre-emption
provisions that otherwise restrict directors from issuing new shares other than pursuant to a rights issue.
The relaxation of the statutory restriction proposed in this resolution would apply to 10 per cent. of the
Company’s current issued share capital.
Resolution 10
Resolution 10, which is proposed as a special resolution will give the Company authority to purchase its
own shares in the market up to a limit of approximately 10 per cent. of its issued ordinary share capital
(excluding treasury shares) at 27 January 2020, being the latest practicable date prior to the publication
of this notice. The maximum and minimum prices are stated in the resolution. Whilst they do not currently
have any intention to utilise this authority the directors believe that it is advantageous for the Company to
have this flexibility to make market purchases of its own shares. The directors will exercise this authority
only if they are satisfied that a purchase would result in an increase in expected earnings per share and
would be in the interests of shareholders generally.
In the event that shares are purchased, they would either be cancelled (and the number of shares in
issue would be reduced accordingly) or, in accordance with the Companies Act 2006, be retained as
treasury shares. The Company may consider holding repurchased shares pursuant to the authority
conferred by this resolution as treasury shares. This gives the Company the ability to transfer treasury
shares quickly and cost effectively and would provide the Company with additional flexibility in the
management of its capital base.
79
Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
2019 Annual Report &
Financial Statements
For the year ended 31 October 2019
Registered No. 06389233