TIDMVEL
RNS Number : 9540H
Velocity Composites PLC
30 March 2020
30 March 2020
Velocity Composites plc
("Velocity" or the "Company")
Trading Update and COVID-19
Velocity Composites plc (AIM: VEL.L), the leading supplier of
advanced composite material kits to the aerospace market, provides
an update to shareholders regarding current and future trading
performance of the Company and the immediate and foreseeable impact
of the COVID-19 pandemic.
As announced in the Company's 2019 Final Results in January
2020, the current financial year ending 31 October 2020 ("FY20")
had started well with the Group achieving good strategic progress
on milestones around contract renewals and new aerospace
qualifications. Trading until the end of February was in line with
the Board's expectations with order book visibility showing a heavy
H2 performance weighting. The Company had announced earlier in the
year that it had won new business with a major Boeing parts
supplier and has been working closely with several large customers
on new business opportunities.
The Company continues to operate effectively, with its
facilities open, but short-term demand has begun to be
significantly impacted by the unprecedented disruption caused by
the COVID-19 pandemic. This disruption is affecting the global
aerospace industry and other manufacturing businesses across the
supply chain. While many of Velocity's customers are still
manufacturing, this is now at a much-reduced rate, as necessary
action is taken to ensure the wellbeing of employees, a priority
throughout the industry. As a result, short term demand for
Velocity's products has now decreased significantly and these
reduced levels of activity are expected to continue in the short
term. The Company's new business development activities in the US,
Europe and the UK continue remotely but timings on projects are
expected to be delayed by prevailing travel restrictions.
The scale and nature of the pandemic is changing constantly and
there is, as yet, no clear understanding of the likely duration of
the necessary restrictions and the timing of a recovery back to
normal production activities. The Board is, therefore, unable to
comment on the likely financial performance of the Group for FY20
and, given the typically long industry contract lead times, for
FY21.
Velocity is a prudently managed, debt free business with current
unaudited cash balances of GBP2.7m at 27 March 2020 and the
availability of additional liquidity through a committed, currently
unused, invoice discounting facility of GBP5.0m, though the
Company's ability to drawdown on this facility is tied to the level
of the Company's receivables. At current levels of receivables,
Velocity is able to draw down up to GBP2.6m under this facility.
The long-term market for composites products in the aerospace
industry remains strong and is forecasted to grow and the Company's
flexible business model allows for rapid revisions to be made to
both materials and labour directly reflecting customer demand. As a
result, the Board believes that Velocity is currently well placed
to withstand the disruption of COVID-19 but will also seek to fully
utilise the UK government's help for businesses, to further support
cash liquidity.
COVID-19 management strategy
Velocity has taken rapid action in relation to COVID-19,
implementing a management strategy to protect its people and to
manage cash, including:
-- At risk employees moved to working from home, social distancing
measures in place for remaining staff and increased cleansing
at all sites;
-- Daily management meetings focused on the COVID-19 pandemic;
-- Increased use of existing telephony and video-conferencing
infrastructure mitigating the loss of 'face time' with existing
and potential customers;
-- Furloughing staff as near-term demand reduces, utilising
the governments employment retention scheme;
-- Raw material stock and deliveries, unaffected to date, now
being managed strictly in line with customer demand;
-- Business development expenditure reduced, as travel and
event restrictions prevent face to face meetings. Full engagement
with existing and prospective customers being maintained;
-- Planned US expenditure postponed to conserve cash with only
essential capital expenditure undertaken; and
-- Utilisation of other UK Government support measures, where
they make sense, including VAT payment holiday and PAYE
deferral if required, while the Company evaluates additional
bank funding via Governmental guarantee schemes.
Jon Bridges, Chief Executive of Velocity, commented:
"These are undoubtedly challenging times and the wellbeing of
employees of Velocity and our customers and suppliers are our
primary concern. However, our healthy liquidity position, combined
with the flexibility in our model to adapt to changing customer
demand, and the inherent long-term demand for composite products in
our markets give the Board confidence in the Group's ability to
weather this unparalleled storm.
I am pleased to report that we are still receiving new business
enquires and remain active in responding to new business RFQs of
significant size. New bids that were in development prior to the
global lockdown continue to be progressed and submitted. Our
customers are planning for the recovery and demand signals from the
aerospace primary OEMs, particularly Airbus, remain strong.
We are working very hard to also support our supply chain,
aiding customers and suppliers to plan and rebalance their demand
requirements, and managing inventory requirements, which has always
been part of Velocity's special service offering to the
industry.
On behalf of the Board, I thank our people for their dedication
and resilience, along with our customers and suppliers who are
fully supportive, and also ask our investors for their patience,
until the landscape becomes clearer."
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Enquiries:
Velocity
Jon Bridges, Chief Executive Officer
Andy Beaden, Chairman +44 (0) 1282 577577
Cenkos (Nominated Adviser and Broker) +44 (0)20 7397 8900
Russell Cook +44 (0)20 7397 1977
Ben Jeynes +44 (0)20 7397 1974
Belvedere Communications (Financial VelocityPR@belvederepr.com
PR) +44 (0) 7715 769 078
Cat Valentine +44 (0) 7967 816 525
Keeley Clarke
About Velocity
Velocity Composites is a manufacturer of composite material kits
for the aerospace industry, delivering engineered kits for its
customers to build component parts. The Company's clients include
multi-national manufacturers of composite parts and assemblies, who
in turn deliver to the world's leading civil and military aircraft
manufacturers. The Airbus A320, A330, A350, A380, Eurofighter
Typhoon, F35 Joint Strike Fighter, Boeing 737 and V22 Osprey are
all constructed using parts manufactured from Velocity's kits. The
Company's business model reduces the operating costs of preparing
composite materials ahead of their usage in the construction of an
aircraft part and as such, its offering is disposed to being
self-financing for aircraft parts' manufacturers. Velocity
Composites also exports to Europe and North America.
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END
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