Supplier of advanced composite material kits to the aerospace market, Velocity Composites (AIM:VEL), saw their losses widen year-on-year as Coronavirus hits the airline sector.
The company saw its revenues fall from £12.2 million to £9.5 million on-year for the first half. This led a switch from an adjusted EBITDA of £0.2 million for the six months ended April 30 2019, to an EBITDA loss of £0.3 million during the same period in 2020.
Similarly, the company’s operating loss widened from £0.4 million to £0.7 million, while its gross margin dropped from 20.9% to 20.5% year-on-year during H1.
The situation was equally bleak for the company’s shareholders, with first half losses per share widening from 1.2p to 1.7p per share.
Operationally, the company noted that air travel restrictions and poor airline confidence created negative impacts for aircraft production, and in turn, a circa 75% reduction in near-term customer demand.
Further, Velocity Composites said that it had taken advantage of the Government’s JRS to fund the furloughing of 60% of its staff. It also stated that in April, it commenced production of PPE for NHS staff.
On a brighter note, the company announced that it had secured a supply agreement with Boeing in January (LON:BOE), which it looks to capitalise on once 737 Max production resumes. Additionally, the company received NADCAP Merit approval for ‘all special processes at all Velocity production facilities’, and once normal trading resumes, they have a pipeline of over £30 million worth of tangible opportunities being developed.
Velocity Composites response
Commenting on the results, company Non-Executive Chairman Andy Beaden, said:
“The effects of the COVID-19 pandemic and resulting lockdowns on the aerospace industry have been dramatic and unprecedented. Whilst we are not where we expected to be right now, our vision and strategy for Velocity’s growth are unchanged. The increased challenges facing our industry provide an even more meaningful commercial rationale for Velocity’s technology and services, as the industry drives for even greater efficiencies in their production programmes.”
“The Company’s financial liquidity remains robust and the Board believes it has adequate cash and banking facilities to work through this disruption. With this in mind, the Board is confident that Velocity is well placed to benefit as production levels pick up and that the prospects for the Company in the mid- to long-term remain positive.”
Investor insights
Despite a seemingly mixed update, Velocity Composites shares bounced 7.14% or 1.00p, to 15.00p per share 23/06/20 10:22 BST. The company isn’t currently paying a dividend, its p/e ratio is -7.00.