Velocity Composites : H1 2025 Interim Presentation

About this update from Velocity Composites Plc

INVESTOR PRESENTATION Interim Results For the Half Year Ended 30 April 2025 Presentation Team Andy Beaden Non-Executive Chairman Andy has over 30 years' experience in finance, technology and manufacturing. A Chartered Accountant and economist by training, originally with KPMG and also having worked for two FTSE 100 companies, he is also a Fellow of the RSA (Royal Society for the encouragement of the Arts, Manufactures and Commerce). He was the CFO of the multi-sector material science business Luxfer, leading a secondary buyout in 2007 and then listing it on the NYSE in 2012. He also co-founded and is Chairman of IN4.0 Group, a digital technology consultancy and training business and largest provider of AWS training bootcamps in the UK. Jon Bridges CEO Jon co-founded Velocity Composites in 2007. Jonathan has over 32 years' experience within the advanced composites industry and is an experienced composite engineer. Previously, Jon was an Aerospace and Lean Solutions Specialist at Cytec Process Materials where he was responsible for direct sales support of UK and European based clients. From 2003 to 2005 Jon was a Manufacturing Engineer for Safran Nacelles where he was responsible for the manufacturing function for a growing, highly loaded aerospace unit supplying multiple assembly lines. Jon has a BSc in Materials Science from Coventry University and is a Director of the North West Aerospace Alliance. Rob Smith © Velocity Composites plc - 2025 | https://www.velocity-composites.com CFO Rob is a chartered management accountant with significant experience in leadership roles in a number of AIM quoted technology companies, where he has been instrumental in leading growth strategies and improving operational efficiencies. Rob has a proven track record in advanced manufacturing at both CFO and CEO level, including manufacturing systems implementation and international commercial leadership. Most recently Rob served as Group CFO at Biome Technologies plc and prior to that, in the CFO and CEO roles at Filtronic plc between 2014 and 2020, an electronics designer and manufacturer of advanced filters, antennas and transceivers. 3 FY25 Financial Highlights Revenue Gross Margin % Adjusted EBITDA* £10.4m 29.0% £0.3m FY24 H1: £10.7m FY24 H1: 22.5% FY24 H1: £(0.2)m Cash at Bank Operating Loss £1.2m £(0.4)m FY24 H1: £1.8m FY24 H1: £(0.9)m © Velocity Composites plc - 2025 | https://www.velocity-composites.com * Earnings before interest, tax, depreciation, amortisation and adjusted for share-based payments. 4 Aerospace Industry | H1 2025 Review - 2025/6 Expectations H1 2025 Outlook for 2025/26 Civil aircraft production rates still below pre-pandemic levels The separation by customer plants, and sale of Spirit Aerosystems to Boeing and Airbus is expected to complete in H2 2025 This disruptive process added additional pressures to the civil supply chain for Boeing, Airbus and their suppliers. Completion will bring clarity to future opportunities Wider (non-composite) supply chain issues in civil aerospace still impacting the ability of OEM's to ramp up key programmes, with Velocity's customers not seeing any significant ramp-up in CY 2025 Limited direct impact from tariffs as all Company sales are made in the country of manufacture The Company is working on securing additional contracts and has focussed efforts on the defence sector The expected ramp ups on key civil programmes should materialise in FY2026 if OEMs are to achieve the forecasted delivery rates of new aircraft © Velocity Composites plc - 2025 | https://www.velocity-composites.com Civil ramp ups, along with increased defence spending, should increase customer need to outsource and reduce costs Live bids with existing and new customers in the US and Europe Greater engagement with potential customers in the defence sector to identify and submit proposals into key programmes and opportunities Smaller programme wins with existing civil customers offsetting natural decline in legacy programmes 5 Business Progress US OPERATIONS Good, planned, progress at Alabama facility. Focus on qualification of aero-engine parts delayed from 2024. Expecting sustained production H2 FY25 New permanent freezer installed increasing capacity and improving efficiency Quality and delivery improvements made in FY24 sustained; Benefiting from a stable, balanced workforce enabling further operational efficiencies New business development continuing and expected to be supported by: Improved global supply chain stability Increase in global defence spending Engaged with new potential customers in both civil and defence sectors EUROPEAN OPERATIONS © Velocity Composites plc - 2025 | https://www.velocity-composites.com Benefiting from pricing agreements implemented in H2 FY24, contributing to margin recovery in H1 FY25 Implementation of Odoo-based VRP update completing in 2025 Ramp up of A350 programme (particularly -1000 variant) delayed in 2025 due to supply chain issues. No growth expected from this programme in 2025 New business activities focused on existing customers in both UK and mainland Europe 6 Summary Income Statement * Earnings before interest, tax, depreciation, amortisation and adjusted for share-based payments. Revenue decrease of 2.8% due to inventory reduction at A350 customer and reduced rate and delay in qualification of certain US programmes © Velocity Composites plc - 2025 | https://www.velocity-composites.com H1 2025 £000 H1 2024 £000 FY 2024 £000 Revenue 10,442 10,745 23,006 Cost of sales (7,409) (8,331) (17,045) Gross profit 3,033 2,414 5,961 Administrative costs (3,430) (3,325) (6,978) Other operating income - 50 86 Operating loss (397) (861) (931) Finance expense (177) (219) (413) Loss before tax (574) (1,080) (1,344) Improved Gross Margin percentage to 29.0% (H1 2024: 22.5%) due to effect of catch-up inflation increases and continuous improvement activities in operational efficiency Administrative costs have increased by £0.1m reflecting a more benign inflation environment and targeted cost reductions The above has driven an adjusted EBITDA profit of Adjusted EBITDA* 258 (157) 374 £0.3m (H1 2024: loss £0.2m) and represents the first H1 post Covid profit and the second sequential half of profits 7 72,08548 Summary Statement of Financial Position © Velocity Composites plc - 2025 | https://www.velocity-composites.com H1 2025 £000 H1 2024 £000 FY 2024 £000 Non-current assets 5,091 4,721 4,667 Inventories 2,374 2,096 2,500 Trade and other receivables 2,719 3,463 3,977 Tax receivable - 450 - Cash and cash equivalents 1,165 1,786 1,663 Increase at H1 2025 versus H1 2024 in non-current assets of £0.4m driven by investment in leased freezer; classed as a Right of Use asset replacing temporary freezers on short term rental agreements Current assets 6,258 7,795 8,140 Inventory management remains a key focus and the £0.1m decrease in the half reflects a focus on improving inventory turns Loans 503 503 503 Trade and other payables 2,848 3,468 3,933 Obligations under finance leases 705 489 561 Current liabilities 4,056 4,460 4,997 Non current liabilities 1,956 2,044 1,944 Net assets 5,337 6,012 5,866 Trade debtors are tightly controlled resulting in an improvement to debtor days H1 2025: 34.7 days (H1 2024: 46 days) Payables decrease £0.6m due to reduced material supplier payables in line with demand Non-current liabilities comprise CBILs £0.2m (H1 2024: £0.7m), dilapidations provisions £0.3m (H1 2024: £nil) and obligations under finance leases £1.5m (H1 2024: £1.3m) 8 Summary Statement of Cash Flows © Velocity Composites plc - 2025 | https://www.velocity-composites.com H1 2025 £000 H1 2024 £000 FY 2024 £000 Operating cash flows 275 (207) 345 Movements in working capital 208 (268) (373) Cash generated from operating activities in half of £0.6m (H1 2024: £0.5m consumed) Cashflow from operations 483 (475) (28) Tax received 130 - 398 Net decrease in cash £0.6m (H1 2024: £1.4m decrease) Repayment of CBILs in period of £0.2m (H1 2024: £0.2m) Cashflow from operating activities 613 (475) 370 Cash used in investing activities (461) (189) (584) Cash used in financing activities (736) (728) (1,412) H1 2025 £000 H1 2024 £000 FY 2024 £000 (Decrease)/increase in cash (584) (1,392) (1,626) Cash at 1 November 1,663 3,178 3,178 Effect of FX rate changes 86 - 111 Cash 1,165 1,786 1,663 CBIL loan (734) (1,222) (971) IDF - - - Overall, a net cash position at £0.4m with headroom in the IDF facility: Closing cash 1,165 1,786 1,663 Net cash 431 564 692 9 H2 FY25 Outlook A350 programme production rates expected to be flat in the year. Increased rates now expected in FY26 Final contracted programme from previously announced agreement expected to reach sustained production at US site through H2 FY25. Customer has faced unexpected resource constraints Business development activities focused on defence sector The board sees good civil sector opportunities in the US, UK and EU where production rates start to increase Management looking to enhance its on-boarding process to (1) bring benefits to Velocity and © Velocity Composites plc - 2025 | https://www.velocity-composites.com our customers sooner (2) mitigate delays in qualification processes Anticipated near-term growth supports the Board's key targets: 25% plus gross margin 10% adjusted EBITDA* margin 25% return on capital The Board expects FY25 to be comparable with FY24 but with higher margins. Revenue growth from new and existing programmes is now projected for FY26 10 Summary Sustained revenue expected for FY25 but at improved gross margin Remaining aero-engine component approvals in US now expected in H2 FY25 A350 programme set to significantly increase in FY26 as OEM strives to fulfil backlog Executive team strengthened with the addition of an experienced COO in H1 New business opportunities being developed in the UK, US and Europe with existing and new customers, including in the defence sector © Velocity Composites plc - 2025 | https://www.velocity-composites.com Sustained profitability and cash generation expected in H2 FY25 based on current contracted business 11 Appendices 12 © Velocity Composites plc - 2025 | https://www.velocity-composites.com Major Shareholders (as at 30 April 2025) © Velocity Composites plc - 2025 | https://www.velocity-composites.com 13 NAME Number of Ordinary Shares % of issued Ordinary Shares Amati Global Investors Jonathan Bridges Seneca Partners Stonehage Fleming Christopher Banks Gerard Johnson Rathbones 5,650,294 5,365,929 4,519,236 4,458,956 4,202,693 4,000,000 2,832,257 10.45% 9.93% 8.36% 8.25% 7.77% 7.40% 5.24% Experienced Board and Senior Management Andy Beaden Non-Executive Chairman Jon Bridges Chief Executive Officer Rob Smith Chief Finance Director Annette Rothwell Non-Executive Director David Bailey Non-Executive Director Andy has over 30 years experience in finance, technology and manufacturing. He is a Chartered Accountant, and worked at Executive Board level for 20 years in a series of advanced material technology businesses, both listed and privately owned. Jon has 32 years' experience within the advanced composites industry and is an experienced composite engineer. Jon is a founder of Velocity and known for his extensive knowledge around composite process technologies. Rob has significant experience in leadership roles in a number of AIM quoted technology companies, where he has been instrumental in leading growth strategies and improving operational efficiencies. He has a proven track record in advanced manufacturing at both CFO and CEO level. Annette has extensive experience in industries undergoing transformational change. Since 2011, she has served as a director on the board of the Midlands Aerospace Alliance, the regional body for the Aerospace, Defence and Security industry. She has held a number of senior aerospace roles with global responsibility for supply chain management and procurement. David has contributed to the strategic direction © Velocity Composites plc - 2025 | https://www.velocity-composites.com of the UK's aerospace industry and cross-sector composites sector as a Board member of the Aerospace Growth Partnership and Composites Leadership Forum. He has a PHD in aeronautics and an in-depth practical knowledge around operational excellence and sustainability within multiple manufacturing sectors. 14 Our Approvals © Velocity Composites plc - 2025 | https://www.velocity-composites.com AIRBUS: ABP-62185, ABP-61289, AIPS03-02-018, AIPS03-02-019, AIPS03-07-007 BOEING: BCA-65224-0312 + SBP-65224-0411 NADCAP - AC7118 (KSP) Merit status (all UK facilities) 15 Investment Case VELOCITY COMPOSITES PLC is an established business which delivers real benefits to large aerospace manufacturers by using proprietary digital technology to manage and remove waste from the complex raw material supply chain FIRST TO MARKET We are the only company to provide a complete outsourced solution to composite aerostructure manufacturers HUGE MARKET GROWTH Aerospace industry currently spends $6.5bn per annum on composite materials. Projected tenfold increase of composites within aircraft by 2041 to meet net zero OUR SOLUTIONS ARE NECESSARY TO THE AEROSPACE INDUSTRY. If the aerospace industry is to meet its projections it needs our solutions to reduce costs and accelerate production rates SUSTAINED PROFITABILITY AND POSITIVE CASH GENERATION EXPECTED IN H2 FY25 with © Velocity Composites plc - 2025 | https://www.velocity-composites.com enough contracted business that at full production rates means in FY25 management expect to achieve improved adjusted EBITDA profitability DEFENCE INDUSTRY We are focusing our business development efforts on winning more defence sector business to balance out our civil programmes REVENUE INCREASES set resume in FY26 as programme production rates increase when supply chain issues are overcome and US qualification process completes. FY25 expected to see revenues the same levels as FY24. Broker consensus forecasts FY25 £23m (FY24 actual £23m) and FY26 £27m 5 YEAR REVENUE TARGET OF £100M WITH 10% EBITDA Highly qualified pipeline of $250.0m. Exisiting facilities could support up to £70.0m annually 16 Composite Materials A combination of a matrix and a reinforcement, which when combined gives properties superior to the properties of the individual components In the case of an aerospace composite, the reinforcement is the fibres and the matrix is the thermosetting resin Better weight saving, strength, corrosion resistance and fatigue resistance when compared with metals Less weight equals less cost for airlines and increased range Material has a shelf life until cured COMPOSITE USE IN AIRCRAFT COMPOSITES 50% 17 © Velocity Composites plc - 2025 | https://www.velocity-composites.com Sustainability driving growth | New generation aircraft 10x 25% © Velocity Composites plc - 2025 | https://www.velocity-composites.com "Today, around 30% of the world's in service aircraft fleet are of the latest generation. Replacing the remaining 70% of previous generation aircraft, combined with more efficient ways to operate aircraft, SAF, future technologies such as hydrogen and hybridisation are key to Airbus' decarbonisation journey..." (AIRBUS Global Market Forecast 2024) 95% By 2041, new generation passenger aircraft will represent >95% of the fleet 10x growth in new generation aircraft The new generation of aircraft will be lighter, stronger, and have a 25% lower carbon footprint 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Number of passenger aircraft in service* 13% 30% >95% By 2041, new generation passenger aircraft will represent >95% of the fleet 10 x growth in new generation aircraft 777X 737 MAX 787 A220 A320 NEO A350 NEO A350 Velocity currently provides composites for the following New Generation Aircraft and has the potential to service all new programmes DEFENCE PROGRAMMES 2000 2005 2010 2015 2019 2023 2026 2031 2036 2041 1st 2nd & Previous generation New Generation (High composite content) * Western built passenger aircraft above 100 seats - pax aircraft only 1st generation: A300, DC 9, DC10, 707, 727, 737, 747. 2nd generation: A310, MD11, MD80, MD90,737, 747, 757, 767, F100. Previous generation: A320 Fam., A330, A340, 717,737NG, 747, 777 18 New generation: A220, A320neo Fam., A330neo, A350, A380, 737Max, 777X, 787 & new programs Source: Airbus, Global Market Forecast '22 ( https://www.airbus.com/sites/g/files/jlcbta136/files/2022-07/GMF-Presentation-2022-2041.pdf ) 2023 figure: Airbus, Global Market Forecast '24 (pg 26) ( https://www.airbus.com/sites/g/files/jlcbta136/files/2024-07/GMF %202024-2043%20Presentation_4DTS.pdf) The Velocity Solution Raw Material Structural Product Customer © Velocity Composites plc - 2025 | https://www.velocity-composites.com Vacuum Bag Product Finished Part (1m diameter) Aimed at providing at least 10% material cost saving and 20% time cost saving to customers 19 © Velocity Composites plc - 2025 | https://www.velocity-composites.com MATERIAL SUPPLIER EXPECTED STOCK ACTUAL STOCK CUSTOMER ERP DEMAND PLANNING D VC DEMAND (KIT/Part level) IBP MONTHLY DEMAND REVIEW MATERIAL D ORDER BOOK 12 to 34 Weeks RAW MATERIAL D FREEZER MANAGEMENT RAW MATERIAL STOCK (WITH RFID) 2 to 12 Weeks P.O. COVER PLANNED Vs ACTUAL PRODUCTION MEC STOCK NEEDED UNUSED RAW MATERIAL STOCK DEFROST LEC PRODUCTION D DEFROST FREEZER SCHEDULING PRODUCTION PLAN & NESTS DIGITAL CELL D (KIT MANUFACTURE) D DASHBOARD C of C / DELIVERY NOTE KIT LOGISTICS CUSTOMER MASTER KITS CLEAN ROOM Velocity Technology 20 Where Velocity sits in the global composites industry VELOCITY TOTAL KIT PROVISION © Velocity Composites plc - 2025 | https://www.velocity-composites.com Inventory Finance Inventory Management Global Material Suppliers / Distributors Demand Aggregation Goods In Quality Inspection Kit Manufacturing Warehousing Goods Out / Transportation Global Primes / Tier 1 Manufacturers Subcon Integration On Site Support Flow Down Material Pricing Velocity has first mover advantage and is the only company to provide an end-to-end solution for manufacturers. 21 © Velocity Composites Plc - JAN 2021 © Velocity Composites plc - 2025 | https://www.velocity-composites.com Revolutionising Composite Cleanrooms 22 © Velocity Composites plc - 2025 | https://www.velocity-composites.com Contact us: https://www.velocity-composites.com +44 (0)1282 577577 23 Attention : This is an excerpt of the original content. 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