Velocity Composites plc, the leading supplier of advanced composite material kits which provides engineering value-solutions for the global aerospace industry updates the market with its trading position ahead of its year end at 31 October 2018.
The Company continues to make progress towards its year end targets. However, a number of factors, which are set out below, mean that revenue in the year is now likely to be lower than current market expectations with a consequent impact on profitability at the EBITDA level. The adverse factors include longer lead times in customers finalising the contractual position, delays in the placing of production orders where contractual terms have been agreed, delays following requests for configuration changes by contracted customers, and in one case the loss of a programme by a customer.
Consequently, full year revenues for the current financial year are now expected to be approximately £24 million representing year on year growth of 16 per cent.
Much of the reduction in expected revenue levels is related to timing (in relation to both the finalisation of new contract wins and the time it has taken to onboard some of the new programmes into production) and as such the Company has continued to incur costs both in the preparation for the onboarding of new programmes and in relation to securing additional mandates.
Gross margins in the second half of FY18 have now recovered to over 19% on a monthly basis from the previously announced lower than expected levels in the first half year. Given the continued investment in sales and business development, including on-going work in relation to opening a new European facility, partly offset by the recovery in gross margins, the Company now expects to report a low single digit EBITDA margin (%) loss for the year ended 31 October 2018.
The Company currently has a net cash position of approximately £4.0 million and has access to a pre-agreed debt facility of approximately £5.0 million when needed, of which a maximum of £1.0 million has been utilised at any one point in time over recent months.
For both FY19 and FY20, the Company has visibility of revenues of £23 million per annum from contractual relationships already in place, subject to customer demand fluctuations. The Company’s pipeline of live opportunities continues to grow, and the Board remains confident that it will secure the future revenue growth from both new customers and new business wins from existing customers that it has set out to achieve.