A N N U A L R E P O R T 2023
& Financial State m ents For the year ended 31.10.23
Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
Registered No: 06389233
Contents
1. Strategic Report
Highlights ....................................................................................... 4
Chairman’s Report ......................................................................... 6
CEO Report ................................................................................. 10
Financial Review ........................................................................... 14
Principal Risks & Uncertainties ....................................................... 17
2. Governance
Statement of Corporate Governance ........................................... 24
Board of Directors and Senior Management ................................ 30
Directors’ Report ........................................................................... 36
Directors’ Remuneration Report ................................................... 39
3. Financial Statements
Independent Auditor’s Report ....................................................... 42
Consolidated Statement of Total Comprehensive Income ............. 48
Consolidated and Company Statement of Financial Position ........ 49
Consolidated and Company Statement of Changes in Equity ....... 50
Consolidated and Company Statement of Cash Flows ................. 52
Notes to the Financial Statements ................................................. 53
4. Shareholder Information
Advisers ........................................................................................ 83
Notice of General Meeting ............................................................ 84
Notes to Notice of General Meeting .............................................. 87
Strategic Report Highlights
Financial Highlights & Group Key Performance Indicators
Revenue
£16.4m
Adjusted EBITDA 1
£(1.6)m
Gross Margin %
18.8%
Operating Loss
£(2.8)m
Cash at Bank
£3.2m
Velocity’s 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.
1 Earnings before interest, tax, depreciation, amortisation, exceptionals 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 p14 of the 2023 Annual Report and Financial Statements.
4
4
Our highly efficient nests reduce material waste & save money
The innovative visual inspection system 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
“
Velocity Composites has grown
significantly, with revenue up
37% to £16.4m (FY22: £12.0m) of
which £2.0m was derived from
maiden revenues from the US...
”
Overview
In the financial year ended
31 October 2023, Velocity
Composites has grown
significantly, with revenue
up 37% to £16.4m (FY22:
£12.0m) of which £2.0m was
derived from the Group’s
maiden revenues from the
US (FY22: nil). We provide
critical carbon fibre kitting
and supply chain management
services to large Tier One
aerospace part manufacturers.
Our technology, which has
been developed over many
years, is proven to improve
material efficiency and speed
up production times. This
technology is in increasing
demand as the aerospace
manufacturing sector recovers
from the pandemic.
GKN Aerospace
At the start of the financial year,
we were excited to announce
our first US-contract with GKN
Aerospace. The US is the global
centre for aircraft manufacturing.
To support the contract, which
is worth $20m per annum in
revenue over at least the next
five years starting from 1 January
2024, we established a facility in
Tallassee, Alabama.
Much of the management team’s
focus over the last year has
been on commissioning the new
facility in the US and starting
to on-board the new business.
As expected in the aerospace
industry, this is a complex and
lengthy process, including a
detailed qualification procedure
known as First Article Inspection
(“FAI”). The new facility has been
a significant financial investment
however it will provide solid
long-term contracted revenues
for the Group. We expect the
initial five-year GKN contract
to rollover to a much longer
period, with the opportunity
to add more contracts from
other US manufacturers. The
costs associated with such
an expansion are the primary
driver the operating loss was
£2.8m during the year as this
included the hiring and training
of a completely new team in
the US as well as the FAI work
and the additional central
resources required to support
this expansion in services. Once
the US facility is fully operational,
with the key programmes
transferred over from GKN, then
it is expected to be profitable and
to have justified these upfront
costs. In doing so and provide
a solid return on investment
even prior to securing additional
contracts for which the facility
has capacity.
The complexity of the onboarding
and qualification processes
required do therefore provide
a high barrier to entry for any
potential competitors, protecting
our long-term revenues. We have
learnt a lot from the onboarding
process, which we will be able
to utilise when we win future
US business to drive greater
efficiencies and returns. The new
team we have built and trained
in the US will be an important
resource and revenue driver for
the Group in the future.
6
Strategic Report Chairman’s Report
Velocity’s visual inspection system
Industry Developments
It is pleasing to report that the
prior headwinds of Covid-19
have been replaced with the
structural tailwind of a drive to
deliver more sustainable air travel
through the greater use of carbon
fibre in aerospace manufacture.
This means that the global
industry needs what we do.
They can either try and reinvent
our solutions for themselves
or simply utilise our Velocity
Resource Planning services, and
we firmly believe that many will
choose the latter.
Greater lightweighting of aircraft
is required to achieve aerospace
industry sustainability targets
and the need for improved fuel
performance. This need is driving
the increased usage of high-
end carbon fibre materials in
critical structural aircraft parts.
Leading manufacturers like
Boeing and Airbus are planning
for a huge upturn in composite
rich aircraft production. They will
need to increase the capability
of their supply chains to deliver
this. This means that our main
contracts in the UK and USA
should grow organically, and
any new business beyond this
could have a significant financial
upside. Airbus and Boeing global
market forecasts that there will
be ten times as many carbon
fibre intensive new generation
civil aircraft in service by the early
2040s.
Fundraising and Balance Sheet
Given the scale of the
opportunities available to us,
we sought new investment from
shareholders in August 2023,
raising £6.1m net of costs. To
effectively grow the Company,
and take on new contracts like
GKN, requires upfront investment
in new people, engineering skills
training, as well as advanced
technology and machinery. These
funds will support our growth and
have strengthened our balance
sheet. As at 31 October 2023,
our Cash at Bank was £3.2m,
after paying down the Invoice
Discounting Facility in the UK
which is still available to use.
7
As reported above, the
investment needed to deliver
the GKN contract means our
results show an operating loss
of £2.8m. This year, however,
we have established significant
commercial assets, through a
new US site, with trained staff,
advanced the FAI processes,
developed and rolled-out
new digital manufacturing
technologies now being used to
deliver the contract, and ensured
that we have the engineering
resources that can support a
much larger business than we are
currently.
While we will continue to invest
as needed, we have enough
contracted business that, at
full production rates, will mean
in 2024 we should move from
operating losses to profitability.
The Board expects that the
second half of FY24 will report an
operating profit and is expected
to roll into a more significant full
year profit in 2025. The Board
and Executive Management of
Velocity Composites understand
that only a profitable business
can grow and be successful in
the long-term. Our expected
Strategic Review Chairman’s Report
Strategic Report Chairman’s Report
Velocity HQ, Burnley, Lancashire, UK
near-term growth supports the
corporate objectives of a 25%
plus gross margin, 10% EBITDA
margin and a 25% return on
capital. It should be noted that
FY23 gross margin was heavily
impacted by charges for staff
and some materials in relation to
the US facility. Whilst it is not at
an optimal level of production,
along with a lag in pass-through
of non-material costs in the UK,
we should start to see these
dynamics change in 2024,
enabling a higher gross margin to
be achieved.
Management Changes
In preparation for this exciting
future, we have ensured that the
Board and management team
have the required aerospace
and composite manufacturing
expertise to accommodate
the planned growth in the US
and the UK. In July 2023, we
appointed Kevin Hickey as
Group Chief Operating Officer
(a non-Board position). Kevin
previously worked at Velocity
between early 2017 and late
2020, where he was responsible
for the establishment, ramp up
and ongoing management of the
Company’s production facility in
Fareham, UK. Prior to this, Kevin
held a range of senior operational
management roles both in the
UK and internationally at GE
Aviation and brings a wealth of
experience in the industry and
the Company’s processes as
Velocity’s existing facilities grow,
and new facilities are established.
In August 2023, we also
welcomed back Andrew Hebb
as non-Board Interim Chief
Financial Officer and Company
Secretary to replace Adam
Holden while we recruit a full time
CFO. Andrew was Velocity’s
non-Board Interim Chief Financial
Officer and Company Secretary
between November 2018, and
August 2020 so has a detailed
understanding of the business.
Outlook
Looking ahead, we have engaged
key customers in the US and
Europe that will enable us to
grow Velocity Composites
into a very sizeable, profitable
8
business, from 2024. Our current
contracted business is worth
at least £30m ($36m - $43m)
annually. Our existing facilities
could support up to £70m
annually, with a current qualified
pipeline of approximately £200m
($250m) annually.
As the first movers in the
industry, we are the only
company proven to provide a
complete outsourced solution
to composite aerostructure
manufacturers, meaning we are
well placed for the future. We
have a strong industry reputation
and all the global approvals to
deliver the service which provide
strong barriers to entry for others.
I would like to thank colleagues
for their continued dedication
and customers, suppliers and
investors for their support. We
look forward to a successful
2024.
Andrew Beaden
Chairman
22 January 2024
Strategic Report Dashboard
Both Airbus & Boeing predict 40,000+ aircraft by 2042
Airbus: 40,850 Boeing: 42,595
Source: Boeing Commercial Market Outlook 2023 (www.boeing.com/commercial/market/commercial-market-outlook)
and Airbus, Global Market Forecast 2023 (www.airbus.com/en/products-services/commercial-aircraft/market/global-market-forecast)
Demand for 40,850 new passenger & freighter aircraft*
46,560
23,680
GROW
22,880
17,170
REPLACE
5,710
STAY
inc 2020/22 deliveries
NEW
DELIVERIES
40,850
58%
GROWTH
42%
REPLACEMENT
Beginning 2020
2042
New Deliveries (2023 - 2042)
Source: Airbus, Global Market Forecast 2023 (www.airbus.com/en/products-services/commercial-aircraft/market/global-market-forecast)
* 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 *
i
*
e
c
v
r
e
s
n
i
t
f
a
r
c
r
i
a
r
e
g
n
e
s
s
a
p
f
o
o
N
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
History Outlook
1st** (e.g. 727) + 2nd** (e.g. MD80) +
previous generation** (e.g. A320ceo)
aircraft
13%
25%
>95%
NEW GENERATION** AIRCRAFT
AIRBUS: A220, A320neo, A330neo, A350,
A380,
BOEING:: 737max, 777x, 787,
& other new programmes)
CURRENT VELOCITY PROGRAMMES
2000
2005
2010
2015
2019
2023
2026
2031
2036
2041
Source: Airbus, Global Market Forecast ‘22 (www.airbus.com/sites/g/files/jlcbta136/files/2022-07/GMF-Presentation-2022-2041.pdf)
2023 figure Global Market Forecast ‘23 (www.airbus.com/en/products-services/commercial-aircraft/market/global-market-forecast)
9
9
CEO Report
Strategic Report CEO Report
Jonathan Bridges Chief Executive
“
Manufacturers are now
approaching us for our solutions,
leading to a current qualified
pipeline of opportunities of
£200m ($250m) annually
”
Overview
2023 was the year when our
customers started to plan
for aircraft production rate
increases. Across the global
industry, aircraft order books
are strengthening as air travel
recovers from lockdowns. For
the first time, we are expecting
simultaneous production
rate increases across most
aircraft platforms over the
next three years albeit from
the historically low numbers
caused by the pandemic.
This welcome increase in
production is happening after
customers have seen their
manufacturing base, internal
know-how and capacity
reduced since 2020 and creates
challenges for which Velocity’s
services provide a proven
solution. Working with us allows
them to focus their resources on
aerostructure part manufacture
and expanding their internal
operational capacity. Velocity’s
customers need to do more-
for-less to meet the production
rate increases of aircraft and
outsourcing is easier when
aircraft production rates are
increasing.
US expansion
In this financial year, a significant
portion of our resources were
focused on the successful site
opening and production ramp
up in Alabama to serve our new
GKN contract. This included not
only the local site team being
recruited and trained, but also
support from the central UK
teams, specifically New Business
Engineering, Operations, Supply
Chain, Quality, Information
Systems, Finance and Human
Resources. Everyone within
the Company has had a part to
play in the critical expansion of
the business and myself and
the wider executive team are
immensely proud and grateful for
their hard work. It is especially
pleasing to see a whole new team
develop in Alabama and they
have quickly grasped Velocity’s
processes and values in order
to support the GKN contract.
We operate in a highly regulated
industry, and it was important
that the new site in Alabama
mirrored the proven way of the
working of the two UK sites. It
has been inspiring to see how the
UK teams have trained their new
colleagues, and how the US team
has adopted the Velocity culture.
As we have documented in
our investor communications
throughout the year, the GKN
contract award in December
2022 was the culmination of
more than 12 months of detailed
business development, bid
creation and contract negotiation
with the customer. This required
not only a detailed understanding
of the customer’s “current state”,
but also the onboarding into the
Velocity system of around 1,300
individual kits to allow for the
detailed costing and creation
of the Velocity “future state” so
we could complete the business
case submission. At the same
time the team was also busy
setting up the production facility
in Alabama under a separate
Authority to Proceed agreement
10
Strategic Report CEO Report
which underwrote the costs
and meant that that the transfer
project could begin immediately
rather than having to wait until the
full contract was signed.
After the contract award, our
focus shifted to the project
delivery stage, particularly the
detailed and highly regulated
FAI process which is a key
enabler on the route to volume
production and sales. The total
project was split into individual
aircraft programme blocks and
a 12-month plan agreed on a
sequential basis and involved
close co-operation between us
and GKN to verify that the kit
engineering data for each block
had been transferred accurately,
and that the first kit produced by
Velocity was identical to the kits
that had been produced by the
customer. To verify this, Velocity
produced a detailed report per kit
which was subject to a desktop
verification, followed by one of
each kit which was manufactured
and then assessed and used by
the customer against the current
standard.
The scale, complexity and
resource-intense nature of this
process for both parties means
that the actual sequence and
timing of each block can change
during the transfer, hence the
trading update that was issued
in July 2023. Once transferred
however, Velocity becomes the
sole approved supplier of the
kits and an integral long-term
partner to our customer, hence
the extension of the contract with
the customer to ensure the initial
term did not commence until the
FAI process was completed. Only
once each block completes the
FAI process does Velocity then
begin to ramp it up into volume
production, which in itself can
take weeks or months depending
on the size and number of kits in
the block.
As we worked through the total
project with our first customer
in Alabama, we ended FY23
with the first two blocks fully
completed and ramped up, which
accounts for over 50% of the
total project, and the third block
in FAI and the fourth block ready
to begin FAI. The period also saw
the focus change from site stand
up to volume production.
Future Contracts
We have continued our business
development activities in the
US to utilise the capacity in
our new business engineering
and operations created as
the GKN contract moves to
sustained production. We have
a live bid with a large tier one
customer under a Memorandum
of Understanding, and a third
business development plan with
another large tier one customer.
Velocity’s new Advanced Manufacturing Facility in Alabama, USA
11
11
Strategic Report CEO Report
Volume production is ramped up and underway in Alabama
In Europe, our stated focus
is around managing the rate
increases with our existing
customers, along with targeted
business development with
existing customers at other
sites they have within mainland
Europe. This is expected
to accelerate in FY24 as
rate recovery drives make/
buy decisions as customer
plants become more capacity
constrained.
As our contractual agreements
with customers are typically
repeatedly extended we will
also refine the contract terms to
account for material and labour
cost inflation, interest rates and
energy inflation so as to protect
both parties from any global
economic factors.
With the completion of the
equity fundraise we were
able to resource our plans
around people and technology
to support the continued
expansion of our services at
our three sites. We recognise
that continued investment in
our key technology areas (real
time digitisation of supply chain
management, material efficiency
and operational performance)
along with our new business
engineering teams gives us
both a clear differentiator from
our customers (who are also
our competitors when it comes
to make/buy decisions) along
with the continued refinement of
our bid development, business
case creation and new business
implementation through FAI, to
support and deliver the continued
flow of new business opportunity
as our customers look to build
back better.
12
This also further strengthens
the barriers to entry for any
competition as our global
approvals, industry reputation,
digital toolbox, new business
engineering capacity, proven cost
saving delivery and geographic
footprint allow us to create and
deliver business cases which
support both our own and our
customers growth plans. Our
entry into the US market also
presents an opportunity for the
business to further position
our orderbook across both civil
aerospace and defence projects,
both of which are equally
applicable to Velocity’s services
but have different global growth
drivers for risk mitigation.
Strategic Report CEO Report
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
24 onwards in the Statement on
Corporate Governance.
Jonathan Bridges
Chief Executive Officer
22 January 2024
Outlook
Velocity Composites has put
into effect a clear strategy to
capitalise on the significant
growth in the use of composites
within aerospace. Manufacturers
need to outsource non-core
processes and reduce costs to
meet demand. Manufacturers
are now approaching us for our
solutions, leading to a current
qualified pipeline of opportunities
of £200m ($250m) annually.
Looking forward into FY24, the
business is fully committed
and resourced to deliver on its
existing projects, both in Europe
and the US, whilst developing
the next opportunities within
a sustainable capital and
profitability structure for the
benefit of all customers and
stakeholders.
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 2023,
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
13
Strategic Report Financial Review
Financial Review
Statement of
Comprehensive Income
Revenue for FY23 of £16.4m
(FY22: £12.0m) represents an
increase of 37% and is driven
by a combination of a 20%
increase in UK sales as the
market continues to recover
to pre-pandemic levels, and
also first-year sales from the
new US site which contributed
£2.0m.
The increased volume has
generated a gross profit of £3.1m,
£0.4m ahead of FY22. There was
a reduction in the reported gross
margin percentage to 18.8%
(FY22: 23.0%), however this is
expected to be temporary as
the reduction results from the
start-up of the US site where
volumes were lower than needed
to recover labour costs at normal
margins and a lag in some
increased cost pressures, when
compared to revising contracted
pricing with customers.
Administrative expenses
(excluding exceptional) have
increased £1.7m from £4.1m in
FY22 to £5.8m in FY23.The US
costs were £1.2m (FY22: £0.0m)
with the onboarding of key roles
to directly support operations in
the US. The remaining support is
directly provided by the UK. The
increase in volume has therefore
been offset by the investment in
overheads to support the future
growth, resulting in an adjusted
EBITDA loss of £1.6m (FY22: loss
of £0.5m).
The continued investment in
a new US facility, business
development, technology
and staff during FY23 means
the Group is well placed for
31 October
2023
31 October
2022
£’000
£’000
(2,817)
(1,317)
206
413
472
170
263
432
Operating loss
Add back:
Share-based payments
Depreciation and amortisation
Depreciation on right of use assets
under IFRS 16
Exceptional Administrative costs
120
-
Adjusted EBITDA
(1,606)
(452)
contracted volume growth in the
forthcoming year. US growth
will be delivered through the
Work Package Agreement
with GKN with the remaining
projects completing First Article
Inspection (FAI) during the first
half of FY24 and full volumes
being achieved in the second
half. In addition, we expect
to start onboarding a second
customer once contracts are
signed. Growth in the UK will
be through a small increase to
existing contract volumes and
also new opportunities with
existing customers.
Therefore, Velocity is in an
excellent position to deliver this
growth, without a linear increase
to its overhead base and will
also benefit in FY24 from the
technological investments that
have driven efficiencies in the
operational process as volumes
grow.
Fundraise and
Capital Reduction
The Group completed a fundraise
in October 2023 raising £6.1m
net of transaction costs. The
funds are being used to support
capital expenditure in particular
for the US facility, technology
development, recruiting
additional personnel in the US,
and working capital. In the short
term we will reduce usage of the
UK Invoice Financing facility.
As part of the fundraise to enable
participation of EIS/VCT funds,
the Group took the opportunity
with Shareholder support and
Court approval to undertake a
capital reduction, reducing the
share premium by £10,920k
and adjusting retained earnings
creating positive retained
earnings which at the year-end
for the Group were £1,087k. This
will help support the Group to
pay dividends at the appropriate
time.
2 Earnings before interest, tax, depreciation, amortisation, exceptional 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.
14
Cashflow and
Capital Investment
The increase in the year-end cash
and cash equivalents position of
£0.9m to £3.2m (FY22: £2.3m)
reflects the Company receiving
net proceeds of £6.1m following
completion of a fundraise by way
of a firm placing, EIS/VCT placing
and retail offer. This has been
partially offset by the investment
from Velocity Composites PLC
to the US subsidiary of £3.1m to
help finance US operations in
order to win and start fulfilling the
contract won in the US.
Losses after tax for the year
for the Group amounted to
£3.1m (FY22: £1.3m). Of these
losses, £1.6m related to the US
subsidiary.
There was an operating cash
outflow before working capital
movements of £1.7m (FY22:
£0.5m outflow), this being
attributable to the US start-
up costs. The movements in
working capital netted to a
£0.1m outflow in FY23 (FY22:
£0.3m inflow), and after other
adjustments for taxation, the final
cash outflow from operations
was £1.8m (FY22: £0.3m inflow,
including tax credits of £0.5m).
Working capital movements can
be further analysed as follows:
There was a positive working
capital movement through a
£2.4m increase in trade and other
payables from suppliers (FY22:
increase of £1.1m). However,
this has been offset by a £1.3m
increase in inventory (FY22:
increase of £0.5m), largely due
to the inventory required to meet
demand in the US and a £1.1m
increase in trade and other
receivables due from customers
(FY22: increase of £0.4m), £1m
of the increase relates to the US
outstanding trade debtors at the
year end. Overall trade receivable
days were 71 days, compared to
68 days at the end of FY22.
A cash outflow from investment
activities of £2.1m is a
combination of the purchase of
property, plant and equipment
mainly in the US of £1.3m (FY22:
Cash
CBILS loan
Invoice discounting facility
Net cash
Strategic Report Financial Review
£0.3m) and an increase in
intangible assets to support the
development of the production
facility in the US of £0.8m (FY22:
£0.1m).
In financing facilities £1.3m
(2022: £1.1m) represents the
repayment of the CBILS loan, the
capital element of the Group’s
lease liabilities and associated
financing costs. The remaining
amount represents the fundraise
net of the transaction costs in
issuing the ordinary shares.
The Company was in a Net Cash
position at the end of the year,
of £1.6m (FY22: £0.2m). This
includes Cash at Bank, offset by
the outstanding CBILS balance
and invoice discounting facility.
31 October
2023
£’000
31 October
2022
£’000
3,178
(1,473)
(68)
1,637
2,344
(2,009)
(175)
160
One of Velocity’s advanced cleanroom manufacturing areas
15
Strategic Report Financial Review
the investment in growth become
tangible. 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.
Having due regard for these
recent deliverables and latest
projections, with available cash
at 31 October 2023 of £3.2m, 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.
Andrew Hebb
Interim Chief Financial Officer
22 January 2024
Going Concern
Management continues to
undertake a significant level
of cash flow forecasting and
detailed financial projections
for the following 24-month
period to 31 October 2025 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 2025 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 contracted
demand, the Work Package
Agreement with GKN in the US,.
The cost base included in the
projections is reflective of the
significant cost reductions that
took place during Covid to right
size the Group, but also realistic
about the investment required to
implement the growth.
It is the investment in growth and
technological advancements
throughout FY23, which is
anticipated to continue in FY24,
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
Financial Highlights & Group Key Performance Indicators
Revenue
Gross Margin %
Adjusted EBITDA3
Cash at Bank
Operating Loss
£16.4m
18.8%
£(1.6)m
£3.2m
£(2.8)m
3 Earnings before interest, tax, depreciation, amortisation, exceptionals 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 p9 of the 2023 Annual Report and Financial Statements.
16
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 was
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.
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, the mitigating activities
noted above remain extremely
relevant. The expansion into
the US using existing resources
means that cash flow forecasting
and capacity planning both
remain key priorities, whilst
also becoming familiar with
trading regulations in a new
geographical market will bring
further challenges that the Group
is looking forward to managing.
The Board is also conscious of
the risk of exclusively operating
in the aerospace sector. The
risk is, however, mitigated by
the strength of the longer-
term outlook from the aircraft
manufacturers which suggests
that there will be a 10-fold
increase (Source: Airbus and
Boeing Global Market Forecast)
in the use of composites over
the next 20 years. The Board is
reassured by past precedents of
crises in the industry that have
not curtailed the underlying trend
of growth in the market.
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.
1717
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 Company’s
UK production facilities.
The successful
implementation
in Tallassee could
lead to further
plants servicing the
geographical clusters
18
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Strategic Risks
(cont)
International
Expansion
High
Winning a Large
Customer Contract
Medium
Sustainability
Credentials
Low
(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.
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.
19
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. In addition, the
Group manages the on-boarding
of individual projects to ensure
timely First Article Inspection (FAI)
and ramp up of production to meet
the agreed customer timelines.
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 material 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
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 which forecast that
aircraft numbers will double in the
next 20 years, with new aircraft being
made using a much higher carbon
fibre content. Though the Covid-19
pandemic did not have a long term
impact on the underlying growth
trends in the aerospace market.
The Company has also started to
develop more of its customer base
around military aerospace which
has proven to be more robust during
the pandemic. Given the strength of
the civil and military aerospace, the
Company will diversify into defence
given the substantial demand in this
area before investing in new sectors at
this stage.
20
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Operational Risks
Dependence on
Third Party Supply
Low
Cyber Security
Medium
Reliance on
Key Individuals
Medium
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.
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.
The success of the
Group will depend largely
upon the expertise and
relationships of the
Board and other senior
employees. The loss of
any of the key individuals
could impact the Group’s
ability to deliver its
strategic goals.
The Group manages its relationships
with suppliers through the commercial
and operational teams. Many products
are single sourced for Airplane frames,
the product type being defined by
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.
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.
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.
21
Strategic Report Principal Risks and Uncertainties
Principal Risks and Uncertainties
PRINCIPAL RISK
MANAGEMENT
PRIORITY
IMPACT
MITIGATION
Price Inflation
High
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. Labour
cost inflation is being added to all
new contracts as an automatic annual
increase. 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 Chief Financial Officer. 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.
22
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 FY2024 and financing the US
growth through existing resources
will continue to 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 market helps
provide access to equity finance if
significant growth requires further
significant investment. The fundraise
in FY2023 has added significant cash
resources to the Company.
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
High
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.
23
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 here:
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,
24
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 Interim (non-Board)
Chief Financial Officer. 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
25
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
26
26
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, Interim
(non-Board) Chief Financial
Officer 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, Chief
Financial Officer 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.
Governance Statement of Corporate Governance
Nomination Committee
The Nomination Committee has
three members, Andrew Beaden
(Chair), Annette Rothwell and
David Bailey. 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,
one of which is an 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.
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 Interim
(non Board) Chief Financial
Officer and external auditor
attend by invitation. The Audit
Committee responsibilities
include the review of the scope,
results and effectiveness of the
external audit, the review of the
Interim and Annual accounts,
and the review of the Group’s
risk management and internal
control systems. The Audit
Committee advises the Board on
the appointment of the external
auditors and monitors their
performance.
Remuneration Committee
The Remuneration Committee
has three members, Annette
Rothwell (Chair), Andrew
Beaden and David Bailey.
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.
27
Governance Statement of Corporate Governance
A summary of the attendance at board and committee meetings by the directors who served during the year is
set out below.
No Meetings in Year
Andrew Beaden
Adam Holden*
Jonathan Bridges
Chris Williams**
Annette Rothwell
David Bailey
Board
Meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
11
11
7
11
2
11
11
4
4
N/a
N/a
N/a
4
4
2
2
N/a
N/a
N/a
2
2
2
2
N/a
N/a
N/a
1
1
Committee
Audit
Remuneration
Nominations
Andrew
Beaden
Chair
Member
Chair
Jonathan
Bridges
Chris
Williams
Adam
Holden
Annette
Rothwell
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
N/a
Member
Chair
Member
David
Bailey
Member
Member
Member
*appointed as a Director 7 December 2022 resigned as a Director 23 August 2023
**resigned as Director 7 December 2022
N/a - indicates that a director was not a member of a particular committee
Non-members are invited to attend committees as appropriate.
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 30 to 31 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
28
Governance Statement of Corporate Governance
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 Chief Financial
Officer 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
22 January 2024
8. Promote a culture
that is based on ethical
values and behaviour
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
on a timely basis, 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
conducting our business
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;
rather it is a framework which
underpins the core values for
29
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 Fellow 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 31 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
and is a Director of the North
West Aerospace Alliance.
Governance Board of Directors
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
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.
(l-r) Annette Rothwell,
Andrew Hebb,
Jonathan Bridges,
Andrew Beaden,
David Bailey
30
30
Governance Board of Directors
Adam Holden
Group Finance Director
(resigned 23 August 2023)
Adam joined as Group Finance
Director and Company Secretary
in December 2022.
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.
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.
Andrew Hebb
Interim Chief Financial Officer
(Company Secretary)
Andrew has been a professional
interim CFO for several AIM
quoted and private companies
across a range of sectors
since 2009. Prior to that, as
CFO, Andrew helped build
Hedra Plc into a major public
sector consulting business and
managed the sale process in
2008. He has held CFO and
operational roles in other major
UK companies. Andrew is a
qualified Fellow Chartered
Management Accountant.
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 2005 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).
31
31
Governance Executives & Senior Management
Executive Team
Matthew Archer
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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
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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.
Kevin Hickey
Kevin re-joined the Company in July
2023. He was previously the Site
Leader for the VC Fareham Facility
from January 2017 to December
2020.
Kevin has over 40 years’ experience
in the Aerospace sector, a degree
in Business Management and held
senior management position within
Operations, Engineering, Quality and
Sourcing. He is currently responsible
for the harmonising of all our facilities
worldwide ensuring VC maximise
their effectiveness in the supply
chain.
32
32
Governance Executives & Senior Management
Senior Management Team
Sheldon Atherton
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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,
Lee Berry
Lee Joined in December 2023
as Manufacturing Manager and
brings with him over 18 years of
management experience within the
composites industry delivering strong
leadership, process improvement,
high quality, and operational
excellence.
Previous positions have provided the
opportunity to hone skills in project
management; staff development;
training; health & safety; Quality
management systems; reducing
costs; adhering to procedures;
customer service; problem-solving;
relationship management.
Paul Britton
Paul joined the Company in
September 2023. Paul has over 38
years’ experience in the Aerospace
industry. Previously he has been
involved in the manufacturing process
for the following projects Boeing 737,
Dash 8, A350 Wing Panels & Hawk
Canopy/Windscreen.
Paul, oversees the Safety, Quality,
Cost, Delivery & People management
system in Fareham, striving to meet
Metric/KPI targets set.
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.
33
33
Governance Executives & Senior Management
Senior Management Team
Katie Kininmonth
Katie joined Velocity in August 2020,
Katie has 19 years’ experience in
Finance beginning her career at a top
10 international firm and going on to
work in a number of large retail and
manufacturing businesses, Katie has
previous PLC experience.
team, preparation of the financial
information working alongside the
Chief Financial Officer to complete
the Statutory and regulatory
reporting for the business and a
key contact for internal and external
stakeholders.
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Katie is responsible for the
management of the finance
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Daniel McNamara
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Daniel joined Velocity in 2018 and
has nearly a decade of experience
operating within high-level composite
supply chains. Daniel began his
career completing a planning and
supply apprenticeship at Gurit,
a distinguished manufacturer
and global supplier of advanced
composite materials.
Leading the global Planning and
Supply Chain Team, Daniel is
responsible for managing sustained
customer interface and demand,
and the business’s global supply
base, with responsibilities including
both indirect and direct procurement
activities across all three Velocity
sites, ensuring operational
enablement and adherence to agreed
contractual requirements.
Max Page
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such as data handling and FAI. Max
is excited to be part of such a crucial
time for Velocity’s growth and is keen
to put the engineering department at
the leading edge of this growth.
Max joined Velocity in 2021 as
a Customer Project Engineer at
the Fareham facility. Previously
experienced in aircraft fuel systems,
Velocity was his first exposure to
composites.
Max leads the customer projects half
of Velocity’s engineering function.
Responsible for engineering process
needed to transfer work into Velocity
Shoaib Tahir
Shoaib joined Velocity in April 2023,
bringing with him years of experience
in finance across engineering &
manufacturing industries, with a key
focus on commercial development
& implementation. Shoaib previously
worked as the Group Financial
Controller at National Floorcoverings,
where he was responsible for
developing and executing key
business strategies for both the short
& long term while improving margin
performance across the group. He is
responsible for the financial planning
& analysis to drive operational
efficiencies and navigate the business
through the growth while achieving
forecasted budgets, in addition to
meeting stakeholder expectations.
Shoaib is a Member of the
Association of Chartered Certified
Accountants (ACCA)
34
34
Governance Executives & Senior Management
Senior Management Team
Andy Caunce
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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.
US Subsidiary
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Byeong Kim
Byeong joined Velocity in September
2022 as the first US subsidiary
employee originally as an Engineer.
Byeong has been awarded the US
Site Lead position through strong
mentorship and dedication. He is
currently working alongside the Chief
Operations Officer to establish a
strong team and build out the facility.
35
35
Governance Directors’ Report
Directors’ Report
The directors present their report and the audited financial statements for the year ended
31 October 2023.
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 14 to 16 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 17 to 23.
Details of the Company’s share
capital, together with details
of the movements, are set out
in note 23 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
£833,000 (2022: £136,000) in-
line with the Group’s accounting
policy.
There were no dividends
proposed or paid in the year
(2022: £Nil).
Political donations
No political donations were made
during the year (2022: £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.
36
Directors
The Directors who held office during the year and up to the date of this report,
along with their direct interest in the shares of the Company at 31 October
2023 were as follows:
Jonathan Karl Bridges
Andrew Beaden
Chris Williams (resigned 7 December 2022)
Annette Rothwell
David Bailey
Adam Holden (resigned 23 August 2023)
4 Includes 50,000 shares in the name of Mrs S Beaden
Governance Directors’ Report
At
31 October
2023
%
Shareholding
5,515,929
568,475 4
-
-
-
-
10.33%
1.06%
-
-
-
-
The table above does not include shares held under options, via the Company’s employee share option arrangements, which include
share options under a salary sacrifice plan, were Director’s and senior management swap part of their base salaries for an equity interest
in the Company. Total shares held under these plans for Directors was 259,309 shares as at 31 October 2023.
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.
Substantial shareholdings
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 14
to 16.
Having due regard for these
recent deliverables and latest
projections, with available cash
at 31 October 2023 of £3.2m, 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.
At 31 October 2023, 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
Amati Global Investors
Gerard Antony Johnson
Christopher Banks
Seneca Partners
Stonehage Fleming
Rathbones
Hargreaves Lansdown stockbrokers
AJ Bell
Charles Stanley
5,650,294
4,802,693
4,702,693
4,519,236
4,338,956
2,945,675
2,619,382
1,726,476
1,712,925
37
10.58%
8.99%
8.81%
8.46%
8.13%
5.52%
4.91%
3.23%
3.21%
Corporate governance
The Statement of Corporate
Governance on pages 24 to 29
sets out the Group’s approach to
good corporate governance.
Statement of directors’
responsibilities
The directors are responsible
for preparing the Strategic
report, the Directors’ report
and the financial statements in
accordance with applicable law
and regulations.
Company law requires the
directors to prepare 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
Governance Directors’ Report
material departures disclosed
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 22 January
2024 and signed on its behalf by:
Andrew Hebb
Company Secretary
22 January 2024
• 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.
38
Governance Directors’ Remuneration Report
Directors’ Remuneration Report
This report covers the financial period ended 31 October 2023.
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 three members, Annette
Rothwell (Chair), Andrew Beaden
and David Bailey. 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
39
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.
Directors’ Emoluments
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
granted to certain Non-Executive
Directors and members of the
Senior Management team. A total
of 0.5m options were issued.
In March 2023 a further 0.8m
options were granted.
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. 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 2023 (or period of service) are summarised below:
Cash paid
salary 5
£’000
Pension
£’000
Benefit
in kind
£’000
Year ended
31 October
2023
£’000
Year ended
30 October
2022
£’000
Executive
Jonathan Bridges
Chris Williams (resigned 7 December 2023)
Adam Holden (resigned 23 August 2023)
Non-Executive
Andrew Beaden
Robert Soen (resigned 31 October 2022)
Annette Rothwell
David Bailey
Total
178
63
90
99
-
28
29
487
12
2
5
2
-
-
-
21
12
-
6
-
-
-
-
18
202
65
101
101
-
28
29
526
133
105
-
66
28
18
15
365
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% has been deferred until 2024 and when the Company expects a positive EBITDA.
40
Governance Directors’ Remuneration Report
Share options
The following table sets out the share option movements for each of the current Directors during the
two years ended 31 October 2023. None of the options below have any further performance conditions
attached and vest subject to continued employment. The options issued in FY 2023 and issued in FY
2022, relate to the Company’s salary sacrifice plan, where senior staff can swap up to 20% of their base
salary for a similar valued equity interest in the Company.
Chris
Williams
No.
Andrew
Beaden
No.
Adam
Holden
No.
Annette
Rothwell
No.
David
Bailey
No.
At 31 October 2021
272,268
108,475
Issued
Exercised
Lapsed
103,529
76,235
-
-
(108,475)
-
At 31 October 2022
375,797
Issued
Exercised
Lapsed
-
(250,797)
(125,000)
At 31 October 2023
Comprising shares that have:
Vested
Not Vested
At 31 October 2023
-
-
-
-
76,235
86,400
-
-
162,635
76,235
86,400
162,635
-
-
-
-
-
107,733
-
(107,733)
-
20,940
-
-
20,940
37,867
-
-
-
-
-
-
-
37,867
-
-
-
-
-
-
58,807
37,867
20,940
37,867
-
37,867
58,807
37,867
41
Financial Statements Independent Auditor’s Report
Independent Auditor’s Report
to the Members of Velocity Composites Plc
42
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 2023 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 and parent financial
statements is applicable law and 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
2023 and of the group’s loss for the year then ended;
• have been properly prepared in accordance with UK adopted international accounting standards;
• 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.
From this, we determined the significance of each component to the group as a whole and devised our
planned audit response. In order to address the audit risks described in the Key audit matters section which
were identified during our planning process, we performed a full-scope audit of the financial statements of the
parent company, Velocity Composites plc and Velocity Composites Aerospace Inc. The operations that were
subject to full-scope audit procedures made up 100% of consolidated revenues and 100% of consolidated
loss before tax.
Analytical procedures were undertaken on the remaining component, using group materiality, which was not
deemed to be material.
43
Financial Statements Independent Auditor’s Report
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current year 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 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 it is probable 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:
• We assessed accounting policies for consistency and appropriateness with the applicable financial
reporting framework and in particular that revenue was recognised when performance obligations were
fulfilled. In addition, we reviewed for the consistency of application of the accounting policies;
• We obtained an understanding of the processes through which the business initiates, records, processes
and reports revenue transactions;
• We performed walkthroughs of the processes as set out by management, to ensure controls appropriate
to the size and nature of operations were designed and implemented correctly throughout the transaction
cycle;
• We obtained a complete listing of journals posted to revenue nominal codes and reviewed the listing for
any unexpected entries. These were then tested to supporting evidence;
• We performed cut-off procedures to test transactions around the year end and verified a sample of reve-
nue to originating documentation to provide evidence that transactions were recorded in the correct year;
• We performed transactional revenue testing to confirm the completeness of revenue and to confirm reve-
nue has been recognised in accordance with the accounting policies and performance obligations have
been met;
• We reviewed a listing of post year end credit notes to verify that revenue has been recorded in the correct
accounting 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 £246,000. 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.
44
Financial Statements Independent Auditor’s Report
The materiality for the parent company financial statements as a whole was set at £222,000. 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.
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:
• Reviewing management’s cash flow forecasts for a period of at least 12 months from the date of approval
of these financial statements;
• Challenging management on key assumptions included in their forecast scenarios;
• Considering the potential impact of various scenarios on the forecasts;
• Reviewing results post year end to the date of approval of these financial statements and assessing them
against original budgets;
• Reviewing management’s forecasting accuracy through reviewing the prior year budgets compared to
actuals; 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.
45
Financial Statements Independent Auditor’s Report
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 year for which the
financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
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 30, 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 and relevant tax legislation.
46
Financial Statements Independent Auditor’s Report
We are not responsible for preventing irregularities and cannot be expected to detect non-compliance with all
laws and regulations. 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;
• 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
specifically in relation to inventory provisions.
Whilst considering how our audit work addressed the detection of irregularities, we also consider the likelihood
of detection based on our approach. Irregularities arising from fraud are inherently more difficult to detect
than those arising from error.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including
those leading to a material misstatement in the financial statements or non-compliance with regulation. This
risk increases the more that compliance with law or regulation is removed from the events and transactions
reflected in the financial statements, as we will be less likely to become aware of non-compliance. The risk
is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional
concealment, forgery, collusion, omission or misrepresentation.
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
22 January 2024
Chartered Accountants and Statutory Auditor
Sky View
Argosy Road
East Midlands Airport
Caste Donington
Derby
DE74 2SA
47
Financial Statements Consolidated Statement of Total Comprehensive Income
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Consolidated Statement of Total
Consolidated Statement of Total Comprehensive
Comprehensive Income
Income
40
Revenue
Cost of sales
Gross profit
Administrative expenses
Exceptional administrative expenses
Operating loss
Operating loss analysed as:
Adjusted EBITDA loss
Depreciation of property, plant and equipment
Amortisation
Depreciation of right-of-use assets under IFRS 16
Share-based payments
Exceptional administrative expenses
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
2023
£’000
Year ended
31 October
2022
£’000
16,411
(13,325)
3,086
(5,783)
(120)
11,959
(9,213)
2,746
(4,063)
-
(2,817)
(1,317)
(1,606)
(297)
(116)
(472)
(206)
(120)
(326)
(3,143)
-
(452)
(210)
(53)
(432)
(170)
-
(187)
(1,504)
167
(3,143)
(1,337)
(£0.08)
(£0.04)
(£0.08)
(£0.04)
Note
4
8
5
31
8
9
10
11
11
The notes on pages 45 to 74 form part of these financial statements.
The notes on pages 53 - 82 form part of these financial statements.
There is no other comprehensive income in the current or prior year.
48
Financial Statements Consolidated and Company Statement of Financial Position
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Consolidated and Company
Statement of Financial Position
Consolidated and Company Statement of Financial
Position
41
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
Note
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Loans
Trade and other payables
Obligations under lease liabilities
Total current liabilities
Non-current liabilities
Loans
Obligations under lease liabilities
Total non-current liabilities
Total liabilities
Net assets
12
13
20
15
16
17
19
18
20
19
20
890
2,095
2,129
5,114
2,743
3,667
3,178
9,588
173
1,099
2,269
3,541
1,407
2,521
2,344
6,272
232
734
1,521
2,487
1,493
5,913
3,131
10,537
173
1,099
1,812
3,084
1,407
2,569
2,337
6,313
14,702
9,813
13,024
9,397
503
4,587
487
5,577
970
1,587
2,557
503
2,207
405
3,115
1,506
1,792
3,298
503
1,921
344
2,768
970
1,196
2,166
503
2,207
313
3,023
1,506
1,442
2,948
8,134
6,413
4,934
5,971
6,568
3,400
8,090
3,426
Equity attributable to equity holders of the company
Share capital
Share premium account
Share-based payments reserve
Retained earnings
23
24
25
133
4,870
478
1,087
91
9,727
684
(7,102)
133
4,870
478
2,609
91
9,727
684
(7,076)
Total equity
6,568
3,400
8,090
3,426
The notes on pages 45 to 74 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 £1,647,000. The financial statements were approved
and authorised for issue by the Board of Directors on 22 January 2024 and were signed on its behalf by:
53 - 82
Jonathan Bridges
Director
Co No: 06389233
49
Financial Statements Consolidated and Company Statement of Changes in Equity
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Consolidated and Company
Consolidated and Company Statement of
Statement of Changes in Equity
Changes in Equity
Consolidated 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
-
(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 25)
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
Share
capital
£’000
Share
premium
account
£’000
Retained
earnings
£’000
Share-
based
payments
reserve
£’000
91
-
91
-
-
42
9,727
-
(7,102)
(3,143)
9,727
(10,245)
-
-
-
412
6,063
(10,920)
-
10,920
684
-
684
206
(412)
-
Total
equity
£’000
3,400
(3,143)
257
206
-
6,105
-
As at 31 October 2022
Loss for the year
Transactions with shareholders:
Share-based payments (note 25)
Transfer of share option reserve on
vesting of options and issue of equity
Issue of new shares net of transaction
costs
Reduction of Share Premium Account
As at 31 October 2023
133
4,870
1,087
478
6,568
The notes on pages 45 to 74 form part of these financial statements.
The notes on pages 53 - 82 form part of these financial statements
50
Financial Statements Consolidated and Company Statement of Changes in Equity
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Consolidated and Company
Consolidated and Company Statement of
Statement of Changes in Equity
Changes in Equity
Company statement of changes in equity
43
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payments
reserve
£’000
Retained
earnings
£’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 25)
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
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payments
reserve
£’000
Retained
earnings
£’000
91
-
91
-
-
42
9,727
-
(7,076)
(1,647)
9,727
(8,723)
-
-
-
412
6,063
(10,920)
-
10,920
684
-
684
206
(412)
-
Total
equity
£’000
3,426
(1,647)
1,779
206
-
6,105
-
As at 31 October 2022
Loss for the year
Transactions with shareholders:
Share-based payments (note 25)
Transfer of share option reserve on
vesting of options and issue of equity
Issue of new shares net of transaction
costs
Reduction of Share Premium Account
As at 31 October 2023
133
4,870
2,609
478
8,090
The notes on pages 45 to 74 form part of these financial statements.
The notes on pages 53 - 82 form part of these financial statements.
51
Financial Statements Consolidated and Company Statement of Cash Flows
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Consolidated and Company
Consolidated and Company Statement of Cash
Statement of Cash Flows
Flows
44
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 in trade and other receivables
Increase in inventories
Increase/(Decrease) in trade and other payables
Cash (outflow)/inflow from operations
Tax received
Net cash (outflow)/inflow from operating
activities
Group
Year
ended
31 October
2023
£’000
Group
Year
ended
31 October
2022
£’000
Company
Year
ended
31 October
2023
£’000
Company
Year
ended
31 October
2022
£’000
(3,143)
-
(4)
326
116
297
472
206
(1,337)
(167)
(38)
187
53
210
432
170
(1,647)
-
(4)
299
53
210
391
206
(1,338)
(167)
(38)
187
53
210
432
170
(1,730)
(490)
(492)
(491)
(1,146)
(1,336)
2,380
(1,832)
-
(359)
(530)
1,149
(230)
510
(3,344)
(86)
(286)
(4,208)
-
(374)
(530)
1,149
(246)
510
(1,832)
280
(4,208)
264
Investing activities
Purchase of property, plant and equipment net of
intercompany transfers
Purchase of development expenditure
Proceeds from the sale of property, plant and
equipment
(1,293)
(833)
4
(262)
(136)
42
Net cash used in investing activities
(2,122)
(356)
Financing activities
Proceeds from issue of ordinary shares
Share issue transaction costs
Finance costs paid
Loan repayment
Repayment of lease liabilities capital
Net cash generate in financing activities
Net Increase/(Decrease) in cash and cash
equivalents
Cash and cash equivalents at 01 November
6,590
(485)
(326)
(536)
(455)
4,788
834
2,344
-
-
(187)
(503)
(366)
(1,056)
(1,132)
3,476
155
(112)
4
47
6,590
(485)
(294)
(536)
(320)
4,955
794
2,337
(262)
(136)
42
(356)
-
-
(187)
(503)
(351)
(1,041)
(1,133)
3,470
Cash and cash equivalents at 31 October
3,178
2,344
3,131
2,337
The notes on pages 53 - 82 form part of these financial statements.
The notes on pages 45 to 74 form part of these financial statements.
52
Financial Statements Notes to the Financial Statements
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Notes to the Financial Statements
Notes to the Financial Statements
45
1.
General information
Velocity Composites plc (the ‘Company’) is a public limited company incorporated and domiciled in England
and Wales. The registered office of the Company is AMS Technology Park, Billington Road, Burnley,
Lancashire, BB11 5UB, United Kingdom. The registered company number is 06389233.
In order to prepare for future expansion in the Asia region, the Company established a wholly owned
subsidiary company, Velocity Composites Sendirian Berhad, which is domiciled in Malaysia. The subsidiary
company commenced trading on 18 April 2018. The Company also established a wholly owned subsidiary
company, Velocity Composites Aerospace Inc. to prepare for future expansion in the United States of
America. These subsidiaries, together with Velocity Composites plc, now 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) interpretations.
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 “FY23” refer to the year ended 31 October 2023, whilst references to “FY22” are in respect of the year
ended 31 October 2022.
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 2023. 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.
53
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
46
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 2025 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 2025 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
contracted demand, the newly signed Work Package Agreement with GKN in the US. 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 FY23, and which is anticipated
to continue in FY24, 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 during periods of FY24.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
2023 of £3.2m, 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.
54
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
47
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 are
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 and services 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.
55
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
48
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.
56
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
49
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.
57
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
50
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.
58
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
51
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.
59
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
52
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 Chief Financial Officer. 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.
60
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
53
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
Group
Company
Company
31 October
2023
£’000
31 October
2022
£’000
31 October
2023
£’000
31 October
2022
£’000
Current assets
Trade and other receivables
Trade and other receivables –
prepayments
Amounts due from subsidiary
undertakings
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
3,282
2,238
385
-
3,667
3,178
6,845
4,053
534
4,587
503
487
283
-
2,521
2,344
4,865
1,750
457
2,207
503
405
Total current liabilities
5,577
3,115
For non-current liabilities please see notes 18 and 19.
2,532
291
3,090
5,913
3,131
9,044
1,587
334
1,921
503
344
2,768
2,238
281
50
2,569
2,337
4,906
1,750
457
2,207
503
313
3,023
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 a large element of the transactional currency risk to pass through the Group.
The Group is also exposed to translation foreign exchange risk on consolidation of US operations, which
are translated into Sterling from US dollars. This can impact the consolidated income statement and also
create a movement in reserves from movements in the US balance sheet items.
61
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
54
Notes to the Financial Statements
3.
Financial instruments and risk management (continued)
a)
Market risk (continued)
The carrying value of the Group’s foreign currency denominated assets and liabilities comprise the trade
receivables in note 16, cash in note 17 and trade payables in note 18.
Foreign exchange risk (continued)
The Group’s financial assets are held in both Sterling and US dollars, the assets are converted to the
presentation currency Sterling assets held in US dollars are in relation to the US subsidiary, 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 Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount of
monetary financial instruments.
As at 31 October 2023
Trade debtors
Cash and cash equivalents
Trade payables
US Dollar
£’000
2,685
204
(3,328)
Euro
£’000
75
118
(31)
Total
£’000
2,760
322
(3,359)
Balance sheet exposure
(439)
162
(277)
As at 31 October 2022
Trade debtors
Cash and cash equivalents
Trade payables
US Dollar
£’000
1,729
1,352
(750)
Euro
£’000
163
249
(32)
Total
£’000
1,892
1,601
(782)
Balance sheet exposure
2,331
380
2,711
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
2023
£’000
31 October
2022
£’000
28
(8)
117
19
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. Included in the US dollar value is £78k relating to
the US Subsidiary (2022: £Nil).
Interest rate risk
The Group carries borrowings from leases and CBILS loans. Lease borrowings are at a fixed rate of interest
whilst the interest on the CBILS 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 5.25%.
62
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
55
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 2023
Loan
Obligations under lease liabilities
Trade payables
Accruals
Other payables
Invoice discounting facility
As at 31 October 2022
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
487
3,786
534
15
68
503
508
-
-
-
-
467
1,079
-
-
-
-
-
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
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.
63
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
56
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
US
Rest of the World
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
14,350
41
1,967
53
11,906
10
-
43
16,411
11,959
During the year four customers accounted for 91.9% (2022: 92.7%) of the Group’s total revenue for the
year ended 31 October 2023. This was split as follows; Customer A – 34.5% (2022: 43.10%), Customer B
– 34.9% (2022: 33.4%), Customer C – 10.49% (2022: 11.44%) and the fourth customer a customer of
Velocity Composite Aerospace Inc 11.99%, previously Customer D – 3.58% (2022: 4.70%).
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 2023 and year ended 31 October 2022 as the site operates as an Engineering
Support Office for the Group. The US subsidiary started to trade in April 2023, revenue of £1,967k has
been generated since the US subsidiary was incorporated.
5.
Operating loss
The operating loss is stated after charging / (crediting):
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
3,700
11,687
57
116
297
472
(5)
75
12
3,090
8,079
(259)
53
210
432
(38)
59
14
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)
64
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
57
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
2023
£’000
Year ended
31 October
2022
£’000
3,049
348
97
206
3,700
2,575
261
84
170
3,090
The average monthly number of employees including directors, during the year was as follows:
Year ended
31 October
2023
Head count
Year ended
31 October
2022
Head count
55
47
102
40
39
79
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
505
21
526
190
12
202
343
22
365
121
12
133
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
65
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
58
Notes to the Financial Statements
8.
Exceptional administrative expenses
Fees associated with newly issued shares
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
120
120
-
-
Exceptional expenses incurred during the year are in relation to the costs associated with the cash
fundraise through the placing and subscription of the New Ordinary Shares. Total costs incurred were
£120,000 and £485,000 charged to the share premium as being directly related to newly issued shares.
No exceptional costs were recognised in the previous year.
9.
Finance income and expenses
Finance expense
Finance charge from lease liabilities
Other interest and invoice discounting charges
10.
Income tax
Company
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
2023
£’000
Year ended
31 October
2022
£’000
120
206
326
81
106
187
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
-
-
-
-
(167)
(167)
66
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
59
Notes to the Financial Statements
10.
Income tax (continued)
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
Different tax rates in other countries
Adjustment in respect of prior year – tax losses
Tax losses not recognised
Total tax income
22.00%
19.00%
(3,143)
(1,504)
(691)
(17)
-
232
-
476
-
(286)
112
(167)
-
(51)
225
(167)
On 3 March 2021, the Chancellor of the Exchequer announced that the corporation tax rate would increase
to 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 2023 is 25% and deferred tax had been re-measured at this date.
11.
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
2023
£
Year ended
31 October
2022
£
(3,143,000)
(1,337,000)
Shares
Shares
38,410,094
1,348,066
39,758,160
36,371,065
2,110,897
38,481,962
(£0.08)
(£0.04)
(£0.08)
(£0.04)
Share options have not been included in the diluted calculation as they would be anti-dilutive with a loss
being recognised.
67
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
60
Notes to the Financial Statements
12.
Intangible assets
Group
Cost
At 31 October 2021
Additions
Disposals
At 31 October 2022
Additions
At 31 October 2023
Amortisation
At 31 October 2021
Charge for the year
Disposals
At 31 October 2022
Charge for the year
At 31 October 2023
Net book value
At 31 October 2021
At 31 October 2022
At 31 October 2023
Company
Cost
At 31 October 2021
Additions
Disposals
At 31 October 2022
Additions
At 31 October 2023
Amortisation
At 31 October 2021
Charge for the year
Disposals
At 31 October 2022
Charge for the year
At 31 October 2023
Net book value
At 31 October 2021
At 31 October 2022
At 31 October 2023
Development
costs
£’000
638
136
(199)
575
833
1,408
548
53
(199)
402
116
518
90
173
890
Development
costs
£’000
638
136
(199)
575
112
687
548
53
(199)
402
53
455
90
173
232
Total
£’000
638
136
(199)
575
833
1,408
548
53
(199)
402
116
518
90
173
890
Total
£’000
638
136
(199)
575
112
687
548
53
(199)
402
53
455
90
173
232
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.
68
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
61
Notes to the Financial Statements
13.
Property, plant and equipment
Group
Cost
At 31 October 2021
Additions
Disposals
At 31 October 2022
Additions
At 31 October 2023
Depreciation
At 31 October 2021
Charge for the year
Disposals
At 31 October 2022
Charge for the year
At 31 October 2023
Net book value
At 31 October 2021
At 31 October 2022
At 31 October 2023
Company
Cost
At 31 October 2021
Additions
Disposals
At 31 October 2022
Transferred to subsidiary
Additions
Disposals
At 31 October 2023
Depreciation
At 31 October 2021
Charge for the year
Disposals
At 31 October 2022
Charge for the year
Disposals
At 31 October 2023
Net book value
At 31 October 2021
At 31 October 2022
At 31 October 2023
Leasehold
improve-
ments
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
Fixtures
& fittings
£’000
491
137
-
628
367
995
99
50
-
149
73
222
392
479
773
1,891
87
(123)
1,855
528
2,383
1,385
116
(119)
1,382
150
1,532
506
473
851
23
-
-
23
-
23
23
-
-
23
-
23
-
-
-
417
38
-
455
398
853
264
44
-
308
74
382
153
147
471
Leasehold
improve-
ments
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
Fixtures
& fittings
£’000
491
137
-
628
(132)
14
-
510
99
50
-
149
50
-
199
392
479
311
1,891
87
(123)
1,855
(57)
57
-
1,855
1,385
116
(119)
1,382
118
-
1,500
506
473
355
69
23
-
-
23
-
-
-
23
23
-
-
23
-
-
23
-
-
-
417
38
-
455
(37)
-
-
418
264
44
-
308
42
-
350
153
147
68
Total
£’000
2,822
262
(123)
2,961
1,293
4,254
1,771
210
(119)
1,862
297
2,159
1,051
1,099
2,095
Total
£’000
2,822
262
(123)
2,961
(226)
71
-
2,806
1,771
210
(119)
1,862
210
-
2,072
1,051
1,099
734
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
62
Notes to the Financial Statements
14.
Investment in subsidiaries
Subsidiary undertakings
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’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
Pentagon Suite,
ES-04, Level 3,
Wisma Suria,
Jalan Teknokrat
6, Cyber 5,
63000,
Cyberjaya,
Selangor
Velocity
Composites
Aerospace, Inc.
Corporation
Trust Center,
1209 N. Orange
St, Wilmington,
Delaware
19801
15.
Inventories
Malaysia
Ordinary
100%
United States
of America
Ordinary
100%
Provider of
engineering
composite
services for
the aerospace
sector non
trading
Manufacturer
of composite
material
products for
the aerospace
sector
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
Raw materials & consumables
Finished goods
1,830
913
1,114
293
1,023
470
1,114
293
2,743
1,407
1,493
1,407
Inventories totalling £2,743,000 (2022: £1,407,000) 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 increase of inventories provision during the previous year amounted to £53,000 Velocity
Composites PLC and £113,000 for Velocity Composites Aerospace Inc, in 2022 the release was £56,000
for Velocity Composites PLC.
The inventory at 31 October 2023 is after a stock provision of £374,000 (2022: £208,000). The provision
reflects the aged stock profile consistent with FY22, 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 2023 amounted to £11,687,000
(2022: £8,079,000), and these were included in cost of sales.
70
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
63
Notes to the Financial Statements
16.
Trade and other receivables
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
Trade receivables
Prepayments
Other receivables
Amounts due from subsidiary undertakings
3,187
385
95
-
2,227
283
11
-
2,489
291
43
3,090
2,227
281
11
50
3,667
2,521
5,913
2,569
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 an average of 71 days (2022: 68 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. No Trade receivables (Group and Company)
were overdue over three months at the year end (2022: £Nil).
The overall expected credit loss is trivial (2022: 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
17.
Cash and cash equivalents
31 October
2023
£’000
31 October
2022
£’000
75
2,685
165
1,742
2,760
1,907
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
Cash at bank
3,178
2,344
3,131
2,337
3,178
2,344
3,131
2,337
71
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
64
Notes to the Financial Statements
18.
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.
19.
Bank loans
Not later than one year
One to two years
Two to five years
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
3,786
534
184
15
68
1,134
457
267
174
175
1,322
334
183
14
68
1,134
457
267
174
175
4,587
2,207
1,921
2,207
Group
31 October
2023
£’000
Group
31 October
2022
£’000
Company
31 October
2023
£’000
Company
31 October
2022
£’000
503
503
467
503
503
1,003
503
503
467
503
503
1,003
1,473
2,009
1,473
2,009
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 5.25% as at 31 October 2023.
Therefore the rate payable at 22 January 2024 is 9.21%.
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.
72
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
65
Notes to the Financial Statements
20.
Leases
Right-of-use-assets
Group
Cost
Balance at 31 October 2021
Additions
Disposals
Balance at 31 October 2022
Additions
Disposals
Balance at 31 October 2023
Depreciation
Balance at 31 October 2021
Depreciation charge for the year
Disposals
Balance at 31 October 2022
Depreciation charge for the year
Disposals
Balance at 31 October 2023
NBV
At 31 October 2021
At 31 October 2022
At 31 October 2023
Land &
buildings
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
1,641
1,013
(221)
2,433
232
-
2,665
399
300
(221)
478
363
-
841
1,242
1,955
1,824
561
-
-
561
-
-
561
190
104
-
294
81
-
375
371
267
186
110
-
-
110
100
(5)
205
35
28
-
63
28
(5)
86
75
47
119
Total
£’000
2,312
1,013
(221)
3,104
332
(5)
3,431
624
432
(221)
835
472
(5)
1,302
1,688
2,269
2,129
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 2023.
73
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
66
Notes to the Financial Statements
20.
Leases (continued)
Right-of-use-assets (continued)
Company
Cost
Balance at 31 October 2021
Additions
Disposals
Balance at 31 October 2022
Additions
Disposals
Balance at 31 October 2023
Depreciation
Balance at 31 October 2021
Depreciation charge for the year
Disposals
Balance at 31 October 2022
Depreciation charge for the year
Disposals
Balance at 31 October 2023
NBV
At 31 October 2021
At 31 October 2022
At 31 October 2023
Land &
buildings
£’000
Plant &
machinery
£’000
Motor
vehicles
£’000
1,641
556
(221)
1,976
-
-
1,976
399
300
(221)
478
282
-
760
1,242
1,498
1,216
561
-
-
561
-
-
561
190
104
-
294
81
-
375
371
267
186
110
-
-
110
100
(5)
205
35
28
-
63
28
(5)
86
75
47
119
Total
£’000
2,312
556
(221)
2,647
100
(5)
2,742
624
432
(221)
835
391
(5)
1,221
1,688
1,812
1,521
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 2023.
Right-of-use lease liabilities
At 31 October 2022
Repayment
Additions to right-of-use assets in exchange for increased lease liabilities
Interest and other movements
At 31 October 2023
Group
£’000
Company
£’000
2,197
(506)
332
51
1,755
(372)
105
52
2,074
1,540
74
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
67
Notes to the Financial Statements
20.
Leases (continued)
Right-of-use lease liabilities (continued)
Analysis by length of liability
Group
Current
Non-current
Company
Current
Non-current
Land &
buildings
£’000
Plant &
equipment
£,000
Motor
vehicles
£’000
420
1,375
1,795
42
113
155
124
2,074
Land &
buildings
£’000
Plant &
equipment
£,000
Motor
vehicles
£’000
277
984
1,261
42
113
155
124
1,540
Total
£’000
487
1,587
Total
£’000
344
1,196
25
99
25
99
Number of right-to-use assets leased
Range of remaining term
6
1-10 years
5
1-10 years
2
1-4 years
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
Group
31 October 2023
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 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
Minimum
lease
payments
£’000
Interest
£’000
Present
value
£’000
585
589
1,209
2,383
505
505
1,545
2,555
98
81
130
309
100
86
172
358
487
508
1,079
2,074
405
419
1,373
2,197
75
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
68
Notes to the Financial Statements
20.
Leases (continued)
Right-of-use lease liabilities (continued)
Reconciliation of minimum lease payments to present value (continued)
Company
31 October 2023
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 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
Minimum
lease
payments
£’000
Interest
£’000
Present
value
£’000
424
430
927
80
64
97
344
366
830
1,781
241
1,540
400
400
1,248
2,048
87
72
134
293
313
328
1,114
1,755
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 is £Nil (2022: £Nil).
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.
76
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
69
Notes to the Financial Statements
21.
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:
Company
Unrecognised deferred tax in respect of losses brought forward
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
2023
£’000
31 October
2022
£’000
(1,401)
-
(229)
-
(840)
(51)
(174)
(336)
Unrecognised deferred tax in respect of losses carried forward
(1,630)
(1,401)
The Group has unused tax losses which were incurred by the holding company. A deferred tax asset of
£1,774,000 (2022: £1,401,000) 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.
22.
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 2021
309
514
1,240
1,998
4,061
Cash flows
Repayment
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
At 31 October 2022
Cash flows
Repayment
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
As at 31 October 2023
(457)
(503)
-
-
-
-
(960)
92
1,013
92
1,013
-
-
553
405
-
-
492
503
(553)
(492)
-
1,792
1,506
4,206
(506)
(536)
-
-
-
-
(1,042)
332
51
-
332
51
(588)
(536)
1,587
970
3,547
-
-
588
487
-
-
536
503
77
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
70
Notes to the Financial Statements
22.
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 2021
309
514
1,240
1,998
4,061
Cash flows
Repayment
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
At 31 October 2022
Cash flows
Repayment
Non-cash
Other differences
Increase to lease liabilities
Transfer from long-term to
short term borrowings
As at 31 October 2023
23.
Share capital
(442)
(503)
-
(372)
(536)
-
92
556
52
105
-
-
446
313
-
-
492
503
-
-
403
344
-
-
536
503
(446)
(492)
1,442
1,506
3,764
-
-
-
-
-
-
(945)
92
556
-
(908)
52
105
-
(403)
(536)
1,196
970
3,013
31 October
2023
£
31 October
2022
£
133,483
91,147
Share capital issued and fully paid
53,393,368 (2022: 36,458,997) Ordinary shares of £0.0025 each
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
Allotted, issued and fully paid in the year
Closing share capital at 31 October 2023
Nominal
value
£
Number of
shares
91,147
1,154
41,182
36,458,997
461,788
16,472,583
133,483
53,393,368
78
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
71
Notes to the Financial Statements
23.
Share capital (continued)
On 17 March 2023, the Company issued 305,856 new ordinary shares of £0.0025 each to satisfy the
exercise of options granted under the Group’s 2022 Share Option Scheme.
On 27 March 2023, the company issued a further 155,932 new ordinary shares of £0.0025 each to satisfy
the exercise of options granted under the Group’s 2022 Share Option Scheme.
During the year ended 31 October 2023, 16,472,583 new ordinary shares were issued. The shares issued
had a nominal value of £0.0025 each and were issued at £0.40 each.
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 25.
24.
Share premium
At the beginning of the year
Shares issued net of transaction costs
Reduction of Share Premium Account
At the end of the year
25.
Share-based payments
31 October
2023
£’000
31 October
2022
£’000
9,727
6,063
(10,920)
9,727
-
-
4,870
9,727
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 225,000 share options dated 29 October 2019 have no attached performance conditions and vest
subject only to continued employment. They vest after 3 years, or earlier if a vesting event occurs as defined
in the rules of the Scheme. They were awarded in relation to joining senior management, providing an
equity incentive around the performance of the business. 125,000 of these share options had lapsed due
to people leaving the business.
Share options dated 29 October 2019 in the year have lapsed, the options 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, 1,480,000 of these
share options had lapsed due to people leaving the business.
The 155,932 remaining 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.
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.
79
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
72
Notes to the Financial Statements
25.
Share-based payments (continued)
The 479,999 shares options dated 26 January 2022 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 20,940 shares options dated 29 March 2022 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.
During the year ended 31 October 2023, further share options were granted as follows:
807,200 shares options dated 28 March 2023. 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 2023:
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
28 March 2023
0.0025 13 Mar 2019 13 Mar 2027
17 Oct 2027
0.6926 17 Oct 2019
29 Oct 2031
0.2065 29 Oct 2022
0.2065 29 Oct 2021
29 Oct 2031
0.2065 01 Nov 2021 01 Nov 2026
01 Apr 2026
0.0025 01 Apr 2021
01 Apr 2026
0.1300 01 Apr 2021
0.1580 01 Apr 2021
01 Apr 2026
0.0025 26 Jan 2023 01 Nov 2027
0.0025 29 Mar 2023 01 Nov 2027
0.0025 28 Mar 2023 01 Nov 2023
95,676
25,000
100,000
-
155,932
28,805
-
-
321,411
20,940
75,000
-
-
-
-
-
125,000
-
-
-
549,467
95,676
25,000
100,000
-
155,932
28,805
125,000
-
321,411
20,940
624,467
822,764
674,467
1,497,231
The Group recognised a cost of £206,000 (2022: £170,000) 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.
80
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
73
Notes to the Financial Statements
25.
Share-based payment (continued)
Movement in share options
Scheme and
grant date
As at 1
Nov 2022
£’000
Issued
£’000
Expired
£’000
Exercised
£’000
Vested
£’000
As at 31
Oct 2023
£’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
28 March 2023
264
55
22
107
72
7
14
14
94
31
4
-
684
-
-
-
-
-
-
-
-
-
-
-
276
276
-
-
(10)
(27)
-
(7)
-
(6)
(14)
(7)
-
-
(70)
-
-
-
-
-
-
-
-
-
-
-
-
-
(264)
-
(2)
(64)
(48)
-
-
-
(33)
-
-
-
(412)
-
55
10
16
24
-
14
8
47
24
4
276
478
26.
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 £Nil
(2022: £37,270) to IN4.0 Talent Recruitment Limited during the year and had £Nil outstanding at the year
end (2022: £Nil). The services related to a specialist software engineer and were at arm’s length market
rates for such expertise, with the fees being passed directly on to the consultant, less an administration
fee.
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 £2,009 (2022: £5,775) to Northwest
Aerospace Alliance during the year and had £Nil outstanding at the year end (2022: £1,000).
The following balances existed at year end with related parties (payable)/receivable:
Related parties
27.
Ultimate controlling party
31 October
2023
£’000
31 October
2022
£’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.
81
Velocity Composites plc
Financial statements for the year ended 31 October 2023
Financial Statements Notes to the Financial Statements
74
Notes to the Financial Statements
28.
Capital commitments
At 31 October 2023 the Group had £Nil (2022: £582,000) of capital commitments relating to the purchase
of leasehold improvements, plant and machinery and fixture and fittings.
29.
Pension commitments
The Group makes contributions to defined contribution stakeholder pension schemes. The contributions for
the year of £97,191 (2022: £84,488) were charged to the Consolidated Income statement. Contributions
outstanding as at 31 October 2023 were £13,595 (2022: £14,107).
30.
Contingent liabilities
As at 31 October 2023 the Group had in place bank guarantees of £Nil (2022: £Nil) in respect of supplier
trade accounts.
As at 31 October 2023, National Westminster Bank plc hold a debenture that provides a fixed and floating
charge on the assets of the Company.
31.
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
Exceptional Administration expenses
Year ended
31 October
2023
£’000
Year ended
31 October
2022
£’000
(2,817)
(1,317)
206
297
116
472
120
170
210
53
432
-
Adjusted EBITDA
(1,606)
(452)
82
Shareholder Information Advisers
Advisers
Company registration number:
06389233
Company Secretary and
Registered office:
Nominated adviser and broker
Andrew Hebb (appointed 23 August 2023)
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
Cavendish Capital Markets Limited
One Bartholomew Close
London
EC1A 7BL
Bankers:
National Westminster Bank
1 Hardman Boulevard
Manchester
M3 3AQ
HSBC Bank USA
452 5th Avenue
New York
NY 10018
Legal Advisers
Independent Auditor
Registrars
Financial PR
Royal Bank of Scotland
1 Hardman Boulevard
Manchester
M3 3AQ
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
83
Shareholder Information Notice of AGM
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting (Meeting) of Velocity Composites plc (Company)
will be held at the offices of AMS Technology Park, Billington Rd, Burnley BB11 5UB on 12 March 2024 at
10 am to consider, and if thought fit, pass the following resolutions. Resolutions 1 to 8 (inclusive) will be
proposed as ordinary resolutions and resolutions 9, 10, and 11 will be proposed as special resolutions.
Ordinary Business
Ordinary Resolutions
1. To receive and adopt the Annual Report and Accounts of the Company for the period ended 31
October 2023 and the reports of the directors and independent auditors thereon.
2. To approve the Directors’ Remuneration Report contained within the Company’s Annual Report
and Accounts for the period ended 31 October 2023.
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 Jonathan Karl Bridges who retires from office in accordance with the
Company’s Articles of Association and offers himself for re-appointment.
7. 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
8. 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:
8.1 up to a maximum nominal amount (within the meaning of Section 551(3) and (6) of the Act) of
£44,494.4733 (such amount to be reduced by the nominal amount allotted or granted under
paragraph 8.2 below in excess of such amount); and
8.2 comprising equity securities (as defined in Section 560(1) of the Act) up to an aggregate
nominal amount (within the meaning of Section 551(3) and (6) of the Act) of £88,988.9467
(such amount to be reduced by any allotments or grants made under paragraph 8.1 above)
in connection with or pursuant to an offer by way of a rights issue in favour of holders of
ordinary shares in proportion (as nearly as practicable) to the respective number of ordinary
shares held by them on the record date for such allotment (and holders of any other class
of equity securities entitled to participate therein or if the directors consider it necessary,
84
Shareholder Information Notice of AGM
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 5 March 2025), 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 Resolutions
9. To resolve that, subject to the passing of resolution 8 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:
9.1 to the allotment of equity securities for cash in connection with or pursuant to an offer of,
or invitation to acquire, equity securities (but in the case of the authorisation granted under
resolution 8.2 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
9.2 to the allotment of equity securities or sale of treasury shares (otherwise than under
paragraph 9.1 above) up to an aggregate nominal amount of £13,348.342,
such authority to expire at the conclusion of the next Annual General Meeting of the Company (or, if
earlier, on 5 March 2025), 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).
10. That, subject to the passing of resolution number 9 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 9 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:
10.1 the allotment of equity securities up to an aggregate nominal amount of £ 13,348.342;
and used for the purposes of financing (or refinancing, if such refinancing 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 on Disapplying Pre-Emption Rights most recently published by the Pre-Emption
Group prior to the date of this notice,
85
Shareholder Information Notice of AGM
and shall expire upon the expiry of the general authority conferred by resolution 9 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.
11. To authorise the Company generally and unconditionally for the purposes of section 701 of
the Act to make market purchases (within the meaning of section 693(4) of the Act) of any of
the ordinary shares in the capital of the Company on such terms and in such manner as the
directors may from time to time determine, such shares to be either held as treasury shares or
cancelled as the board may determine, provided that:
11.1 the maximum aggregate number of shares that may be purchased is 5,339,336;
11.2 the minimum price that may be paid for each ordinary share is the nominal amount of such
share which amount shall be exclusive of expenses, if any;
11.3 the maximum price (exclusive of expenses) which may be paid for each ordinary share is
an amount equal to the higher of:
11.3.1 105 per cent of the average of the middle market quotations for the ordinary shares
of the Company (as derived from the AIM Appendix to the Daily Official List of
London Stock Exchange plc) for the five business days immediately preceding the
day on which such share is contracted to be purchased; and
11.3.2 the higher of the price of the last independent trade and the highest current
independent bid on the London Stock Exchange as stipulated by the Commission-
adopted Regulatory Technical Standards pursuant to article 5(6) of the Market
Abuse Regulation;
11.4 the Company may, before this authority expires, make a contract to purchase ordinary
shares that would or might be executed wholly or partly after the expiry of this authority,
and may make purchases of ordinary shares pursuant to it as if this authority had not
expired; and
11.5 unless previously renewed, revoked or varied, this authority shall expire on 12 March
2025, or if earlier, at the conclusion of the next Annual General Meeting of the Company.
By order of the Board
Andrew Hebb
Company Secretary
22 January 2024
Registered Office: AMS Technology Park, Billington Road, Burnley, Lancashire, BB11 5UB
Registered in England and Wales No. 06389233
86
Shareholder Information Notes to Notice of AGM
Notes to Notice of Annual General Meeting
Notes to the AGM
1.
2.
3.
4.
5.
6.
Only those shareholders registered in the Company’s register of members at: 6.30pm on 8 March
2024; 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.
7.
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
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Shareholder Information Notes to Notice of AGM
10.00am on 8 March 2024. 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 8 March 2024. If you attempt to revoke your proxy appointment but the revocation is
received after the time specified, then your proxy appointment will remain valid.
If you are an institutional investor, you may be able to appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the Company and approved by the Registrar. For further
information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 10.00
am on 8 March 2024 in order to be considered valid. Before you can appoint a proxy via this process
you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you
read these carefully as you will be bound by them, and they will govern the electronic appointment of
your proxy.
As at 6.30pm on 22 January 2024 (the latest practicable date prior to the printing of this notice) (i) the
Company’s issued share capital consisted of 53,393,368 ordinary shares, carrying one vote each,
and (ii) the total voting rights in the Company were 53,393,368. The Company’s website will include
information on the number of shares and voting rights.
8.
9.
10. 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 8 March 2024 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.
11.
The register of directors’ interests in the shares of the Company and copies of the directors’ service
contracts and letters of appointment, other than those expiring or determinable without payment of
compensation within one year, are available for inspection at the registered office of the Company
during the usual business hours on any weekday (Saturdays, Sundays and public holidays excluded)
from the date of this notice until the Annual General Meeting, subject to restrictions in place for
Covid-19 safety in accordance with UK Government guidelines, and will be available for inspection
at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting,
subject to restrictions in place for Covid-19 safety in accordance with UK Government guidelines.
12. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only those shareholders
registered in the register of members of the Company by 6.30pm on 8 March 2024 shall be entitled to
attend and vote at the Annual General Meeting in respect of the number of shares registered in their
name at that time. Any changes to the register of members after such time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
13. You may not use any electronic address (within the meaning of Section 333(4) of the Companies
Act 2006) provided in either this Notice or any related documents (including the form of proxy) to
communicate with the Company for any purposes other than those expressly stated.
14.
There are set out below notes to the resolutions to be passed at the Annual General Meeting. If you
require further guidance you should contact your solicitor or financial adviser.
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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 period ended
31 October 2023 together with the directors’ report and the auditor’s report on those financial
statements.
Resolution 2
Remuneration report
The directors will present the remuneration report for the period ended 31 October 2023 for approval.
This vote is not mandatory but is considered best practice.
Resolutions 3 to 6 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 7
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 7 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 8
General authority to allot new shares
Resolution 8, 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 8.1 would permit
allotments of new shares up to approximately one-third of the current issued share capital. The
authority set out in paragraph 8.2 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 12 March 2024.
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Shareholder Information Notes to Notice of AGM
Resolution 9
General disapplication of pre-emption rights
Resolution 9, which is proposed as a special resolution, will, if passed, give the directors power,
pursuant to the authority to allot granted by resolution 8, 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 £44,494.4733 which represents approximately one-
third of the current issued share capital (excluding treasury shares) as at 22 January 2024 (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 £88,988.9467 which represents approximately two thirds of the current
issued share capital (excluding treasury shares) as at 22 January 2024 (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 £13,348.342 which represents approximately 10 per cent of the Company’s issued ordinary share
capital (excluding treasury shares) as at 22 January 2024 (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 12 March 2025). The directors have no present intention to exercise the
authority conferred by this resolution.
Resolution 10
Disapplication of statutory pre-emption rights to finance an acquisition or other capital
investment
In addition to the powers granted by Resolution 9, Resolution 10 will empower the directors to allot
ordinary shares in the capital of the Company for cash on a non-pre-emptive basis:
• up to a maximum nominal value of £13,348.342, representing approximately 10 per cent of the
issued ordinary share capital of the Company as at 22 January 2024 (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 9 and 10 represent, in
aggregate, approximately 20% of the issued ordinary share capital of the Company as at 22 January
2024.
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Shareholder Information Notes to Notice of AGM
Resolution 11
Resolution 11 – authority to make market purchases of own shares
Resolution 11, 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) as at 22 January 2024, 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.
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A N N U A L R E P O R T 2023
& Financial State m ents For the year ended 31.10.23
Velocity Composites Plc
AMS Technology Park
Billington Road
Burnley
Lancashire
BB11 5UB
www.velocity-composites.com
Registered No: 06389233