Final Results for the year ended 31 October 2023

About this update from Velocity Composites Plc

[{"type":"text","content":"\n \n The information contained within this announcement is deemed to constitute inside information as stipulated under the UK Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain. \n   \n 23 January 2024 \n   \n VELOCITY COMPOSITES PLC \n (\"Velocity or the \"Company\") \n   \n Final Results for the twelve months to 31 October 2023 \n Revenue increased 37% with operating profit expected in H2 FY24 \n Velocity Composites plc (AIM: VEL), the leading supplier of composite material kits to aerospace and other high-performance manufacturers, is pleased to announce the Company's audited results for the twelve months to 31 October 2023 (\"FY23\"). \n Financial Highlights: \n ·    Total revenue increased 37% to £16.4m (FY22: £12.0m), in line with market expectations. \n ·    Maiden revenue of £2.0m during the period was derived from the Company's new US facility built to support the five-year Work Package Agreement (\"the Agreement\") announced in December 2022 with a global Tier 1 launch customer. \n ·    Agreement term commenced on planned start date of 1 January 2024, with the full-term revenue of US$100m remaining unchanged at the underlying base of US$20m per annum based on current programme production rates. \n ·     Gross margin decreased from 23.0% to 18.8% reflecting the significant startup costs associated with the new US site. \n ·    Full year adjusted EBITDA* loss of £1.6m (FY22: loss of £0.5m) due primarily to lower margins and additional costs associated with onboarding key roles to support the US operation. \n ·    Net cash position (cash less debt) of £1.6m at 31 October 2023 (FY22: £0.2m). The net proceeds of £6.1m from the successful fundraise in August 2023 have been used to fund the investment in the new US facility, including plant and equipment, and for working capital support. \n ·    The Group also repaid debt of £1.0m (FY22: £0.9m), being CBILs Loan and lease liabilities. \n Operational Highlights: \n ·    Successful site opening and production ramp up in Alabama to serve the Agreement. \n ·    Agreement is expected to rollover to a much longer period, with the opportunity to add more contracts from other US manufacturers - currently there is one live bid with a large Tier 1 customer under a Memorandum of Understanding, and a third business development plan with another large Tier 1 customer. \n ·    UK production has scaled to meet increased customer demand. \n ·    In July 2023, the Company appointed Kevin Hickey as Group Chief Operating Officer. Kevin previously worked at Velocity between 2017 and 2020, where he was responsible for the establishment, ramp up and management of the Company's production facility in Fareham, UK. \n   \n   \n Outlook \n ·    Guidance given by the Company on 26 July 2023, stated that the Board expected revenues for FY23 of between £15.0m and £17.0m and an EBITDA loss of between £1.2m and £1.6m.  The Company has today reported FY23 revenues in line with that guidance at £16.4m with an EBITDA loss of £1.6m. \n ·    At the same time the Company announced that revenues for FY24 were expected to be between £30m and £36m, with an EBITDA profit of between £1.7m to £2.5m. With a more detailed understanding of the progress of the transfer of business in the US, the Board remains confident that, based solely on the existing contracted revenues, FY24 EBITDA guidance remains in line with previous guidance, with additional engineering income and lower costs offsetting a revenue shift into FY25. . \n ·    While existing contracts will show significant growth on FY23, the Board now expects revenues for FY24 will be between £27m and £30m. \n ·    This guidance assumes no revenue is recognised in FY24 from the current pipeline of new business opportunities, with the main risk variances relating to FX and OEM regulatory sign off on individual US programmes now being onboarded \n ·    Current contracted business, without any new customer wins, is expected to double in size once all contracts reach full production to at least £33m. \n ·    Expected near-term growth supports the Board's objective of a 25% plus gross margin, 10% EBITDA margin and a 25% return on capital. \n Change of Nominated Adviser and Broker \n Following the completion of the all share merger between Cavendish Securities plc (previously named Cenkos Securities plc) and Cavendish Financial plc (previously named finnCap Group plc), as a consequence of internal reorganisation within the Cavendish Group, the Company has changed its Nominated Adviser and Broker from Cavendish Securities plc to Cavendish Capital Markets Limited. \n   \n Andy Beaden, Chairman, Velocity Composites, said:  \"There is now a clear 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. Greater lightweighting of aircraft is required to achieve aerospace industry sustainability targets.  In FY23 we achieved 37% organic growth, based solely on our current business, revenues are expected to increase another 100%.  This will propel us into a solid level of profitability, and well positioned for significant future growth.\" \n   \n Jon Bridges, CEO. Velocity Composites added: \"2023 was the year when 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. Manufacturers are now approaching us for our solutions, leading to a current transformational pipeline of opportunities of £200m per annum. \n   \n \"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.\" \n   \n   \n   \n   \n   \n   \n   \n   \n Enquiries:  \n \n \n \n \n Velocity \n \n \n Tel: + 44 (0) 1282 577577   \n \n \n \n \n Andy Beaden, Chairman \n Jon Bridges, Chief Executive Officer \n Andrew Hebb, Interim Chief Financial Officer   \n   \n \n \n   \n \n \n \n \n Cavendish Capital Markets Limited \n (Nominated Adviser and Broker) \n \n \n Tel: +44 (0)20 7220 0500 \n \n \n \n \n Katy Birkin \n Ben Jeynes  \n George Lawson     \n   \n \n \n   \n \n \n \n \n SEC Newgate (Financial Communications) \n   \n \n \n Tel: +44 (0)7540 106 366 \n Email: [email protected] \n \n \n \n \n Robin Tozer \n George Esmond \n Harry Handyside   \n   \n \n \n   \n \n \n \n \n   \n   \n   \n   \n About Velocity Composites \n Based in Burnley, UK, Velocity Composites is the leading supplier of composite material kits to aerospace and other high-performance manufacturers, that reduce costs and improve sustainability. Customers include Airbus, Boeing, and GKN. \n   \n By using Velocity's proprietary technology, manufacturers can also 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, urban air mobility and electric vehicles, where the demand for composites is expected to grow. \n \n \n   \n Chairman's Report \n   \n Overview \n 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. \n   \n GKN Aerospace \n 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.  \n   \n 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 it will provide a solid return on investment even prior to securing additional contracts for which the facility has capacity.  \n   \n The complexity of the onboarding and qualification processes required 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. \n   \n Industry Developments \n 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. \n   \n 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.  \n   \n   \n Fundraising and Balance Sheet \n 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. \n   \n   \n 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 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. \n   \n Management Changes \n 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.    \n   \n 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. \n   \n Outlook \n 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 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. \n   \n 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. \n   \n 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. \n   \n   \n Andrew Beaden \n Chairman \n 22 January 2024          \n   \n \n \n CEO Report \n   \n Overview \n 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. \n   \n 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. \n   \n US expansion \n 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. \n   \n 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 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. \n   \n 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. \n   \n 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. \n   \n 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.  \n   \n   \n Future Contracts \n 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 1 customer under a Memorandum of Understanding, and a third business development plan with another large tier one customer. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n Outlook \n 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. \n   \n 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. \n   \n Section 172 Statement \n   \n 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. \n   \n The Directors acknowledge the importance of forming and retaining a constructive relationship with all stakeholder groups. Effective engagement with stakeholders enables the Board to ensure stakeholder interests are considered when making decisions which is crucial for achieving the long-term success of the Group. The main mechanisms for wider stakeholder engagement and feedback can be found on page 19 onwards in the Statement on Corporate Governance. \n   \n   \n   \n   \n Jonathan Bridges \n Chief Executive Officer \n 22 January 2024 \n   \n \n \n   \n \n Financial Review \n   \n Statement of Comprehensive Income \n   \n 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. \n   \n 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. \n   \n 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 [1] loss of £1.6m (FY22: loss of £0.5m). \n   \n \n \n \n \n   \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n Reconciliation from operating loss \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Operating loss \n \n \n (2,817) \n \n \n (1,317) \n \n \n \n \n Add back: \n \n \n \n \n \n \n \n \n \n \n Share-based payments \n \n \n 206 \n \n \n 170 \n \n \n \n \n Depreciation and amortisation \n \n \n 413 \n \n \n 263 \n \n \n \n \n Depreciation on right of use assets under IFRS 16 \n \n \n 472 \n \n \n 432 \n \n \n \n \n Exceptional administrative costs \n \n \n 120 \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Adjusted EBITDA \n \n \n (1,606) \n \n \n (452) \n \n \n \n \n   \n   \n The continued investment in a new US facility, business development, technology and staff during FY23 means the Group is well placed for 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.   \n   \n 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. \n   \n Fundraise and Capital Reduction \n   \n 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. \n 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. \n Cashflow and Capital Investment \n 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. \n   \n 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. \n   \n 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). \n   \n 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.  \n   \n 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: £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).  \n   \n 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. \n   \n 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. \n   \n \n \n \n \n   \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash \n \n \n 3,178 \n \n \n 2,344 \n \n \n \n \n CBILS loan \n \n \n (1,473) \n \n \n (2,009) \n \n \n \n \n Invoice discounting facility \n \n \n (68) \n \n \n (175) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net cash \n \n \n 1,637 \n \n \n 160 \n \n \n \n \n   \n   \n   \n   \n Going Concern \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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 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. \n                                                                                       \n 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. \n   \n Andrew Hebb \n Interim Chief Financial Officer \n 22 January 2024 \n   \n \n \n \n   \n   \n \n \n \n \n Consolidated Statement of Total Comprehensive Income \n \n \n \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n Note \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Revenue \n \n \n 4 \n \n \n 16,411 \n \n \n 11,959 \n \n \n \n \n Cost of sales \n \n \n \n \n \n (13,325) \n \n \n (9,213) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Gross profit \n \n \n \n \n \n 3,086 \n \n \n 2,746 \n \n \n \n \n Administrative expenses \n \n \n \n \n \n (5,783) \n \n \n (4,063) \n \n \n \n \n Exceptional administrative expenses \n \n \n 8 \n \n \n (120) \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Operating loss \n \n \n 5 \n \n \n (2,817) \n \n \n (1,317) \n \n \n \n \n Operating loss analysed as: \n \n \n \n \n \n \n \n \n \n \n \n \n \n Adjusted EBITDA loss \n \n \n 31 \n \n \n (1,606) \n \n \n (452) \n \n \n \n \n Depreciation of property, plant and equipment \n \n \n \n \n \n (297) \n \n \n (210) \n \n \n \n \n Amortisation \n \n \n \n \n \n (116) \n \n \n (53) \n \n \n \n \n Depreciation of right-of-use assets under IFRS 16 \n \n \n \n \n \n (472) \n \n \n (432) \n \n \n \n \n Share-based payments \n \n \n \n \n \n (206) \n \n \n (170) \n \n \n \n \n Exceptional administrative expenses \n \n \n 8 \n \n \n (120) \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Finance income and expense \n \n \n 9 \n \n \n (326) \n \n \n (187) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss before tax from continuing operations \n \n \n \n \n \n (3,143) \n \n \n (1,504) \n \n \n \n \n Corporation tax recoverable \n \n \n 10 \n \n \n - \n \n \n 167 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss for the year and total comprehensive loss \n \n \n \n \n \n (3,143) \n \n \n (1,337) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss per share - basic (£) from continuing operations \n \n \n 11 \n \n \n (£0.08) \n \n \n (£0.04) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss per share - diluted (£) from continuing operations \n \n \n 11 \n \n \n (£0.08) \n \n \n (£0.04) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n There is no other comprehensive income in the current or prior year. \n \n \n   \n   \n \n \n \n \n \n Consolidated and Company Statement of Financial Position \n \n \n \n \n \n Group \n \n \n Group \n \n \n Company \n \n \n Company \n \n \n \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n Note \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Non-current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Intangible assets \n \n \n 12 \n \n \n 890 \n \n \n 173 \n \n \n 232 \n \n \n 173 \n \n \n \n \n Property, plant and equipment \n \n \n 13 \n \n \n 2,095 \n \n \n 1,099 \n \n \n 734 \n \n \n 1,099 \n \n \n \n \n Right-of-use assets \n \n \n 20 \n \n \n 2,129 \n \n \n 2,269 \n \n \n 1,521 \n \n \n 1,812 \n \n \n \n \n Total non-current assets \n \n \n \n \n \n 5,114 \n \n \n 3,541 \n \n \n 2,487 \n \n \n 3,084 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Inventories \n \n \n 15 \n \n \n 2,743 \n \n \n 1,407 \n \n \n 1,493 \n \n \n 1,407 \n \n \n \n \n Trade and other receivables \n \n \n 16 \n \n \n 3,667 \n \n \n 2,521 \n \n \n 5,913 \n \n \n 2,569 \n \n \n \n \n Cash and cash equivalents \n \n \n 17 \n \n \n 3,178 \n \n \n 2,344 \n \n \n 3,131 \n \n \n 2,337 \n \n \n \n \n Total current assets \n \n \n \n \n \n 9,588 \n \n \n 6,272 \n \n \n 10,537 \n \n \n 6,313 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total assets \n \n \n \n \n \n 14,702 \n \n \n 9,813 \n \n \n 13,024 \n \n \n 9,397 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loans \n \n \n 19 \n \n \n 503 \n \n \n 503 \n \n \n 503 \n \n \n 503 \n \n \n \n \n Trade and other payables \n \n \n 18 \n \n \n 4,587 \n \n \n 2,207 \n \n \n 1,921 \n \n \n 2,207 \n \n \n \n \n Obligations under lease liabilities \n \n \n 20 \n \n \n 487 \n \n \n 405 \n \n \n 344 \n \n \n 313 \n \n \n \n \n Total current liabilities \n \n \n \n \n \n 5,577 \n \n \n 3,115 \n \n \n 2,768 \n \n \n 3,023 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Non-current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loans \n \n \n 19 \n \n \n 970 \n \n \n 1,506 \n \n \n 970 \n \n \n 1,506 \n \n \n \n \n Obligations under lease liabilities \n \n \n 20 \n \n \n 1,587 \n \n \n 1,792 \n \n \n 1,196 \n \n \n 1,442 \n \n \n \n \n Total non-current liabilities \n \n \n \n \n \n 2,557 \n \n \n 3,298 \n \n \n 2,166 \n \n \n 2,948 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total liabilities \n \n \n \n \n \n 8,134 \n \n \n 6,413 \n \n \n 4,934 \n \n \n 5,971 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net assets \n \n \n \n \n \n 6,568 \n \n \n 3,400 \n \n \n 8,090 \n \n \n 3,426 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Equity attributable to equity holders of the company \n   \n \n \n \n \n \n \n \n \n \n \n Share capital \n \n \n 23 \n \n \n 133 \n \n \n 91 \n \n \n 133 \n \n \n 91 \n \n \n \n \n Share premium account \n \n \n 24 \n \n \n 4,870 \n \n \n 9,727 \n \n \n 4,870 \n \n \n 9,727 \n \n \n \n \n Share-based payments reserve \n \n \n 25 \n \n \n 478 \n \n \n 684 \n \n \n 478 \n \n \n 684 \n \n \n \n \n Retained earnings \n \n \n \n \n \n 1,087 \n \n \n (7,102) \n \n \n 2,609 \n \n \n (7,076) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total equity \n \n \n \n \n \n 6,568 \n \n \n 3,400 \n \n \n 8,090 \n \n \n 3,426 \n \n \n \n \n   \n 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: \n   \n Jonathan Bridges \n Director \nCo No: 06389233 \n   \n \n \n Consolidated statement of changes in equity      \n   \n \n \n \n \n \n \n \n Share \n \n \n Share \n premium \n \n \n Retained \n \n \n Share- \n          based payments \n \n \n Total \n \n \n \n \n \n \n \n capital \n \n \n account \n \n \n earnings \n \n \n reserve \n \n \n equity \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2021 \n \n \n 91 \n \n \n 9,727 \n \n \n (5,790) \n \n \n 539 \n \n \n 4,567 \n \n \n \n \n Loss for the year \n \n \n - \n \n \n - \n \n \n (1,337) \n \n \n - \n \n \n (1,337) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 91 \n \n \n 9,727 \n \n \n (7,127) \n \n \n 539 \n \n \n 3,230 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Transactions with shareholders: \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Share-based payments (note 25) \n \n \n - \n \n \n - \n \n \n - \n \n \n 170 \n \n \n 170 \n \n \n \n \n Transfer of share option reserve on vesting of options and issue of equity \n \n \n - \n \n \n - \n \n \n 25 \n \n \n (25) \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2022 \n \n \n 91 \n \n \n 9,727 \n \n \n (7,102) \n \n \n 684 \n \n \n 3,400 \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Share \n \n \n Share \n premium \n \n \n Retained \n \n \n Share- \n          based payments \n \n \n Total \n \n \n \n \n \n \n \n capital \n \n \n account \n \n \n earnings \n \n \n reserve \n \n \n equity \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2022 \n \n \n 91 \n \n \n 9,727 \n \n \n (7,102) \n \n \n 684 \n \n \n 3,400 \n \n \n \n \n Loss for the year \n \n \n - \n \n \n - \n \n \n (3,143) \n \n \n - \n \n \n (3,143) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 91 \n \n \n 9,727 \n \n \n (10,245) \n \n \n 684 \n \n \n 257 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Transactions with shareholders: \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Share-based payments (note 25) \n \n \n - \n \n \n - \n \n \n - \n \n \n 206 \n \n \n 206 \n \n \n \n \n Transfer of share option reserve on vesting of options and issue of equity \n \n \n - \n \n \n - \n \n \n 412 \n \n \n (412) \n \n \n - \n \n \n \n \n Issue of new shares net of transaction costs \n \n \n 42 \n \n \n 6,063 \n \n \n - \n \n \n - \n \n \n 6,105 \n \n \n \n \n Reduction of Share Premium Account \n \n \n \n \n  (10,920) \n \n 10,920 \n \n \n \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2023 \n \n \n 133 \n \n \n 4,870 \n \n \n 1,087 \n \n \n 478 \n \n \n 6,568 \n \n \n \n \n   \n \n \n   \n Company statement of changes in equity \n   \n \n \n \n \n \n \n \n Share \n \n \n Share \n premium \n \n \n Retained \n \n \n Share- \n          based payments \n \n \n Total \n \n \n \n \n \n \n \n capital \n \n \n account \n \n \n earnings \n \n \n reserve \n \n \n equity \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2021 \n \n \n 91 \n \n \n 9,727 \n \n \n (5,763) \n \n \n 539 \n \n \n 4,594 \n \n \n \n \n Loss for the year \n \n \n - \n \n \n - \n \n \n (1,338) \n \n \n - \n \n \n (1,338) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 91 \n \n \n 9,727 \n \n \n (7,101) \n \n \n 539 \n \n \n 3,256 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Transactions with shareholders: \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Share-based payments (note 25) \n \n \n - \n \n \n - \n \n \n - \n \n \n 170 \n \n \n 170 \n \n \n \n \n Transfer of share option reserve on vesting of options and issue of equity \n \n \n - \n \n \n - \n \n \n 25 \n \n \n (25) \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2022 \n \n \n 91 \n \n \n 9,727 \n \n \n (7,076) \n \n \n 684 \n \n \n 3,426 \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Share \n \n \n Share \n premium \n \n \n Retained \n \n \n Share- \n          based payments \n \n \n Total \n \n \n \n \n \n \n \n capital \n \n \n account \n \n \n earnings \n \n \n reserve \n \n \n equity \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2022 \n \n \n 91 \n \n \n 9,727 \n \n \n (7,076) \n \n \n 684 \n \n \n 3,426 \n \n \n \n \n Loss for the year \n \n \n - \n \n \n - \n \n \n (1,647) \n \n \n - \n \n \n (1,647) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 91 \n \n \n 9,727 \n \n \n (8,723) \n \n \n 684 \n \n \n 1,779 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Transactions with shareholders: \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Share-based payments (note 25) \n \n \n - \n \n \n - \n \n \n - \n \n \n 206 \n \n \n 206 \n \n \n \n \n Transfer of share option reserve on vesting of options and issue of equity \n \n \n - \n \n \n - \n \n \n 412 \n \n \n (412) \n \n \n - \n \n \n \n \n Issue of new shares net of transaction costs \n \n \n 42 \n \n \n 6,063 \n \n \n - \n \n \n - \n \n \n 6,105 \n \n \n \n \n Reduction of Share Premium Account \n \n \n \n \n \n (10,920) \n \n \n 10,920 \n \n \n \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n As at 31 October 2023 \n \n \n 133 \n \n \n 4,870 \n \n \n 2,609 \n \n \n 478 \n \n \n 8,090 \n \n \n \n \n   \n   \n \n \n \n \n \n \n \n Consolidated and Company Statement of Cash Flows \n   \n   \n \n \n Group \n \n \n Group \n \n \n Company \n \n \n Company \n \n \n \n \n \n \n \n Year \n ended \n \n \n Year \n ended \n \n \n Year \n ended \n \n \n Year \n ended \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Operating activities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss for the year \n \n \n (3,143) \n \n \n (1,337) \n \n \n (1,647) \n \n \n (1,338) \n \n \n \n \n Taxation \n \n \n - \n \n \n (167) \n \n \n - \n \n \n (167) \n \n \n \n \n Profit on sale of assets \n \n \n (4) \n \n \n (38) \n \n \n (4) \n \n \n (38) \n \n \n \n \n Finance costs \n \n \n 326 \n \n \n 187 \n \n \n 299 \n \n \n 187 \n \n \n \n \n Amortisation of intangible assets \n \n \n 116 \n \n \n 53 \n \n \n 53 \n \n \n 53 \n \n \n \n \n Depreciation of property, plant and equipment \n \n \n 297 \n \n \n 210 \n \n \n 210 \n \n \n 210 \n \n \n \n \n Depreciation of right-of-use assets \n \n \n 472 \n \n \n 432 \n \n \n 391 \n \n \n 432 \n \n \n \n \n Share-based payments \n \n \n 206 \n \n \n 170 \n \n \n 206 \n \n \n 170 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Operating cash flows before movements in working capital \n \n \n (1,730) \n \n \n (490) \n \n \n (492) \n \n \n (491) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increase in trade and other receivables \n \n \n (1,146) \n \n \n (359) \n \n \n (3,344) \n \n \n (374) \n \n \n \n \n Increase in inventories \n \n \n (1,336) \n \n \n (530) \n \n \n (86) \n \n \n (530) \n \n \n \n \n Increase/(Decrease) in trade and other payables \n \n \n 2,380 \n \n \n 1,149 \n \n \n (286) \n \n \n 1,149 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash (outflow)/inflow from operations \n \n \n (1,832) \n \n \n (230) \n \n \n (4,208) \n \n \n (246) \n \n \n \n \n Tax received \n \n \n - \n \n \n 510 \n \n \n - \n \n \n 510 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net cash (outflow)/inflow from operating activities \n \n \n (1,832) \n \n \n 280 \n \n \n (4,208) \n \n \n 264 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Investing activities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Purchase of property, plant and equipment net of intercompany transfers \n \n \n (1,293) \n \n \n (262) \n \n \n 155 \n \n \n (262) \n \n \n \n \n Purchase of development expenditure \n \n \n (833) \n \n \n (136) \n \n \n (112) \n \n \n (136) \n \n \n \n \n Proceeds from the sale of property, plant and equipment \n \n \n 4 \n \n \n 42 \n \n \n 4 \n \n \n 42 \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net cash used in investing activities \n \n \n (2,122) \n \n \n (356) \n \n \n 47 \n \n \n (356) \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Financing activities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Proceeds from issue of ordinary shares \n \n \n 6,590 \n \n \n - \n \n \n 6,590 \n \n \n - \n \n \n \n \n Share issue transaction costs \n \n \n (485) \n \n \n - \n \n \n (485) \n \n \n - \n \n \n \n \n Finance costs paid \n \n \n (326) \n \n \n (187) \n \n \n (294) \n \n \n (187) \n \n \n \n \n Loan repayment \n \n \n (536) \n \n \n (503) \n \n \n (536) \n \n \n (503) \n \n \n \n \n Repayment of lease liabilities capital \n \n \n (455) \n \n \n (366) \n \n \n (320) \n \n \n (351) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net cash generate in financing activities \n \n \n 4,788 \n \n \n (1,056) \n \n \n 4,955 \n \n \n (1,041) \n \n \n \n \n Net Increase/(Decrease) in cash and cash equivalents \n \n \n 834 \n \n \n (1,132) \n \n \n 794 \n \n \n (1,133) \n \n \n \n \n Cash and cash equivalents at 01 November \n \n \n 2,344 \n \n \n 3,476 \n \n \n 2,337 \n \n \n 3,470 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash and cash equivalents at 31 October \n \n \n 3,178 \n \n        2,344 \n \n 3,131 \n \n \n 2,337 \n \n \n \n \n   \n   \n Notes to Financial Statements \n 1.         General information \n 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. \n   \n 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'). \n   \n The Group's principal activity is that of the sale of kits of composite material and related products to the aerospace industry. \n   \n 2.         Accounting policies \n   \n Basis of preparation \n 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. \n   \n 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. \n   \n 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. \n   \n Basis of consolidation \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n The accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in the consolidated financial statements. \n   \n 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. \n   \n Going concern \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n Revenue recognition \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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 . \n   \n Inventory \n 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: \n   \n ·    Raw materials, consumables and goods for resale - purchase cost on a first-in/first-out basis. \n ·   Work in progress and finished goods - costs of direct materials and labour plus attributable overheads based on a normal level of activity. \n   \n Net realisable value is based on an estimated selling price less any further costs expected to be incurred for completion and disposal. \n   \n Expenditure \n 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. \n   \n Provisions \n 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. \n   \n Retirement benefits: defined contribution schemes \n Contributions to defined contribution pension schemes are charged to the statement of comprehensive income in the year to which they relate. \n   \n Short-term employee benefits \n 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. \n Research and development expenditure \n Research expenditure - expenditure on research activities is recognised as an expense in the year in which it is incurred. \n   \n 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: \n   \n ·    an asset is created that can be identified and is technically and commercially feasible; \n ·    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 \n ·    the development cost of the asset can be measured reliably. \n   \n 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. \n   \n Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and impairment. \n   \n Amortisation \n 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: \n   \n \n \n \n \n Development costs \n \n \n \n \n \n 5 years \n \n \n \n \n   \n Property, plant and equipment \n Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs. \n   \n 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: \n   \n \n \n \n \n Land and buildings (right-of-use) \n \n \n \n \n \n Over the term of the lease \n \n \n \n \n Plant and machinery \n \n \n \n \n \n 15% straight line \n \n \n \n \n Motor vehicles \n \n \n \n \n \n 25% straight line \n \n \n \n \n Fixtures and fittings \n \n \n \n \n \n 15% straight line \n \n \n \n \n Leasehold improvements \n \n \n \n \n \n Over the term of the lease \n \n \n \n \n   \n Foreign currency translation \n 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. \n   \n Foreign currency translation (continued) \n 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. \n   \n 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: \n   \n ·   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; \n ·   income and expenses for each statement of profit or loss and statement of comprehensive income are translated at average exchange rates; and \n ·  all resulting exchange differences are recognised immediately in the Consolidated comprehensive statement of income. \n   \n Impairment of non-financial assets \n 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. \n   \n 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). \n   \n Impairment charges are included in the income statement, except to the extent they reverse previous gains recognised in the statement of comprehensive income. \n   \n Financial instruments \n 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. \n   \n Bank borrowings \n 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. \n   \n The Group has current borrowings of CBIL loans and can utilise its invoice discounting facility in support of its working capital requirements. \n   \n Financial assets \n 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. \n   \n Trade and other receivables \n 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. \n   \n The Group's loans and receivables comprise trade and other receivables included within the statement of financial position. \n \n \n   \n   \n Financial assets (continued) \n   \n Cash and cash equivalents \n 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. \n   \n Impairment of financial assets \n 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'. \n   \n 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. \n   \n Trade and other payables \n 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. \n   \n Share capital \n 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. \n   \n Share premium \n 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. \n   \n Share-based payment \n 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. \n   \n Leased assets \n   \n Leases \n 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. \n   \n 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. \n   \n Measurement and recognition \n 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. \n   \n 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. \n   \n Leased assets (continued) \n   \n Measurement and recognition (continued) \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n 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. \n   \n See the accounting policy on Property plant and equipment for the depreciation methods and useful lives for assets held under lease. \n   \n   \n Government grants \n 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. \n   \n Current taxation \n 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. \n   \n R&D tax credit \n 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. \n   \n Deferred taxation \n 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: \n   \n ·    the initial recognition of goodwill; \n   \n 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. \n   \n 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. \n   \n Operating segments \n 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. \n   \n No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial information. \n   \n Critical accounting estimates and judgements \n 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. \n   \n Provisions for inventory \n 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. \n   \n 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. \n   \n Sensitivity analysis \n 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. \n   \n 3.         Financial instruments and risk management \n   \n 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. \n   \n \n \n \n \n Financial instruments \n   \n \n \n Group \n \n \n Group \n \n \n Company \n \n \n Company \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Current assets \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Trade and other receivables \n \n \n 3,282 \n \n \n 2,238 \n \n \n 2,532 \n \n \n 2,238 \n \n \n \n \n Trade and other receivables - prepayments \n \n \n 385 \n \n \n 283 \n \n \n 291 \n \n \n 281 \n \n \n \n \n Amounts due from subsidiary undertakings \n \n \n - \n \n \n - \n \n \n 3,090 \n \n \n 50 \n \n \n \n \n   \n \n \n 3,667 \n \n \n 2,521 \n \n \n 5,913 \n \n \n 2,569 \n \n \n \n \n Cash and cash equivalents - loans and receivables \n \n \n 3,178 \n \n \n 2,344 \n \n \n 3,131 \n \n \n 2,337 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Total loans and receivables \n \n \n 6,845 \n \n \n 4,865 \n \n \n 9,044 \n \n \n 4,906 \n \n \n \n \n Current liabilities \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Trade and other payables \n \n \n 4,053 \n \n \n 1,750 \n \n \n 1,587 \n \n \n 1,750 \n \n \n \n \n Trade and other payables - accruals \n \n \n 534 \n \n \n 457 \n \n \n 334 \n \n \n 457 \n \n \n \n \n \n \n \n 4,587 \n \n \n 2,207 \n \n \n 1,921 \n \n \n 2,207 \n \n \n \n \n Loans \n \n \n 503 \n \n \n 503 \n \n \n 503 \n \n \n 503 \n \n \n \n \n Obligations under lease liabilities \n \n \n 487 \n \n \n 405 \n \n \n 344 \n \n \n 313 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total current liabilities \n \n \n 5,577 \n \n \n 3,115 \n \n \n 2,768 \n \n \n 3,023 \n \n \n \n \n             \n For non-current liabilities please see notes 18 and 19. \n   \n Risk management \n 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. \n   \n a)         Market risk \n   \n Foreign exchange risk \n 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. \n   \n 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. \n 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. \n   \n Foreign exchange risk (continued) \n 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.  \n   \n The Group's exposure to foreign currency risk is as follows. This is based on the carrying amount of monetary financial instruments. \n   \n \n \n \n \n As at 31 October 2023 \n \n \n US Dollar \n \n \n Euro \n \n \n Total \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Trade debtors \n \n \n 2,685 \n \n \n 75 \n \n \n 2,760 \n \n \n \n \n Cash and cash equivalents \n \n \n 204 \n \n \n 118 \n \n \n 322 \n \n \n \n \n Trade payables \n \n \n (3,328) \n \n \n (31) \n \n \n (3,359) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Balance sheet exposure \n \n \n (439) \n \n \n 162 \n \n \n (277) \n \n \n \n \n   \n   \n   \n As at 31 October 2022 \n \n \n \n \n \n \n \n US Dollar \n \n \n Euro \n \n \n Total \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Trade debtors \n \n \n 1,729 \n \n \n 163 \n \n \n 1,892 \n \n \n \n \n Cash and cash equivalents \n \n \n 1,352 \n \n \n 249 \n \n \n 1,601 \n \n \n \n \n Trade payables \n \n \n (750) \n \n \n (32) \n \n \n (782) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Balance sheet exposure \n \n \n 2,331 \n \n \n 380 \n \n \n 2,711 \n \n \n \n \n   \n Sensitivity analysis \n 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. \n   \n \n \n \n \n \n \n \n   \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n   \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n US dollar \n \n \n \n \n \n 28 \n \n \n 117 \n \n \n \n \n Euro \n \n \n \n \n \n (8) \n \n \n 19 \n \n \n \n \n   \n 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). \n   \n Interest rate risk \n 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%. \n a)         Credit risk \n   \n 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. \n   \n 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. \n   \n b)         Liquidity risk \n   \n 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. \n   \n As at 31 October 2023 \n \n \n \n \n   \n \n \n Within 1 year \n \n \n One to two years \n \n \n Two to five years \n \n \n Over five years \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loan \n \n \n 503 \n \n \n 503 \n \n \n 467 \n \n \n - \n \n \n \n \n Obligations under lease liabilities \n \n \n 487 \n \n \n 508 \n \n \n 1,079 \n \n \n - \n \n \n \n \n Trade payables \n \n \n 3,786 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Accruals \n \n \n 534 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Other payables \n \n \n 15 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Invoice discounting facility \n \n \n 68 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n   \n As at 31 October 2022 \n \n \n \n \n   \n \n \n Within 1 year \n \n \n One to two years \n \n \n Two to five years \n \n \n Over five years \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loan \n \n \n 503 \n \n \n 503 \n \n \n 1,003 \n \n \n - \n \n \n \n \n Obligations under lease liabilities \n \n \n 405 \n \n \n 419 \n \n \n 1,373 \n \n \n - \n \n \n \n \n Trade payables \n \n \n 1,134 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Accruals \n \n \n 457 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Other payables \n \n \n 174 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Invoice discounting facility \n \n \n 175 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n c)         Capital risk management \n   \n 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. \n   \n 4.         Segmental analysis \n   \n 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: \n   \n \n \n \n \n \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Revenue \n \n \n \n \n \n \n \n \n \n \n United Kingdom \n \n \n 14,350 \n \n \n 11,906 \n \n \n \n \n Europe \n \n \n 41 \n \n \n 10 \n \n \n \n \n US \n \n \n 1,967 \n \n \n - \n \n \n \n \n Rest of the World \n \n \n 53 \n \n \n 43 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 16,411 \n \n \n 11,959 \n \n \n \n \n   \n 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%). \n   \n 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. \n   \n 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. \n   \n 5.         Operating loss \n   \n The operating loss is stated after charging / (crediting): \n \n \n \n \n \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Staff costs (see note 6) \n \n \n 3,700 \n \n \n 3,090 \n \n \n \n \n Cost of inventories \n \n \n 11,687 \n \n \n 8,079 \n \n \n \n \n Foreign exchange (gain)/loss \n \n \n 57 \n \n \n (259) \n \n \n \n \n Amortisation of development costs \n \n \n 116 \n \n \n 53 \n \n \n \n \n Depreciation: \n \n \n \n \n \n \n \n \n \n \n Owned assets \n \n \n 297 \n \n \n 210 \n \n \n \n \n Property, plant and equipment under right-of-use assets \n \n \n 472 \n \n \n 432 \n \n \n \n \n Profit on disposal of assets \n \n \n (5) \n \n \n (38) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Auditor's remuneration: \n \n \n \n \n \n \n \n \n \n \n Audit of the accounts of the Group \n \n \n 75 \n \n \n 59 \n \n \n \n \n Other audit related services (relating to interim review) \n \n \n 12 \n \n \n 14 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n                                                                                                                       \n   \n   \n \n \n 6.         Staff costs \n \n \n \n \n   \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Wages, salaries and bonuses \n \n \n 3,049 \n \n \n 2,575 \n \n \n \n \n Social security costs \n \n \n 348 \n \n \n 261 \n \n \n \n \n Defined contribution pension costs \n \n \n 97 \n \n \n 84 \n \n \n \n \n Share-based payments \n \n \n 206 \n \n \n 170 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 3,700 \n \n \n 3,090 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n The average monthly number of employees including directors, during the year was as follows: \n   \n \n \n \n \n   \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n   \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n \n \n \n Head count \n \n \n Head count \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Manufacturing \n \n \n 55 \n \n \n 40 \n \n \n \n \n Administration \n \n \n 47 \n \n \n 39 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 102 \n \n \n 79 \n \n \n \n \n   \n 7.         Directors' costs \n \n \n \n \n   \n \n \n Year ended \n \n \n Year ended \n \n \n \n \n   \n \n \n 31 October \n \n \n 31 October \n \n \n \n \n   \n \n \n 2023 \n \n \n 2022 \n \n \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Directors' remuneration included in staff costs: \n \n \n \n \n \n \n \n \n...

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