2020 Annual Report &
Financial Statements
For the year ended 31 October 2020
Contents
1. Strategic Report
Highlights ................................................................................. 3
Chairman’s Report ................................................................... 4
Business Strategy ................................................................... 6
CEO Report ........................................................................... 12
Financial Review .................................................................... 15
Principal Risks & Uncertainties ................................................ 19
2. Governance
Statement of Corporate Governance ..................................... 26
Board of Directors .................................................................. 32
Senior Management ................................................................ 34
Director’s Report .................................................................... 35
Director’s Remuneration Report ............................................. 38
3. Financial Statements
Independent Auditor’s Report .................................................. 40
Consolidated Statement of Total Comprehensive Income ........ 50
Consolidated and Company Statement of Financial Position ... 51
Consolidated and Company Statement of Changes in Equity . 52
Consolidated and Company Statement of Cash Flows ............ 54
Notes to the Financial Statements ........................................... 55
4. Shareholder Information
Advisors .................................................................................. 82
Notice of General Meeting ..................................................... 83
Notes to Notice of General Meeting ........................................ 87
Strategic Report Highlights
Financial Highlights
Revenue
£13.6m
Gross Margin %
Adjusted EBITDA1
17.1%
£(1.9m)
Cash at bank
£3.3m
Operating Profit / (Loss)
£(3.1m)
1 Earnings before Interest, Tax, Depreciation, Amortisation, Impairment, adjusted for exceptional administrative costs and share based
payments. The business uses this Alternative Performance Measure to appropriately measure the underlying business performance,
as such it excludes costs associated with non core activity.
3
Chairman’s Report
Strategic Report Chairman’s Report
Andy Beaden Executive Chairman
“
The Company is now highly
operationally geared, such that
any significant recovery in activity,
even if only to below pre-pandemic
levels, will have a strong positive
impact on future profitability.
”
We will all remember 2020 as
a year of extraordinary events
and in the Aerospace industry
it has been one of the most
challenging in living memory.
For Velocity Composites plc,
we entered the year with the
objectives of securing new
business and developing our
strategy around being seen
as the leading supplier of
composite kitting technology
in our industry.
Despite the immense challenges,
we have still advanced
significantly in developing a full
package of solutions for the
composite aerospace sector
around our core offering of
Velocity Resource Planning.
This has led to us winning
new business and developing
our relationships with the
major composite aerospace
manufacturers.
The pandemic has resulted in
significant reductions in the
manufacturing volumes of all civil
aircraft frames by the primary
manufacturers Airbus and
Boeing. The dramatic impact
across the airline industry has
resulted in a series of lockdowns
and temporary plant closures
forced upon our customers
and resulted directly to lower
order levels for the Company.
Revenues in the second half of
our financial year were £4.1m,
compared to £12.2m in H2
FY2019. As a result revenues
for the full year were £13.6m
(FY2019: £24.3m).
In response to prevailing macro
and industry conditions, Velocity
reacted swiftly to right size its
business. In doing so, we sadly
had to reduce our staffing levels
from 132 at the start of the
financial year to 70 by the end,
and we utilised U.K. government
support packages. We have
also focussed attention on
reducing inventory levels, working
closely with both suppliers and
customers in this area. While this
has resulted in an improvement in
working capital, the full benefit of
the inventory reduction process
will be realised in 2021.
In anticipation of a sharp fall
in sales, the Board has been
acutely focussed on ensuring that
the Company maintained, and
continues to maintain, sufficient
financial liquidity. In this regard
4
during the year we received
support from our bank and the
U.K. Government through the
Coronavirus Business Interruption
Loan scheme and secured £2.0m
of new debt funding. This was
repayable over two years from
July 2020, with repayments
starting in August 2021, but with
the continued uncertainty we
have recently agreed to extend
this to a 6 year period. The
interest cost is favourable and
covenants are minimal, with no
cost to the Company in the first
year. The Company also secured
Government grants under the
Coronavirus Job Retention
Scheme of £0.4m. This support,
plus cost reductions, utilisation
of HMRC salary furlough credits
and inventory management,
have meant we have controlled
our cash position. Even with the
new debt, we have retained a net
positive cash position and expect
to generate further cash through
inventory reduction in 2021.
As a result of the effects of
the pandemic, customer and
Velocity shutdowns and some
inventory obsolescence,
the Company recorded an
adjusted EBITDA loss in the
Strategic Report Chairman’s Report
year of £1.9m. Further details
can be found in Note 29, with
adjusted EBITDA being defined
as earnings before finance
charges, taxation, depreciation,
amortisation, impairment, share-
based payments and exceptional
restructuring costs. As we enter
2021, the level of these losses
has been narrowed as a result of
the cost reduction programme,
and the Board anticipates that
going forward the Company
will be EBITDA break-even at
FY2020 levels of revenues.
Given the disruption in early
2021, the realistic objective is
for the Company to be EBITDA
break-even by the second half
of 2021. The Company is now
highly operationally geared, such
that any significant recovery in
activity, even if only to below
pre-pandemic levels, will have a
strong positive impact on future
profitability.
The Board is making no rash
assumptions as to the recovery
of build rates in the civil aircraft
industry to pre-COVID levels,
but Velocity is fortunate to
have been awarded a series
of new programmes with
existing customers, who see
our technology as a contributor
to greater cost efficiency and
improved margins in their own
front end production processes.
This new business, which will
take time to qualify and ramp
up, is expected to result in
a significant improvement in
sales for 2022 and beyond. It
also means when we eventually
do see the upturn in primary
aircraft production rates, that
upturn should push us above
the pre-COVID sales levels.
We also continue to pursue a
number of further new business
opportunities, including in the
USA.
We have radically restructured
our operations, with a focus on
Industry 4.0 technology and
customer service, as well as
changes to our management
team with the introduction
of some new highly skilled
individuals, particularly
strengthening our commercial
and financial functions.
Colleagues have worked tirelessly
in the demanding period and our
push towards being seen as a
leading engineering technology
provider in our sector continues.
This has been funded via the
EIS money raised at the IPO and
everyone at Velocity is energised
by the exciting opportunities
opening up for the business.
During the period we were also
pleased to welcome Margaret
Amos and Chris Williams to
the Board. Margaret Amos
brings with her nearly 30
years aerospace and financial
management expertise. She
has been appointed as our Audit
Chair, along with supporting
us in governance and strategy.
Chris Williams was appointed as
the Company’s new permanent
CFO in August 2020 and brings
a diverse range of systems and
commercial finance skills.
In summary, the industry
wide demand reductions are
disappointing, but with the
prudent financial management
and strategic re-alignment, we
remain very confident of the long-
term prospects. The business
has gone through a major
restructuring and is leaner than
before, but better skilled for the
future demands in our industry.
The Board is, and I am
personally, extremely proud of
Velocity’s employees and the
dedication they have shown
throughout 2020 and the
Company remains grateful for
the ongoing support and backing
received by customers and
suppliers during the year.
Andy Beaden
Chairman
25 January 2021
Velocity HQ, Burnley, Lancashire, UK
5
Strategic Review Chairman’s Report Business Strategy
Market
The civil aerospace industry has
gone through a large amount
of uncertainty over the past 10
months as the immediate and
severe effects on global flight
schedules caused both Airbus
and Boeing to reduce aircraft
production rates to minimal
levels as the long-term effects
were understood. This in turn
was replicated by the customers
of Velocity as they adjusted the
production rates of their sub-
assemblies and the associated
supply chains.
Both Airbus and Boeing publish
detailed market outlook forecasts
annually, usually with clear
correlations between the two
companies:
Airbus - www.airbus.com/
aircraft/market/global-market-
forecast
Boeing - www.boeing.com/
commercial/market/commercial-
market-outlook
At the time of writing only
Boeing has updated its forecast
taking into account COVID-19
effects, with both companies
expecting to publish detailed
updates by summer 2021. From
this intermediate report it is
clear that despite the picture
remaining dynamic and the
unprecedented disruption to the
industry, the long-term growth
drivers and fundamentals for air
travel remain. In support of this,
Boeing sets out a three-stage
outlook for near term, medium
term and long term recovery and
growth:
Strategic Report Business Strategy
Near Term: Demand
Focused on Fleet Renewal
Over the last decade, growth in
passenger air travel averaged
6.5% per year, well above the
long-term average of 5%. In this
business environment, many
of the world’s airlines grew
their fleets through deliveries
of new airplanes and often
delayed airplane retirements
to accommodate passenger
demand.
The current downturn is likely to
lead to the replacement of many
older passenger airplanes. This
accelerated replacement cycle
will position airlines for the future
by improving the efficiency and
sustainability of today’s fleet.
July 2020: British Airways aircraft sit in long term storage due to coronavirus
6
Strategic Report Business Strategy
Medium Term: Aviation
Has Proven Resilient
While aviation has seen periodic
demand shocks since the
beginning of the Jet Age, our
industry has recovered from
these downturns every time.
Boeing currently believe it will
likely take about three years
for air travel to return to 2019
levels, and it will be a few years
beyond that for the industry
to return to long-term growth
trends. Aviation remains an
integral part of transportation
systems around the world. The
maturation of many emerging
market economies will further
increase consumer spending’s
share of economic activity,
bolstering demand for air travel.
In addition, coming out of every
crisis, the industry has innovated
by improving service and value
for the travelling public.
Aviation has proven resilient over and over again
COVID-19
Pandemic
Global Financial Crisis
9/11 and SARS
12
10
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2010
2020
Actual Traffic (RPKs)
Scenario (RPKs)
Trend
ICAO scheduled traffic through 1999 / 2000-2019 EIATA stats / 2020F. IATA December 2019
7
Strategic Report Business Strategy
WORLD AIRCRAFT DELIVERIES 2010 - 2029
(VALUE IN 2020 $BNS)
160
140
120
100
80
60
40
20
s
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$
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2
Military
Civil (January)
Civil (November)
SOURCE: AERO MARKET, TEAL
GROUP CORPORATION DEC 2020
composite materials,
both now and with
future hydrocarbon
free power
technologies.
Regarding military
platforms these have
been less effected
by rate reductions as
they are not subject to
the same commercial
pressures. The
outlook for both
production rates and
composite content on
these platforms
remains
strong.
Long Term: Emphasis
on Fleet Versatility
The current market disruption
will shape airline fleet strategies
long into the future as airlines
make decisions to renew their
fleets and resume growth.
Airlines will focus on building
versatile fleets that provide
future network flexibility,
maximizing capability while
minimizing risk, and improving
efficiency and sustainability as
the industry moves towards de-
carbonisation by electrification
and hydrogen power.
What this means
for Velocity is that
production rates
are expected to
recover over the
next 3 years, led by
single aisle platforms
(A220, A320, B737)
followed by the newer twin
aisle platforms (A350, B777X,
B787). Capacity has been lost
due to the early retirement
of predominantly metallic
airframes and so airlines will
be looking to replace these
with newer, more fuel efficient/
sustainable aircraft which
all utilise higher volumes of
TOP 10 AVIATION PROGRAMS; CUMULATIVE DELIVERIES (VALUE IN 2020 $ BNS)
$0
$50
$100
$150
$200
$250
$300
$350
Airbus A320/Neo
Boeing 737NG/MAX
Lockheed Martin F-35
Boeing 787
Airbus A350XWB
Boeing 777/X
Airbus A220
Boeing 767/KC-46
Gulfstream 650/700
Gulfstream 500/600
Top 5 are
54% of total
(next 15 are
22%)
2020-2029
2010 - 2019
Active Velocity Programmes
SOURCE: AERO MARKET, TEAL GROUP CORPORATION DEC 2020
8
8
Strategic Report Business Strategy
Velocity’s new Advanced Technology Centre at Burnley HQ
Strategy
Taking the market forecasts
into account the long-term
fundamentals of Velocity remain
compelling, albeit subject to
short-term disruption caused
by production rate demand
reductions, customer response
to the demand reductions,
travel restrictions for business
development and general
uncertainty in the aerospace
market.
What the disruption has
demonstrated is that despite
the effects of a global pandemic
(i.e. immediate one year of
flight groundings followed
by three years of production
rate recovery) not being part
of industry planning, the
procedures, manufacturing
processes and technology of
Velocity facilitated an orderly
and data driven transition for
all customers and suppliers
through the disruption in 2020.
Once stabilised, the technology,
IP and flexible service offering
of Velocity has also allowed for
newer, more relevant solutions
to be developed for customers
to help them reduce costs, right-
size and manage the disruption
through their manufacturing
areas until production rates
recover. This reaffirms the
need of Velocity to remain at
the forefront of raw material
management, material utilisation
and lean manufacturing
integration, whilst having the
flexibility to adapt to how the
customer wants to use Velocity’s
IP to reduce their own costs. To
this end Velocity will utilise the
disruption period to focus on the
following:
• Continued investment in
digital technology, utilising
the fully open Advanced
Technology Centre on the
Burnley, UK site, to further
develop in-house Industry
9
Strategic Report Business Strategy
4.0 solutions around
material nesting, real time
vision system process
augmentation, real time
material resource planning
technology (including AI),
real time tracking of all life-
managed raw materials
using cloud computing and
RFID, rapid prototyping
using 3D scanning
technology.
• The integration of the above
technology into the in-house
developed “VRP System”
managing all aspects of the
Company’s services.
• Development of alternative
service models utilising
the licensing of the above
technology for customers
who want a more phased
adoption of Velocity’s model.
This would be controlled
by Velocity centrally,
but deployed in a more
flexible way to permit new
customers to transition to
Velocity by the sub-licence
of Velocity technology and
serviced without immediate
resource intensive changes
to their operational set-up.
changes were structured to
protect business development
and technology development
personnel and bring forward
longer term development plans
into a focussed and targeted
plan for FY21 to deliver the
above benefits.
It is expected that accelerated
development and completion
of the above plans will assist
in the potential new-business
pipeline of £50m over the next
three financial years, by bringing
further benefits and flexibility
to existing customers, whilst
creating a unique system of
software tools, manufacturing
technology and digital solutions
to meet the global need in the
advanced composites industry.
•
Investigations, with
Velocity’s industry partners
(both supply chain and
material suppliers), of
alternative markets where
the above technology can be
deployed e.g. wind energy,
surface transport, light
weighting for electrification
of road transport, medical,
personal urban air vehicles
and unmanned air vehicles.
The above developments have
been planned and budgeted
as part of the Company’s
Integrated Business Plan for
FY21. Recent headcount
10
Strategic Report Business Strategy
Our highly efficient nests
Engineers using our bespoke VRP system
3D scanning technology
ATDC Trials
Reverse Engineering
11
CEO Report
Strategic Report CEO Report
Jon Bridges Chief Executive
“
The Company has accelerated
activities to utilise our industry
partners in both Europe and North
America to investigate new composite
markets where our technology can
be applied, for example ground
transportation, wind energy, military
and transport electrification.
”
So much has changed in the
world during the last year
that Velocity’s annual report
unsurprisingly reflects two
very distinct periods; the
period before the effects of
COVID-19 became globally
apparent and the time since.
The year started with two key
executive recruitment goals, to
appoint both a new Customer
Programmes Director and full
time CFO, the latter of which
had previously been filled (by
Andrew Hebb) on an interim
basis. Despite the onset of the
COVID-19 pandemic during
these processes, I am pleased
to announce that both roles were
filled by the preferred candidates,
with James Eastbury taking up
the position of Head of Customer
Programmes in May 2020 and
Chris Williams joining as Chief
Financial Officer in August 2020.
Both James and Chris bring
significant and valuable skills and
experience to their roles as the
Company meets the challenges
of the COVID-19 pandemic and
plans for the recovery that will
follow.
The year also started well in
progressing the key strategic
targets of working with a focused
number of key customers for
new business growth and
utilising Velocity’s technology to
drive further efficiencies in the
composites supply chain. These
targets, however, were impacted
by the onset of the COVID-19
pandemic, which led to an
immediate and unprecedented
reduction in air travel, and in
turn, leading to the immediate
reduction in aircraft production
rates and the associated
reduction in demand seen by
Velocity’s customers.
The response from Velocity
was swift, based around the
safety of our staff and the need
to align the raw material supply
chain with the new customer
demand, inside of the usual
extended lead times. From the
onset of the pandemic, and
through the summer months,
the demand from customers
was changing on a daily
basis. Our industry sought to
respond to the unprecedented
circumstances, and the work
to align the raw material supply
12
chain with customer demand
involved considerable real time
planning and dynamic scenario
modelling utilising Velocity’s
bespoke technology. During this
period customer manufacturing
plants were also closed for
several intervals and at different
times, as each customer utilised
furlough schemes to help with
the reduced demand build
rates. The immediate reductions
also lead to higher raw material
stock levels for material that
was already purchased by
the Company, including stock
positions put in place to mitigate
any effects of Brexit disruption.
As such, the Company continues
to work collaboratively with
customers to consume these
stocks, whilst managing the
wider supply chain effects of the
COVID-19 pandemic.
During this period of maximum
disruption, I am pleased to
report that Velocity’s sites
remained open and responsive
to customers along with home
working and utilising the furlough
scheme. As reported, the
Company agreed terms for a
£2.0m CBIL during this period
Strategic Report CEO Report
to provide further headroom
as the disruption was better
understood. As this period
concluded, and the longer
term effects of the pandemic
were better understood, it
became clearer that production
rates would not recover in the
short-term and government
intervention around furlough
support was limited in duration,
so plans were enacted to right
size both the direct and indirect
headcount of the business
based on the current demand,
whilst protecting the delivery of
products to current customers
and the ability of the business
to progress and respond to new
business activities. Regrettably,
this involved the reduction in
headcount from 132 to 70 and
I would like to personally thank
all staff members involved in
these difficult decisions for
dealing with this restructuring in
a professional and understanding
way.
Looking forward there is still
not a definitive picture around
aircraft production rate recovery
as both Boeing and Airbus are
awaiting the return of air travel
numbers before committing rates
to the market, communicated
publicly in their Market Forecast
documents. Whilst there has
been some recent exciting
developments around vaccines
and airport testing the industry
needs demand to recover in air
travel before this translates into
new aircraft sales and aircraft
part production. What is widely
accepted is that single aisle rate
recovery will be faster than twin
aisle rate recovery and so along
with military applications the
Company continues to review
its new customer portfolio to
target the higher demand for its
services.
During the year the government
supported the Company
with the Coronavirus Job
Retention Grants of £0.4m,
the Company also applied for
a £2m Coronavirus Business
Interruption Loan which was
received in July 2020 (see note
17 for more details regarding the
loan).
The Company has also
worked closely with its existing
customers to ensure that
the service offering remains
compelling during and after the
disruption and rate reductions.
Clearly this is a challenging
13
Strategic Report CEO Report
time for the whole industry
and customers have had to
revisit their entire industrial
strategy as capacity created
during previous growth years
becomes available due to
rate reductions. Significant
work has been undertaken
to work with customers to
align future service with the
new requirements, utilising
Velocity’s technology to
identify enhanced efficiencies
to assist customers. This has
resulted in an extended long-
term agreement with one
key customer and additional
packages of work with
another. Work continues with
our third key customer as part
of a planned contract renewal
exercise.
As the industry stabilises
around the new production
rates, the Company has a
revised strategy to emerge
more resilient from the
unprecedented effects of
the COVID-19 pandemic.
Clearly like for like sales of
existing business has been
significantly reduced and
so our priority in FY21 is to
continue the cost reductions
and new business growth to
return the business to profit
during the second half of
the year. The Company is
still working through a new
business sales opportunity
pipeline of £50m over the
next three financial years,
and utilising our technology,
proven service levels and geared
operational capacity we expect
the new proposition process to
form an important part of our
customers response to the new
production rates.
The Company has also
accelerated activities to utilise
our industry partners in both
Europe and North America
to investigate new composite
markets where our technology
Velocity’s customer engineering team
can be applied, for example
ground transportation, urban air
vehicles, wind energy, hydrogen
power and military and transport
electrification. As part of this, the
Velocity model will be developed
to enable our technology to be
licensed, or deployed internally,
at new customers to accelerate
the adoption in a cash light way.
particularly in aerospace, will
be felt for several years to
come. At Velocity, the team are
focused on dealing with those
immediate effects, ensuring
the long term sustainability of
the business whilst adapting
our technology and offering to
meet the continued needs of our
customers.
Whilst there appears to be a
roadmap to undo the physical
restrictions of the COVID-19
pandemic, the effects,
Jonathan Bridges
Chief Executive Officer
25 January 2021
14
Strategic Report Financial Review
Financial Review
Statement of
Comprehensive Income
Revenue for FY20 has
understandably been
impacted significantly by
COVID-19, as has the wider
aerospace sector. We
have remained operational
throughout the period, but
with intermittent customer
shutdowns and heavily
reduced underlying demand
on existing programmes, we
have finished the period with
sales 44% lower year-on-year
at £13.6m (FY19: £24.3m) and
had to adjust the business
accordingly.
This sales decline was nearly all
attributable to the last 7 months
of the year, as the pandemic
hit hard across the industry.
As a result, sales for the first 5
months of the year were in line
with management’s expectations
at £8.7m and continuing to
display healthy demand. From
March 2020 however, underlying
aircraft production rates dropped
significantly, flowing directly
Wide width ZUND machine trials
through into our demand with
sales of £4.9m in the final 7
months. International sales
and expansion has also paused
over this period as international
borders were closed and
business commuting restricted,
though the business is in a
positive position to continue this
once travel is again permitted.
Whilst this position has picked
up to some extent in the final
months of the year, we expect
underlying volumes with
existing programmes to remain
suppressed into FY21 and
starting to recover in FY22 and
beyond. In addition, the business
continues to seek out new
contracts to deliver some of the
identified pipeline opportunities.
The gross margin has declined
to 17.1% (FY19: 21.7%), but this
has been driven by one-off stock
provisions reflecting a prudent
stance regarding slow-moving
stock caused by the disruption
in the supply chain. Excluding
these, the margin is in line with
management’s expectations
given the movement in sales mix
during the year. Year-on-year
overheads have significantly
reduced and the full-year-effect
of management’s right-sizing
efforts will be seen as we go
into FY21. This, combined with
a strong pipeline of sales will
enable Velocity to positively
leverage its high operational
gearing from H2 FY21 going into
FY22 and beyond.
As explained above, increased
stock provisions required for
slow-moving stock have reduced
our overall gross margin to 17.1%
(FY19: 21.7%). Discussions
are ongoing with customers
to resolve these, but with high
uncertainty in the current climate,
we have taken a prudent position.
Excluding the impact of slow-
moving stock, and despite
the lower volumes, underlying
gross margin was in line with
management’s expectations,
with a slight decline reflecting
our movement in sales mix. The
gross margin can be impacted
by the mix between structural
composite materials and lower
cost process materials, which
15
Strategic Report Financial Review
in 2020 led to a slightly negative
margin impact.
The government supported the
Company with the Coronavirus
Job Retention Grants of
£0.4m, the Company received
a £2m Coronavirus Business
Interruption Loan in July 2020
(see note 17 for more details).
Administrative expenses
(excluding depreciation and
share based payments) for the
year have decreased by £0.4m
to £4.3m (FY19: £4.7m) as the
business has right-sized its cost
base with the latest demand
forecast. Despite utilising the
government furlough scheme,
the business has needed
to undertake two rounds of
restructuring. As a result, people
costs have reduced by £0.8m in
the year with headcount being
reduced 47% from 132 to 70. In
addition, a Cost Improvement
Plan has been successfully
implemented, bringing the
overhead cost-base of the
business down to a £13.5m sales
revenue breakeven sales level.
Further cost reductions plans are
ongoing into FY21 to continue the
work done in this area.
The Company has benefitted
from being 70% naturally hedged
from both US Dollar and Euro
foreign exchange movements,
with both revenues and direct
material purchases now being
aligned contractually into the
same currency where applicable.
On a consistent basis with
last year, adjusted EBITDA
amounted to a £(1.9)m loss for
the year (FY19: £0.8m profit). This
excludes share-based payments
and exceptional administrative
costs relating to restructuring
in response to the pandemic.
The adjusted EBITDA has been
impacted adversely by the
dramatic sales fall, combined by
some one-off costs in inventory
valuation. The restructuring
benefits will start to show through
in the first part of 2021, with the
full benefit seen by the second
half of 2021.
Adjusted EBITDA 1
31 October
2020
31 October
2019
Reconciliation from Operating Loss
Operating Loss
Add back:
Share-based payments
Depreciation & Amortisation
Impairment of Intangible assets
Depreciation on Right of Use assets under
IFRS 16 (equivalent 2019 rent payments)
Exceptional Administrative costs
Adjusted EBITDA 1
£’000
(3,149)
120
445
72
246
341
(1,925)
£’000
(594)
66
431
18
221
692
834
Adjusted EBITDA1 defined as earnings before finance charges, tax, amortisation, depreciation,
impairment, share based payments, exceptional restructuring costs. During the year the Group
has applied IFRS 16 using the modified retrospective approach and therefore the comparative
information has not been restated and continues to be reported under IAS 17. In the adjusted
EBITDA for 2019 the rent payments for those assets now accounted for as Right of Use assets
under IFRS 16 have been added back so that both years can be compared. The rent payments
are not significantly different to the depreciation charge.
16
Strategic Report Financial Review
The cash balance at 31 October
2020 of £3.3m includes
£2.0m Coronavirus Business
Interruption Loan (CBIL) proceeds
and £0.7m remaining EIS funds
to be utilised in establishing a
production facility in the USA and
to invest further in developing
our mainland European
activities when international
travel resumes. Our focussed
stock reduction programme is
expected to yield additional cash
upside as we continue through
FY21.
Despite the loss in the year, the
business remains in a net cash
position at year end, with £0.9m
net cash (FY19: £3.1m). This
includes Cash at bank, EIS, and
CBIL proceeds offset by the
outstanding CBIL balance and
hire purchase liabilities.
Working Capital
Inventory levels decreased at
the year-end by £(1.3)m to £1.9m
(FY19: £3.2m) reflecting our
increased stock provision and
additional stock reduction efforts
in-year as underlying demand
has reduced.
Trade and other receivables
reduced significantly during
the year by £1.7m to £2.5m as
a result of the reduced sales
and continuing robust controls
around debt collection improved
monthly routines to manage the
collection of debts. Debtor days
have therefore decreased slightly
to 44 days (FY19: 45 days).
Trade and other payables also
reduced during the year by £1.7m
to £1.5m due to reduction in
Trade Creditors of £1.7m as the
business utilises existing material
stock.
Cashflow and
Capital Investment
The year-end cash and cash
equivalents reduced by £0.1m
to £3.3m (FY19: £3.4m). Cash
utilised from operations of £(0.8)
m (FY19: £0.3m) in the year was
driven by the £(1.9)m EBITDA
offset partly by £1.3m favourable
working capital position as the
business right-sized. Cash
used in Investing Activities of
£(2.4)m (FY19: £(0.2)m) primarily
related to the capitalisation of
Right Of Use (leased) assets
(£1.4m) as well as property,
plant and equipment as the
new business premises and
Technology R&D centre were
completed. Financing activities
generated £3m over the period
(FY19: £(0.8)m) with the benefit
of the £2.0m CBIL facility agreed
during the year, offset by £(0.5)m
payments towards Hire Purchase
commitments and Invoice
Discounting arrangements. The
Invoice Discounting facility was
not being utilised at 31 October
2020.
Year ended
31 October
2020
£’000
Year ended
31 October
2019
£’000
3,264
(2,000)
(358)
2
3,424
-
(290)
(4)
Cash
Cash Loans (excluding right to use assets)
CBIL Loan
Hire Purchase
Invoice discount Facility
Net Cash/(Debt)
908
3,130
17
Note 1: The net cash/(debt)
calculation is designed to explain the
level of financial debt, net of cash at
bank. It does not include the IFRS
16 presentation changes around
property rental agreements and
similar short-term operating rental
lease agreements, where the rental
liability and an equal asset right are
both now recognised for the contract
life, on the balance sheet.
positive operational gearing to
leverage once growth resumes.
Further scenario tests included
losing major customers, failure
to utilise slow-moving stock
under new demand levels and
not receiving additional CBIL
support or extension of terms.
Even in the worst of these cases,
with all three downside scenarios
happening, Management’s
mitigation plan meant the
business could navigate the
forecast period utilising its
net cash position and existing
facilities, albeit with some
shorter-term decisions needed to
be made. This recovery has been
made possible by a combination
of existing contracts recovering
to pre-COVID-19 run rates over
the 5 to 7 year period, as well
as new contracts being won
from the significant pipeline of
opportunities being targeted.
Continued monthly monitoring
of this forecast model is ongoing
over a rolling 36 month period,
Going concern
Under the current climate,
Management have undergone
a significant level of cash
flow forecasting and scenario
modelling. This work also
supported the application for
our CBIL and its extension.
Detailed financial projections for
the following 24 month rolling
period were prepared, and
then extended annually for a
further 5 years. The Aerospace
sector lends itself to this kind of
long-term planning due to the
nature and length of customer
programmes, typically a minimum
of 3 years, but often 5 years
or more. This has enabled the
business to fully model the
impact of COVID-19 and the
expected recovery period. Post
year end the CBIL facility term
has been extended from 2 to 6
years to better reflect the cash
flow needs of the business and
ongoing support from our bank.
As the pandemic unfolded and
continued to gather pace, our
initial forecasts illustrated the
need for cost reductions to
be made, which unfortunately
meant restructuring and several
rounds of redundancies. This has
put the business once again on
a stable footing for FY21, with
Strategic Report Financial Review
with the business adopting a new
Integrated Business Planning
approach in January 2021. As
a result, any departures from
budget or future requirements for
cash flow will be identified early
on. Key cash flow projects within
this, such as the stock reduction
programme, have been flagged
as priorities in the Velocity
strategy, with project leads, KPIs
and reporting mechanisms into
the Board. Any gaps against
forecast will be caught in this
process and a recovery plan put
in place to ensure delivery of
results.
Having due regard for these
projections and available cash
at 31 October 2020 of £3.3m,
an invoice discount facility
where we can borrow up to £5m
dependent on debtor levels,
and the continued support
of our bank, customers and
shareholders during these difficult
circumstances, it is the opinion
of the Board that the Group has
adequate resources to continue
to trade as a going concern.
Chris Williams
Chief Financial Officer
25 January 2021
Financial Highlights
Revenue
Cash at bank
Gross Margin %
Operating
Profit / (Loss)
Adjusted EBITDA1
£13.6m
£3.3m
17.1%
£(3.1m)
£(1.9m)
1 Earnings before Interest, Tax, Depreciation, Amortisation, Impairment, adjusted for exceptional administrative costs and share based payments
18
Strategic Report 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.
With the COVID-19 pandemic
there has clearly been an
unprecedented impact on the
aviation industry in the UK. As
the pandemic has unfolded, its
impact on the business in the
immediate and longer-term has
become clearer. In the shorter-
term, Velocity has had to manage
a significant drop in sales within
existing customer contracts
through right-sizing the cost
base and working closely with
our customers to understand
ongoing demand. Whilst in the
longer-term, Management have
been focussed on managing
cash flow needs, reviewing the
Company’s strategy and offering
in the market.
In addition, the Group has
undertaken various risk mitigation
activities which included:
planning ahead to ensure a
smooth transition through
Brexit 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, now more than
ever, of exclusively operating
in the aerospace sector, and
is comfortable that the risk is
mitigated by the strength of
the longer-term outlook from
the aircraft manufacturers and,
reassured by past precedents
of crisis in the industry have not
stopped the underlying trends of
growth in the market.
The Group’s principal risks and
our actions to mitigate these
risks are set out in the table on
the following pages. 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.
19
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
Loss of Key
Contracts
High
Airworthiness
Issues
High
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. Aircrafts are
increasingly being manufactured
using composite material, a
trend that is continuing despite
the COVID-19 pandemic. We
operate through Long Term
Contracts and when an initial
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. Spreading
sales risk across many platforms
has helped to offset some of the
impact due to COVID-19. Where
this has not been possible, a
rapid response to right-sizing the
business’ cost base has been
the best mitigation, in line with
demand fluctuations.
The aerospace sector
has a concentration
of very large primary
aircraft manufacturers
and Tier 1 suppliers.
These form the core
of the Company’s
customer base.
Therefore the loss of
any of the Company’s
major contracts
with these large
customers may have
a material impact
on the Company’s
business, prospects,
financial condition
or operations.
Management have
been particularly
wary of this during
the current period of
significant upheaval
in the aerospace
sector.
Changes in demand
due to airworthiness
issues, regulatory
issues, safety
issues with aircraft
platforms, or, as we
have seen this year, a
global crisis.
20
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
International
Expansion
Medium
Winning a Large
Customer
Contract
Low
Although impacted by current
International travel restrictions,
we are continuing to develop
partnerships with larger supply
chain businesses, for example
to develop the North American
market we are working with
Incora. We are taking a measured
approach by investing in our first
production facility to support
customers in the South East
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
capacity in our UK plants and
a good structure of Executive
and second line management to
support additional demand.
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,
travel permitting.
The successful
implementation could
lead to 5 or 6 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
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
Research and
Development
Low
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.
Exclusively
Operating in the
Aerospace Sector
Medium
Not sufficient demand
in the sector and
particularly in the civil
aerospace sector due
to COVID-19 or similar
disruption.
Risk is mitigated by the strength of
the longer-term outlook of aircraft
manufacturers and proven by past
crisis that have failed to stop the
underlying growth trends in the
aerospace market. Longer term
we plan to diversify away from
this sector, through partnerships
with our major suppliers and
customers. The Company has
also started to develop more its
customer base around military
aerospace which has been more
robust in the last year.
22
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Operational Risks
Dependence on
Third Party Supply
Low
Reliance on Key
Individuals
Medium
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 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.
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.
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
Low
Material price changes
are flowed through to
customers
Ensure any material price changes
are flowed through from supplier
to customer through contract.
23
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Financial and
Compliance Risks
Treasury and
Foreign Exchange
Risk
Low
Liquidity Risk
High
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.
Insufficient cash to
meet the needs of the
business in near or long
term
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.
Despite the challenges of
COVID-19 and Brexit, this risk has
not been as high risk as expected
in the past and so is currently
considered a lower risk to the
Company.
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. These activities have
been undertaken extensively
throughout FY20, with longer-
term scenario testing being
done regularly as new data has
come to light. This has been
done in conjunction with utilising
government offered support
through the CBIL and furlough
schemes, and right-sizing the
cost-base in line with latest
demand outlook.
24
Strategic Report Principal risks and uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Financial and
Compliance Risks
Credit Risk
Low
Unable to collect
due receivables from
customers
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.
Interest Rate Risk
Low
Insufficient cash to
meet the needs of the
business in near or long
term
The Company seeks to manage
its interest rate risk through
minimising exposure wherever
possible and regularly reviewing
interest rates available in the
marketplace.
25
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 below:
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 leading
manufacturers with composite
kits and consumables to
eliminate waste and provide
essential logistics and supply
chain efficiencies to its customer
base. Our current core focus is
in the aerospace industry and
our customer arrangements are
almost exclusively based on
long-term contracts, typically
for a 3 to 5 year period. Our
business strategy and business
model are included in the
strategic report section of our
Annual Report, along with key
performance indicators set out in
the Finance Review to measure
growth and profitability around
our business model.
26
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
performance, a wider business
update and discussion of the
Governance Statement of Corporate Governance
longer-term plan. These meetings
are normally attended by the
Chairman, Chief Executive Officer
and 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
Directors 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, customers, 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.
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 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.
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.
27
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 and
regular oversight by the Non-
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
28
issues are referred to the
Board for consideration.
• Appraisal and authorisation
of general and capital
expenditure as well as
research and development
projects.
• Dual signatories on all bank
accounts.
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, Chief Executive
Officer, Chief Financial Officer,
Company Secretary and two
Non-Executive Directors. During
the year Margaret Amos joined
the Board in April 2020, Group
Financial Officer Chris Williams
joined the Board in August
2020 and Group Financial
Controller Adam Newton was
appointed Company Secretary in
September 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
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 Commercial &
Supply Chain 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 two formal Board
committees that meet
independently of Board meetings
and one additional Executive
management committee:
Governance Statement of Corporate Governance
Our engineers developing highly efficient nests
Audit Committee
The Audit Committee currently
has three members, Margaret
Amos (Chair),Andy Beaden and
Rob Soen. The 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 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.
Remuneration Committee
The Remuneration Committee
has three members, Rob
Soen (Chair), Andy Beaden
and Margaret Amos. 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.
29
Nomination Committee
The Nomination Committee
has three members, Andy
Beaden (Chair), Rob Soen and
Margaret Amos. 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 four members, two
of which are Executive Directors.
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.
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
Jon Bridges
Margaret Amos*
Chris Williams**
Board
Meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
11
11
11
11
6
1
3
3
3
n/a
2
n/a
2
2
2
n/a
2
n/a
2
2
2
n/a
2
n/a
*appointed as Director on 7 April 2020
**appointed a Director on 4 August 2020
n/a - indicates that a Director was not a member of a particular committee
Audit Committee (AC)
RemunerationCommittee
Nominations Committee
Andrew
Beaden
Member
Member
Chair
Rob
Soen
Member
Chair
Member
Jon
Bridges
Margaret
Amos
Chris
Williams
n/a
n/a
n/a
Chair
Member
Member
n/a
n/a
n/a
non-members are invited to attend committees as appropriate
cash flows and the ongoing
health of Velocity.
Now that business has resumed
with a semblance of steady-state,
the new Board will continue to
improve these working practices
in line with the business need in
the months to come.
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
pages 32 - 33 of this report.
7. Evaluate board performance
based upon clear and
relevant objectives, seeking
continuous improvement
Whilst the Board have continually
looked to refine and improve
working practices throughout the
year, the COVID-19 pandemic
has led to some short-term
crisis management processes
being required. As a testament
to the previous years’ focus
on Board governance these
were implemented swiftly
and decisively. These were
particularly focussed around
30
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.
Governance Statement of Corporate Governance
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
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 report 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.
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.
The Chairman, Chief Executive
Officer and the 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.
10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
Andy Beaden
Chairman
25 January 2021
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;
31
Governance Board of Directors
Board of Directors
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, having trained
with KPMG, 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).
Jonathan 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.
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 a Fellow of the
Institute of Purchasing and
Supply.
(l-r) Andy Beadon, Rob Soen (screen), Adam Newton,
Jon Bridges, Margaret Amos & Chris Williams
32
Online board meeting
Financial highlights Governance Board of Directors
Adam Newton
Adam joined Velocity in January
2017 as Financial Controller,
bringing with him many years of
experience from varied roles in
finance. Most recently he was
Divisional Finance Business
Partner at Well Pharmacy
(formerly Co-operative Pharmacy)
for 9 years, where he worked
as part of the leadership team
responsible for strategy and
driving operational efficiencies.
Adam comes from an audit
background, having worked for
several years in practice with
a diverse client portfolio, from
SME’s to larger PLC businesses.
Adam is Fellow of the Association
of Chartered Certified
Accountants.
Margaret Amos
Margaret joined the Board of
Velocity in April 2020. She has
27 years’ experience working
for Rolls Royce Holdings plc
and held a number of important
senior roles in Finance, Strategy
Development, Supply Chain
and Programme management,
including the position of
Divisional Finance Director -
Engineering, IT and Corporate
Sector. She has since developed
a significant portfolio of Non-
Executive roles, including
NMCN plc, Trinity House and
The Ombudsman Services. She
is also a Corporate Fellow for
Denstone College.
Margaret is a Fellow of both
the Chartered Institute of
Management Accountants (CIMA)
and the Chartered Institute of
Purchase and Supply (CIPs). She
has a BA degree in Secretarial
Administration and French
and a Masters in Supply Chain
Management from Nottingham
University and is currently
studying for a Doctorate in
Professional Studies.
Margaret is Chair of the Audit
Committee.
Chris Williams
Chris joined Velocity in August
2020 as Chief Financial Officer.
Chris brings with him a wealth of
experience across many sectors,
having previously been Finance
Director for Bettys Tearooms, a
multi-site hospitality business
in Yorkshire, as well as Caparo
Engineering, where he was a
Divisional Finance Director for a
number of Precision Engineering
SMEs based in the Midlands.
Chris is a Chartered Accountant,
having trained with KPMG,
and holds a Masters degree in
Physics from the University of
Birmingham.
33
Financial highlights Governance Senior Management
Senior Management
Commercial & Supply Chain Director
Customer Programmes Director
HR Business Partner
r
e
h
c
r
A
w
e
h
t
t
a
M
y
r
u
b
t
s
a
E
s
e
m
a
J
h
t
a
r
G
c
M
y
l
l
e
K
Matthew joined the Company
as Chief Commercial Officer
in February 2017 bringing
extensive experience of the
Defence and Aerospace sectors
having worked for several of the
world’s leading companies in
those industries.
Matthew previously worked
for GKN Aerospace where
he led the introduction of a
global strategy for composite
procurement across Europe,
North America and Asia. Prior to
this Matthew worked at Defence
industry prime contractors and
the UK Ministry of Defence.
James leads a team of
technically skilled programme
managers and new business
engineers in developing and
executing comprehensive multi-
level plans of engagement with
all of Velocity’s customers. He is
responsible for the expansion of
Velocity’s revenue, with existing
& new customers, within all
territories and future markets.
James has over 11 years’
experience in the aerospace
market, previously with
Solvay Composite Materials,
the advanced materials and
specialty chemicals company,
where he held a number of roles,
most notably as Key Account
Manager for Airbus.
With over 10 years HR
experience and a qualified
Associate Member of CIPD,
Kelly is responsible for the
development and delivery of the
People Management Strategy.
Kelly joined Velocity in 2019
and works with the Executive
Team to define and deliver
business growth plans. A true
HR Generalist and People
Partner, Kelly gained experience
within the Manufacturing
and Aerospace Industries
and supports all areas of the
business but is particularly
passionate about people
development and engagement.
Principal Engineer
Site Operations Burnley
Site Operations Fareham
n
a
h
K
l
i
m
E
s
t
r
e
b
o
R
x
e
A
l
Emil began a career with Velocity
in 2010 after graduating from
University of Central Lancashire
with an Engineering degree.
Engineering lead on many key
internal and external projects.
Responsible for engineer
governance and managing
the engineering team whilst
supporting the team with
individual projects. Revelled
in the challenges Velocity has
faced as a upcoming business
in the aerospace industry
and looking forward to future
business prospects. Keen to
optimise and grow the team to
ensure standardisation in multi-
site deployment.
Alex joined Velocity in 2013 and
has been a vital member of the
Management team in ensuring
the Business is future ready
through the development of its
growth plans.
Responsible for the
Manufacturing areas at Burnley,
Alex has recently taken on the
rolling out of a robust Lean
and Continuous Improvement
culture across the Site and is
a great supporter of people
development. Alex holds a BA
Honours Degree in Sport &
Leisure Management and has
over 13 years’ experience within
Operations Management.
34
34
y
e
l
r
i
h
S
a
s
s
i
l
e
M
After joining our Fareham facility
in 2017 as a Production Quality
Engineer she recently moved
into the role of Manufacturing
Manager. Melissa has extensive
knowledge within the aerospace
industry and specifically in
composites manufacturing
processes.
She achieved her master’s
degree in Mechanical
Engineering from the University
of Durham and spent the 10
years prior to Velocity in various
Composite Engineering roles
including GKN on the Isle of
Wight and Hexion CCT on the
south coast. Melissa brings her
experience in quality compliance
and Health & Safety knowledge
gained through the achievement
of her NEBOSH certificate.
Governance Directors’ Report
Directors’ Report
The directors present their report and the audited financial statements for the
year ended 31 October 2020.
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 2020. Further
details are provided in Note 2 to
the financial statements.
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 of the business,
as referenced in the Financial
Review on pages 15 to 18 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 page 15.
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
capitalised development costs
of £0.04m (2019: £0.09m) in line
with the Group’s accounting
policy.
35
35
Directors
The Directors who held office at 31 October 2020 and their interest in
the shares of the Company were as follows:
Jonathan Karl Bridges
Andy Beaden
Rob Soen
Margaret Amos
Chris Williams
1 Includes 50,000 shares in the name of Mrs S Beaden
Governance Directors’ Report
At
31 October
2020
%
Shareholding
5,515,929
400,000 1
-
-
-
15.23%
1.10%
-
-
-
Going concern
The Group has prepared
extensive financial projections
for the next two years,
incorporating the impact of
COVID-19 and modelling
a number of ‘worst case’
scenarios. The forecasts include
revenue projections based on
current demand plus a weighting
of opportunities in the pipeline,
with an appropriate cost base
Substantial shareholdings
reflective of the significant cost
reductions that have already
taken place in the Group.
review of going concern can be
found in the financial review on
page 15 - 18.
Having due regard to these
projections and available cash
at 31 October 2020 of £3.3m,
and an invoice discount facility
where we can borrow up to £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. A more extensive
Indemnification of Directors
The Group provides Directors
and Officers Insurance cover
and is contractually committed
to provide cover.
At 31 October 2020, 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
TM Stonehage Fleming AIM Fund
Charles Stanley Clients
Herald Investment Trust
Hargreaves Lansdown Clients
Amati Global Investors
13.60%
13.60%
9.63%
4.84%
3.95%
3.61%
3.18%
4,927,693
4,927,693
3,488,956
1,753,047
1,431,177
1,307,539
1,150,294
36
Governance Directors’ Report
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 25 January
2021 and signed on its behalf by:
Adam Newton
Company Secretary
25 January 2021
Corporate governance
The Statement of Corporate
Governance on Pages 26 to 31
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
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
• prepare the financial
• The Directors’ Report
statements on the going
concern basis unless it is
includes a fair review of the
development and performance
37
Governance Directors’ Remuneration Report
Directors’ Remuneration Report
This report covers the financial year ended 31 October 2020
Responsibilities
Executive Directors
The Remuneration & Nomination
Committee has three members
with Robert Soen (Chairman),
Andy Beaden and Margaret
Amos (since joining the Board
in April 2020). The Committee
is responsible for setting the
remuneration packages for the
the 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.
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
and retains management of
38
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.
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 2020 Options
were issued to members of
the Non Executive Directors
and members of the Senior
Management team. A total of
0.6m 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 2020 (or period of service) are summarised
below:
Executive
Jonathan Bridges
Chris Williams (appointed 4 August 2020)
Alan Kershaw (resigned 31 January 2019)
Non-Executive
Andy Beaden (appointed 26 July 2019)
Rob Soen
Margaret Amos (appointed 7 April 2020)
Mark Mills (resigned 25 March 2019)
Brian Tenner (resigned 24 July 2019)
Meera Parmar (resigned 24 July 2019)
Salary
£’000
Pension
£’000
Benefit
in kind
£’000
Year ended
31 October
2020
Year ended
31 October
2019
130
18
-
80
35
20
-
-
-
14
2
-
2
-
-
-
-
-
13
2
-
-
-
-
-
-
-
157
22
-
82
35
20
-
-
-
154
-
48
23
10
-
110*
60
35
Total
283
18
15
316
440
* - emoluments included within exceptional costs
39
Financial statements Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Velocity Composites Plc
40
Financial statements Independent Auditor’s Report
Independent Auditor’s Report to the
Members of Velocity Composites Plc
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 2020, which comprise the
Consolidated Statement of Total Comprehensive Income, the Consolidated and Company
Statements 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 2020 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 United Kingdom Generally Accepted Accounting Practice; 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.
41
Financial statements Independent Auditor’s Report
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all
relevant uncertainties, including those a rising as a consequence of the effects of macro-
economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge the
reasonableness of estimates made by the directors and the related disclosures and the
appropriateness of the going concern basis of preparation of the financial statements. All of
these depend on assessments of the future economic environment and the group’s and the
parent company’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by
the UK, and at the date of this report their effects are subject to unprecedented levels of
uncertainty, with the full range of possible outcomes and their impacts unknown. We applied
a standardised firm-wide approach in response to these uncertainties when assessing the
group’s and the parent company’s future prospects and performance. However, no audit
should be expected to predict the unknowable factors or all possible future implications for a
group and a parent company associated with these particular events.
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.
In our evaluation of the directors’ conclusions, we considered the risks associated with the
group’s and the parent company’s business, including effects arising from macro-economic
uncertainties such as Covid-19 and Brexit, and analysed how those risks might affect the
group’s and the parent company’s resources or ability to continue operations over the period
of at least twelve months from the date when the financial statements are authorised for issue.
In accordance with the above, we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in this auditor’s report is not a
guarantee that the group or the parent company will continue in operation.
42
Financial statements Independent Auditor’s Report
Overview of our audit approach
• Overall materiality: £203,400, which represents 1.5% of the group’s
total revenues; and
• Key audit matters were identified as the risk that the revenue cycle
includes fraudulent transactions and going concern assumption; and
• We performed full scope audit procedures on the financial
statements of Velocity Composites Plc and analytical procedures on
components which were considered immaterial based upon group
materiality.
Key audit matters
The graph below depicts the audit risks identified and their relative significance based on the
extent of the financial statement impact and the extent of management judgement.
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.
43
Financial statements Independent Auditor’s Report
Key Audit Matter - Group
How the matter was addressed in the audit - Group
Our audit work included, but was not restricted to:
Revenue includes fraudulent
transactions
•
Revenue is a key performance
indicator for stakeholders.
We have identified the risk of
fraudulent journal entries or
journal entries made in error as
a key audit matter specifically
within the unpaid revenue
balance as the risk of revenue
being incorrectly recorded is
higher in this population.
We therefore identified the risk
of fraudulent transactions in
revenue as a significant risk,
which was one of the most
significant assessed risks of
material misstatement.
assessing accounting policies for both consistency
and appropriateness with 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;
• obtaining an understanding of the processes
through which the business initiate, record, process
and report revenue transactions;
•
testing 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;
• performance of cut-off testing to ensure
transactions have been recorded within the correct
period;
•
•
•
testing journal entries within revenue postings to
supporting documentation;
review of credit notes raised post year end to check
for overstatement of revenue during the year; and
trend analysis and ratio analysis to identify any
potential unusual movements in revenue. Any
movements outside of our expectations 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 identify any indicators of fraud within
the revenue recorded for the year, and no adjustments
have been proposed for potential errors. The revenue
policy as set out on page 47 is applied in line with IFRS
15 ‘Revenue from Contracts with Customers’.
44
Financial statements Independent Auditor’s Report
Key audit matter – group
How the matter was addressed in the audit
– Group
Going concern
Our audit work included, but was not restricted to:
As stated in the ‘The impact of
macro-economic uncertainties
on our audit’ section of our
report, COVID-19 is amongst
the most significant economic
events currently faced by the
UK, and at the date of this
report its effects are subject
to unprecedented levels of
uncertainty. This event could
adversely impact the future
trading performance of the
group and the parent company
and, as such, increases
the extent of judgement
and estimation uncertainty
associated with management’s
decision to adopt the going
concern basis of accounting in
the preparation of the financial
statements. Further as a result
of these uncertainties there is a
higher risk that the disclosures
are misleading.
We therefore identified going
concern and related disclosures
as a significant risk, which was
one of the most significant
assessed risks of material
misstatement.
• obtaining management’s base case cash flow
forecasts covering the period from 1 November
2020 to 31 October 2022, assessing how these cash
flow forecasts were compiled and assessing their
appropriateness by applying relevant sensitivities to
the underlying assumptions, and challenging those
assumptions;
•
•
•
assessing the accuracy of management’s past
forecasting by comparing management’s forecasts
for last year to the actual results for last year and
considering the impact on the base case cash flow
forecast;
assessing the impact of the mitigating factors
available to management in respect of the ability to
restrict cash impact, including the level of available
facilities; and
assessing the adequacy of related discourse within
the annual report.
The group’s accounting policy on going concern is
shown in note 2 to the financial statements. The Audit
Committee identified going concern as a significant
issue in its report on page 4, where the Audit Committee
also described the action that is has taken to address
the issue.
Key observations
We have nothing to report in addition to that stated in
the ‘Conclusions relating to going concern’ section of
our report.
45
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:
Materiality measure
Group
Parent
Financial statements as
a whole
Performance materiality
used to drive the extent of
our testing
Specific materiality
£203,400 which is 1.5% of group
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 lower than the level that we
determined for the year ended 31
October 2019 to reflect trading
downturn as a result of the
COVID-19 pandemic.
£202,700 which is 1.5% of
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 lower than the level that we
determined for the year ended 31
October 2019 to reflect trading
downturn as a result of the
COVID-19 pandemic.
75% of financial statement
materiality.
75% of financial statement
materiality.
We determined a lower level
of specific materiality for
certain areas such as directors’
remuneration and related party
transactions.
We determined a lower level
of specific materiality for
certain areas such as directors’
remuneration and related party
transactions.
Communication of
misstatements to the
audit committee
£10,200 and misstatements
below that threshold that, in
our view, warrant reporting on
qualitative grounds.
£10,100 and misstatements
below that threshold that, in
our view, warrant reporting on
qualitative grounds.
46
Financial statements Independent Auditor’s Report
The graph below illustrates how performance materiality interacts with our overall materiality and
the tolerance for potential uncorrected misstatements.
OVERALL MATERIALITY - GROUP
OVERALL MATERIALITY - PARENT
25%
25%
75%
75%
Tolerance for potential uncorrected mis-statements
Performance materiality
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:
• we identified and evaluated the components to assess their significance and to determine
the planned audit response based on a measure of materiality. We determined significance
as a percentage of the group’ total assets, revenues and profit before taxation;
• based on our assessment of the group as above, we focused our group audit scope
•
primarily on the parent company, which was subject to a full-scope audit and represented
99% of the group’s revenue, profit before tax and net assets;
at the group level we also tested the consolidation process, including re-performance of
management’s calculations and carried out analytical procedures for the remaining two
components to confirm our conclusion that there were no significant risks of material
misstatement of the aggregated financial information of those remaining components;
• we identified revenue recognition and the going concern assumption as key audit matters
and the procedures performed in respect of these have been included in the Key audit
matters section of our report; and
there were no changes in scope from the prior year.
•
47
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, 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.
48
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 35, 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 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
25 January 2021
49
Financial statements Consolidated statement of total comprehensive income
Consolidated statement of total
Velocity Composites plc
Financial statements for the year ended 31 October 2020
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
Impairment of Intangible assets
Depreciation of Right to Use assets under IFRS 16 (equivalent
2019 rent payments)
Share based payments
Exceptional administrative expenses
Finance income and expense
Loss before tax from continuing operations
Income tax income
Loss for the period and total comprehensive loss
Loss per share - Basic (£) from continuing operations
Loss per share - Diluted (£) from continuing operations
Year ended
31 October
2020
Year ended
31 October
2019
Note
£’000
£’000
4
7
5
13,561
(11,237)
24,316
(19,047)
2,324
(5,132)
(341)
-
5,269
(5,177)
(692)
6
(3,149)
(594)
29
(1,925)
(445)
(72)
(246)
(120)
(341)
834
(431)
(18)
*(221)
(66)
(692)
8
9
10
10
(98)
(58)
(3,247)
117
(652)
16
(3,130)
(636)
(£0.08)
(£0.02)
(£0.08)
(£0.02)
The notes on pages 45 to 71 form part of these financial statements.
The notes on Pages 55 to 81 form part of these financial statements
There were no discontinued operations in the current or prior period.
There is no other comprehensive income.
*The consolidated statement of total comprehensive income is not restated but to aid comparability the
alternative performance measure adjusted EBITDA has been restated following implementation of IFRS
16 for further details see Note 29.
50
Financial statements Consolidated and Company statement of financial position
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Consolidated and Company
Consolidated and Company statement of
statement of financial position
financial position
41
Group
31 October
2020
£’000
Group
31 October
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
Note
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Loans
Trade and other payables
Grant income deferred
Net obligations under finance leases
Total current liabilities
Non-current liabilities
Loans
Deferred tax liabilities
Net obligations under finance leases
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to equity holders of
the company
Share capital
Share premium account
Share-based payments reserve
Retained earnings
11
12
19
14
15
16
17
17
18
19
17
20
19
22
22
167
1,723
1,127
3,017
1,908
2,464
-
3,268
7,640
318
1,061
-
1,379
3,177
4,149
75
3,424
10,825
167
1,723
1,127
3,017
1,908
2,490
-
3,265
7,663
318
1,061
-
1,379
3,177
4,178
75
3,416
10,846
10,657
12,204
10,680
12,225
500
1,504
-
411
2,415
1,500
-
1,060
2,560
4,975
5,682
-
3,223
-
121
3,344
-
-
169
169
3,513
500
1,499
-
411
2,410
1,500
-
1,060
2,560
4,970
-
3,223
-
121
3,344
-
-
169
169
3,513
8,691
5,710
8,712
91
9,727
490
(4,626)
90
9,727
537
(1,663)
91
9,727
490
(4,598)
90
9,727
537
(1,642)
Total equity
The notes on Pages 45 to 71 form part of these financial statements.
5,682
8,691
5,710
8,712
The notes on Pages 55 to 81 form part of these financial statements.
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 year was (£3,123,000).
The financial statements were approved and authorised for issue by the Board of Directors on 25 January 2021 and
were signed on its behalf by;
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 year was (£3,123,000).
The financial statements were approved and authorised for issue by the Board of Directors on 25 January 2021 and
were signed on its behalf by;
Christopher Williams
Director
Christopher Williams
Co No: 06389233
Director
Co No: 06389233
51
Financial statements Consolidated and Company statement of changes in equity
Consolidated and Company
Velocity Composites plc
Financial statements for the year ended 31 October 2020
statement of changes in equity
Consolidated and Company statement of
changes in equity
Consolidated statement of changes in equity
42
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-based
payments
reserve
£’000
89
-
89
-
1
9,727
-
(1,091)
(636)
9,727
(1,728)
-
-
-
65
536
-
536
66
(65)
Total
equity
£’000
9,261
(636)
8,624
66
1
As at 31 October 2018
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2019
90
9,727
(1,663)
537
8,691
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-based
payments
reserve
£’000
9,727
-
(1,663)
(3,130)
9,727
(4,793)
537
-
537
Total
equity
£’000
8,691
(3,130)
5,561
-
-
-
167
120
(167)
120
1
As at 31 October 2019
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options and issue of equity
90
-
90
-
1
As at 31 October 2020
91
9,727
(4,626)
490
5,682
The notes on Pages 45 to 71 form part of these financial statements
The notes on Pages 55 to 81 form part of these financial statements
52
Financial statements Consolidated and Company statement of changes in equity
Consolidated and Company
Velocity Composites plc
Financial statements for the year ended 31 October 2020
statement of changes in equity
Consolidated and Company statement of
changes in equity
Company statement of changes in equity
43
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-based
payments
reserve
£’000
89
-
89
-
1
9,727
-
(1,062)
(645)
9,727
(1,707)
-
-
-
65
536
-
536
66
(65)
Total
equity
£’000
9,290
(645)
8,645
66
1
As at 31 October 2018
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2019
90
9,727
(1,642)
537
8,712
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-based
payments
reserve
£’000
9,727
-
(1,642)
(3,123)
9,727
(4,765)
537
-
537
Total
equity
£’000
8,712
(3,123)
5,589
-
-
-
167
120
(167)
120
1
As at 31 October 2019
Loss for the year
Transactions with shareholders:
Share-based payments
Transfer of share option reserve on
vesting of options and issue of equity
90
-
90
-
1
As at 31 October 2020
91
9,727
(4,598)
490
5,710
The notes on Pages 45 to 71 form part of these financial statements
The notes on Pages 55 to 81 form part of these financial statements
53
Financial statements Consolidated and Company statement of cash flows
Velocity Composites plc
Consolidated and Company
Financial statements for the year ended 31 October 2020
statement of cash flows
Consolidated and Company Statement of cash
flows
44
Operating activities
Loss for the year
Taxation
Loss on disposal of assets
Finance costs
Amortisation of intangible assets
Impairment of Intangible assets
Depreciation of property, plant and equipment
Depreciation of right to use assets
Share-based payments
Grant income amortisation
Operating cash flows before movements in
working capital
Decrease in trade and other receivables
Decrease/(Increase) in inventories
Increase/(Decrease) in trade and other payables
Cash generated from operations
Income taxes received
Net cash (Outflow) 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
2020
£’000
Group
Year ended
31 October
2019
£’000
Company
Year ended
31 October
2020
£’000
Company
Year ended
31 October
2019
£’000
(3,130)
(117)
-
98
118
72
327
246
120
-
(636)
(16)
(11)
58
116
18
315
-
65
(6)
(3,123)
(117)
-
98
118
72
327
246
120
-
(645)
(16)
(11)
58
116
18
315
-
65
(6)
(2,266)
(97)
(2,259)
(106)
1,685
1,269
(1,526)
(838)
-
(838)
(991)
(39)
3
1,579
(433)
(1,363)
(314)
54
(260)
(156)
(89)
15
1,688
1,269
(1,531)
(833)
-
1,588
(433)
(1,363)
(314)
54
(833)
(260)
(991)
(39)
3
(156)
(89)
15
Net cash used in investing activities
(1,027)
(230)
(1,027)
(230)
Financing activities
Loan received
Finance lease proceeds
Finance costs paid
Increase/(Decrease) in invoice discounting
Repayment of finance lease capital
Net cash generated from financing activities
Net (Decrease) in cash and cash equivalents
Cash and cash equivalents at 01 November
2,000
211
(98)
-
(404)
1,709
(156)
3,424
-
-
(58)
(612)
(142)
(812)
(1,302)
4,726
2,000
211
(98)
-
(404)
1,709
(151)
3,416
-
-
(58)
(612)
(142)
(812)
(1,302)
4,718
Cash and cash equivalents at 31 October
3,268
3,424
3,265
3,416
54
Financial statements Notes to the Financial Statements
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Notes to the Financial Statements
Notes to the Financial Statements
45
1.
General information
Velocity Composites Plc (the ‘Company’) is a 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’).
The Group’s principal activity is that of the sale of kits of composite material and related products to the
aerospace industry.
2.
Accounting policies
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 statements are
presented in sterling and have been rounded to the nearest thousand (£’000).
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 2020. Subsidiaries are consolidated from the date of acquisition, using
the purchase method (see “Business combinations” below).
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting
policies used into line with those used by the Group. The Group’s subsidiaries have prepared their statutory
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 against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
New Standards adopted at 1 November 2019
IFRS 16 Accounting for leases has become applicable for the current reporting period, and the Group had to
change its accounting policy as a result. The impact of the adoption of the leasing standard and the new
policies are disclosed below.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods
presented in the consolidated financial statements.
55
Velocity Composites plc
Financial statements for the year ended 31 October 2020
46
Financial statements Notes to the Financial Statements
Notes to the Financial Statements
2.
Accounting policies (continued)
Going concern
Under the current climate and the business need for CBIL and furlough support, Management have invested
a lot of time during the year in cash flow forecasting and scenario modelling. Detailed financial projections for
the following 24 month rolling period were prepared, and then extended annually for a further 5 years. The
Aerospace sector lends itself to this kind of long term planning due to the nature and length of customer
programmes, typically a minimum of 3 years, but often 5 years or more. This has enabled the business to fully
model the impact of Covid-19 and the expected recovery period.
Initial forecasts illustrated the need for further cost reduction, which unfortunately meant additional
restructuring, but has put the business once again on a stable footing for FY21, with positive operational
gearing to leverage once growth resumes. Further scenario tests included losing major customers, failure to
utilise slow-moving stock under new demand levels and not receiving CBIL support or extension of terms.
Even in the worst of these cases, with all three downside scenarios happening, Management’s mitigation
plans, meant the business could navigate the forecast period utilising its net cash position and existing
facilities, albeit with some shorter-term decisions needed to be made. This recovery has been made possible
by a combination of existing contracts recovering to pre-COVID-19 run rates over the 5-7 year period, as well
as new contracts being won from the significant pipeline of opportunities being targeted.
Continued monthly monitoring of this forecast model is ongoing over a rolling 36 month period, with the
business adopting the latest Integrated Business Planning approach in January 2021. As a result, any
departures from budget or future requirements for cash flow will be identified early on. Key cash flow projects
within this, such as the stock reduction programme, have been flagged as key priorities in the Velocity strategy,
with project leads, KPIs and reporting mechanisms into Board. Any gaps against forecast will be caught in this
process and a recovery plan put in place to ensure delivery of results.
Having due regard to these projections and available cash at 31 October 2020 of £3.3m, an invoice discount
facility where we can borrow up to £5m dependent on debtor levels, and continued the support of our bank,
customers and shareholders during these difficult circumstances, it is the opinion of the Board that Group has
adequate resources to continue to trade as a going concern.
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 2019:
IFRS 16 ‘Leases’
The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative
information has not been restated and continues to be reported under IAS 17. This note explains the impact
of the adoption of IFRS 16 on the Group’s financial statements and discloses the new accounting policies that
have been applied from 1 November 2019. The Group has adopted IFRS 16 retrospectively from 1 November
2019 but has not restated the comparative for the 2019 reporting period, as permitted under the specific
transactional provisions in the standard. The reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening balance sheet on 1 November 2019.
On adoption of IFRS, the Group recognised lease liabilities in relation to leases which had previously been
Classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at
present value of the remaining lease payments, discounted using the Group’s incremental borrowing rates as
at 1 November 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1
November 2019 was 5.2%. In applying IFRS 16 for the first time, the Group has used the following practical
expedients permitted by the standard:
-
-
-
-
-
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
reliance on the previous assessments on whether leases are onerous;
the accounting of operating leases with a remaining lease term of less than 12 months as at 1
November 2020 as short term leases;
the exclusion of initial direct costs for the measurement of the right -of-use asset at the date of initial
application; and
the use of hindsight in determining the lease term where the contract contains options to extend or
terminate the lease.
56
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
47
Notes to the Financial Statements
2.
Accounting policies (continued)
Impact of transition to IFRS 16
On the transition date of 1 November 2019, the Group recognised the following transactions:
Right of use assets:
Land and buildings
Motor Vehicles
Lease liability
£’000
479
13
492
(492)
Further recognition during the financial year of £885k related to the addition of Unit 5 at the Burnley site.
The change in accounting policy affected the above items in the balance sheet on 1 November 2020. The net
impact on retained earnings at 1 November 2020 was £Nil. For the year ending 31 October 2020 operating
lease rentals of £307k have been restated as deprecation £246k and finance costs of £47k, EBITDA has
increased by £293k whereas profit before tax has reduced by £47k.
Further analysis of the impact of IFRS 16 is provided in note 19.
Further recognition during the financial year of £885k related to the addition of Unit 5 at the Burnley site.
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 has applied IFRS 15 “Revenue from Contracts with Customers”. The
new standard requires clear identification of separate performance obligations and the revenue associated
with those obligations with each new contract entered into is reviewed for consistency with the standard.
Revenue arises mainly from the sale of structural and consumable materials for the use within the Aerospace
industry.
To Determine whether to recognise revenue, the Group follows a 5-step process:
1
2
3
4
5
Identifying the contract with a customer
Identifying the performance obligations
Determining the transaction price
Allocating the transaction price to the performance obligations
Recognising revenue when/as performance obligations are satisfied
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
upon specifications. Warranties are not provided separately and, therefore, do not
function in line with agreed
represent separate performance obligations
‑
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.
57
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
48
Notes to the Financial Statements
2.
Accounting policies (continued)
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 – purchase cost on a first-in/first-out basis.
• Work in progress and finished goods – costs of direct materials and labour plus attributable overheads
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’s own 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
58
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
49
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:
Land and buildings (right of use)
Plant and machinery
Motor vehicles
Fixtures and fittings
Leasehold Improvements
Over the term of the lease
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’s underlying business performance.
Foreign currency translation
Items included in the financial statements of each of the group’s entities are measured using the currency of
the primary economic environment in which the entity operates (‘its functional currency’). The consolidated
financial statements are presented in sterling, which Velocity Composites plc’s functional and 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
carried out on the asset’s cash generating unit (i.e. the smallest grouping of assets in which the asset 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.
59
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
50
Notes to the Financial Statements
2.
Accounting policies (continued)
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.
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’s 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 consider
and recognise impairment that might occur in the future through an “expected loss” model. The 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’s ordinary shares are classified as equity instruments.
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.
60
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
51
Notes to the Financial Statements
2.
Accounting policies (continued)
Leased Assets
Finance Lease
For Finance leases recognised until 2019 financial year, management apply judgement in considering the
substance of a lease agreement and whether it transfers substantially all the risks and rewards incidental to
ownership of the leased asset. Key factors considered include the length of the lease term in relation to the
economic life of the asset, the present value of the minimum lease payments in relation to the asset’s fair
value, and whether the Group obtains ownership at the end of the lease term,
See the accounting policy on Property plant and equipment for the depreciation methods and useful lives for
assets held under finance leases.
Minimum lease payments are apportioned between finance charges and the reduction of the outstanding
liability. The finance charges are allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
Operating Lease
An operating lease is defined as a lease in which substantially all of the risks and rewards incidental to
ownership remain with the lessor.
Any leases in the year end 31 October 2020 that are not defined as a right of use asset have been defined
as an operating lease see note 19 for details.
Government Grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the
grant will be received and the group will comply with all attached conditions. Government grants relating to
cost are deferred and recognised in the profit or loss by deducting from the related expense over the period
necessary to match them with the costs that they are intended to compensate.
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 or
deductible. The Group’s liability for current tax is calculated using rates that have been enacted or
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.
61
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
52
Notes to the Financial Statements
2.
Accounting policies (continued)
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.
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.
Share based payments
Further information about the assumptions made in measuring fair values is included in the following note 23.
62
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
53
Notes to the Financial Statements
3.
Financial instruments & Risk Management
The Board has overall responsibility for the determination of the Group’s risk management objectives and
policies. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without
unduly affecting the Group’s competitiveness and flexibility. The Group reports in Sterling. All 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 – loans and receivables
Trade and other receivables – non financial assets
Cash and cash equivalents – loans and receivables
Total loans and receivables
Current liabilities
Trade and other payables – at amortised cost
Trade and other payables – non financial liabilities
Year ended
31 October
2020
£’000
Year ended
31 October
2019
£’000
2,205
259
2,464
3,268
5,732
919
585
1,504
3,912
312
4,224
3,424
7,648
2,691
532
3,223
Risk management
The Group’s activities expose it to a variety of financial risks: market risk (primarily foreign exchange risk and
interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s
financial performance. Risk management is carried out by the Board and their policies are outlined below.
63
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
54
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’s foreign currency denominated assets and liabilities comprise the inventories
in Note 14, trade receivables in Note 15, cash in Note 16 and trade payables in Note 17.
Whilst the majority of the Group’s financial assets are held in Sterling, movements in the exchange rate of the
US Dollar, Euro or Ringgit against Sterling do have an impact on both the result for the year and equity. The
Group’s assets and liabilities that are held in US Dollar, Euro or Ringgits are held in those currencies 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.
2019
Finance lease liability
Trade payables
Accruals
Other payables
Invoice discounting facility
Within 1
year
£’000
One to
two
years
£’000
Two to
five
years
£’000
Over five
years
£’000
121
2,242
532
13
4
110
-
-
-
-
59
-
-
-
-
-
-
-
-
-
64
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
55
Notes to the Financial Statements
3.
Financial instruments & Risk Management (continued)
2020
Within 1
year
£’000
One to
two
years
£’000
Two to
five
years
£’000
Over five
years
£’000
Loan
Finance lease liability including right of use assets
Trade payables
Accruals
Other payables
Invoice discounting facility
500
411
487
585
15
-
1,500
266
-
-
-
-
-
794
-
-
-
-
-
-
-
-
-
-
The finance lease liability is shown gross, inclusive of interest payments.
Capital risk management
c)
For the purpose of the Group’s capital management, capital includes issued capital and all other equity
reserves attributable to the equity holders of the Group. The Group’s objectives when managing capital are
to safeguard the Group’s ability to continue as a going concern in order 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.
The Group’s subsidiary 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
2020
£’000
Year ended
31 October
2019
£’000
12,337
1,224
-
21,850
2,435
31
13,561
24,316
During the year four customers accounted for 94.0% of the Group’s total revenue for the year ended 31
October 2020. This was split as follows; Customer A – 43.6% (2019: 50.9%), Customer B – 27.2% (2019:
19.9%), Customer C – 12.9% (2019: 16.1%) and Customer D – 10.3% (2019: 9.5%). The majority of 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.
During the current and previous year, the Group operated in Asia. No revenue was generated in Asia during
the year ended 31 October 2020 and year ended 31 October 2019 as the site operates as an Engineering
Support Office for the Group.
65
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
56
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)
Amortisation of development costs
Impairment of development costs
Depreciation:
Owned assets
Property, plant and equipment under-right-of-use assets
Assets held under finance leases
(Profit) on disposal of assets
Grant income amortisation
Operating lease payments
Auditor’s remuneration:
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
2020
£’000
Year ended
31 October
2019
£’000
4,336
(39)
118
72
223
246
104
-
-
59
60
19
5
11
4,431
(75)
116
18
214
-
101
(11)
(6)
272
52
8
4
12
Following the implementation of IFRS 16, assets under qualifying operating leases have been capitalised as
‘Right-of-use-assets’. Lease rental cost is now replaced by depreciation charge and implied interest calculation
on each qualifying lease.
66
Velocity Composites plc
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements for the year ended 31 October 2020
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Velocity Composites plc
Notes to the Financial Statements
Notes to the Financial Statements
Financial statements for the year ended 31 October 2020
Notes to the Financial Statements
6.
6.
Notes to the Financial Statements
6.
Staff costs
Staff costs
Staff costs
Financial statements Notes to the Financial Statements
57
57
57
57
During the year the company took advantage of the government furlough scheme, in the year to 31 October
During the year the company took advantage of the government furlough scheme, in the year to 31 October
2020 £445k was claimed in relation to this scheme, this benefit is not included in the above totals.
2020 £445k was claimed in relation to this scheme, this benefit is not included in the above totals.
During the year the company took advantage of the government furlough scheme, in the year to 31 October
2020 £445k was claimed in relation to this scheme, this benefit is not included in the above totals.
Staff costs net of furlough claims amounted to £3.9m during the financial year.
Staff costs net of furlough claims amounted to £3.9m during the financial year.
During the year the company took advantage of the government furlough scheme, in the year to 31 October
Staff costs net of furlough claims amounted to £3.9m during the financial year.
2020 £445k was claimed in relation to this scheme, this benefit is not included in the above totals.
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:
Staff costs net of furlough claims amounted to £3.9m during the financial year.
4,336
4,431
The average monthly number of employees during the period was as follows:
6.
Staff costs
Wages, salaries and bonuses
Wages, salaries and bonuses
Social security costs
Social security costs
Wages, salaries and bonuses
Pension costs
Pension costs
Social security costs
Share-based payments
Share-based payments
Wages, salaries and bonuses
Pension costs
Social security costs
Share-based payments
Pension costs
Share-based payments
Manufacturing
Manufacturing
Administration
Administration
Manufacturing
Administration
Manufacturing
Administration
Directors costs
Directors costs
Directors costs
Directors costs
Directors’ remuneration included in staff costs:
Directors’ remuneration included in staff costs:
Directors’ remuneration included in staff costs:
Wages, salaries and bonuses
Wages, salaries and bonuses
Compensation for retirement from office
Compensation for retirement from office
Wages, salaries and bonuses
Directors’ remuneration included in staff costs:
Pension costs
Pension costs
Compensation for retirement from office
Pension costs
Wages, salaries and bonuses
Compensation for retirement from office
Pension costs
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
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees
Year ended
Year ended
31 October
31 October
Year ended
2020
2020
31 October
£’000
£’000
2020
Year ended
£’000
31 October
3,747
3,747
2020
346
346
£’000
3,747
123
123
346
120
120
3,747
123
346
120
4,336
4,336
123
120
4,336
Year ended
Year ended
31 October
31 October
Year ended
2019
2019
31 October
£’000
£’000
2019
Year ended
£’000
31 October
2019
£’000
3,929
3,929
321
321
3,929
116
116
321
65
65
3,929
116
321
65
4,431
4,431
116
65
4,431
Year ended
Year ended
31 October
31 October
Year ended
2020
2020
31 October
Head count
Head count
2020
Year ended
Head count
31 October
76
76
2020
46
46
Head count
76
46
122
122
76
46
122
Year ended
Year ended
31 October
31 October
Year ended
2019
2019
31 October
Head count
Head count
2019
Year ended
Head count
31 October
2019
Head count
83
83
49
49
83
49
132
132
83
49
132
Year ended
Year ended
122
31 October
31 October
Year ended
2020
2020
31 October
£’000
£’000
2020
Year ended
£’000
31 October
2020
333
333
£’000
-
-
333
18
18
-
18
333
352
352
-
18
352
132
Year ended
Year ended
31 October
31 October
Year ended
2019
2019
31 October
£’000
£’000
2019
Year ended
£’000
31 October
2019
£’000
325
325
113
113
325
19
19
113
19
325
457
457
113
19
457
352
175
175
175
175
457
172
172
172
172
67
Velocity Composites plc
Financial statements for the year ended 31 October 2020
58
Financial statements Notes to the Financial Statements
Notes to the Financial Statements
7.
Exceptional administrative expenses
Restructuring costs
Year ended
31 October
2020
Year ended
31 October
2019
£’000
£’000
341
341
692
692
The exceptional items reported in 2020 £0.3m consist of cost of restructuring and redundancy costs
in the year due to COVID-19.
Prior year costs £0.7m were in relation to the resignations of the previous chairman and non-
executive directors, settlement of a dispute with the founding shareholders, and various other
associated costs relating to the restructuring of the board.
8.
Finance income and expenses
Finance expense
Finance charge from Finance leases
Right-of-use liability interest under IFRS 16
Other interest & invoice discounting charges
Finance Income
Year ended
31 October
2020
£’000
Year ended
31 October
2019
£’000
16
47
42
(7)
98
21
-
60
(23)
58
Following the implementation of IFRS 16, assets under qualifying operating leases have been capitalised as
‘Right-of-use-assets’. Lease rental cost is now replaced by depreciation charge and implied interest
calculation on each qualifying lease.
68
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
59
Notes to the Financial Statements
9.
Income tax
Current tax (income)/expense
UK corporation tax: in respect of prior years
Total tax (income)/expense
Year ended
31 October
2020
£’000
Year ended
31 October
2019
£’000
(117)
(117)
(117)
(16)
(16)
(16)
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
19.00%
19.00%
(3,131)
(652)
Expected tax credit based on corporation tax rate
(595)
(124)
Expenses not deductible for tax purposes
Other differences
Tax effect of R&D credits
Total tax (income)/expense
595
(66)
(51)
(117)
124
-
(16)
(16)
The UK corporation tax rate reduced to 19% with effect from 1 April 2017. A reduction in the UK corporation
tax rate from 19% to 17% was (effective from 1 April 2020) was substantively enacted on the 6 September
2016.
In the 11 March 2020, Budget it was announced that the UK tax rate will remain at the current 19% and not
reduce to 17% from 1 April 2020.
The UK corporation tax rate for the year ended 31 October 2020 is calculated at 19% (2019: 19%).
69
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Notes to the Financial Statements
Notes to the Financial Statements
Loss per share
10.
Financial statements Notes to the Financial Statements
60
60
Loss per share (£) (diluted)
Share options have not been included in the diluted calculation as they would be anti-dilutive with a loss being
recognised.
Share options have not been included in the diluted calculation as they would be anti-dilutive with a loss being
11.
recognised.
Intangible assets
(£0.02)
(£0.08)
10.
Loss per share
Loss for the year
Loss for the year
Weighted average number of shares in issue
Weighted average number of share options
Weighted average number of shares in issue
Weighted average number of shares (diluted)
Weighted average number of share options
Weighted average number of shares (diluted)
Loss per share (£) (basic)
Loss per share (£) (basic)
Loss per share (£) (diluted)
Group and Company
11.
Intangible assets
Group and Company
Cost
At 31 October 2018
Cost
Additions
At 31 October 2018
Disposal
Additions
At 31 October 2019
Disposal
Additions
At 31 October 2019
Disposal
Additions
At 31 October 2020
Disposal
At 31 October 2020
Amortisation
At 31 October 2018
Amortisation
Charge for the year
At 31 October 2018
Impairment
Charge for the year
Disposal
Impairment
At 31 October 2019
Disposal
Charge for the year
At 31 October 2019
Impairment
Charge for the year
Disposal
Impairment
At 31 October 2020
Disposal
At 31 October 2020
Net book value
At 31 October 2018
Net book value
At 31 October 2019
At 31 October 2018
At 31 October 2020
At 31 October 2019
At 31 October 2020
Year ended
31 October
2020
Year ended
£
31 October
2020
£
(3,130,000)
Year ended
31 October
2019
Year ended
£
31 October
2019
£
(636,000)
(3,130,000)
Shares
(636,000)
Shares
Shares
35,995,289
2,143,440
35,995,289
38,138,729
2,143,440
38,138,729
(£0.08)
Shares
35,860,652
587,101
35,860,652
36,447,753
587,101
36,447,753
(£0.02)
(£0.08)
(£0.08)
(£0.02)
(£0.02)
Development
Costs
Development
£’000
Costs
£’000
533
89
533
(23)
89
599
(23)
39
599
(-)
39
638
(-)
638
171
116
171
18
116
(23)
18
282
(23)
118
282
72
118
-
72
472
-
472
Group
Total
Group
£’000
Total
£’000
533
89
533
(23)
89
599
(23)
39
599
(-)
39
638
(200)
438
171
116
171
18
116
(23)
18
282
(23)
118
282
72
118
-
(129)
472
-
271
362
317
362
167
317
167
362
317
362
167
317
167
Impairment
The Group tests Development costs at each reporting period for impairment in accordance with IAS 36
‘Impairment of Assets’, and more frequently if there is an indication that the carrying value might be impaired.
Impairment
An indication of impairment can be generated from the loss of a customer, or contracted sales. The Board
The Group tests Development costs at each reporting period for impairment in accordance with IAS 36
have provided an impairment of £72,000 (2019 - £18,000) relating to development costs capitalised but where
‘Impairment of Assets’, and more frequently if there is an indication that the carrying value might be impaired.
no future economic benefits are currently expected to be generated for the Group.
An indication of impairment can be generated from the loss of a customer, or contracted sales. The Board
have provided an impairment of £72,000 (2019 - £18,000) relating to development costs capitalised but where
no future economic benefits are currently expected to be generated for the Group.
70
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
61
Notes to the Financial Statements
12.
Property, plant and equipment
Group and Company
Cost
At 31 October 2018
Additions
Disposal
At 31 October 2019
Additions
Disposal
At 31 October 2020
Depreciation
At 31 October 2018
Charge for the year
Disposal
At 31 October 2019
Charge for the year
Disposal
At 31 October 2020
Net book value
At 31 October 2018
At 31 October 2019
At 31 October 2020
Leasehold
Fixtures
Improvements machinery vehicles & Fittings
Plant &
Motor
£’000
£’000
£’000
£’000
182
16
-
198
372
(3)
567
27
19
-
46
33
-
79
155
152
488
1,732
188
-
1,920
569
-
2,489
993
240
-
1,233
233
-
1,466
739
687
1,023
146
51
(56)
141
-
-
141
136
12
(56)
92
17
-
109
10
49
32
329
45
(25)
349
51
-
400
153
44
(21)
176
44
-
220
176
173
180
Net book value of assets under finance lease agreements:
At 31 October 2018
At 31 October 2019
At 31 October 2020
Group
Total
£’000
2,389
300
(81)
2,608
992
(3)
3,597
1,309
315
(77)
1,547
327
-
1,874
1,080
1,061
1,723
£000’s
457
421
536
Included within plant and machinery is £0.2m of assets not currently being depreciated, relating to two Zund
Machines which are in storage in the USA. We expect these will be brought into use within the next 12 months,
and once the assets come into use will be depreciated in line with the policy.
During the year right-to-use assets of £1,127k have been recognised under IFRS 16 and capitalised as
tangible assets these have been split out as a separate asset to property, plant and equipment and details
can be found in note 19.
71
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
62
Notes to the Financial Statements
13.
Investment in subsidiaries
Group
Company
31 October 31 October 31 October 31 October
Company
Group
Subsidiary undertakings
2020
£’000
2019
£’000
2020
£’000
2019
£’000
-
-
-
-
-
-
-
-
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
Raw materials & consumables
Finished goods
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
2020
£’000
1,558
350
2019
£’000
2,230
947
2020
£’000
1,558
350
2019
£’000
2,230
947
1,908
3,177
1,908
3,177
Inventories totalling £1,908k (2019: £3,177k) 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 2020 is after a stock provision of £857k (2019: £241k). The provision reflects the
aged stock profile consistent with FY19, as well as specific provisions related to slow moving stock as a result
of reduced demand.
Inventories recognised as an expense during the year ended 31 October 2020 amounted to £9,745k (2019:
£16,787k), and these were included in cost of sales.
72
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
63
Notes to the Financial Statements
15.
Trade and other receivables
Group
31 October
2020
£’000
Group
31 October
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
Trade receivables
Prepayments and accrued income
Other receivables
Amounts due from subsidiary
undertakings
1,954
259
251
-
3,607
312
230
-
1,954
257
250
3,607
312
230
29
29
2,464
4,149
2,490
4,178
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 them
subsequently at amortised cost. Details about the group’s impairment policies and 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
2020
£’000
2019
£’000
249
7
5
-
261
22
-
8
-
30
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
31 October
2020
£’000
31 October
2019
£’000
268
1,910
367
2,594
2,178
2,961
73
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
64
Notes to the Financial Statements
16.
Cash and cash equivalents
Group
Group
31 October 31 October
2020
£’000
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
Cash at bank
3,268
3,424
3,265
3,416
3,268
3,424
3,265
3,416
Of the total cash balance, £745k (2019: £1,613k) 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.
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.
Bank Loan in the period
Not later than one year
One to two years
Group
31 October
2020
£’000
Group
31 October
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
487
585
417
15
-
2,242
532
432
13
4
486
583
417
13
-
1,504
3,223
1,499
2,242
532
432
13
4
3,223
Group
31 October
2020
£’000
Group
31 October
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
500
1,500
2,000
-
-
-
500
1,500
2,000
-
-
-
During the year the company took out a Coronavirus Business Interruption Loan for £2m pounds, this is to
be paid over 2 years with the first payments due August 2021, the last payment date is August 2022. The
loan is at interest free for the initial 12 months, followed by an interest rate of 3% above the Bank of England
base rate which currently stands at 0.1%.
18.
Grant income deferred
Opening balance
Grant income amortisation
Closing balance
Group
31 October
2020
£’000
Group
31 October
2019
£’000
Company
31 October
2020
£’000
Company
31 October
2019
£’000
7
(7)
-
-
(-)
-
7
(7)
-
-
(-)
-
74
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
65
Notes to the Financial Statements
19.
Leases
In the current year, the Company adopted IFRS 16 and applied the modified retrospective approach. The
reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the
opening balance sheet on 1 November 2019.
Right-of-use-assets
Group and Company
Land and
property
£’000
Motor
Vehicles
£’000
Total
£’000
Cost
Balance as at 1 November 2019
Adjustment on transition to IFRS 16 on 1 November 2019
Additions
Balance at 31 October 2020
Depreciation and amortisation
Balance as at 1 November 2019
Adjustment on transition to IFRS 16 on 1 November 2019
Depreciation charge for the year
Balance at 31 October 2020
Net book value
At 31 October 2020
-
479
885
1,364
-
-
238
238
1,126
-
9
-
9
-
-
8
8
1
-
488
885
1,373
-
-
246
246
1,127
The associated right-of-use assets for property leases and other assets were measured at the amount equal
to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease
recognised in the balance sheet as at 31 October 2020.
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.
Right-of-use lease liabilities
At 1 November 2019
Repayment
Additions to right-of-use assets in exchange for increased lease liabilities
Other lease movements
£’000
488
(307)
885
47
1,113
At 31 October 2020
Analysis by length of liability
Current
Non-current
Total
Number of right-to-use assets leased
Range of remaining term
Land and
property
£’000
Motor
Vehicles
£’000
Total
£’000
259
854
1,113
5
-
-
-
2
259
854
1,113
1-10 years less than 1 year
75
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
66
Notes to the Financial Statements
19.
Leases (continued)
Finance leases and right to use
The Group leases plant and equipment under finance leases which are secured against the assets. Future
lease payments are due as follows these include the above split of right-of use lease liabilities:
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
31 October 2020
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
135
123
66
-
324
480
317
899
-
1,696
14
13
7
-
34
69
51
105
-
225
121
110
59
-
290
411
266
794
-
1,471
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
Motor vehicles
Not later than one year
Later than one year and not later than two 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
31 October
2020
£’000
31 October
2019
£’000
-
-
-
23
4
-
-
27
5
2
7
360
360
443
578
1,741
76
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
67
Notes to the Financial Statements
19.
Leases (continued)
Company
Motor vehicles
Not later than one year
Later than one year and not later than two 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
31 October
2020
£’000
31 October
2019
£’000
-
-
-
23
4
-
-
5
2
7
360
360
443
578
27
1,741
Operating leases not classed as right of use assets, relate to a building security contract, all other prior year
operating leases have been classed as right-to-use asset on transition to IFRS 16.
20.
Deferred Tax
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
2020
£’000
2019
£’000
-
-
-
-
-
-
31 October 31 October
2020
£’000
2019
£’000
-
113
(139)
(252)
(139)
(139)
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.
77
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
68
Notes to the Financial Statements
21.
Reconciliation of liabilities arising from financing activities
Group and Company
At 31 October 2018
Cash flows
Repayment
Proceeds
Non-cash
Foreign exchange differences
Transfer from Long-term to short term borrowings
At 31 October 2019
Cash flows
Repayment
Proceeds
Non-cash
Foreign exchange differences
Transfer from Long-term to short term borrowings
As 31 October 2020
22.
Share capital
Share capital issued and fully paid
36,227,379 Ordinary shares of £0.0025 each
Long-term
borrowings
£’000
Short-term
borrowings
£’000
Total
£’000
171
-
119
-
(121)
169
3,302
-
(511)
2,960
732
903
(29,494)
28,784
(29,494)
28,903
(18)
121
125
(18)
-
294
(15,434)
15,303
(15,434)
18,605
6
511
511
6
-
3,471
31 October
2020
£
31 October
2019
£
90,569
89,791
Ordinary shares have a par value of 0.25p and an exercise price of £0.39 as at 31 October 2020. 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 2020
Nominal
value
£
Number of
shares
89,791
778
90,569
35,916,179
311,200
36,227,379
On 20 February 2020, the Company issued 70,000 new ordinary shares of £0.0025 each to satisfy the
exercise of options granted under the Group’s 2017 Share Option Scheme.
On the 15 September 2020, the company issued a further 241,200 new ordinary shares of £0.0025 each to
satisfy the exercise of options granted under the Group’s 2017 Share Option Scheme.
78
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
69
Notes to the Financial Statements
23.
Share-based payment
The Group’s employees are granted option awards under the Velocity Composites Limited Enterprise
Management Incentive and Unapproved Scheme.
The share options dated 13 March, 17 October 2017 have no attached performance conditions and vest
subject only to continued employment. The options may be exercised at any point up to the 10th Anniversary
of the grant date. 225,000 share 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. The 1,480,000 share options dated 29 October 2019 have attached
performance conditions linked to EBITDA. They vest after two years, or earlier if a vesting event occurs in
the rules of the Scheme. The options may be exercised at any point up to the 10th Anniversary grant date.
During the year £765,000 of these share options lapsed due to people leaving the business and the
performance criteria not being met.
During the year ended 31 October 2020, share options were granted as follows:
615,065 shares options dated 30 October 2020 have no attached performance conditions and vest subject
only to continued employment. They vest after 5 years, or earlier if a vesting event occurs as defined in the
rules of the Scheme.
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 £167,313 (2019 – £65,453) 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 2020:
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
30 October 2020
0.0025
0.6926
0.2065
0.2065
0.2065
13 Mar 2019 13 Mar 2027 431,920
-
17 Oct 2019 17 Oct 2027
-
29 Oct 2022 29 Oct 2031
-
29 Oct 2021 29 Oct 2031
-
1 Nov 2026
1 Nov 2021
171,281
35,000
225,000
1,480,000
615,065
603,201
35,000
225,000
1,480,000
615,065
431,920
2,526,346
2,958,266
The cost of share-based payments is included in “Administrative expenses” within the Statement of total
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
Scheme and grant
date
As at 30
Nov 2019
Issued
Expired Exercised
Vested As at 31
Oct 2020
1 January 2017
13 March 2017
17 October 2017
29 October 2019
30 October 2020
264,178
253,602
19,404
-
9,600
2,400
- 108,000
-
-
537,184 120,000
-
-
-
-
-
-
-
-
-
-
-
-
(167,313)
-
-
-
264,178
95,889
21,804
108,000
-
-
(167,313)
489,871
79
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
70
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
2020
£’000
31 October
2019
£’000
92
-
92
724
40
764
Included within compensation of key management personnel are directors’ settlements. These costs are
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 £nil (£1,500 – 2019)
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:
Related parties
25.
Ultimate controlling party
31 October
2020
£’000
31 October
2019
£’000
-
-
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 2020 the Group had £nil (2019: £445,369) 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 £131,761 (2019: £115,654) were charged to the Consolidated Income statement. Contributions
outstanding at 31 October 2020 were £22,142 (2019: £24,374).
28.
Contingent liabilities
At 31 October 2020 the Group had in place bank guarantees of £nil (2019: £nil) in respect of supplier trade
accounts.
80
Velocity Composites plc
Financial statements for the year ended 31 October 2020
Financial statements Notes to the Financial Statements
72
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, impairment, share-based payments and exceptional restructuring costs.
Adjusted EBITDA
Reconciliation from Operating Loss
31 October 31 October
2020
£’000
2019
£’000
Operating Loss
(3,149)
(594)
Add back:
Share-based payments
Depreciation & Amortisation
Impairment of Intangible assets
Depreciation of Right of Use assets under IFRS 16 (equivalent 2019
rent payments)
Exceptional Administrative costs
120
445
72
246
341
66
431
18
*221
692
(1,925)
834
* In the adjusted EBITDA for 2019 the rent payments for those assets now accounted for as Right of Use assets under IFRS 16 have been added back so
that both years can be compared. The rent payments are not significantly different to the depreciation charge.
81
Shareholder Information Advisors
Advisors
Company registration number:
06389233
Company Secretary and
Registered office:
Nominated advisor and broker
Adam Newton
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
Cenkos Securities Plc
6-8 Tokenhouse Yard
London
EC2R 7AS
Bankers:
Legal Advisors
Independent Auditor
Registrars
Financial PR
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
Fieldfisher Manchester
Free Trade Exchange,
Level 5, 37 Peter Street
Manchester
M2 5GB
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
82
Shareholder Information Notice of AGM
Notice of AGM
Velocity Composites plc
Notice of Annual General Meeting
Notice is hereby given that the 2021 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 23 February 2021 at 10:00am to consider, and if thought fit, pass the following resolutions.
Resolutions 1 to 9 (inclusive) will be proposed as ordinary resolutions and resolutions 10 and 11 will be
proposed as special resolutions.
COVID-19 and Annual General Meeting proceedings
In light of the UK Government's responses to the COVID-19 outbreak, which currently includes
restrictions on all non-essential travel, the Company is adopting the following Annual General Meeting
arrangements in order to ensure that the health and safety of our shareholders, directors, employees
and other key stakeholders is protected:
-
-
The Annual General Meeting will only address the formal matters contained in this Notice of
Annual General Meeting.
In accordance with the Company's Articles of Association, the quorum necessary to constitute
the Annual General Meeting is two members in person or proxy, therefore two members will be
in attendance to form the quorum and conduct the business of the meeting. The board of
directors will also attend by telephone and professional advisers will not be in attendance (but
will be available by telephone).
-
Attendance by additional shareholders is not considered as "essential for work purposes" and
so would not be permitted under the Stay at Home Measures. Shareholders may not attend in
person and will be refused entry to the Annual General Meeting given the Stay at Home
Measures.
-
-
There will be no form of broadcast, website, videoconference or dial in for the Annual General
Meeting for all shareholders due to complexity and cost.
All shareholders are urged to appoint the Chairman of the meeting as their proxy, with voting
instructions. Please refer to the Notes to this Notice of Annual General Meeting for more
information regarding proxy voting. It is emphasised that any forms of proxy being returned via
a postal service should be submitted as soon as possible to allow for any delays to or
suspensions of postal services in the United Kingdom as a result of measures being
implemented by the Government of the United Kingdom.
- Please note that as shareholders will not be able to attend this year's Annual General Meeting
the Company is proposing to allow shareholders the opportunity to raise any issues or concerns
arising from the business proposed to be conducted at the meeting. Appropriate questions on
the business of the meeting should be emailed to ir@velocity-composites.com before 6:30pm
on 19 February 2021 and responses will be posted on the Company's website, www.velocity-
composites.com on the morning of the Annual General Meeting. The Company must answer
any such question relating to the business being dealt with at the meeting but no such answer
need be given if (a) to do so would interfere unduly with the preparation for the meeting or
involve the disclosure of confidential information, (b) the answer has already been given on a
73474116-4
83
Shareholder Information Notice of AGM
website in the form of an answer to a question, or (c) it is undesirable in the interests of the
Company or the good order of the meeting that the question be answered.
-
In order to ensure a more accurate reflection of the views of shareholders and ensure that your
proxy votes are recognised, voting on all resolutions to be proposed at the Annual General
Meeting will be by way of a poll as permitted by the Company's Articles of Association.
Resolutions 1 to 9 are proposed as ordinary resolutions. An ordinary resolution will be passed
on a poll if it is passed by shareholders representing a simple majority of the total voting rights
of shareholders who (being entitled to do so) vote at the Annual General Meeting. Resolutions
10 and 11 are proposed as special resolutions. A special resolution will be passed on a poll if
it is passed by a majority of shareholders representing not less than 75% of the total voting
rights of shareholders who (being entitled to do so) vote at the Annual General Meeting.
The UK Government may change current restrictions or implement further measures relating to the
holding of general meetings prior to the Annual General Meeting. Any changes to the Annual General
Meeting (including the arrangements outlined above) will be made available on the Company's website
at www.velocity-composites.com and by means of the Regulatory Information Service.
Ordinary business
Ordinary resolutions
1.
To receive and adopt the Annual Report and Accounts of the Company for the period
ended 31 October 2020 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 2020.
3.
To re-appoint as a director Christopher Williams 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 director Jonathan Karl Bridges 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 Margaret Mary Amos who retires from office in
accordance with the Company's Articles of Association and offers herself for re-appointment.
6.
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.
7.
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.
8.
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.
73474116-4
84
Shareholder Information Notice of AGM
Special business
Ordinary resolution
9.
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:
9.1
up to a maximum nominal amount (within the meaning of Section 551(3) and (6) of the
Act) of £30,189.55 (such amount to be reduced by the nominal amount allotted or
granted under paragraph 9.2 below in excess of such amount); and
9.2
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
£60,379.10 (such amount to be reduced by any allotments or grants made
under 9.1 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
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 23 May 2022), 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).
Special resolution
10.
To resolve that, subject to the passing of resolution 9 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 and/or to sell ordinary shares held by the Company as treasury shares, as if
Section 561 of the Act did not apply to any such allotment or sale, provided that such authority
be limited:
10.1
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 9.2 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
73474116-4
85
Special business
Ordinary resolution
shares:
9.
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,
9.1
up to a maximum nominal amount (within the meaning of Section 551(3) and (6) of the
Act) of £30,189.55 (such amount to be reduced by the nominal amount allotted or
granted under paragraph 9.2 below in excess of such amount); and
9.2
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
£60,379.10 (such amount to be reduced by any allotments or grants made
under 9.1 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
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 23 May 2022), unless previously revoked or varied by the Company
(save that the Company may before such expiry make any offer or agreement which would or
Shareholder Information Notice of AGM
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).
Special resolution
10.
To resolve that, subject to the passing of resolution 9 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 and/or to sell ordinary shares held by the Company as treasury shares, as if
Section 561 of the Act did not apply to any such allotment or sale, provided that such authority
be limited:
10.1
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 9.2 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
73474116-4
or other arrangements as the directors may consider necessary or appropriate to deal
with treasury shares, 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
10.2
to the allotment of equity securities or sale of treasury shares (otherwise than under
paragraph 10.1 above) up to an aggregate nominal amount of £9,056.85,
such authority to expire at the conclusion of the next Annual General Meeting of the Company
(or, if earlier, on 23 May 2022), 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).
11.
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:
11.1
the maximum aggregate number of shares that may be purchased is 3,622,746;
11.2
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;
11.3
the maximum price (exclusive of expenses) which may be paid for each ordinary share
is an amount equal to the higher of:
11.3.1 105 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
11.3.2 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)
86
of the Market Abuse Regulation;
11.4
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
11.5
unless previously
renewed,
revoked or varied,
this authority shall expire
on 23 May 2022, or if earlier, at the conclusion of the next Annual General Meeting of
expired; and
the Company.
73474116-4
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 treasury shares, 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
10.2
to the allotment of equity securities or sale of treasury shares (otherwise than under
paragraph 10.1 above) up to an aggregate nominal amount of £9,056.85,
such authority to expire at the conclusion of the next Annual General Meeting of the Company
(or, if earlier, on 23 May 2022), 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
Shareholder Information Notes to the AGM
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).
11.
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:
11.1
the maximum aggregate number of shares that may be purchased is 3,622,746;
11.2
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;
11.3
the maximum price (exclusive of expenses) which may be paid for each ordinary share
is an amount equal to the higher of:
11.3.1 105 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
11.3.2 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;
11.4
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
11.5
unless previously
renewed,
revoked or varied,
this authority shall expire
on 23 May 2022, or if earlier, at the conclusion of the next Annual General Meeting of
the Company.
By order of the Board
73474116-4
Adam Newton
Company Secretary
25 January 2020
25 January 2021
Registered Office: AMS Technology Park, Billington Road, Burnley, Lancashire, BB11 5UB
Registered in England and Wales No. 06389233
87
73474116-4
Shareholder Information Notes to the AGM
Notes to the AGM
Notes:
1.
Only those shareholders registered in the Company's register of members at: 6.30pm on
Friday 19 February 2021; or if this meeting is adjourned, at 6.30pm on the day two days prior to
the adjourned meeting (excluding non-business days) shall be entitled to vote at the meeting.
Changes to the register of members after the relevant deadline shall be disregarded in
determining the rights of any person to attend and vote at the meeting. In light of the UK
Government's responses to the COVID-19 outbreak, which currently includes restrictions on all
non-essential travel, attendance by additional shareholders is not considered as "essential for
work purposes" and so would not be permitted under the Stay at Home Measures.
Shareholders may not attend in person and will be refused entry to the Annual General Meeting
given the Stay at Home Measures.
2.
Any member wishing to vote at the meeting without attending in person or (in the case of a
corporation) through its duly appointed representative must appoint a proxy to do so. 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. A proxy need not be a shareholder of the Company. Shareholders
are not permitted to attend the meeting. As such shareholders are encouraged to appoint the
Chairman of the meeting as their proxy rather than a named person who will not be permitted
to attend the meeting. To be validly appointed, a proxy must be appointed using the procedures
set out in these notes and in accordance with any specific proxy appointment instructions. If
you appoint a proxy who is not the Chairman, please note that in light of the UK Government's
responses to the COVID-19 outbreak, they will not be permitted to attend in person and will be
refused entry to the Annual General Meeting given the Stay at Home Measures.
3.
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 19 February 2021.
4.
If you return more than one proxy appointment, either by paper or electronic communication,
the appointment received last by the registrar before the latest time for the receipt of proxies will
take precedence. You are advised to read the terms and conditions of use carefully.
5.
In the case of joint holders, where more than one of the joint holders completes a proxy
appointment, only the appointment submitted by the most senior holder will be accepted.
Seniority is determined by the order in which the names of the joint holders appear in the
Company's register of members in respect of the joint holding (the first named being the most
senior).
6.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy
appointment service may do so for the meeting (and any adjournment of the meeting) by using
the
procedures
described
in
the
CREST
manual
(available
from
www.euroclear.com/site/public/EUI). CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service provider(s), should refer
73474116-4
88
Shareholder Information Notes to the AGM
to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
7.
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 Annual General Meeting. 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.
8.
In order to revoke a proxy instruction, you will need to inform the Company by sending a signed
notice clearly stating your intention to revoke your proxy appointment to the Company's
registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, by
no later than 10.00am on Friday 19 February 2021. In the case of a member that is a company,
the revocation notice must be executed under its common seal or signed on its behalf by an
officer of the Company or a duly appointed attorney for the Company. Any power of attorney or
any other authority under which the revocation notice is signed (or a duly certified copy of such
power or authority) must be included with the revocation notice. The revocation notice must be
received by Equiniti Limited no later than 10.00am on Friday 19 February 2021. If you attempt
to revoke your proxy appointment but the revocation is received after the time specified, then
your proxy appointment will remain valid.
9.
As at 6.30pm on 22 January 2021 (the latest practicable date prior to the printing of this notice)
(i) the Company's issued share capital consisted of 36,227,459 ordinary shares, carrying one
vote each, and (ii) the total voting rights in the Company were 36,227,459. The Company's
website will include information on the number of shares and voting rights.
10.
Please note that as shareholders will not be able to attend this year's Annual General Meeting,
the Company is proposing to allow shareholders the opportunity to raise any issues or concerns
arising from the business proposed to be conducted at the meeting. Appropriate questions on
the business of the meeting should be emailed to ir@velocity-composites.com before 6.30pm
on 19 February 2021 and responses will be posted on the Company's website, www.velocity-
composites.com on the morning of the Annual General Meeting. The Company must answer
any such question relating to the business being dealt with at the meeting but no such answer
need be given if (a) to do so would interfere unduly with the preparation for the meeting or
involve the disclosure of confidential information, (b) the answer has already been given on a
website in the form of an answer to a question, or (c) it is undesirable in the interests of the
Company or the good order of the meeting that the question be answered.
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Shareholder Information Notes to the AGM
11.
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, subject
to restrictions in place for COVID-19 safety in accordance with UK Government guidelines, 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, subject to restrictions in place for COVID-19 safety in
accordance with UK Government guidelines.
12.
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 19 February 2021 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.
13.
You may not use any electronic address (within the meaning of Section 333(4) of the
Companies Act 2006) provided in either this Notice or any related documents (including the
form of proxy) to communicate with the Company for any purposes other than those expressly
stated.
14.
There are set out below notes to the resolutions to be passed at the Annual General Meeting.
If you require further guidance you should contact your solicitor or financial adviser.
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91
Strategic Review Chairman’s Report Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
2020 Annual Report &
Financial Statements
For the year ended 31 October 2020
92
Registered No. 06389233
Strategic Review Chairman’s Report