Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
Registered No: 06389233
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Contents
1. Strategic Report
Highlights ....................................................................................... 4
Chairman’s Report ......................................................................... 6
CEO Report ................................................................................. 10
Financial Review .......................................................................... 15
Principal Risks & Uncertainties ...................................................... 18
2. Governance
Statement of Corporate Governance ........................................... 25
Board of Directors and Senior Management ................................ 31
Directors’ Report ........................................................................... 35
Directors’ Remuneration Report ................................................... 38
3. Financial Statements
Independent Auditor’s Report ........................................................ 41
Consolidated Statement of Total Comprehensive Income ............. 47
Consolidated and Company Statement of Financial Position ........ 48
Consolidated and Company Statement of Changes in Equity ....... 49
Consolidated and Company Statement of Cash Flows .................. 51
Notes to the Financial Statements ................................................. 52
4. Shareholder Information
Advisers ........................................................................................ 81
Notice of General Meeting ............................................................ 82
Notes to Notice of General Meeting .............................................. 85
Strategic Report Highlights
Our Mission: To revolutionise aerospace composites
manufacturing by enabling our customers to reduce waste/costs
whilst meeting increased global demand by creating a lean and
scalable supply chain in a more-for-less era, delivering real value
for all stakeholders.
Financial Highlights & Group Key Performance Indicators
Revenue
£12m
Gross Margin %
23%
Adjusted EBITDA 1
Cash at Bank
£(0.5)m
£2.3m
Operating Loss
£(1.3)m
1 Earnings before interest, tax, depreciation, amortisation and adjusted for 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. Share-based payments are added back to make the share-based payment charge clear to
stakeholders. Workings are provided on p15 of the 2022 Annual Report and Financial Statements.
4
4
Our highly efficient nests help reduce waste & save money
The innovative visual inspection system is now in operation in our digital cell at Burnley HQ
Velocity Composites is the leading supplier of advanced composite material kits to the aerospace market
5
5
Strategic Report Chairman’s Report
Chairman’s Report
Andrew Beaden Executive Chairman
“
We have contracted UK and
US business which when in full
production will significantly
increase revenue, several times
the FY22 level.
”
Market Recovery
FY22 Financial Results
The global civil aerospace
sector has started to
recover and combined with
a robust defence industry
and opportunities outside
aerospace, we are selling our
services and technology into
strong growing markets.
Our investment in innovation and
extended supply chain services
is paying off. As we enter 2023,
our contracted business, when
fully onboarded, is close to three
times the run rate of most of
FY22. This is mainly a result of
our new US business, but also
more work flowing from existing
UK contracts.
The Company’s future is
underpinned by these long-term
contracts with leading blue-
chip industry customers and
the accelerating need to meet
sustainability targets. Composite
material technology has a key
part to play in light-weighting
aircraft, along with enabling new
fuel systems to be introduced.
Our offering provides customers
and suppliers with the ability
to achieve far more ambitious
sustainability goals.
Revenue increased 22% to
£12.0m as the UK civil aerospace
market recovered to an extent,
although it remains significantly
below pre-pandemic levels. It
was essential, therefore, that
Velocity expanded internationally,
particularly into the US, which is
the largest aerospace market in
the world.
Over the past year, we have
focused on developing our
services and technology to
further support customers
productivity and sustainability
goals. The Board decided to
re-invest any margin growth and
cost efficiencies back into growth
opportunities. The EBITDA
result of a £0.5m loss, was
therefore expected, as we carried
overheads to achieve our longer-
term growth objectives. These
initial objectives are achievable
with the current contracted UK
and US business for 2023 and
2024.
With inflation in all our major
supply inputs, our gross margin
came under very significant
pressure, decreasing slightly
from 26% to 23%. However, this
6
should prove to be temporary as
prices increase and efficiencies
catch up in the medium term.
Given the challenges, the Board
is pleased to have achieved a
positive operating cash flow
after tax as a result of effective
working capital management.
We were also able to recover
some of our FY22 innovation
costs through UK R&D tax
credits.
The strategic progress and
financial results are explained
further in the Financial Review
below.
Board
There were a number of changes
to the Board during the year as
we looked to strengthen and
develop its composition.
Annette Rothwell joined the
Board as a Non-executive
Director in March 2022, bringing
with her experience as a senior
executive in global procurement
and supply chain management
across our core industry
partners. Dr David Bailey, CEO of
Composites UK, was appointed
Strategic Report Chairman’s Report
Velocity’s digital manufacturing cell
as a Non-executive Director in
June 2022. He has had a long
career in aerospace operational
management, and has a deep
understanding of composite
technology, as well as tackling
sustainability objectives, across
aerospace and other industries.
Both Annette and David are
highly respected in the industries
we serve.
Robert Soen stepped down
from the Board as a Non-
executive Director at the end
of our financial year. He has
moved to a more commercial
part-time consultancy role at
Velocity, working with our CEO,
Jonathan Bridges, across various
global supply chain projects.
His contribution in the last three
years has been immense and
I want to thank him personally
for his support. Annette has
taken over as Chair of the
Remuneration Committee and
David has taken on a new role
as Chair of our Sustainability
Committee.
On behalf of the Board, I would
also like to thank Chris Williams,
who stepped down as Group
Finance Director in December
2022 and we welcome Adam
Holden, as our new Group
Finance Director and Company
Secretary.
highly skilled workforce as a
key asset for delivering our
future growth. Retention and
development of staff is therefore
a critical objective for the
business.
Sustainability
Employees
Our staff have worked under
significant pressure in the last few
years and we are grateful for their
efforts. Velocity’s achievements in
terms of innovation, new systems,
advance manufacturing, and new
business, are a lasting legacy to
their hard work.
We also welcome new employees
that have joined us in the USA.
We expect the full commissioning
of our facility in Alabama in 2023,
with progress well advanced in
2022 thanks to the UK team’s
efforts around design and setup.
Velocity is committed to the
development of a diverse and
The environmental risks to our
planet are the main driver for
innovation in our industry. At
Velocity, we have built a business
that supports the efficient use of
composite materials and delivers
a significant reduction in waste.
Over time, we have invested
in digital technologies on the
manufacturing shop floor and in
our engineering services. This
has resulted in the development
of the Group’s advanced Velocity
Resource Planning (“VRP”)
technology and supply chain
services, which we believe has
a major contribution to make
in helping our customers and
suppliers achieve their targets.
Helping to meet sustainability
7
Strategic Review Chairman’s Report
Strategic Report Chairman’s Report
objectives is a key element of our
customer service offering.
Outlook
Industries outside aerospace,
such as specialist automotive and
various forms of electric powered
transportation, are also looking
to achieve similar sustainability
objectives. We are active in trials
and proof of concept projects
in these other industrial sectors.
We expect that over time these
will become meaningful growth
areas and help rebalance our
customer portfolio.
Our new Non-executive Director,
David Bailey, is chairing a
specialist committee to oversee
our business initiatives that
drive forward sustainability
across Velocity and support
our customers and suppliers
in their own objectives in this
area. At Velocity we are proud
to work across the supply chain
to support those companies
and their employees to achieve
progressive improvements each
year in sustainability objectives.
As a result of our investments,
we expect the business to grow
significantly in the next two years.
This growth is largely expected
to come in the North American
region, and we have designed
our new facility in Alabama so it
can be expanded to manage this
expected expansion.
We have contracted UK and
US business which, when in full
production (at current OEM run
rates), will significantly increase
revenue, several times the FY22
level. This is combined with a
strong pipeline of new business
which can also potentially
increase revenue even further
over the next few years. To
deliver our ambitious targets,
we expect some growth to
come from non-aerospace
sectors, in industries such as
high performance automotive,
alternative fuel solutions and
large consumer products.
Global defence spending is also
expected to increase significantly
in the next few years, and we
believe this will generate further
growth and opportunities. With
both demand for, and the costs of
composite materials increasing,
there will be greater pressure
on manufacturers to save on
material wastage, which is at the
core of our VRP solution.
Both Airbus and Boeing produce
regular and detailed market
forecast documents which are
available to download from their
websites and key data is sourced
from:
www.boeing.com/commercial/market/
commercial-market-outlook and www.
airbus.com/en/products-services/
commercial-aircraft/market/global-
market-forecast
Ultimately, international
sustainability targets will
underpin the long-term growth
opportunities and continued
demand for our products and
services.
The Board, employees and
external investors have all
supported the Company’s
growth aspirations and we
expect a significant return on that
investment.
Andrew Beaden
Chairman
23 January 2023
Velocity HQ, Burnley, Lancashire, UK
8
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Strategic Report Dashboard
Both Airbus & Boeing predict circa 40,000 aircraft by 2041
Airbus: 39,490 Boeing: 41,170
Source: Boeing (www.boeing.com/commercial/market/commercial-market-outlook)
and Airbus, Global Market Forecast (www.airbus.com/sites/g/files/jlcbta136/files/2022-07/GMF-Presentation-2022-2041.pdf)
Demand for new passenger & freighter aircraft
*
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46,930
24,050
GROW
23,770
15,440
REPLACE
39,490
NEW
DELIVERIES
22,880
Beginning 2020
15,250
7,440
7,700
2041
STAY
inc 2020/21 deliveries
2022 - 2041 New Deliveries
Source: Airbus, Global Market Forecast (www.airbus.com/sites/g/files/jlcbta136/files/2022-07/GMF-Presentation-2022-2041.pdf)
* Passenger aircraft above 100 seats & freighters with a payload above 10t
By 2041, new generation passenger aircraft will represent >95% of the fleet
New Generation Aircraft = 25% lower carbon footprint *
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50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
History Outlook
13%
20%
>95%
1st** (e.g. 727) + 2nd** (e.g. MD80) +
previous generation** (e.g. A320ceo)
aircraft
NEW GENERATION** AIRCRAFT
AIRBUS: A220, A320neo, A330neo,
A350, A380,
BOEING: 737max, 777x, 787,
& other new programmes
CURRENT VELOCITY PROGRAMMES
2000
2005
2010
2015
2019
2021
2026
2031
2036
2041
Source: Airbus, Global Market Forecast (www.airbus.com/sites/g/files/jlcbta136/files/2022-07/GMF-Presentation-2022-2041.pdf)
9
9
CEO Report
Strategic Report CEO Report
Jonathan Bridges Chief Executive
“
US expansion: Industry approvals
have been successfully granted,
with end customer approval
and first article testing to be
completed in Q1 2023 and full
rate production expected by
August 2023.
”
Overview
In FY22, business confidence
started to improve in our
existing and prospective
customer base. We focused our
business development on key
scale opportunities, including
outside the UK.
In the last few years, our strategy
has switched to targeted
investment to grow a smaller
number of larger customers,
we believed could benefit
from utilising our advanced
technology to support “total cost
of ownership” (“TCO”) business
cases. TCO business cases
focus on increased productivity,
reduced inventory and higher
levels of quality control.
Our new approach is to perform
a detailed assessment of
our customers’ current front
production operations and
then provide them with a clear
commercial business case,
utilising the latest VRP solution.
We have been able to do this
due to the investments we have
made in our technology in recent
years. Being able to clearly
detail all the benefits of our
services to potential customers
has given Velocity a healthy
pipeline of opportunities. It was
this approach that led to our
largest contract agreement to
date, announced post year end
in December 2022. We have
signed a five-year Work Package
Agreement with GKN Aerospace
in the United States expected to
be worth in excess of US$100
million in revenue over five years.
It is testament to the hard work
of the Velocity team that we
delivered this agreement within
our existing resources, under
close cost control, with a smaller
number of key staff due to the
pandemic.
Customers
While existing programme
customer rates are still to recover
to pre-pandemic levels, our focus
has been on the following pillars:
• Technology – to drive
efficiencies and optimisation
in existing programmes
and assist in winning new
business.
• Data – use the TCO business
case model to clearly identify
customer benefits to the
point where the document
created can be used as an
internal business case for the
customer, speeding up the
pipeline process.
• Customers – focus on
enhancing value with existing
customers and targeted
business development in
key locations and markets
(aerospace, high end
automotive, lightweight
transport).
Our customers are advanced
manufacturers and innovators in
their specialist technology field.
We have tailored our services
and new business approach
to support them in delivering
their specific sustainability and
efficiency objectives.
The development of the TCO
business case process has been
instrumental in all our business
10
Strategic Report CEO Report
proved invaluable in managing
material supply chain issues in
the first half of FY22, and the
implementation of larger, more
complex nesting scenarios for
both existing customers and
business development.
As the VRP system fully digitises,
this will help Velocity as it
expands into new geographic
locations and means we can
implement the standardisation of
our processes and aid training of
new staff; all with real time links
back into central management.
In addition, we have started
the implementation of a new
business system for the non-
VRP processes, which will
help with the scalability and
standardisation needed as the
business expands into the US.
development activities as we
streamline and speed up the
onboarding process. Working
with global aerostructure
manufacturers with complex
supply chains, it was time
consuming to communicate all
the benefits of Velocity’s offering
through many layers of the
organisation.
of civil aerospace and defence
programmes in our customer
portfolio to protect it from any
future disruptions in any one part
of the composites industry. The
results of this can be seen in the
mix of new contracts we have
won and this will continue as
we increase our presence in the
large US defence industry.
The TCO model has created
a structured new business
process. Working with actual
customer data, we can identify
all the savings available and
compare this to the customer’s
current process in a detailed
business case document. We
have successfully used this with
existing and new customers.
Furthermore, by building
relationships at the highest level
within customer organisations we
can ensure that Velocity receives
senior leader sponsorship.
Velocity has also progressed
opportunities to balance the ratio
Operational and
Technology Progress
Our VRP system has created
better controls, more efficient
operational scenarios, and
full traceability from long term
demand or order management
to the delivery of composite kits
into customers’ manufacturing
areas. This has included the
digitisation of the entire demand
and forecasting system, plus
the roll out of the digital cell
from the development area
into the production area. This
Development of our innovative visual inspection system
11
11
Strategic Report CEO Report
Velocity’s new Advanced Manufacturing Facility in Alabama, USA
US Expansion
In December 2022, Velocity
signed an agreement with
GKN Aerospace in the US and
has opened a facility close
by to deliver the project. The
Group remains on track for site
approvals and first article testing
by February 2023, in order for
volume production to start in Q1
2023
The processes, equipment and
technology used in the US are
identical to the UK facilities which
assisted the customer decision
based on the proven service
model, reputation and confidence
in our delivery.
The facility itself can be scaled
to support multiple customers in
the region and work continues
with other potential large-scale
customers utilising the TCO
business case and senior level
approach, and we are working
towards securing additional
agreements in 2023.
Employees
As with previous years I am
pleased to report that staff
turnover has remained low. The
Company has continued to
invest for growth and, as such,
has retained staff in critical
areas. We have expanded
teams in business development,
technology development and
information systems to support
business improvement and bid
activities.
This has been delivered by
external recruitment, internal
career development and external
contractor support, and as
new business moves into full
implementation there will be
budgeted proportionate growth
in direct employees with targeted
increases in indirect roles. We
have welcomed Andy Caunce as
Head of Operations to help as
we return to growth in multiple
locations.
12
Strategic Report CEO Report
Outlook
Looking ahead, our actions in
FY22 have prepared the business
for a return to growth in FY23
in terms of cost management,
targeted investment, a forecasted
increase in existing programme
production rates and significant
new business opportunities in the
UK and the US.
We believe our TCO business
case model and senior level
engagement approach to key
customers, coupled with an
increase in existing production
rates as aircraft deliveries
recover, will deliver the planned
growth. Our scalable and digital
business model is expected to
open up opportunities in the
global industry at a scale much
higher than historic programmes.
Our business model is more
relevant now as customers look
to prioritise their core business
post Covid-19, and the industry
strives to meet its sustainability
targets. Composites will play an
important role in reducing the use
of fossil fuels through greater fuel
efficiency.
Section 172 Statement
In accordance with section 172
of the Companies Act 2006,
the Directors, collectively and
individually, confirm that during
the year ended 31 October 2022,
they acted in good faith and have
upheld their ‘duty to promote
the success of the Group’ to the
benefit of its stakeholder groups.
The Directors acknowledge
the importance of forming
and retaining a constructive
relationship with all stakeholder
groups. Effective engagement
with stakeholders enables the
Board to ensure stakeholder
interests are considered when
making decisions which is
crucial for achieving the long-
term success of the Group. The
main mechanisms for wider
stakeholder engagement and
feedback can be found on page
25 onwards in the Statement on
Corporate Governance.
Jonathan Bridges
Chief Executive Officer
23 January 2023
13
Our highly efficient nests help reduce waste & save money
Reducing material waste entering landfill
Recycling practices
14
14
Sustainable waste management processes
Velocity HQ’s solar panels
Strategic Report Financial Review
Financial Review
Statement of
Comprehensive Income
Revenue for FY22 of £12.0m
(FY21: £9.8m) represents an
increase of 22%, as a result
of both recovery in civil
aerospace production rates
and smaller contract wins in
the UK. Though UK sales and
production volumes remain
significantly below pre-
pandemic levels, contracted
long term business is now
above those levels, with
production at the new US
operating facility to commence
in 2023. When reviewing these
historical results, it should be
noted that a large element of
the overhead cost base has
been focused on services
innovation and expansion of
our business on a global basis.
The increased volume has
generated a gross profit of
£2.7m, £0.2m ahead of the
£2.5m achieved in FY21,
resulting in a reported gross
margin percentage of 23.0%
(FY21: 26.0%). This reduction
is expected to be temporary,
as it results from a lag in some
increased cost pressures, when
compared to revising contracted
pricing with customers. All
things being equal, this timing
difference, should correct itself
through 2023.
Administrative expenses have
increased £0.2m from £3.9m in
FY21 to £4.1m in FY22. This small
increase is a major achievement,
given the significant investment
in, and focus on, business
development and innovation.
Costs have increased in many
areas and there was a major
effort required to counter these
pressures. Though we expect
31 October
2022
31 October
2021
£’000
£’000
(1,317)
(1,364)
170
263
432
90
305
421
Operating loss
Add back:
Share-based payments
Depreciation and amortisation
Depreciation on right of use assets
under IFRS 16
Adjusted EBITDA
(452)
(548)
2 Earnings before interest, tax, depreciation, amortisation, and adjusted for 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. Share-based payments are added back to make the share-based payment charge
clear to stakeholders.
commence in early FY23 and
is expected to be at full rate
production by August 2023.
Growth in the UK will be through
an increase to existing contract
volumes, with new opportunities
to pursue in both regions, as
aircraft deliveries continue to
recover following the pandemic.
Therefore, Velocity is in an
excellent position to deliver this
growth, without a linear increase
to its overhead base and will
also benefit in FY23 from the
technological investments that
have driven efficiencies in the
operational process.
the cost base to increase with
the US operations opening
in 2023, the central costs will
be spread over two to three
times the activities, once the
new contracted business is
onboarded.
The increase in volume has
therefore been offset by the
investment in overheads to
support the future growth,
resulting in an Adjusted EBITDA2
loss of £0.5m (FY21: loss of
£0.5m).
The investment in business
development, technology and
staff development during FY22
means the Group is well placed
for the now contracted volume
growth in the forthcoming year.
US growth will be delivered
through the Work Package
Agreement with GKN which will
15
Cashflow and
Capital Investment
The decrease in the year end
cash and cash equivalents
position of £1.2m to £2.3m
(FY21: £3.5m) is a reflection
of a combination of factors.
Firstly, the Adjusted EBITDA
loss referred to above has
been partially offset by a
positive movement in working
capital of £0.3m (FY21: £0.9m),
resulting in a cash outflow
from operations of only £0.2m
(FY21: cash inflow from of
operations of £0.3m). After
adjusting for tax receipts in
respect of R&D expenditure of
£0.5m (FY21: £Nil), the overall
result was a cash inflow from
operating activities of £0.3m
(FY21: £0.3m).
The tight control on working
capital, can be further analysed
as follows: A positive working
capital movement through a
£1.1m increase in trade and
other payables from suppliers
(FY21: decrease of £0.4m).
£0.5m of this funded an
increase in inventory (FY21:
decrease of £1.0m), partly due
to the increase in volume, but
also follows a strategic decision
to minimise the risk of supply
chain disruption. Whilst there
has also been an increase in
trade and other receivables of
£0.4m due from customers (FY21:
decrease of £0.3m), this is a
product of the increased volume,
rather than an increase to terms
as the overall trade receivable
days have reduced to 68 days,
compared to 76 days at the end
of FY21.
A cash outflow from investment
activities of £0.4m is reflective
of the increase in Non-
Current Assets to support the
development of the production
facility in the US. A further £1.1m
has been used in financing
activities, driven by repayments
of the CBILS loan, the capital
element of the Group’s lease
Cash
CBIL loan
Invoice discounting facility
Net cash
Strategic Report Financial Review
liabilities and associated
financing costs.
Despite the loss in the year, the
business remains in a net cash
position at the end of the year,
with £0.2m net cash (FY21:
£1.0m). This includes Cash at
Bank, offset by the outstanding
CBIL balance and invoice
discounting facility.
The Board consider this a
significant achievement in
cash management, given
the investment milestones
achieved in the last year and
transformation of future business
opportunities.
31 October
2022
£’000
31 October
2021
£’000
2,344
(2,009)
(175)
160
3,476
(2,516)
2
962
One of Velocity’s advanced cleanroom manufacturing areas
16
Strategic Report Financial Review
alternative financing be required,
the Group would preserve cash
by delaying certain investment
activities until longer-term funding
could be implemented, such as
asset-based financing against
new capital expenditure or equity
funding.
Alongside the robust forecasting
and governance process,
the Group has demonstrated
strong cash flow management
through the Covid-19 pandemic,
successfully reducing inventory
levels and navigating through
right-sizing efforts to deliver
significant reductions to
administrative overheads.
Having due regard for these
recent deliverables and latest
projections, with available cash
at 31 October 2022 of £2.3m, an
invoice discount facility where
the Group can borrow up to £3m
dependent on debtor levels,
access to an invoice discounting
facility with one of our major
customers, and continued
support from our banks and
shareholders, it is the opinion
of the Board that the Group has
adequate resources to continue
to trade as a going concern.
Adam Holden
Group Finance Director
23 January 2023
Going Concern
Management continues to
undertake a significant level
of cash flow forecasting and
detailed financial projections
for the following 24 month
rolling period to 31 October
2024 have been prepared. A
number of sensitivities have
been performed to understand
the cash flow impact of various
scenarios and even in the most
severe down-side scenario
modelled the business had
sufficient liquidity to continue
trading as a going concern.
The aerospace sector lends itself
to long-term planning due to the
nature and length of customer
programmes, typically a minimum
of three years, but often five
years or more. This has enabled
the business to fully model the
period to 31 October 2024 and
undertake more strategic, longer-
term planning for growth and
full recovery emerging from the
pandemic.
The cash flow forecasts are,
however, reviewed monthly
through Management’s Integrated
Business Planning (IBP) process
and the assumptions updated
for any new knowledge to ensure
there is no change in the Group’s
liquidity outlook. This is linked in
with Management’s monthly risk
review and should the outlook
change significantly with no
mitigating actions, the Group’s
liquidity risk rating on the risk
register will be adjusted to reflect
this and subsequently discussed
at Board level through the Audit
Committee’s quarterly risk
register review.
In preparing the latest two-year
forecasts, Management has
included revenue projections
based on current demand, the
newly signed Work Package
Agreement with GKN in the US,
plus a weighting of opportunities
in the pipeline. The cost base
included in the projections is
reflective of the significant cost
reductions that have already
taken place in the Group, but also
realistic about the investment
required to implement the growth.
It is the investment in growth and
technological advancements
throughout FY22, which is
anticipated to continue in FY23,
that has resulted in the forecasts
indicating that the Group’s Invoice
Discounting Facility, secured
against Trade Debtors, will be
utilised during certain months
within the going concern period.
Whilst this facility is designed
to be short-term and can be
withdrawn with 3 months’ notice,
the latest discussions have
reflected the bank’s support for
Velocity’s growth strategy and
as such we expect this facility
will remain available for the
foreseeable future. Utilisation
of the facility is forecast to
be temporary as the benefits
from the investment in growth
become tangible in the second
half of FY23. However, should
Financial Highlights & Group Key Performance Indicators
Revenue
£12m
Cash at Bank
Gross Margin %
Operating Loss
£2.3m
23.0%
£(1.3)m
Adjusted EBITDA3
£(0.5)m
3 Earnings before interest, tax, depreciation, amortisation and adjusted for 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. Share-based payments are added back to make the share-based payment charge clear to stakeholders. Workings are provided on
p15 of the 2022 Annual Report and Financial Statements.
17
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
The Board is committed to
managing risk within the
business and maintains a
risk register that is kept up
to date with input from the
senior management team. The
Covid-19 pandemic clearly
had an unprecedented impact
on the aviation industry in
the UK and the Board were
required to quickly re-evaluate
the business risks as the
pandemic unfolded. Velocity
had to manage a significant
drop in sales from existing
contracts by right sizing the
cost base and working closely
with customers to understand
the ongoing demand.
Management was also focused
on managing cash flow, but
mindful of the need for future
investment to support the
Company’s growth strategy
and offering to the market.
The Board is also conscious
of the risk, now more than
ever, of exclusively operating
in the aerospace sector. The
risk is, however, mitigated by
the strength of the longer-
term outlook from the aircraft
manufacturers and the Board
reassured by past precedents
of crises in the industry that
have not stopped the underlying
trend of growth in the market. In
addition, the Group continues to
look at opportunities to diversify
into other markets, particularly
where composite material has
been adopted.
The Group’s principal risks and
actions to mitigate these risks are
set out in the table below. These
are the risks that Management
feel are most material to the
business and which might
prevent the Group from achieving
its strategic objectives if not
managed accordingly.
In addition, the Group undertook
various risk mitigation activities
which included planning ahead
to help mitigate supply chain
disruption; undertaking other
capacity planning assessments
with customers and suppliers;
ensuring any tariff and tax
changes were fully covered
in contracts; and liaising with
Government bodies to prepare
for the different outcomes which
may come to pass.
Moving into the post-pandemic
period and the mitigating
activities noted above remain
extremely relevant. The
expansion into the US using
existing resources means that
cash flow forecasting and
capacity planning remain key
priorities, whilst becoming
familiar with trading regulations
in a new geographical market
will bring further challenges that
the Group is looking forward to
managing.
1818
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
Loss of Key
Contracts
Medium
International
Expansion
High
The Group nurtures relationships with
key customers in order to understand
their business and to identify further
opportunities to support them. In
addition to working tirelessly to
deliver excellent customer service
levels for the existing business, the
Group is actively developing its
pipeline with the aim of securing new
contracts. Aircraft are increasingly
being manufactured using composite
material, a trend that has continued,
despite the COVID-19 pandemic
and will only add to the pipeline
of work. Key to any mitigation is
that the business operates 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 the lead time placed on their
behalf. The Company’s three biggest
historic customers were successfully
renewed during FY21, each for a
minimum of 3 years. The first large
US customer contract is for 5 years.
The Group has not only signed the
Work Package Agreement with GKN
Aerospace in the United States,
but has seen other international
customers actively engage.
Management is therefore taking a
measured approach by investing
in the first production facility in the
Southeast USA region and expansion
into other markets (i.e. Europe)
will be timed to manage the risks
around cash flow, management time
and bandwidth. In addition, any
site development will be supported
with contractual commitments from
customers prior to any significant
financial commitment by Velocity.
The aerospace sector
has a concentration
of very large primary
aircraft manufacturers
and Tier 1 suppliers.
These form the core of
the Group’s customer
base. The loss of
any of the Group’s
major contracts with
these large customers
may have a material
impact on the
business, prospects,
financial condition,
or operations.
Management have
been particularly
wary of this during
the current period of
significant upheaval in
the aerospace sector.
As evidenced by the
announcement of
the Work Package
Agreement with GKN
Aerospace in the
United States, the
Group’s strategy is
to expand into new
markets that cannot be
serviced from the UK
production facilities.
The successful
implementation
in Tallassee could
lead to further
plants servicing the
geographical clusters
19
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
(cont)
International
Expansion
(Cont)
(Cont)
across the USA, with
further international
opportunities. 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.
Winning a Large
Customer Contract
Medium
Sustainability
Credentials
Low
Optimising the performance of
the production units by working
on efficiency improvements,
utilising space more effectively
and scheduling the work in the
most efficient way is a key target
for the business. Technological
investments will also make a
difference. The Group currently
has capacity and a good structure
of Executive and second line
management to support additional
demand, but has recruited
accordingly to ensure the Work
Package Agreement with GKN
Aerospace in the US is a success.
Management believes this a low
risk, with Velocity’s offering naturally
supporting an increasingly green
agenda. The Group minimises
waste of composite material
throughout the supply chain and
recycles that which cannot be
utilised, often something customers
are unable to focus on. In addition,
operating in the composite sector
naturally supports many green or
alternative energy sectors, such
as electric vehicles, wind power
and hydrogen cell production. The
The winning of additional
large customer contracts
could absorb the
capacity headroom
and lead to supply
issues if not closely
managed. It could also
be a distraction to
Management.
The Group recognises
the importance of trading
as a sustainable and
socially responsible
organisation and
the impact on the
environment of not
putting in place
measures that will help it
to do so.
20
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
(cont)
(Cont)
(Cont)
Sustainability
credentials
Low
Company also has adopted an
EV car scheme and offers on-site
charging at its Burnley facilities for
employees, supported by green
energy generated through its
on-premises solar panels. Further
recognising the importance of
operating sustainably, the Board
has introduced a Sustainability
Committee, chaired by a Non-
executive Director, to identify
additional methods of promoting
sustainability throughout the
business.
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
Insufficient demand in the
sector and particularly in
the civil aerospace sector
due to disruption such as
the COVID-19 pandemic.
Risk is mitigated by the strength of
the longer-term outlook of aircraft
manufacturers and proven by past
crises 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 and have had
some success already. The Company
has also started to develop more of
its customer base around military
aerospace which has proven to be
more robust.
21
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Operational Risks
Dependence on
Third Party Supply
Low
The Group’s business
depends on products
and services provided
by third parties. Any
interruption to the supply
of products or services
by third parties, 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 must be
maintained to meet
customer contractual
requirements.
The Group manages its relationships
with suppliers through the commercial
and operational teams. Many products
are single sourced for Airplane frames,
the product type being defined by
the customer. Orders are placed
according to the supplier delivery
schedule, paid for on time and
contractual buffer stocks maintained.
Our rigorous forecasting processes
allow us to identify shortages in
supply early and where lead times are
extended beyond our control, three-
way discussions are actively sought
out early between Velocity, the end
customer and the material supplier to
resolve.
Cyber Security
Medium
With an ever-increasing
number of reported data
leaks and ransomware
events, there is a growing
risk of cyber attack in
today’s society. With the
sensitive data used by
Velocity and the growth
strategy projected, this
will become increasingly
prominent.
Management regularly reviews the
strength of the IT infrastructure within
the business and undertakes third
party audits to reinforce this. Through
a combination of encryption, regular
backups, firewalls and limited third
party access points the current
structure is deemed secure.
22
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Reliance on
Key Individuals
Medium
The success of the
Group will depend largely
upon the expertise and
relationships of the
Board and other senior
employees. The loss of
any of the key individuals
could impact the Group’s
ability to deliver its
strategic goals.
Salary and benefit levels are
competitive and reviewed on a regular
basis, with bonus and equity schemes
to reward longer term performance.
Annual performance reviews and
development plans are carried
out throughout the organisation
whilst operational staff are also
benchmarked regularly to ensure
Velocity remains an attractive place to
work, with compensation reflective of
a high-value manufacturer.
Price Inflation
Medium
Significant levels of
inflation may adversely
impact the performance of
the Group.
Material price changes are
contractually passed through from
the supplier to the customer. All other
inflation must be considered and
prices re-negotiated with the customer
where appropriate.
Financial and
Compliance Risks
Foreign Exchange
Risk
Medium
There is an approved Treasury policy
which is managed and monitored by
the Group Finance Director. However,
the Group will look to naturally hedge
wherever possible, matching foreign
currency revenue with purchases of
the same currency.
In addition, short term cash flow
forecasts highlight future surplus
or shortfalls in foreign currency,
allowing funding levels to be managed
accordingly.
As the Group purchases
and sells products on a
global basis, it is exposed
to gains and losses linked
to movements in the US
Dollar and Euro foreign
exchange rates. Group
policy is to naturally
hedge wherever possible.
These exposures will
increase with international
expansion, particularly
with the US Dollar to
Sterling exchange rate. A
weaker US Dollar would
be expected to reduce
profits and cash flows,
and vice-versa for a
weaker pound Sterling.
23
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Preparation of detailed cash
flow forecasts allow the group to
understand the financial position
both now and in the future and can
be used to mitigate the risk of there
being insufficient funds available.
The forecasts are kept up to date
and reflect the latest views on sales,
purchases and facilities available.
Scenario analysis is also carried out to
understand the liquidity implications
should performance be favourable
or adverse to forecast. Moving into
FY2023 and financing the US growth
through existing resources will be
one of the key challenges facing the
business.
Ultimately the Company has access
to both debt and equity financing
and the listing on the AIM quotation
was intentional to help provide
access to equity finance if significant
growth requires further significant
investments.
The Group’s trade receivables relate to
amounts owed by aerospace supply
chain companies who, by their nature,
are large. Given the size and stability
of its core receivables, together with
the procedures in place to follow up
any overdue debts, the Directors do
not believe that the credit risk to the
Group is significant.
The Group seeks to manage its
interest rate risk through minimising
exposure wherever possible and
regularly reviewing interest rates
available in the marketplace.
Liquidity Risk
Medium
Insufficient cash to meet
the needs of the business
in near or long term
Credit Risk
Low
Unable to collect
due receivables from
customers
Interest Rate Risk
Low
Ability to minimise
exposure
24
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 Group. Details of the
Group’s compliance with the
ten principles of the Code are
set out below:
manufacturers can also reduce
costs and free up internal
resources to focus on their core
business. Velocity has significant
potential for expansion, both in
the UK and abroad, including
into new market areas, such
as wind energy and electric
vehicles, where the demand for
composites is expected to grow.
The core focus has
predominantly been in the
aerospace industry and the
customer arrangements are
almost exclusively based on
long-term contracts, typically
for a 3-to-5-year period. The
Group’s strategy and business
model are included in the
strategic report section of our
Annual Report, along with key
performance indicators set out in
the Financial Review to measure
growth and profitability.
1. Establish a strategy
and business model which
promotes long-term value
for the shareholders
Velocity’s strategy is to be the
leading supplier of composite
material kits to aerospace
and other high-performance
manufacturers, that reduce costs
and improve sustainability.
Velocity manufactures advanced
composite material kits for use
in the production of carbon
fibre composite parts for
aerospace and other high-
performance manufacturers,
such as automotive OEM’s, and
pioneers of renewable energy
applications. There has been a
step-change in the use of carbon
fibre in aircraft as manufacturers
look to reduce aircraft weight and
improve their efficiency to deliver
greater sustainability. By using
Velocity’s proprietary technology,
25
Governance Statement of Corporate Governance
maternity. Employees are kept
up to date with the performance
of the business through periodic
briefings whilst all members
of staff are encouraged to
participate in the annual
engagement survey and the
feedback acted upon.
Industry Bodies
Velocity is a member of industry
bodies such as Northwest
Aerospace Alliance (‘NWAA’)
and the National Aerospace and
Defence Contractors (‘NADCAP’)
which are influential in how the
Group is perceived by clients.
Community
The Group actively participates
in the community and in
apprenticeships and other
schemes to provide opportunities
for young people, such as
T-Levels for BTEC Engineering
students and Work Experience.
We are firm believers in
supporting the local economies in
which we operate and therefore
always look to employ local
people, having been awarded
membership to the Lancashire
Skills and Employment Hub as a
business dedicated to supporting
local skills and development.
Velocity also operates within
the Enterprise Advisor Network,
supporting the development
of the future generation of
employees to ensure we are an
employer of choice for the future.
2. Seek to understand and
meet shareholder needs and
expectations
Under the current Board
structure, Velocity engages
in regular dialogue with its
shareholders through a
structured Investor Relations
programme. The Group
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
Group’s website (www.velocity-
composites.com).
The Board offers to meet with
those institutional and major
private investors that wish to do
so at least twice a year following
the announcement of results.
These meetings include a
presentation of the latest financial
performance, a wider business
update and discussion of the
longer-term plan. These meetings
are normally attended by the
Chairman, Chief Executive Officer
and Group Finance Director.
The presentation given at these
meetings is also made available
on the Company’s website.
Engagement with other key
shareholders is also welcomed,
with the Directors and other
executives meeting 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
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
Dedicated staff in the businesses
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 its customers are fully
understood so that the Group
is well positioned to initiate
appropriate actions in response.
Suppliers
The third-party supply base can
be the key to the success of
the Velocity business. As such,
there are processes in place
within the business to actively
manage supplier relationships in
the normal course of business,
taking appropriate feedback and
developing actions as necessary.
Employees
Velocity is an equal opportunity
employer regardless of race,
religion, gender, age, disability,
sexual orientation, gender
reassignment, marriage and civil
partnership and pregnancy and
26
Governance Statement of Corporate Governance
process and recommends
any new significant risks
are referred to the Board for
consideration.
• Full appraisals and appropriate
levels of authorisation of new
contracts entered into, whether
these be sales contracts,
contracts related to research
and development, operating or
capital expenditure;
• Dual signatories on all bank
accounts to safeguard the
assets of the business.
4. Embed effective risk
management, considering
both opportunities and threats,
throughout the organisation
The Board recognises that it
has overall responsibility for
ensuring the Group has in place
a system of internal control
that allows it to manage risk
accordingly. The system does
not prevent the Group from
considering opportunities for
growth but takes a balanced
approach, safeguarding the
assets of the business and
providing reasonable assurance
regarding compliance with laws
and regulations. The system
of internal control is therefore
designed to manage rather than
eliminate the risk and is prevalent
across all areas of the business.
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. Some of the key internal
controls in place include the
following:
• An ongoing assessment to
identify, evaluate and manage
business risks;
• A Management structure with
clearly defined responsibilities
and authority limits;
• A comprehensive process of
reporting financial results to
the Board;
• An Audit Committee that
reviews the effectiveness of
the Group’s risk management
27
27
Governance Statement of Corporate Governance
5. Maintain the Board as a
well-functioning, balanced
team led by the chair
At the date of this report the
Board comprises the Chairman,
Chief Executive Officer, Group
Finance Director and two Non-
Executive Directors.
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, HR and People, Chief
Commercial & Supply Chain
Officer report, Chief Programmes
Officer report, Group Finance
Director report and the
management accounts. This
enables the Board to discharge
its duties with all Directors
receiving appropriate and timely
information and with briefing
papers circulated 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:
Audit Committee
The Audit Committee currently
has three members, Andrew
Beaden (Chair), David Bailey and
Annette Rothwell. The Group
Finance Director 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 two members, Annette
Rothwell (Chair) and Andrew
Beaden. The Committee is
responsible for setting the
remuneration arrangements,
short term bonus and long-
term incentives for the
Executive Directors and senior
management. In addition, the
committee oversees the creation
and implementation of all
employee share plans.
Nomination Committee
The Nomination Committee has
two members, Andrew Beaden
(Chair) and Annette Rothwell. The
Nomination Committee meets
as required and is responsible
for proposing candidates for
appointment to the Board, as well
as advising on the structure and
composition of the Board and
succession planning.
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.
28
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.
Board
Meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
10
10
9
10
10
6
3
4
4
4
N/a
4
2
1
2
2
2
N/a
N/a
1
N/a
2
2
2
N/a
N/a
1
N/a
Andrew
Beaden
Robert
Soen
Jonathan
Bridges
Chris
Williams
Annette
Rothwell
David
Bailey
No Meetings in Year
Andrew Beaden
Robert Soen*
Jonathan Bridges
Chris Williams**
Annette Rothwell***
David Bailey****
Committee
Audit
Chair
Member
Remuneration
Member
Chair*
Nominations
Chair
Member
N/a
N/a
N/a
N/a
N/a
N/a
Member
Member
Chair***
Member
N/a
N/a
Non-members are invited to attend committees as appropriate.
*resigned as Director, 31 October 2022
**resigned as Director, 7 December 2022
***appointed as Director, 29 March 2022
****appointed as Director, 9 June 2022
N/a - indicates that a director was not a member of a particular committee
been set objectives that are
relevant to the Group’s current
position and performance
against these objectives will
be monitored as the year
progresses.
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 31 to 32 of this report.
7. Evaluate board performance
based upon clear and
relevant objectives, seeking
continuous improvement
Whilst the restrictions imposed
by the Covid-19 pandemic have
been lifted and the focus of
the Board returns to delivering
growth for Velocity, the Board
also recognises that some
of the key challenges and
practices entered into during the
pandemic (for example, cash flow
forecasting) remain the same.
With this in mind, the new and
existing Board members have
29
Governance Statement of Corporate Governance
rather it is a framework which
underpins the core values for
running the business. The Board
has formal responsibilities
and agendas and three sub-
committees; in addition, strong
informal relations are maintained
between Executive and Non-
executive Directors.
Non-executive Directors meet
with other senior managers
and give advice and assistance
between meetings.
The Chairman, Chief Executive
Officer and the Group Finance
Director make presentations to
institutional shareholders and
analysts each year 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 ‘Reports and
Presentations’ section. They also
meet regularly with the Group’s
Nomad/broker and discuss any
shareholder feedback, following
which, 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 are communicated to
shareholders via RNS and on the
Group’s website.
Andrew Beaden
Chairman
23 January 2023
8. Promote a culture
that is based on ethical
values and behaviour
conducting our business
with the highest personal,
professional and ethical
standards.
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
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
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 also
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 Group are set out
on the website (www.velocity-
composites.com).
10. Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders and
other relevant stakeholders
The Board believes that
corporate governance is more
than just a set of guidelines;
30
Board of Directors
Andrew Beaden
Chairman
Andrew was appointed Non-
Executive Chairman of Velocity
in July 2019. From 2011 to 2017,
Andrew Beaden served as Group
Finance Director and a member of
the Board of Luxfer Holding plc, a
developer and producer of highly
engineered advanced materials,
having joined its predecessor
British Aluminium in 1997. Luxfer
(LXFR) is listed on the New York
Stock Exchange. Andrew is a co-
founder and Chairman of IN4.0
Group Limited, a digital training
Company, encouraging business
growth and skills development
through the use of Industry 4.0
technologies.
Andrew 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).
Andrew is the current Chair of the
Audit Committee.
Jonathan Bridges
Chief Executive Officer
Jonathan co-founded Velocity
Composites in October 2007.
Jonathan has over 25 years’
experience within the advanced
composites industry and is
an experienced composite
engineer. Previously, Jonathan
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 Jonathan
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. Jonathan
was re-appointed to the Board
as an Executive Director in July
2019.
Jonathan has a BSc in Materials
Science from Coventry University.
Governance Board of Directors
Adam Holden
Group Finance Director
Adam joined as Group Finance
Director and Company Secretary
in December 2022 and has a
wealth of accounting experience.
In his previous role, Adam was
Group Financial Controller at
Bright Blue Foods (“BBF”),
a multi-site manufacturer of
ambient cakes and other baked
goods. Adam has also worked as
Financial Controller at Northern
Rail although began his career
at KPMG where he qualified as a
Chartered Accountant.
Annette Rothwell
Independent
Non-executive Director
Annette joined Velocity in March
2022 as a Non-Executive Director
and is Chair of the Remuneration
Committee. Annette has
extensive experience in industries
undergoing transformational
change. Annette is a proven
executive leader in General
Management, Procurement
and Supply Chain, Operational
Excellence (CI) and Project
Management working with senior
(l-r) Annette Rothwell, David Bailey,
Andrew Beadon, Adam Holden
& Jonathan Bridges
31
31
Governance Board of Directors
stakeholders including regional
and national government.
Since 2006, Annette has served
in executive roles supporting
CEOs within a number of global
companies including FTSE100
listed Aerospace & Defence
companies. Annette has
experience in and around supply
chains and has been responsible
for procurement and supply chain
activity, operational improvement
across multiple companies and
multiple cultures. Since 2011,
Annette has served as a director
on the board of the Midlands
Aerospace Alliance, the regional
body for the Aerospace, Defence
and Security industry.
David Bailey
Independent
Non-executive Director
Joining as a Non-executive
Director in June 2022, David is
an experienced executive with
extensive management and
technical expertise developed
across the aerospace and power
generation industries. He has
contributed to the strategic
direction of the UK’s aerospace
industry and cross-sector
composites sector as a Board
member of the Aerospace Growth
Partnership and Composites
Leadership Forum. He is a
renowned aerospace supply
chain specialist and has worked
with the senior management
teams of over 100 aerospace and
defence suppliers.
Since February 2020, David has
been the CEO of Composites UK,
the trade association for the UK
composites industry with over
360 member companies. David
formed Aerospace Consulting
Limited in February 2020 to
specialise in developing and
delivering high-level consultancy
projects in the aerospace
industry.
Prior to establishing Aerospace
Consulting, David was Chief
Executive of the North West
Aerospace Alliance (NWAA),
the regional trade association
for the aerospace and defence
industry in the North West of
England between 2011 and 2020.
The NWAA is one of the largest
aerospace clusters in the world,
representing over 240 aerospace
member companies (including
organisations such as Airbus,
BAE Systems, Brookhouse
Aerospace, MBDA Missile
Systems, Rolls-Royce, Safran,
Senior Aerospace and Teledyne
CML Composites).
David has a PhD in Gas
Turbine Aerodynamics and
an Aeronautical Engineering
degree both from Loughborough
University. David was made a
Fellow of the Royal Aeronautical
Society for services to the North
West’s Aerospace Industry in
2017.
Chris Williams
Group Finance Director
(resigned 7 December 2022)
Chris joined Velocity in August
2020 as Group Finance Director
and brought 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 stepped down from his role
on 7 December 2022.
Robert Soen
Non-executive Director
(resigned 31 October 2022)
Robert joined Velocity in July
2019 as an independent Non-
Executive Director and was
the Chair of the Remuneration
Committee throughout his tenure.
Robert has worked extensively in
aerospace and automotive supply
chains, ending his executive
career as Senior Vice President
Supply Chain in GKN Aerospace
Services Limited. Robert
stepped down from the Board
on 31 October 2022 to focus
on his other business interests
but has continued to act as an
advisor, helping with Velocity’s
commercial and supply chain
strategy as the business grows.
32
32
Governance Senior Management
Senior Management
r
o
t
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e
r
i
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s
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o
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e
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e
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e
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l
i
a
c
n
a
n
F
i
Jeff Armitage
Jeff Armitage joined the Executive
Team as Strategic Operation
Director in November 2021. Jeff
holds a wealth of experience within
the aerospace sector, having held
the position MD/Vice President of
GKN/Fokker, responsible for the
Aircraft Refurbishment and Spares
Provisioning for the Boeing 737
Airbus A320/330. Jeff was also
Senior Vice President of the Fokker
Acquisition and Integration/Synergy
and spent ten years as Senior
Vice President for GKN European
Composites.
Matthew Archer
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.
In October 2020 Matthew’s role
expanded to that of Commercial and
Supply Chain Director giving Matthew
accountability for the Company’s
Contractual, Supply Chain and
Quality Assurance matters.
James Eastbury
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 all of Velocity’s revenue
with existing and new customers
within all territories and future
markets.
James has over 12 years’ experience
in the aerospace sector, previously
with Solvay Composite Materials, the
advanced materials and speciality
chemicals company, where he held a
number of roles. Most notable as Key
Account Manager for Airbus.
Adam Newton
audit background, having worked
for several years in practice with a
diverse client portfolio, from SMEs to
larger PLC businesses.
Adam is a Fellow of the Association of
Chartered Certified Accountants
Adam joined Velocity in January
2017, bringing with him many years
of experience from varied roles in
finance. Adam previously worked
as Divisional Finance Business
Partner at Well Pharmacy (formerly
Co-operative Pharmacy) for 9
years, where he was responsible
for strategy and driving operational
efficiencies. Adam comes from an
33
33
Governance Senior Management
i
g
n
i
r
e
e
n
g
n
E
f
o
d
a
e
H
l
y
g
o
o
n
h
c
e
T
f
o
d
a
e
H
s
n
o
i
t
a
r
e
p
O
f
o
d
a
e
H
t
s
i
l
i
a
c
e
p
S
R
H
Emil Khan
Emil began a career with Velocity
in 2010 after graduating from the
University of Central Lancashire
with an Engineering Degree. Emil is
the 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, Emil thrives
on the challenges that Velocity
faces as an upcoming business in
the aerospace industry and looks
forward to future business prospects.
Emil is keen to optimise and grow
the team to ensure standardisation in
multi-site deployment.
Sheldon Atherton
knowledge and experience through
Production, Systems Integration,
Quality and Supply Chain.
Sheldon has been a member
of the Velocity team since 2008
and has played a significant role
in establishing the production
processes, IT systems and the
Quality Management System.
Sheldon is homegrown through the
Velocity leadership development
programme, developing his skills,
Andy Caunce
Andy joined Velocity in October 2022
as Head of Operations and brings
with him many years of experience
in both Manufacturing and Utilities
sectors.
A strong leader with a background in
Quality Management and Operational
delivery which he developed whilst
working for BAE SYSTEMS and
United Utilities.
Andy has teams covering multiple
sites and will drive efficiencies and
improvements across all the Safety,
Quality, Cost, Delivery and People
measures within the operations
teams.
Amy Heap
Amy has a CIPD Level 5 Diploma in
HR Management and is a member of
the CIPD association.
Amy joined Velocity in October
2022, bringing with her over 6 years’
experience from varied roles in HR.
Amy has previously worked in many
industries including the Educational,
Health and Social Care and
Manufacturing sectors, responsible
for leading and directing all aspects
of the Human Resource function.
34
34
Governance Directors’ Report
Directors’ Report
The directors present their report and the audited financial statements for the year ended
31 October 2022.
Principal activities
Capital structure
Dividends
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 17 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 principal risks
review on pages 18 to 24.
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
£136,000 (2021: £Nil) in-line with
the Group’s accounting policy.
There were no dividends
proposed or paid in the year
(2021: £Nil).
Political donations
No political donations were made
during the year (2021: £Nil).
Basis of preparation of the
financial statements
The consolidated financial
statements of Velocity
Composites plc have been
prepared in accordance with
UK-adopted international
accounting standards and
International Financial Reporting
Interpretations Committee
(IFRIC). Further details are
provided in note 2 to the financial
statements.
35
35
Directors
The Directors who held office during the year and up to the date of this report,
along with their interest in the shares of the Company at 31 October 2022 were
as follows:
Jonathan Karl Bridges
Andrew Beaden
Robert Soen (resigned 31 October 2022)
Chris Williams (resigned 7 December 2022)
Annette Rothwell (appointed 29 March 2022)
David Bailey (appointed 9 June 2022)
Adam Holden (appointed 7 December 2022)
4 Includes 50,000 shares in the name of Mrs S Beaden
Governance Directors’ Report
At
31 October
2022
%
Shareholding
5,515,929
568,475 4
-
-
-
-
-
15.13%
1.56%
-
-
-
-
-
Going concern
The Group has prepared
base and sensitised financial
projections for the next two
years. The forecasts include
revenue projections based on
current demand, the newly
signed Work Package Agreement
with GKN in the US, plus a
weighting of opportunities in the
pipeline. The cost base included
in the projections is reflective of
the significant cost reductions
that have already taken place
in the Group, but also realistic
about the investment required to
implement the growth.
Alongside the robust forecasting
and governance process,
the Group has demonstrated
strong cash flow management
through the Covid-19 pandemic,
successfully reducing inventory
levels and navigating through
right-sizing efforts to deliver
significant reductions to
administrative overheads.
customers, and continued
support from our banks and
shareholders, it is the opinion
of the Board that the Group has
adequate resources to continue
to trade as a going concern. A
more extensive disclosure of
going concern can be found in
the financial review on pages 15
to 17.
Having due regard for these
recent deliverables and latest
projections, with available cash
at 31 October 2022 of £2.3m, an
invoice discount facility where
the Group can borrow up to £3m
dependent on debtor levels,
access to an invoice discounting
facility with one of our major
Indemnification of directors
The Group provides Directors
and Officers Insurance cover and
is contractually committed to
provide cover.
Substantial shareholdings
At 31 October 2022, 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
Stonehage Fleming
Charles Stanley Clients
Octopus Investments
Braveheart Investment Group
Hargreaves Lansdown, stockbrokers (EO)
Amati Global Investors
4,802,693
4,802,693
4,222,753
1,734,638
1,567,058
1,500,615
1,482,062
1,150,294
36
13.17%
13.17%
11.58%
4.78%
4.30%
4.12%
4.07%
3.16%
Corporate governance
The Statement of Corporate
Governance on pages 25 to 30
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 Group
and parent Company financial
statements for each financial
year. Under that law the directors
have prepared the financial
statements in accordance with
International Financial Reporting
Standards (“IFRS”) as adopted by
the UK (UK-adopted international
accounting standards) and
applicable law. 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 Group
and parent Company and of
their profit or loss for that year.
In preparing each of the Group
and parent Company financial
statements, the directors are
required to:
•
select suitable accounting
policies and then apply them
consistently;
• make judgements and
accounting estimates that are
reasonable and prudent;
•
state whether applicable
accounting standards have
been followed, subject to any
material departures disclosed
Governance Directors’ Report
and explained in the Group
and parent Company financial
statements; and
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
Cooper Parry Group Limited,
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 23 January
2023 and signed on its behalf by:
Adam Holden
Company Secretary
23 January 2023
• prepare the financial
statements on the going
concern basis unless it is
inappropriate to presume
that the Group and parent
Company will continue in
business.
The directors are responsible for
keeping adequate accounting
records that are sufficient to
show and explain the parent
Company’s transactions and
disclose with reasonable
accuracy at any time the financial
position of the parent Company
and enable them to ensure that
the financial statements and the
Director’s Remuneration Report
comply with the Companies Act
2006. The directors are also
responsible for safeguarding
the assets of the Group and
parent Company and hence for
taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The Directors are responsible
for ensuring the Annual Report
and the Financial Statements
are made available on a website.
Financial statements are
published on the Company’s
website in accordance with
legislation in the United Kingdom
governing the preparation
and dissemination of financial
statements, which may vary from
legislation in other jurisdictions.
The maintenance and integrity
of the Company’s website is the
responsibility of the Directors.
The Directors’ responsibility also
extends to the ongoing integrity
of the financial statements
contained therein.
37
Governance Directors’ Remuneration Report
Directors’ Remuneration Report
This report covers the financial period ended 31 October 2022.
The Director’s remuneration report sets out the key points of the remuneration process for the Group, as
well as any rationale for any decisions made by the remuneration committee during the year. This is intended
to help investors understand the remuneration policy in the light of the strategy for the Group. The report is
voluntarily disclosed.
Responsibilities
Executive Directors
The Remuneration Committee
has two members, Annette
Rothwell and Andrew Beaden.
The Committee is responsible
for setting the remuneration
packages for 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
38
of 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
the highest quality. The Board
also considers the link between
the individual’s remuneration
package and the Group’s long-
term performance. Incentivisation
through equity ownership is
encouraged to further align
Directors to shareholders and the
success of the Company.
Governance Directors’ Remuneration Report
Basic Salary
Share Options
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. Basic salary can
be paid in cash and equity
instruments equal at the start of a
year to the cash equivalent.
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 with
shareholders, with those of the
individuals tasked with delivering
the Group’s strategic aims.
These include financial targets
around profitability, and strategic
targets around profitable growth
and business development.
Share options are also used
where Directors and Senior
Management have agreed to take
part of their basic salary in equity.
For several years most qualifying
staff have taken 20% of their
basic salary in equity alternatives.
In January and March 2022,
options were
Directors’ Emoluments
granted to certain Non-Executive
Directors and members of the
Senior Management team. A
total of 0.5m options were issued.
Non-executive Directors
The salary of the Chairman is
determined by the Board and
the fees 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. The fees of all the
Non-executive Directors have
remained frozen since 2019.
Similar to senior management
and Executive Directors, 20% of
the Non-Executive Directors pay
has been in the form of equity
instruments since 2020.
Directors’ emoluments for the year ended 31 October 2022 (or period of service) are summarised below:
Executive
Jonathan Bridges
Chris Williams
Non-Executive
Andrew Beaden
Robert Soen (resigned 31.10.22)
Margaret Amos (resigned 15.09.21)
Annette Rothwell (appointed 29.03.22)
David Bailey (appointed 09.06.22)
Cash paid
salary 5
£’000
Pension
£’000
Benefit
in kind
£’000
Year ended
31 October
2022
£’000
Year ended
30 October
2021
£’000
110
97
64
28
-
18
15
12
8
2
-
-
-
-
11
-
-
-
-
-
-
133
105
66
28
-
18
15
131
102
66
29
26
-
-
Total
332
22
11
365
354
5 All of the cash paid salaries above represent 80% of each individuals’ basic salary for the year. Apart from Jonathan Bridges, the additional 20% was
serviced through equity awards, via share options valued at the start of each year or on appointment and to be of equivalent value to the 20% cash
amounts sacrificed. Jonathan Bridges’ 20% is deferred until 2023 and when the Company reports a positive EBITDA.
39
Governance Directors’ Remuneration Report
Share options
The following table sets out the share option movements for each of the Directors during the two years
ended 31 October 2022. None of the options below have performance conditions attached and vest
subject to continued employment.
Chris
Williams
No.
Andrew
Beaden
No.
Rob
Soen
No.
Margaret
Amos
No.
Annette
Rothwell
No.
David
Bailey
No.
At 31 October 2020
147,268
108,475
-
47,458
-
-
-
-
-
-
-
-
47,458
-
20,940
(47,458)
-
-
-
-
-
-
-
20,940
-
20,940
20,940
-
-
-
-
-
-
-
-
-
-
-
-
Issued
Exercised
Lapsed
125,000
-
-
-
-
-
At 31 October 2021
272,268
108,475
Issued
Exercised
Lapsed
103,529
76,235
-
-
(108,475)
-
28,805
-
-
28,805
33,412
-
-
At 31 October 2022
375,797
76,235
62,217
Comprising shares that have:
Vested
Not Vested
147,268
-
228,529
76,235
28,805
33,412
At 31 October 2022
375,797
76,235
62,217
40
Financial Statements Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Velocity Composites Plc
41
Financial Statements Independent Auditor’s Report
Independent Auditor’s Report to the
Members of Velocity Composites Plc
OPINION
We have audited the financial statements of Velocity Composites plc (the ‘parent Company’) and its subsid-
iaries (the ‘Group’) for the year ended 31 October 2022 which comprise the Consolidated Statement of Total
Comprehensive Income, the Consolidated and Company Statement of Financial Position , the Consolidated
and Company Statement of Changes in Equity, the Consolidated and Company Statement of Cash Flows and
the related notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the group financial statements
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom
(“UK adopted international accounting standards”).
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 2022 and of the Group’s loss for the year then ended;
the financial statements have been properly prepared in accordance with UK adopted international
accounting standards; 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 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.
Our approach to the audit
We adopted a risk-based audit approach. We gained a detailed understanding of the Group’s business, the
environment it operates in and the risks it faces.
The key elements of our audit approach were as follows:
In order to assess the risks identified, the engagement team performed an evaluation of identified components
and to determine the planned audit responses based on a measure of materiality, calculated by considering
the significance of components as a percentage of the Group’s total revenue and loss before taxation and
Group’s total assets.
Our Group audit scope focused on the Group’s principal trading entity, Velocity Composites plc which was
subject to a full scope audit and represents 100% of the Group’s revenue in the year, 100% of the Group’s
loss before tax in the year and 100% of the Group’s net assets at 31 October 2022.
Analytical procedures were undertaken on remaining components, using group materiality, which were not
deemed to be material.
42
Financial Statements Independent Auditor’s Report
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) we identified, including those which 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.
Risk of fraud in revenue recognition
Matter
Under Under International Standard on Auditing (UK) 240 there is a presumed risk that revenue is misstated
due to fraud. The Group recognises revenue to the extent that economic benefits will flow to the Group and
the revenue can be reliably measured. There is relatively little judgement involved in determining the timing
and value of the amount to be recognised. We therefore assess the significant risk to be specifically with
respect to manual journals posted to revenue.
Response
Our procedures in response to the risk included:
• Assessing accounting policies for consistency and appropriateness with financial reporting framework
and in particular that revenue was recognised 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;
• Performing a walkthrough of the process as set out by management, to ensure controls appropriate to the
size and nature of operations are designed and implemented correctly throughout the transaction cycle;
• Obtaining a complete listing of journals posted to revenue nominal codes. From this listing we selected a
sample of unexpected manual adjustments which were vouched to evidence supporting the timing and
measurement of the revenue recognised;
• Performing enhanced cut-off testing over October 2022 sales to ensure sales are recognised in the
correct accounting period;
• Performing transactional revenue testing to confirm the existence of revenue;
• Reviewing of post year end credit notes to check for overstatement of revenue during the year.
Our procedures did not identify any material misstatements in the revenue recognised during the year.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in determining the nature, timing
and extent of our audit procedures, in evaluating the effect of any identified misstatements, and in forming
our audit opinion.
The materiality for the Group financial statements as a whole was set at £182,000. This has been determined
with reference to the benchmark of the Group’s revenue which we consider to be an appropriate measure for
a group of companies such as these. Materiality represents 1.5% of group revenue. Performance materiality
has been set at 75% of group materiality.
The materiality for the parent company financial statements as a whole was set at £164,000. This has been
determined with reference to the benchmark of the parent company’s revenue which we consider to be
an appropriate measure for a parent company such as this. Materiality has been capped to 90% of group
materiality.
43
Financial Statements Independent Auditor’s Report
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis
of accounting included:
• Challenging management on key assumptions included in their forecast scenarios;
• Considering the potential impact of various scenarios on the forecasts; and
• Reviewing management’s disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue
as a going concern for a period of at least twelve months from when the financial statements are authorised
for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information included
in the annual report. 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. 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.
Opinions on other matters prescribed by the Companies Act 2006
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 period 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.
44
Financial Statements Independent Auditor’s Report
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the strategic report or
the directors’ report.
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, 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 37, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
Our assessment focused on key laws and regulations the company has to comply with and areas of the
financial statements we assessed as being more susceptible to misstatement. These key laws and regulations
included but were not limited to compliance with the Companies Act 2006, UK adopted international
accounting standards (IFRSs), and relevant tax legislation.
We are not responsible for preventing irregularities. Our approach to detecting irregularities included, but was
not limited to, the following:
• obtaining an understanding of the legal and regulatory framework applicable to the entity and how the
entity is complying with that framework;
• obtaining an understanding of the entity’s policies and procedures and how the entity has complied with
these, through discussions;
• obtaining an understanding of the entity’s risk assessment process, including the risk of fraud;
45
Financial Statements Independent Auditor’s Report
• designing our audit procedures to respond to our risk assessment; and
• performing audit testing over the risk of management override of controls, including testing of journal
entries and other adjustments for appropriateness, evaluating the business rationale of significant
transactions outside the normal course of business and reviewing accounting estimates for bias.
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 parent 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 parent
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 parent company and the parent company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Melanie Hopwell (Senior Statutory Auditor)
For and on behalf of Cooper Parry Group Limited
Chartered Accountants and Statutory Auditor
Sky View
Argosy Road
East Midlands Airport
Caste Donington
Derby
DE74 2SA
23 January 2023
46
Financial Statements Consolidated Statement of Total Comprehensive Income
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Consolidated Statement of Total
Comprehensive Income
Consolidated Statement of Total Comprehensive
Income
39
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Operating loss analysed as:
Adjusted EBITDA
Depreciation of property, plant and equipment
Amortisation
Depreciation of right-of-use assets under IFRS 16
Share based payments
Finance income and expense
Loss before tax from continuing operations
Corporation tax recoverable
Loss for the year and total comprehensive loss
Loss per share - basic (£) from continuing operations
Loss per share - diluted (£) from continuing operations
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
11,959
(9,213)
2,746
(4,063)
9,767
(7,228)
2,539
(3,903)
(1,317)
(1,364)
(452)
(210)
(53)
(432)
(170)
(187)
(548)
(229)
(76)
(421)
(90)
(182)
(1,504)
167
(1,546)
340
(1,337)
(1,206)
(£0.04)
(£0.03)
(£0.04)
(£0.03)
Note
4
5
29
8
9
10
10
The notes on pages 44 to 72 form part of these financial statements.
The notes on pages 52 - 80 form part of these financial statements.
There is no other comprehensive income in the current or prior year.
47
Financial Statements Consolidated and Company Statement of Financial Position
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Consolidated and Company
Consolidated and Company Statement of
Consolidated and Company Statement of
Statement of Financial Position
Financial Position
Financial Position
40
40
Company
31 October
Company
2021
31 October
£’000
2021
£’000
91
1,051
91
1,688
1,051
2,830
1,688
2,830
877
2,195
877
341
2,195
3,470
341
6,883
3,470
6,883
9,713
9,713
514
1,058
514
309
1,058
1,881
309
1,881
1,998
1,240
1,998
3,238
1,240
3,238
5,119
5,119
4,594
4,594
Note
Note
11
12
11
19
12
19
14
15
14
15
16
16
18
17
18
19
17
19
18
19
18
19
Non-current assets
Intangible assets
Non-current assets
Property, plant and equipment
Intangible assets
Right-of-use assets
Property, plant and equipment
Total non-current assets
Right-of-use assets
Total non-current assets
Current assets
Inventories
Current assets
Trade and other receivables
Inventories
Corporation tax
Trade and other receivables
Cash and cash equivalents
Corporation tax
Total current assets
Cash and cash equivalents
Total current assets
Total assets
Total assets
Current liabilities
Loans
Current liabilities
Trade and other payables
Loans
Obligations under lease liabilities
Trade and other payables
Total current liabilities
Obligations under lease liabilities
Total current liabilities
Non-current liabilities
Loans
Non-current liabilities
Obligations under lease liabilities
Loans
Total non-current liabilities
Obligations under lease liabilities
Total non-current liabilities
Total liabilities
Total liabilities
Net assets
Group
31 October
Group
2022
31 October
£’000
2022
£’000
173
1,099
173
2,269
1,099
3,541
2,269
3,541
Group
31 October
Group
2021
31 October
£’000
2021
£’000
91
1,051
91
1,688
1,051
2,830
1,688
2,830
Company
31 October
Company
2022
31 October
£’000
2022
£’000
173
1,099
173
1,812
1,099
3,084
1,812
3,084
1,407
2,521
1,407
-
2,521
2,344
-
6,272
2,344
6,272
9,813
9,813
503
2,207
503
405
2,207
3,115
405
3,115
1,506
1,792
1,506
3,298
1,792
3,298
6,413
6,413
3,400
877
2,162
877
341
2,162
3,476
341
6,856
3,476
6,856
9,686
9,686
514
1,058
514
309
1,058
1,881
309
1,881
1,998
1,240
1,998
3,238
1,240
3,238
5,119
5,119
4,567
4,567
1,407
2,569
1,407
-
2,569
2,337
-
6,313
2,337
6,313
9,397
9,397
503
2,207
503
313
2,207
3,023
313
3,023
1,506
1,442
1,506
2,948
1,442
2,948
5,971
5,971
3,426
3,426
Net assets
3,400
Equity attributable to equity holders of the company
Share capital
Equity attributable to equity holders of the company
Share premium account
Share capital
Share-based payments reserve
Share premium account
Retained earnings
Share-based payments reserve
Retained earnings
Total equity
91
9,727
91
684
9,727
(7,102)
684
(7,102)
3,400
22
22
22
22
91
9,727
91
539
9,727
(5,790)
539
(5,790)
4,567
91
9,727
91
684
9,727
(7,076)
684
(7,076)
3,426
91
9,727
91
539
9,727
(5,763)
539
(5,763)
4,594
3,400
Total equity
The notes on pages 44 to 72 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 £1,338,000. The
The notes on pages 44 to 72 form part of these financial statements. The Company has taken advantage
The notes on pages 52 - 80 form part of these financial statements.
financial statements were approved and authorised for issue by the Board of Directors on 23 January 2022
of the exemption allowed under section 408 of the Companies Act 2006 and not presented its own
and were signed on its behalf by:
statement of profit and loss in these financial statements. The loss for the year was £1,338,000. The
financial statements were approved and authorised for issue by the Board of Directors on 23 January 2022
and were signed on its behalf by:
3,426
4,567
4,594
Adam Holden
Director
Co No: 06389233
Adam Holden
Director
Co No: 06389233
48
Financial Statements Consolidated and Company Statement of Changes in Equity
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Consolidated and Company
Consolidated and Company Statement of
Statement of Changes in Equity
Changes in Equity
Consolidated statement of changes in equity
41
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payments
reserve
£’000
Retained
earnings
£’000
91
-
91
-
-
9,727
-
(4,626)
(1,205)
9,727
(5,831)
-
-
-
41
490
-
490
90
(41)
Total
equity
£’000
5,682
(1,205)
4,477
90
-
As at 31 October 2020
Loss for the year
Transactions with shareholders:
Share-based payments (note 23)
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2021
91
9,727
(5,790)
539
4,567
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-
based
payments
reserve
£’000
91
-
91
-
-
9,727
-
(5,790)
(1,337)
9,727
(7,127)
-
-
-
25
539
-
539
170
(25)
Total
equity
£’000
4,567
(1,337)
3,230
170
-
As at 31 October 2021
Loss for the year
Transactions with shareholders:
Share-based payments (note 23)
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2022
91
9,727
(7,102)
684
3,400
The notes on pages 44 to 72 form part of these financial statements.
The notes on pages 52 - 80 form part of these financial statements
49
Financial Statements Consolidated and Company Statement of Changes in Equity
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Consolidated and Company
Consolidated and Company Statement of
Statement of Changes in Equity
Changes in Equity
Company statement of changes in equity
42
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payments
reserve
£’000
Retained
earnings
£’000
91
-
91
-
-
9,727
-
(4,598)
(1,206)
9,727
(5,804)
-
-
-
41
490
-
490
90
(41)
Total
equity
£’000
5,710
(1,206)
4,504
90
-
As at 31 October 2020
Loss for the year
Transactions with shareholders:
Share-based payments (note 23)
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2021
91
9,727
(5,763)
539
4,594
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-
based
payments
reserve
£’000
91
-
91
-
-
9,727
-
(5,763)
(1,338)
9,727
(7,101)
-
-
-
25
539
-
539
170
(25)
Total
equity
£’000
4,594
(1,338)
3,256
170
-
As at 31 October 2021
Loss for the year
Transactions with shareholders:
Share-based payments (note 23)
Transfer of share option reserve on
vesting of options and issue of equity
As at 31 October 2022
91
9,727
(7,076)
684
3,426
The notes on pages 44 to 72 form part of these financial statements.
The notes on pages 52 - 80 form part of these financial statements.
50
Financial Statements Consolidated and Company Statement of Cash Flows
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Consolidated and Company
Consolidated and Company Statement of Cash
Statement of Cash Flows
Flows
43
Operating activities
Loss for the year
Taxation
Profit on sale of assets
Finance costs
Amortisation of intangible assets
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Share-based payments
Operating cash flows before movements in
working capital
(Increase)/Decrease in trade and other
receivables
(Increase)/Decrease in inventories
Increase/(Decrease) in trade and other payables
Cash (outflow)/inflow from operations
Tax received
Net cash inflow from operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of development expenditure
Proceeds from the sale of property, plant and
equipment
Net cash used in investing activities
Financing activities
Loan received
Finance costs paid
Loan repayment
Repayment of lease liabilities capital
Net cash used in financing activities
Net Increase/(Decrease) in cash and cash
equivalents
Cash and cash equivalents at 01 November
Group
Year
ended
31 October
2022
£’000
Group
Year
ended
31 October
2021
£’000
Company
Year
ended
31 October
2022
£’000
Company
Year
ended
31 October
2021
£’000
(1,337)
(167)
(38)
187
53
210
432
170
(1,206)
(341)
(13)
182
76
229
421
90
(1,338)
(167)
(38)
187
53
210
432
170
(1,206)
(341)
(13)
181
76
229
421
90
(490)
(562)
(491)
(563)
(359)
(530)
1,149
302
1,031
(446)
(374)
(530)
1,149
294
1,031
(440)
322
-
322
(64)
-
13
(51)
634
(181)
(119)
(400)
(66)
325
-
325
(64)
-
13
(51)
634
(181)
(119)
(400)
(246)
510
264
(262)
(136)
42
(356)
-
(187)
(503)
(351)
(66)
(1,041)
(230)
510
280
(262)
(136)
42
(356)
-
(187)
(503)
(366)
(1,056)
(1,132)
3,476
208
3,268
(1,133)
3,470
205
3,265
Cash and cash equivalents at 31 October
2,344
3,476
2,337
3,470
The notes on pages 44 to 72 form part of these financial statements.
The notes on pages 52 - 80 form part of these financial statements.
51
Financial Statements Notes to the Financial Statements
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Notes to the Financial Statements
Notes to the Financial Statements
44
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 form 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 consolidated financial statements of Velocity Composites plc have been prepared in accordance with
UK-adopted international accounting standards and International Financial Reporting Interpretations
Committee (IFRIC).
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 years presented, unless otherwise stated. The financial
statements are presented in sterling and have been rounded to the nearest thousand (£’000). References
to “FY22” refer to the year ended 31 October 2022, whilst references to “FY21” are in respect of the year
ended 31 October 2021.
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 and are made up to 31 October 2022. Subsidiaries are consolidated from the date
of acquisition, using the purchase method.
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 IFRS standards.
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 losses are eliminated in the same way as unrealised gains, but
only to the extent that there is no evidence of impairment.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all years
presented in the consolidated financial statements.
There are no new accounting standards or interpretations that are not yet fully effective that could be
expected to have a material impact on the Group.
52
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
45
Notes to the Financial Statements
2.
Accounting policies (continued)
Going concern
Management continues to undertake a significant level of cash flow forecasting and detailed financial
projections for the following 24 month rolling period to 31 October 2024 have been prepared. A number of
sensitivities have been performed to understand the cash flow impact of various scenarios and even in the
most severe down-side scenario modelled the business had sufficient liquidity to continue trading as a
going concern.
The aerospace sector lends itself to 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 period to 31 October 2024 and undertake more strategic, longer-term planning for growth
and full recovery emerging from the pandemic.
The cash flow forecasts are, however, reviewed monthly through Management’s Integrated Business
Planning (IBP) process and the assumptions updated for any new knowledge to ensure there is no change
in the Group’s liquidity outlook. This is linked in with Management’s monthly risk review and should the
outlook change significantly with no mitigating actions the Group’s liquidity risk rating on the risk register
will be adjusted to reflect this and subsequently discussed at Board through the Audit Committee’s quarterly
risk register review.
In preparing the latest two-year forecasts, Management has included revenue projections based on current
demand, the newly signed Work Package Agreement with GKN in the US, plus a weighting of opportunities
in the pipeline. The cost base included in the projections is reflective of the significant cost reductions that
have already taken place in the Group, but also realistic about the investment required to implement the
growth.
It is the investment in growth and technological advancements throughout FY22, and which is anticipated
to continue in FY23, that has resulted in the forecasts indicating that the Group’s Invoice Discounting
Facility, secured against Trade Debtors, will be utilised during certain months within the going concern
period. Whilst this facility is designed to be short-term and can be withdrawn with 3 months’ notice, the
latest discussions have reflected the bank’s support for Velocity’s growth strategy and as such we expect
this facility will remain available for the foreseeable future. Utilisation of the facility is forecast to be
temporary as the benefits from the investment in growth become tangible in the second half of FY23.
However, should alternative financing be required the Group would preserve cash by delaying certain
investment activities until longer-term funding could be implemented, such as asset-based financing
against new capital expenditure or equity funding.
Alongside the robust forecasting and governance process, the Group has demonstrated strong cash flow
management through the Covid-19 pandemic, successfully reducing inventory levels and navigating
through right-sizing efforts to deliver significant reductions to administrative overheads.
Having due regard for these recent deliverables and latest projections, with available cash at 31 October
2022 of £2.3m, an invoice discount facility where the Group can borrow up to £3m dependent on debtor
levels, access to an invoice discounting facility with one of our major customers, and continued support
from our banks and shareholders, it is the opinion of the Board that the Group has adequate resources to
continue to trade as a going concern.
53
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
46
Notes to the Financial Statements
2.
Accounting policies (continued)
Revenue 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.
The Group generates revenue from the sale of structural and consumable materials for use within the
aerospace industry. This is the sole revenue stream of the Group.
At contract inception (which is upon receipt of a purchase order from a customer), an assessment is
completed to identify the performance obligations in each contract. Performance obligations in a contract
are the goods that are distinct.
At contract inception, the transaction price is determined, being the amount that the Group expects to
receive for transferring the promised goods – this is a fixed price with no variable consideration. The
transaction price is allocated to the performance obligations in the contract based on their relative
standalone selling prices – this reflects the agreed price as per purchase order for each product. The Group
has determined that the contractually stated price represents the standalone selling price for each
performance obligation.
Revenue from sale of goods is recognised when a performance obligation has been satisfied by transferring
the promised product to the customer at a point in time, usually when legal title passes to the customer and
the business has the right to payment, for example, on delivery. Standard payment terms are in place for
each customer.
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. Goods or services supplied in a foreign currency are recognised at the exchange rate
ruling at the time of accounting for this expenditure.
Provisions
A 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.
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.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave
and sick leave in the year the related service is rendered at the undiscounted amount of the benefits
expected to be paid in exchange for that service.
54
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
47
Notes to the Financial Statements
2.
Accounting policies (continued)
Research and development expenditure
Research expenditure - expenditure on research activities is recognised as an expense in the year 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
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
Over the term of the lease
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 is Velocity Composites plc’s functional
and presentation currency.
55
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
48
Notes to the Financial Statements
2.
Accounting policies (continued)
Foreign currency translation (continued)
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 statement of financial position presented are translated at the closing
•
rate at the date of the statement of financial position
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 year. 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, or similar instruments. The Group does
not issue or use financial instruments of a speculative nature.
Bank borrowings
Interest-bearing loans are recorded initially at their fair value, net of direct transaction costs. Such
instruments are subsequently carried at their amortised cost and finance charges are recognised in the
statement of comprehensive income over the term of the instrument using an effective rate of interest.
Finance charges are accounted for on an accrual’s basis to the statement of comprehensive income.
The Group has current borrowings of CBIL loans and can utilise its invoice discounting facility in support of
its working capital requirements.
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.
Trade and other 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.
56
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
49
Notes to the Financial Statements
2.
Accounting policies (continued)
Financial assets (continued)
Cash and cash equivalents
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 of financial assets
Impairment provisions are recognised through the expected credit losses model (ECL). IFRS 9’s
impairment requirements use forward-looking information to recognise expected credit losses – the
‘expected credit loss (ECL) model’.
The Group considers a broader range of information when assessing credit risk and measuring expected
credit losses, including past events, current conditions, reasonable and supportable forecasts that affect
the expected collectability of the future cash flows of the instrument.
Trade and other payables
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.
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.
Leased assets
Leases
The Group makes the use of leasing arrangements principally for the buildings and motor vehicles. The
rental contracts for offices are typically negotiated for terms of 5 and 10 years and some of these have
extension terms. The Group does not enter into sale and leaseback arrangements. All the leases are
negotiated on an individual basis and contain a wide variety of different terms and conditions.
The Group assesses whether a contract is or contains a lease at inception of the contract. A lease conveys
the right to direct the use and obtain substantially all of the economic benefits of an identified asset for a
period of time in exchange for consideration.
Measurement and recognition
At lease commencement date, the Group recognises a right-of-use asset and a lease liability in its
consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up
of the initial measurement of the lease liability, any initial direct costs incurred by the Group, and any lease
payments made in advance of the lease commencement date.
The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement date
to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group
also assesses the right-of-use asset for impairment when such indicators exist.
57
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
50
Notes to the Financial Statements
2.
Accounting policies (continued)
Leased assets (continued)
Measurement and recognition (continued)
At the commencement date, the Group measures the lease liability at the present value of the lease
payments unpaid at that date, discounted using the Group’s incremental borrowing rate because as the
lease contracts are negotiated with third parties it is not possible to determine the interest rate that is implicit
in the lease.
The incremental borrowing rate is the estimated rate that the Group would have to pay to borrow the same
amount over a similar term, and with similar security to obtain an asset of equivalent value. This rate is
adjusted should the lessee entity have a different risk profile to that of the Group.
Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated
between repayments of principal and finance costs. The finance cost is the amount that produces a
constant periodic rate of interest on the remaining balance of the lease liability.
The lease liability is reassessed when there is a change in the lease payments. Changes in lease payments
arising from a change in the lease term or a change in the assessment of an option to purchase a leased
asset. The revised lease payments are discounted using the Group’s incremental borrowing rate at the
date of reassessment when the rate implicit in the lease cannot be readily determined. The amount of the
remeasurement of the lease liability is reflected as an adjustment to the carrying amount of the right-of-use
asset. The exception being when the carrying amount of the right-of-use asset has been reduced to zero
then any excess is recognised in profit or loss.
Payments under leases can also change when there is either a change in the amounts expected to be paid
under residual value guarantees or when future payments change through an index or a rate used to
determine those payments, including changes in market rental rates following a market rent review. The
lease liability is remeasured only when the adjustment to lease payments takes effect and the revised
contractual payments for the remainder of the lease term are discounted using an unchanged discount
rate. Except for where the change in lease payments results from a change in floating interest rates, in
which case the discount rate is amended to reflect the change in interest rates.
The remeasurement of the lease liability is dealt with by a reduction in the carrying amount of the right-of-
use asset to reflect the full or partial termination of the lease for lease modifications that reduce the scope
of the lease. Any gain or loss relating to the partial or full termination of the lease is recognised in profit or
loss. The right-of-use asset is adjusted for all other lease modifications.
The Group has elected to account for short-term leases and leases of low-value assets using the practical
expedients. These leases relate to property security. Instead of recognising a right-of-use asset and lease
liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line
basis over the lease term.
See the accounting policy on Property plant and equipment for the depreciation methods and useful lives
for assets held under lease.
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 year. 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 years 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.
58
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
51
Notes to the Financial Statements
2.
Accounting policies (continued)
R&D tax credit
R&D tax credits are recognised at the point when claims have been quantified relating to expenditure within
current or previous years and recovery of the asset is virtually certain, these tax credits relating to R&D are
recognised within the tax on profit line of the income statement.
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;
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit
will be available against which the difference can be utilised. The amount of the asset or liability is
determined using tax rates that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the deferred tax liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current
tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either the same taxable Company; or different Company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax assets and liabilities are
expected to be settled or recovered.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the
executive directors. The Chief Operating Decision Makers have been identified as the Chief Executive
Officer and the Group Finance Director. The Group supplies a single type of product into a single industry
and so has a single operating 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.
Provisions for inventory
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.
The provision percentage is applied to various aging categories dependent on stock type, this is a key
estimate made by management based on judgement and if change is applied to the percentage for the
aged stock, then the outcome of the value of the provision would differ.
Sensitivity analysis
A 5% increase in the levels of the current stock provision would lead to and finance impact of an increase
in stock provision of £10k.
59
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
52
Notes to the Financial Statements
3.
Financial instruments and 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, 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
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
Current assets
Trade and other receivables
Trade and other receivables –
prepayments
Cash and cash equivalents – loans and
receivables
Total loans and receivables
Current liabilities
Trade and other payables
Trade and other payables – accruals
Loans
Obligations under lease liabilities
2,238
283
2,521
2,344
4,865
1,750
457
2,207
503
405
1,902
260
2,162
3,476
5,638
921
137
1,058
514
309
Total current liabilities
3,115
1,881
For non-current liabilities please see notes 17 and 18.
2,238
331
2,569
2,337
4,906
1,750
457
2,207
503
313
3,023
1,902
293
2,195
3,470
5,665
921
137
1,058
514
309
1,881
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.
a)
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 and Euros. 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 trade
receivables in note 15, cash in note 16 and trade payables in note 17.
60
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
53
Notes to the Financial Statements
3.
a)
Financial instruments and risk management (continued)
Market risk (continued)
Foreign exchange risk (continued)
Whilst the majority of the Group’s financial assets are held in Sterling, movements in the exchange rate of
the US Dollar or Euro 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 or Euro are held in those currencies for normal
trading activity in order to recover funds from customers or to pay funds to suppliers.
The Groups exposure to foreign currency risk is as follows. This is based on the carrying amount of
monetary financial instruments.
As at 31 October 2022
Trade debtors
Cash and cash equivalents
Trade payables
Balance sheet exposure
As at 31 October 2021
Trade debtors
Cash and cash equivalents
Trade payables
US Dollar
£’000
Euro
£’000
1,729
1,352
(750)
2,331
US Dollar
£’000
1,651
993
(408)
163
249
(32)
380
Euro
£’000
194
1,035
(35)
Total
£’000
1,892
1,601
(782)
2,711
Total
£’000
1,845
2,028
(443)
Balance sheet exposure
2,236
1,194
3,430
Sensitivity analysis
A 5% strengthening of the following currencies against the pound sterling at the balance sheet date would
have reduced the loss by the amounts shown below. This calculation assumes that the change occurred
at the balance sheet date and had to be applied to risk exposures existing at that date.
US dollar
Euro
31 October
2022
£’000
31 October
2021
£’000
117
19
112
60
This analysis assumes that all other variables, in particular other exchange rates and interest rates remain
constant. A 5% weakening of the above currencies against pound sterling in any year would have had the
equal but opposite effect to the amounts shown above.
Interest rate risk
The Group carries borrowings from leases and CBIL loans. Lease borrowings are at a fixed rate of interest
whilst the interest on the CBIL loans is a combination of fixed rate and Bank of England base rate plus
3.96%. The Directors do not consider there to be a significant interest rate risk on the element of loans
linked to movements in the Bank of England base rate. The Group also has access to an invoicing
discounting facility that carries a fixed monthly charge plus interest at a fixed rate of 2.25%.
61
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
54
Notes to the Financial Statements
3.
b)
Financial instruments and risk management (continued)
Credit risk
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.
c)
Liquidity risk
The Group currently holds cash balances in Sterling, US Dollars and Euros 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.
As at 31 October 2022
Loan
Obligations under lease liabilities
Trade payables
Accruals
Other payables
Invoice discounting facility
As at 31 October 2021
Loan
Obligations under lease liabilities
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
503
405
1,134
457
174
175
503
419
-
-
-
-
1,003
1,373
-
-
-
-
-
-
-
-
-
-
Within 1
year
£’000
One to two
years
£’000
Two to
five years
£’000
Over five
years
£’000
514
309
639
137
14
-
536
225
-
-
-
-
1,462
1,015
-
-
-
-
-
-
-
-
-
-
The lease liability is shown exclusive of interest payments (the comparative information for FY21 has
been updated to correctly exclude interest payments).
d)
Capital risk management
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.
62
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
55
Notes to the Financial Statements
4.
Segmental analysis
The Group supplies a single type of product into a single industry and so has a single reportable segment.
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
2022
£’000
Year ended
31 October
2021
£’000
11,906
10
43
11,959
9,702
26
39
9,767
During the year four customers accounted for 92.7% (2021: 95.06%) of the Group’s total revenue for the
year ended 31 October 2022. This was split as follows; Customer A – 43.10% (2021: 44.7%), Customer B
– 33.4% (2021: 28.5%), Customer C – 11.44% (2021: 13.4%) and Customer D – 4.70% (2021: 8.51%).
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 2022 and year ended 31 October 2021 as the site operates as an Engineering
Support Office for the Group. The US subsidiary is currently dormant, and no revenue has been generated
since the US subsidiary was incorporated.
5.
Operating loss
The operating loss is stated after charging / (crediting):
Staff costs (see note 6)
Cost of inventories
Foreign exchange (gain)/loss
Amortisation of development costs
Depreciation:
Owned assets
Property, plant and equipment under right-of-use assets
Profit on disposal of assets
Auditor’s remuneration:
Audit of the accounts of the Group
Other audit related services (relating to interim review)
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
3,090
8,079
(259)
53
210
432
(38)
59
14
2,854
6,335
156
76
229
421
(13)
62
12
63
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
56
Notes to the Financial Statements
6.
Staff costs
Wages, salaries and bonuses
Social security costs
Defined contribution pension costs
Share-based payments
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
2,575
261
84
170
3,090
2,435
240
89
90
2,854
During the previous year the company took advantage of the government furlough scheme. In the year to
31 October 2021, £152k was claimed in relation to this scheme and this benefit is not included in the above
totals. Staff costs net of furlough claims as at 31 October 2021 amounted to £2.7m during the financial
year. The government ended the furlough scheme ended in September 2021 therefore £nil has been
claimed in this financial year.
The average monthly number of employees including directors, during the year was as follows:
Year ended
31 October
2022
Head count
Year ended
31 October
2021
Head count
40
39
79
45
30
75
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
343
22
365
121
12
133
333
21
354
120
11
131
Manufacturing
Administration
7.
Directors’ costs
Directors’ remuneration included in staff costs:
Wages, salaries and bonuses
Defined contribution pension costs
Remuneration of the highest paid director(s):
Wages, salaries and bonuses or fees
Defined contribution pension costs
64
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
57
Notes to the Financial Statements
8.
Finance income and expenses
Finance expense
Finance charge from lease liabilities
Other interest and invoice discounting charges
9.
Income tax
Current tax income
UK corporation tax on income for the year
UK corporation tax adjustment in respect of prior years – R&D
Total tax income
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
81
106
187
112
70
182
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
-
(167)
(167)
-
(340)
(340)
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 the loss for the year are as follows:
Tax rate
Loss for the year before tax
Expected tax credit based on corporation tax rate
Expenses not deductible for tax purposes
Adjustment in respect of prior year – R&D
Adjustment in respect of prior year – tax losses
Tax losses not recognised
Total tax income
19.00%
19.00%
(1,504)
(1,546)
(286)
112
(167)
(51)
225
(167)
(294)
(12)
(340)
-
306
(340)
On 3 March 2021, the Chancellor of the Exchequer announced that the corporation tax rate would increase
to a maximum of 25% from 1 April 2023. It was substantively enacted on 24 May 2021. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset
is realised, based on tax law and the corporation tax rates that have been enacted, or substantively
enacted, at the Statement of Financial Position date. As such, the deferred tax rate applicable at 31 October
2022 is 25% and deferred tax had been re-measured at this date.
65
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
58
Notes to the Financial Statements
10.
Loss per share
Loss for the year
Weighted average number of shares in issue
Weighted average number of share options
Weighted average number of shares (diluted)
Loss per share (£) (basic)
Loss per share (£) (diluted)
Year ended
31 October
2022
£
Year ended
31 October
2021
£
(1,337,000)
(1,206,000)
Shares
Shares
36,371,065
2,110,897
38,481,962
36,270,917
1,856,366
38,127,283
(£0.04)
(£0.03)
(£0.04)
(£0.03)
Share options have not been included in the diluted calculation as they would be anti-dilutive with a loss
being recognised.
11.
Intangible assets
Group and Company
Cost
At 31 October 2020 and 31 October 2021
Additions
Disposal
At 31 October 2022
Amortisation
At 31 October 2020
Charge for the year
At 31 October 2021
Charge for the year
Disposal
At 31 October 2022
Net book value
At 31 October 2020
At 31 October 2021
At 31 October 2022
Development
costs
£’000
638
136
(199)
575
472
76
548
53
(199)
402
166
90
173
Total
£’000
638
136
(199)
575
472
76
548
53
(199)
402
166
90
173
Impairment
The Group reviews the Development costs at each reporting year for indicators of impairment. An indication
of impairment can be generated from the loss of a customer, or contracted sales. No impairment was
judged to be required for either year.
66
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
59
Notes to the Financial Statements
12.
Property, plant and equipment
Group and Company
Cost
At 31 October 2020
Additions
Disposal
At 31 October 2021
Additions
Disposal
At 31 October 2022
Depreciation
At 31 October 2020
Charge for the year
Disposal
Balance at 31 October 2021
Charge for the year
Disposal
At 31 October 2022
Net book value
At 31 October 2020
At 31 October 2021
At 31 October 2022
Leasehold
improve-
ments
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
Fixtures
& fittings
£’000
491
-
-
491
137
-
628
49
50
-
99
50
-
149
442
392
479
1,844
47
-
1,891
87
(123)
1,855
1,249
136
-
1,385
116
(119)
1,382
595
506
473
71
-
(48)
23
-
-
23
71
-
(48)
23
-
-
23
-
-
-
400
17
-
417
38
-
455
221
43
-
264
44
-
308
179
153
147
Total
£’000
2,806
64
(48)
2,822
262
(123)
2,961
1,590
229
(48)
1,771
210
(119)
1,862
1,216
1,051
1,099
67
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
60
Notes to the Financial Statements
13.
Investment in subsidiaries
Subsidiary undertakings
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’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
Malaysia
Ordinary
100%
United States
of America
Ordinary
100%
Manufacturer
of composite
material
products for
the aerospace
sector non
trading
Manufacturer
of composite
material
products for
the aerospace
sector
14.
Inventories
Raw materials & consumables
Finished goods
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
1,114
293
1,407
541
336
877
1,114
293
1,407
541
336
877
Inventories totalling £1,407,000 (2021: £877,000) 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 release of inventories provision during the previous year amounted to £593,000, in
2022 the release was £56,000.
The inventory at 31 October 2022 is after a stock provision of £208,000 (2021: £264,000). The provision
reflects the aged stock profile consistent with FY21, 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 2022 amounted to £8,079,000
(2021: £6,335,000), and these were included in cost of sales.
68
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
61
Notes to the Financial Statements
15.
Trade and other receivables
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
Trade receivables
Prepayments
Other receivables
Amounts due from subsidiary undertakings
2,227
283
11
-
1,883
260
19
-
2,227
281
11
50
1,883
259
19
34
2,521
2,162
2,569
2,195
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 68 days (2021: 76 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 (Group and Company) 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
2022
£’000
31 October
2021
£’000
-
-
-
-
-
13
-
-
-
13
The overall expected credit loss is trivial (2021: trivial). There is no movement in allowance of impairment
of trade receivables during each year.
Trade receivables (Group and Company) held in currencies other than sterling are as follows:
Euro
US Dollar
16.
Cash and cash equivalents
31 October
2022
£’000
31 October
2021
£’000
165
1,742
194
1,651
1,907
1,845
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
Cash at bank
2,344
3,476
2,337
3,470
2,344
3,476
2,337
3,470
69
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
62
Notes to the Financial Statements
17.
Trade and other payables
Trade payables
Accruals and deferred income
Other taxes and social security
Other payables
Invoice discounting facility
Book values approximate to fair values.
18.
Bank loans
Not later than one year
One to two years
Two to five years
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
1,134
457
267
174
175
639
137
268
14
-
1,134
457
267
174
175
639
137
268
14
-
2,207
1,058
2,207
1,058
Group
31 October
2022
£’000
Group
31 October
2021
£’000
Company
31 October
2022
£’000
Company
31 October
2021
£’000
503
503
1,003
514
536
1,462
503
503
1,003
514
536
1,462
2,009
2,512
2,009
2,512
In FY20 the Company took out a Coronavirus Business Interruption Loan for £2.0m and on 19 January
2021 the term of this loan was extended to 6 years. Repayment by instalment commenced in August 2021,
with the final instalment due in August 2026. The loan was interest free for the initial 12 months, followed
by an interest rate of 3.96% above the Bank of England base rate which was 2.25% at 31 October 2022.
This has since increased to 3.5% and therefore the rate payable at 23 January 2023 is 7.46%.
During FY21, the Company took out a further Coronavirus Business Interruption Loan for £0.45m secured
against owned non-current assets. This is being repaid over 5 years with the first payment made in July
2021 and the final instalment due in June 2026. The loan was interest free for the initial 12 months, followed
by an interest rate of 7.75% per annum.
70
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
63
Notes to the Financial Statements
19.
Leases
Right-of-use-assets
Group
Cost
Balance at 31 October 2020
Additions
Disposal
Balance at 31 October 2021
Additions
Disposal
Balance at 31 October 2022
Depreciation
Balance at 31 October 2020
Depreciation charge for the year
Disposal
Balance at 31 October 2021
Depreciation charge for the year
Disposal
Balance at 31 October 2022
NBV
At 31 October 2020
At 31 October 2021
At 31 October 2022
Land &
buildings
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
1,364
414
(137)
1,641
1,013
(221)
2,433
238
298
(137)
399
300
(221)
478
1,126
1,242
1,955
561
-
-
561
-
-
561
86
104
-
190
104
-
294
475
371
267
58
61
(9)
110
-
-
110
25
19
(9)
35
28
-
63
33
75
47
Total
£’000
1,983
475
(146)
2,312
1,013
(221)
3,104
349
421
(146)
624
432
(221)
835
1,634
1,688
2,269
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 statement of financial position as at 31 October 2022.
71
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
64
Notes to the Financial Statements
19.
Leases (continued)
Right-of-use-assets (continued)
Company
Cost
Balance at 31 October 2020
Additions
Disposal
Balance at 31 October 2021
Additions
Disposal
Balance at 31 October 2022
Depreciation
Balance at 31 October 2020
Depreciation charge for the year
Disposal
Balance at 31 October 2021
Depreciation charge for the year
Disposal
Balance at 31 October 2022
NBV
At 31 October 2020
At 31 October 2021
At 31 October 2022
Land &
buildings
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
1,364
414
(137)
1,641
556
(221)
1,976
238
298
(137)
399
300
(221)
478
1,126
1,242
1,498
561
-
-
561
-
-
561
86
104
-
190
104
-
294
475
371
267
58
61
(9)
110
-
-
110
25
19
(9)
35
28
-
63
33
75
47
Total
£’000
1,983
475
(146)
2,312
556
(221)
2,647
349
421
(146)
624
432
(221)
835
1,634
1,688
1,812
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 statement of financial position as at 31 October 2022.
Right-of-use lease liabilities
At 31 October 2021
Repayment
Additions to right-of-use assets in exchange for increased lease liabilities
Other lease movements
At 31 October 2022
Group
£’000
Company
£’000
1,549
(457)
1,013
92
1,549
(442)
556
92
2,197
1,755
72
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
65
Notes to the Financial Statements
19.
Leases (continued)
Right-of-use lease liabilities (continued)
Analysis by length of liability
Group
Current
Non-current
Land &
buildings
£’000
Plant &
equipment
£,000
Motor
vehicles
£’000
353
1,612
1,965
42
155
197
10
25
35
Number of right-to-use assets leased
Range of remaining term
6
1-10 years
5
1-10 years
2
1-4 years
Company
Current
Non-current
Land &
buildings
£’000
Plant &
equipment
£,000
Motor
vehicles
£’000
261
1,262
1,523
42
155
197
10
25
35
Number of right-to-use assets leased
Range of remaining term
5
1-10 years
5
1-10 years
2
1-4 years
Reconciliation of minimum lease payments to present value
Total
£’000
405
1,792
2,197
Total
£’000
313
1,442
1,755
Group
31 October 2022
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
31 October 2021
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
Minimum
lease
payments
£’000
Interest
£’000
Present
value
£’000
505
505
1,545
2,555
378
292
1,181
1,851
100
86
172
358
69
67
166
302
405
419
1,373
2,197
309
225
1,015
1,549
73
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
66
Notes to the Financial Statements
19.
Leases (continued)
Right-of-use lease liabilities (continued)
Reconciliation of minimum lease payments to present value (continued)
Company
31 October 2022
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
31 October 2021
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
Minimum
lease
payments
£’000
Interest
£’000
Present
value
£’000
400
400
1,248
2,048
378
292
1,181
1,851
87
72
134
293
69
67
166
302
313
328
1,114
1,755
309
225
1,015
1,549
Low value leases
The Group leases comprise both office and assembly space, under low value leases. The total value of
the minimum lease payments due is payable as follows:
Group and Company
Property, plant and equipment
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
2022
£’000
31 October
2021
£’000
-
-
-
-
-
4
-
-
-
4
Low value leases not classed as right-of-use assets due to the minimal value of the lease, 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. Payments made under such leases are expensed on a straight-line basis.
74
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
67
Notes to the Financial Statements
20.
Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using tax rates
appropriate for the year. The movement on the deferred tax account is as shown below:
The movement on the deferred tax (asset)/liability is shown below:
Group and Company
Unrecognised deferred tax in respect of losses at 31 October 2021
Corporation tax loss adjustments in respect of prior year
Corporation tax losses arising during the year
Adjustment for movement in corporation tax rate
31 October
2022
£’000
31 October
2021
£’000
(840)
(51)
(174)
(336)
(534)
-
(306)
-
Unrecognised deferred tax in respect of losses at 31 October 2022
(1,401)
(840)
The Group has unused tax losses which were incurred by the holding company. A deferred tax asset of
£1,401,000 (2021: £840,000) 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.
21.
Reconciliation of liabilities arising from financing activities
Group
Lease
liabilities <
one year
£’000
Other
short-term
borrowings
£’000
Lease
liabilities >
one year
£’000
Other
long-term
borrowings
£’000
Total
£’000
At 31 October 2020
411
500
1,060
1,500
3,471
Cash flows
Repayment
Proceeds
Non-cash
Increase to lease liabilities
Transfer from long-term to
short term borrowings
At 31 October 2021
Cash flows
Repayment
Proceeds
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
As at 31 October 2022
(400)
-
(119)
634
(519)
634
475
105
-
(17)
475
-
1,240
1,998
4,061
-
-
92
1,013
-
-
-
-
(960)
-
92
1,013
(553)
(492)
-
1,792
1,506
4,206
-
-
-
(102)
309
(457)
-
-
-
553
405
-
-
-
14
514
(503)
-
-
-
492
503
75
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
68
Notes to the Financial Statements
21.
Reconciliation of liabilities arising from financing activities (continued)
Company
Lease
liabilities <
one year
£’000
Other
short-term
borrowings
£’000
Lease
liabilities >
one year
£’000
Other
long-term
borrowings
£’000
Total
£’000
At 31 October 2020
411
500
1,060
1,500
3,471
Cash flows
Repayment
Proceeds
Non-cash
Increase to lease liabilities
Transfer from long-term to
short term borrowings
At 31 October 2021
Cash flows
Repayment
Proceeds
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
As at 31 October 2022
-
-
-
(102)
309
(442)
-
-
-
446
313
-
-
-
14
514
(503)
-
-
-
492
503
(400)
-
(119)
634
(519)
634
475
105
-
(17)
475
-
1,240
1,998
4,061
-
-
92
556
-
-
-
-
(446)
(492)
(945)
-
92
556
-
1,442
1,506
3,764
76
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
69
Notes to the Financial Statements
22.
Share capital
Share capital issued and fully paid
36,458,997 (2021: 36,303,064) Ordinary shares of £0.0025 each
31 October
2022
£
31 October
2021
£
91,147
90,758
Ordinary shares have a par value of 0.25p. They entitle the holder to participate in dividends, and to share
in the proceeds of winding up the Company in proportion to the number of and amounts paid on the shares
held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled
to one vote, and upon a poll each share is entitled to one vote. The Company does not have a limited
amount of authorised capital.
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 2022
Nominal
value
£
Number of
shares
90,758
389
36,303,064
155,933
91,147
36,458,997
On 29 March 2022, the Company issued 108,475 new ordinary shares of £0.0025 each to satisfy the
exercise of options granted under the Group’s 2020 Share Option Scheme.
On 5 October 2022, the company issued a further 47,458 new ordinary shares of £0.0025 each to satisfy
the exercise of options granted under the Group’s 2020 Share Option Scheme.
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
year, is set out in note 23.
23.
Share-based payments
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 have
vested as a resulted of continued employment. The options may be exercised at any point up to the tenth
anniversary of the grant date.
The 100,000 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. They were awarded in relation to joining senior management, providing an
equity incentive around the performance of the business.
The 667,680 share options dated 29 October 2019 have attached performance conditions linked to
adjusted 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 tenth anniversary grant date. There were 1,480,000
originally issued and as of the year ended 31 October 2022, 812,320 of these share options had lapsed
due to people leaving the business.
The 459,132 shares options dated 30 October 2020 have no attached performance conditions and have
been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity
alternatives.
77
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
70
Notes to the Financial Statements
23.
Share-based payments (continued)
The 28,805 shares options dated 1 April 2021 have no attached performance conditions and have been
issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity alternatives.
The 250,000 shares options dated 1 April 2021 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. They were awarded in relation to joining senior management, providing an equity
incentive around the performance of the business.
During the year ended 31 October 2022, further share options were granted as follows:
479,999 shares options dated 26 January 2022. These options have no attached performance conditions
and have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity
alternatives.
20,940 shares options dated 29 March 2022. These options have no attached performance conditions and
have been issued in exchange for qualifying staff agreeing to accept 20% of their basic salary in equity
alternatives.
Vesting events are defined within the rules of the Scheme as a reorganisation, takeover, sale, listing (except
on AIM), asset sale or death of the Option holder.
There were no cancellations or modifications to the awards in the year.
The following options were outstanding as at 31 October 2022:
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
01 April 2021
01 April 2021
01 April 2021
26 January 2022
29 March 2022
0.0025 13 Mar 2019 13 Mar 2027
17 Oct 2027
0.6926 17 Oct 2019
29 Oct 2031
0.2065 29 Oct 2022
29 Oct 2031
0.2065 29 Oct 2021
0.2065 01 Nov 2021 01 Nov 2026
01 Apr 2026
0.0025 01 Apr 2021
01 Apr 2026
0.1300 01 Apr 2021
01 Apr 2026
0.1580 01 Apr 2021
0.0025 26 Jan 2023 01 Nov 2027
0.0025 29 Mar 2023 01 Nov 2027
95,676
30,000
-
-
459,132
28,805
-
-
-
-
-
-
100,000
667,680
-
-
125,000
125,000
479,999
20,940
95,676
30,000
100,000
667,680
459,132
28,805
125,000
125,000
479,999
20,940
613,613
1,518,619
2,132,232
The Group recognised a cost of £170,000 (2021: £90,000) 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.
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. The table below sets out the movement to the share-
based payment reserves in the year.
78
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
71
Notes to the Financial Statements
23.
Share-based payment (continued)
Movement in share options
Scheme and
grant date
As at 1
Nov 2021
£’000
Issued
£’000
Expired
£’000
Exercised
£’000
Vested
£’000
As at 30
Oct 2022
£’000
1 January 2017
13 March 2017
17 October 2017
29 October 2019
30 October 2020
01 April 2021
01 April 2021
01 April 2021
26 January 2022
26 January 2022
29 March 2022
264
55
22
80
97
7
7
7
-
-
-
539
-
-
-
27
-
-
7
7
94
31
4
170
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25)
-
-
-
-
-
-
(25)
264
55
22
107
72
7
14
14
94
31
4
684
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:
The Group has previously engaged IN4.0 Access Limited, which provides consulting services. One of the
directors of IN4.0 Talent Recruitment Limited is a director of Velocity Composites plc. The Group paid
£37,270 (2021: £Nil) to IN4.0 Access Limited during the year and had £Nil outstanding at the year end
(2021: £Nil).
During the year the Group engaged Northwest Aerospace Alliance, which provides membership and
subscription services for the Aerospace Industry. One of the directors of Northwest Aerospace Alliance
Limited is a director of Velocity Composites plc. The Group paid £5,775 (2021: £Nil) to Northwest
Aerospace Alliance during the year and had £1,000 outstanding at the year end (2021: £Nil).
The following balances existed at year end with related parties (payable)/receivable:
Related parties
25.
Ultimate controlling party
31 October
2022
£’000
31 October
2021
£’000
(1)
-
The Directors do not consider there to be an ultimate controlling party due to no individual party owning a
majority share in the Group.
79
Velocity Composites plc
Financial statements for the year ended 31 October 2022
Financial Statements Notes to the Financial Statements
72
Notes to the Financial Statements
26.
Capital commitments
At 31 October 2022 the Group had £582,000 (2021: £Nil) 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 £84,488 (2021: £89,337) were charged to the Consolidated Income statement. Contributions
outstanding at 31 October 2021 were £14,107 (2021: £13,557).
28.
Contingent liabilities
At 31 October 2022 the Group had in place bank guarantees of £Nil (2021: £Nil) in respect of supplier trade
accounts.
As at 31 October 2022, the providers of the Invoice Discounting Facility hold a debenture that provides a
fixed and floating charge on the assets of the Company.
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 and adjusted for share-based payments. Share-based payments are
added back to make the share-based payment charge clear to stakeholders.
Reconciliation from operating loss
Operating loss
Add back:
Share-based payments
Depreciation of property, plant and equipment
Amortisation
Depreciation of right-of-use assets under IFRS 16
Adjusted EBITDA
Year ended
31 October
2022
£’000
Year ended
31 October
2021
£’000
(1,317)
(1,364)
170
210
53
432
90
229
76
421
(452)
(548)
80
Shareholder Information Advisers
Advisers
Company registration number:
06389233
Company Secretary and
Registered office:
Adam Holden (appointed 7 December 2022)
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
Nominated adviser and broker
Cenkos Securities Plc
6-8 Tokenhouse Yard
London
EC2R 7AS
Bankers:
Legal Advisers
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 LLP
17th Floor No 1
Spinningfields
1 Hardman Street
Manchester
M3 3EB
Cooper Parry Group Limited
Sky View
Argosy Road
East Midland Airport
Castle Donington
Derby
DE74 2SA
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
SEC Newgate UK Limited
14 Greville Street
London
EC1N 8SB
81
Shareholder Information Notice of AGM
Notice of General Meeting
Notice is hereby given that the Annual General Meeting (Meeting) of Velocity Composites plc (Company)
will be held at the offices of the Company at AMS Technology Park, Billington Rd, Burnley BB11 5UB on
28 February 2023 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, 11 and 12 will be proposed
as special resolutions.
Ordinary business
Ordinary resolutions
1. To receive and adopt the Annual Report and Accounts of the Company for the year ended 31
October 2022 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 year ended 31 October 2022.
3. To re-appoint as a non-executive director David Warren Bailey who retires from office in
accordance with the Company’s Articles of Association and offers himself for re-appointment.
4. To re-appoint as a non-executive director Annette Rothwell who retires from office in accordance
with the Company’s Articles of Association and offers herself for re-appointment.
5. 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.
6. To re-appoint as a director Adam Holden 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 director Jonathan Karl Bridges who retires from office in accordance with the
Company’s Articles of Association and offers himself for re-appointment.
8. To re-appoint Cooper Parry Group Limited as independent auditors of the Company, from the
conclusion of this Annual General Meeting until the conclusion of the next general meeting
of the Company at which accounts are laid and to authorise the directors to determine the
auditors’ remuneration.
Special business
Ordinary resolutions
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
9.2
up to a maximum nominal amount (within the meaning of Section 551(3) and (6) of
the Act) of £30,382.50 (such amount to be reduced by the nominal amount allotted
or granted under paragraph 9.2 below in excess of such amount); and
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 £60,765.00 (such amount to be reduced by any allotments or grants
made under paragraph 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
82
Shareholder Information Notice of AGM
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 28 May 2024), 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 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 of £18,229.50.
such authority to expire at the conclusion of the next Annual General Meeting of the Company
(or, if earlier, on 28 May 2024), 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. That, subject to the passing of resolution number 10 above, the directors be and they are hereby
empowered, pursuant to section 570 of the Act, to allot equity securities (as defined in section
560 of the Act) for cash pursuant to the authority conferred by resolution number 10 or by way
of a sale of treasury shares as if section 561 of the Act did not apply to any such allotment,
provided that this power shall be limited to:
11.1
the allotment of equity securities up to an aggregate nominal amount of £9,114.75;
and
11.2
used for the purposes of financing (or refinancing, if such refinancing occurs within
83
Shareholder Information Notice of AGM
six months of the original transaction) a transaction which the directors determine
to be an acquisition or other capital investment of a kind contemplated by the
Statement of Principles on Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of this notice, and shall expire upon
the expiry of the general authority conferred by resolution 10 above, except that
the Company may before such expiry make offers or agreements which would or
might require equity securities to be allotted and/or shares held by the Company
in treasury to be sold or transferred after such expiry and the directors may allot
equity securities and/or sell or transfer shares held by the Company in treasury in
pursuance of such offers or agreements as if the power conferred by this resolution
had not expired.
12. 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:
12.1
the maximum aggregate number of shares that may be purchased is 3,645,899;
12.2
12.3
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;
the maximum price (exclusive of expenses) which may be paid for each ordinary
share is an amount equal to the higher of:
12.3.1 105 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
12.3.2
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;
12.4
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
12.5
unless previously renewed, revoked or varied, this authority shall expire on 28 May
2024, or if earlier, at the conclusion of the next Annual General Meeting of the Company.
By order of the Board
Adam Holden
Company Secretary
23 January 2023
Registered Office: AMS Technology Park, Billington Road, Burnley, Lancashire, BB11 5UB
Registered in England and Wales No. 06389233
84
Shareholder Information Notes to Notice of AGM
Notes to Notice of Annual General Meeting
1.
2.
3.
4.
5.
6.
Only those shareholders registered in the Company’s register of members at: 6.30pm on Friday
24 February 2023; 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.
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. To appoint more than one
proxy, please return a separate form in relation to each proxy to the Company’s registrar, Equiniti
Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA, clearly indicating next
to the name of each proxy the number and class of shares in respect of which he is appointed.
Failure to specify the number of shares to which each proxy appointment relates or specifying
a number in excess of those held by the shareholder will result in the proxy appointment being
invalid. If you submit more than one valid proxy appointment in respect of the same shares, the
appointment received last before the latest time for the receipt of proxies will take precedence.
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. You are advised to read the
terms and conditions of use carefully.
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).
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 to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
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.
85
Shareholder Information Notes to Notice of AGM
7.
8.
9.
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 24 February 2023. 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 24 February 2023. If you attempt to revoke
your proxy appointment but the revocation is received after the time specified, then your proxy
appointment will remain valid.
As at 6.30pm on 23 January 2023 (the latest practicable date prior to the printing of this notice) (i)
the Company’s issued share capital consisted of 36,458,997 ordinary shares, carrying one vote
each, and (ii) the total voting rights in the Company were 36,458,997. The Company’s website will
include information on the number of shares and voting rights.
Please note that as shareholders may 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
Friday 24 February 2023 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.
10. 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.
11. 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 24
February 2023 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.
12. 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.
13. 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.
86
Shareholder Information Notes to Notice of AGM
Explanatory Notes to the Resolutions to be proposed at the Annual General Meeting
Resolution 1
Report and accounts
The directors will present the audited financial statements of the Company for the year ended 31
October 2022 together with the directors’ report and the auditor’s report on those financial statements.
Resolution 2
Remuneration report
The directors will present the remuneration report for the year ended 31 October 2022 for approval.
This vote is not mandatory but is considered best practice.
Resolutions 3 to 7 inclusive
Re-election of directors
Under the Articles of Association of the Company, all directors appointed by the Board after the first
annual general meeting shall retire at the annual general meeting following appointment and shall then
be eligible for re-election and at least one third of the total number of directors shall retire at the
annual general meeting and shall then be eligible for re-election. Brief biographical details of each of
the directors can be found in the Annual Report and Accounts and on the Company’s website www.
velocity-composites.com.
Resolution 8
Re-appointment of auditors and fixing of auditors’ remuneration
At every Annual General Meeting at which accounts are laid before shareholders, the Company is
required to appoint an auditor to hold office from the end of the meeting until the next such meeting. This
Resolution 8 proposes that Cooper Parry Group Limited be re-appointed as the Company’s auditors
to hold office until the next Annual General Meeting and that the directors be authorised to set their
remuneration.
Resolution 9
General authority to allot new shares
Resolution 9, if passed, will grant authority for the directors to issue new shares within the best practice
limits set by The Investment Association. The authority set out in paragraph 9.1 would permit allotments
of new shares up to approximately one-third of the current issued share capital. The authority set out
in paragraph 9.2 would permit allotments of new shares up to approximately two-thirds of the current
issued share capital but would apply only in the case of an allotment of shares made pursuant to a
rights issue (pre-emptive offer). The power granted by this resolution will expire on the conclusion of
next year’s Annual General Meeting or, if earlier, on 28 May 2024.
87
Shareholder Information Notes to Notice of AGM
Resolution 10
General disapplication of pre-emption rights
Resolution 10, which is proposed as a special resolution, will, if passed, give the directors power,
pursuant to the authority to allot granted by resolution 9, to allot equity securities (as defined by section
560 of the Act) or sell treasury shares for cash without first offering them to existing shareholders in
proportion to their existing holdings: (a) in relation to pre-emptive offers and offers to holders of other
equity securities if required by the rights of those securities or as the directors otherwise consider
necessary, up to a maximum nominal amount of £30,382.50 which represents approximately one-third
of the current issued share capital (excluding treasury shares) as at 23 January 2023 (being the latest
practicable date prior to the publication of this notice) and, in relation to rights issues only, up to a
maximum additional amount of £60,765.00 which represents approximately two thirds of the current
issued share capital (excluding treasury shares) as at 23 January 2023 (being the latest practicable
date prior to the publication of this notice); and (b) in any other case, up to a maximum nominal amount
of £18,229.50 which represents approximately 20 per cent of the Company’s issued ordinary share
capital (excluding treasury shares) as at 23 January 2023 (being the latest practicable date prior to the
publication of this notice).
The power granted by this resolution will expire on the conclusion of the next Annual General Meeting
of the Company (or, if earlier, on 28 May 2024). The directors have no present intention to exercise the
authority conferred by this resolution.
Resolution 11
Disapplication of statutory pre-emption rights to finance an acquisition or other capital investment.
In addition to the powers granted by Resolution 10, Resolution 11 will empower the directors to allot
ordinary shares in the capital of the Company for cash on a non-pre-emptive basis.
•
to a maximum nominal value of £9,114.75, representing approximately 10 per cent of the issued
ordinary share capital of the Company as at 23 January 2023 (the latest practicable date before
publication of this document); and
• used only for the purposes of financing (or refinancing, if such financing occurs within six
months of the original transaction) a transaction which the directors determine to be an
acquisition or other capital investment of a kind contemplated by the Statement of Principles
of Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior to
the date of this notice.
The rights of pre-emption disapplication sought pursuant to Resolutions 10 and 11 represent,
in aggregate, approximately 30% of the issued ordinary share capital of the Company as at 23
January 2023.
88
Shareholder Information Notes to Notice of AGM
Resolution 12
Authority to make market purchases of own shares
Resolution 12, which is proposed as a special resolution will give the Company authority to purchase
its own shares in the market up to a limit of approximately 10% of its issued ordinary share capital
(excluding treasury shares) at 23 January 2023, being the latest practicable date prior to the publication
of this notice. The maximum and minimum prices are stated in the resolution. Whilst they do not currently
have any intention to utilise this authority the directors believe that it is advantageous for the Company
to have this flexibility to make market purchases of its own shares. The directors will exercise this
authority only if they are satisfied that a purchase would result in an increase in expected earnings per
share and would be in the interests of shareholders generally. In the event that shares are purchased,
they would either be cancelled (and the number of shares in issue would be reduced accordingly) or, in
accordance with the Companies Act 2006, be retained as treasury shares. The Company may consider
holding repurchased shares pursuant to the authority conferred by this resolution as treasury shares.
This gives the Company the ability to transfer treasury shares quickly and cost effectively and would
provide the Company with additional flexibility in the management of its capital base.
89
Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
Registered No: 06389233
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