(Alliance News) - Velocity Composites PLC on Monday said revenue shrank by almost 30% in its recently completed financial year, and the company predicted a three-to-four-year wait before the civil aircraft market recovers its past pace of growth.
The Lancashire, England-based supplier of composite materials for aerospace manufacturers said revenue for the year ending October 31 was down 28% to GBP9.8 million from GBP13.6 million in financial 2020. Velocity said this was due to the Covid-19 pandemic suppressing civil aircraft original equipment manufacturer volume production.
Velocity's shares were down 7.2% to 22.27 pence each in London midday on Monday.
Pretax loss narrowed to GBP1.5 million from GBP3.2 million in the previous year. Owing to proactive management of previously written down stock, Velocity said, gross margins improved by almost nine percentage points to 26% from 17.1% in financial 2020. Velocity also narrowed its operating loss to GBP1.4 million from GBP3.1 million the previous year.
Adjusted earnings before interest, tax, depreciation and amortisation for the year were in line with expectations, at a loss of GBP500,000, narrowed from a loss of GBP1.9 million in financial 2020. Velocity said the "difficult decision to reduce [its] workforce" enabled an adjusted Ebitda at break-even in the second half of the year.
The company reported that all major customers renewed or extended long-term contracts in the year.
"We believe it will take time for civil aircraft build rates to recover fully, potentially three to four years before we return to, or exceed, the long-term growth trends," said Chair Andy Beaden.
"However, new aircraft as they are built (including those designed to be electrically powered) will be more composite intensive. Velocity's growth will come from new business and the recovery in our current contracted business volumes. That recovery will start in 2022, and we expect it to accelerate into 2023.
"The shift to electric power means the need to make lighter vehicles and to maximise range is expected to increase the demand for composites in other sectors. We are already in discussions with a variety of new potential customers outside of aerospace, creating long-term opportunities for the company."
By Elizabeth Winter; elizabethwinter@alliancenews.com
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Velocity Comp (VEL)