LONDON (Alliance News) - Velocity Composites PLC said Monday it expected interim revenue to grow by a fifth whilst cautioning that revenue and profit may lag expectations for the full year due to delays to a contract from a major customer.
For the six months ended April, Velocity expects revenue to be over GBP11.0 million. For the six months ended April 2017, Velocity generated GBP9.3 million in revenue with a pretax loss of GBP35,000.
A further GBP13.0 million of revenue has been contracted for the remainder of the financial year and another GBP4.0 million of revenue agreed in principle. Revenue for financial 2018 through to financial 2020 has increased to GBP54.0 million.
"The current visibility reflects that whilst there has been strong growth in the global aerospace market," Velocity said in a statement, "some programmes that the company has been working on have seen short term reductions in demand signals and these fluctuations have affected some rates of growth with existing customers."
Delays in a contract from one of its largest customers, however, is set to have an impact on full year profitability and revenue being below market forecasts. The effect on future years results is expected to be reduced, however, as contracts achieve full production later than expected.
The customer had agreed in principle to GBP3.0 million worth of work with full year expectations of GBP5.0 million revenue from the customer anticipated. Although "confident" the contracts will be entered into eventually, the delays will impact revenue for the full year.
"The first half of the current financial year has seen continued trading momentum," Velocity Chief Executive Officer Jon Bridges said. "Whilst it is frustrating that certain contracts have taken longer to close than envisaged by both Velocity and our customer, with the resultant reduced impact on expected revenues for this year, we continue to demonstrate that our customers can make significant savings and that we help to improve build rates. We remain wholly confident that this remains a timing issue rather than anything more fundamental."
"Our customers appreciate our efforts to help them to reduce costs and the company has made substantial progress and is now producing kits with a value of over GBP2 million per month," Bridges added, "up from just over GBP1 million per month 18 months ago, with both visibility and confidence that this value will increase substantially alongside continued improvements in our gross margins."
Shares in Velocity were 25% lower at 50.00 pence on Monday.
Velocity Comp (VEL)