Share Name Share Symbol Market Type Share ISIN Share Description
Velocity Composites Plc LSE:VEL London Ordinary Share GB00BF339H01 ORD 0.25P
  Price Change % Change Share Price Shares Traded Last Trade
  0.00 0.0% 16.50 4,600 08:00:00
Bid Price Offer Price High Price Low Price Open Price
15.00 18.00 16.50 16.50 16.50
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Aerospace & Defence 24.32 -0.65 -2.00 6
Last Trade Time Trade Type Trade Size Trade Price Currency
14:07:10 O 4,600 15.10 GBX

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Velocity Composites Daily Update: Velocity Composites Plc is listed in the Aerospace & Defence sector of the London Stock Exchange with ticker VEL. The last closing price for Velocity Composites was 16.50p.
Velocity Composites Plc has a 4 week average price of 16.50p and a 12 week average price of 15.50p.
The 1 year high share price is 44.50p while the 1 year low share price is currently 13p.
There are currently 35,986,179 shares in issue and the average daily traded volume is 13,373 shares. The market capitalisation of Velocity Composites Plc is £5,937,719.54.
sidam: Carlo S Hi, the number was taken from the previous research published last November. It was towards the end of the 40 + page note. I would speculate that on the extra £12.5m of revenue, Cenkos are expected higher gross margins. Otherwise £2.4m of EBITDA would seem high on that extra revenue. I would also speculate that the possible extra revenues are likely to arise in the US. It is this possibility followed by further substantial growth which could make the current share price ludicrously cheap. Current forecast appear to be UK and EU centric and without extra growth the shares would be rather boring and possibly too high at least in the short term. So fingers crossed for some big wins.
mtioc: Another mixed bag in recent interims. My initial thoughts. 1. Sales: encouraging growth on H117 and positive outlook. £28m guidance (24%yoy). 2. GM: very disappointing with no real explanation (see below). Suspect it inefficiency at Fareham with ramp up. It would be much easier if we could see site by site performance. VEL effectively sells labour and machine capacity. Some hint that customers have "booked" it and not delivered (and therefore not paid). 3. O/H: also really disappointing increase again with no real explanation. To increase overheads when underperforming is brave at best. 4. Cash: encouraging. This is another "jam tomorrow" announcement. My (and the market's) patience is wearing thin. Share price will depend on new wins and H2 performance. I was disappointed in the quality of the interim report (and VEL's reporting in general). Both the chair and CEO reports are vague and basic. I realise there may be commercial reasons for a lack of candour, but if I compare VEL to a XP Power, a long term holding, the contrast is stark. XP Power's reporting allows the private shareholder to understand the business and its drivers (e.g. KPI reporting etc..), without providing detailed commercial information. VEL does not. For example, the chair says the business is looking to increase sales and manage costs, which would not win prizes for insight. The CEO's report is not much better. It appears the house broker gets more detailed information, which at least allows a better analysis of a confusing picture, but this is not generally available to private investors. I don't think the private/institutional shareholder information asymmetry reflects well on the Board (or should be allowed). When the non publics and top 3 institutional account for 68% of the shares, perhaps the Board does not care as much as when the shareholder base is more diversified. I will wait and see, but am more negative - it appears that the rate of progress is slower than forecast and the governance picture is not encouraging. MTIOC
sidam: Here is the note. It is a bit long. I hope it is of general interest. 27 February 2018 Velocity Composites (VEL.L) Price: 70p Market Cap: £25m Velocity (VEL) was one of my favourite stocks for 2018. At the end of last year, the shares rose sharply, but the fell after the results as estimates were cut and again after the AGM statement. The reasons for the early reduction were partly for positive (possibly very positive) long term reasons and partly negative, but there was no further reduction in estimates after the AGM. The purpose of this comment is to look at the current projections, compare the difference with those previously published and to try to ascertain whether the shares can be considered a buy. If you read to the end, you will see that I am still very bullish. Velocity manufactures advanced carbon fibre kits, which are used by Tier I suppliers to produce components for the major aircraft manufacturers. Management state that they are unique and are the only company worldwide to offer this service. Their USP is the reduction in waste by using their proprietary software to cut the carbon fibre rolls. There can also be a reduction in the rejection rate of finished components. The AIM admission document describes further significant benefits. It is worth reading for background and can be found on the company’s website. The company joined the AIM market last year to raise capital. The company’s facilities are replicable and the new capital would enable new sites to be commissioned in Europe. A secondary consideration was the status accorded to publicly traded PLC. This has proved to be the case and is discussed in more detail below. The results for last year are roughly as expected in that adjusted profits were in line. However, revenues were higher than expected, but gross margins were well down. There also unexpected and large marketing expense outside Europe. That will continue and is one of the reasons that profits and EPS for the current and next year will be lower than original projections. That is potentially, and likely, to be very good news. It was publicity from the flotation that led a number of non-European groups to approach VEL and ask for quotations. Management indicated that the most likely area to build a plant would be Asia where there were some nine hubs each of which was as large as the UK market. A site in this area is possible this year but more likely next. The first non-UK site will almost certainly be opened in the EU. The AGM statement reiterated this factor. I quote “Since IPO, the Company has won significant new business and momentum remains firmly with the Company as they are approached by more and more potential customers looking for significant savings versus their existing processes. Velocity has started to benefit from economies of scale and this will drive further cost savings, both for the Company and its customers. The Board remains excited about the prospects for the Company and this has been reinforced by recent additional industry accreditations that provide the Company with access to new platforms and programmes. In addition to the above, we continue to expand the customer base, including for programmes to be delivered to customers in Europe and beyond. The scale of composite production in these locations dwarfs the UK market.” In the latter context, virtually all historic revenues have been generated in the UK. The original projections were for EPS of 8.5p and 13.5p for the years ending October 2018 and 2019 respectfully. With a share price of then around 95p, there appeared very large upside as in January 2019, the current year PER would have been 7. That would have been ridiculous given the growth rate and the likelihood in the medium term of a growth rate of 20% made up from a 10% growth in industry demand and 10% from increasing market share. However, those projections have been reduced and the EPS estimates are now 5.5p, 10.6p and 13.0p for October 2018, 19 and 20. As one would expect the drivers for profitability are revenues growth and margin recovery. The AGM statement added “developments have had an impact of approximately £2m on the visibility of this year's revenue outturn, but management is confident that further work can be won to replace that and bridge the gap in order to meet market expectations for the year ended October 2018, if market conditions and customer demand remain stable.” Looking at the numbers in more detail, there is no change in revenue estimates for the current year but those for 2019 have been increased by almost 10%. That is almost certainly from the first non-European site. Gross margins are now lower, however these are expected to be more in line with the historic levels. Previously these had been projected to rise significantly, which with hindsight does look a bit strange. Marketing costs will increase as mentioned above and depreciation is forecast to increase in both years. The tax charge is expected to be lower. There were no previous estimates for 2020 as far as I am aware. The move into Asia and potentially into North America, from where there have also been requests, is likely in my view to maintain a 20% (plus?) growth rate for a longer period. On that basis, I consider that the shares should justify a PER in the range of 12 to 15 (a long term PEG of 0.6 – 0.75). However, if current projections are now accurate, in January 2019 the current year PER would be 6.6. A PER of 10, would give 50% upside and 12 would give over 81%. In addition, maiden dividends are projected for the current year. Management have stated that the results will be H2 weighted and that Q1 normally is the quietest, so it appears that there is some seasonal weighting not just growth. I consider this should be a winner. The safety play is probably to wait for the interim results, but I have recently added and it is now one of my largest holdings. I hope I am right.
jonwig: Thanks all for the recent posts. I must say that I misread the factors which drove the share price fall. However, as pointed out, future growth is bigger than originally anticipated, and capacity has to be bought. I hope the current management are able to manage the expansion. If the AGM is in Burnley, I'll be there. If Fareham or London, not.
jonwig: Share price spooked by possible fundraising? What else could it be? EDIT - I've added.
jonwig: The share price rose at just about the time this was released: Dubai’s Emirates Airline has signed an initial agreement to buy 36 Airbus A380 aircraft, including 20 firm orders and the option for 16 more in a deal valued at $16bn, marking a critical win that will salvage the super-jumbo jet programme. The deliveries, expected to start in 2020, will guarantee production of the plane for at least another decade, said John Leahy, Airbus’ sales chief. “I’m personally convinced more orders will follow Emirates’ example and that this great aircraft will be built well into the 2030s.” Https:// The A380 was in doubt since November, when the orders appeared to be cancelled. It's one of the key models which will trickle all the way through the supply chain.
jonwig: FinnCap this morning on the trading statement: The year-end trading update reads positively, with the group continuing to see a significant year-on-year increase in operations and profits, and having traded in line with expectations. No change to forecasts or price target, but with continuing strong conviction that the group’s growth trajectory is achievable. The low share price rating offers significant upside as the group delivers on its stated scale-up strategy.
mtioc: I agree that current performance does not justify share price, but nevertheless I have bought a small initial holding. In general any shares that currently have the characteristics that I like (e.g. ROCE>15% and relevant profit margin at least 10%, consistent growth, cash generative and management on the right side of the table etc..), are all too expensive for me (e.g. EBIT yields<4% versus the 8% I would like). In that case, if I could be reasonably confident that a share could meet these thresholds in the medium term, I may take that risk rather than buying one I consider very overpriced now. VEL has an EV of c. £30m and should make £1m EBITDA (normalised) on c. £20m sales. On its own, £30m is a ridiculous valuation, but if it made the forecast £4.5m EBITDA (on £35m sales) for the next year (and that was sustainable) it would be relatively cheap. Therefore the key is the confidence that VEL will grow to that level in the next few years. Commercial airliner production is set to grow significantly over the next 15 years. The major manufacturers, Airbus and Boeing, have developed their platforms and the next airframes will not appear until the mid to late 2020s (i.e. this is the period for them to recover their development investment). This is covered in detail in the listing docs. VEL mainly provides services to the Airbus supply chain. The new-ish Airbus wide body, A350, will double production from 5/month to 10/month and has a c. 9 year order book. The narrow body, the A320 with new engines, will increase from 50/month to 60 and has a similar order book. At the moment, we do not know how much revenue VEL gets from each aircraft produced. However, a bit of research suggests VEL is embedded in the supply chain and its sales should grow rapidly with production increases. In its latest news release it mentions a major US customer contract win. VEL only appears to have one major US customer, GE. Its composites (mainly for airframes) are done in Hamble (near Southampton) in an old Smiths facility. According to Googlemaps, VEL's facility in Fareham is 20 minutes drive away. Given Airbus order visibility the supply chain ramp up is no surprise - everyone in the industry has been talking about it for years. Since 2013, GE appears to have spent $50m on 2000m2 of composite clean rooms. In considering an investment of this size, it has still outsourced the relevant services to VEL (after making sure they could deliver on a PO basis first). VEL would therefore appear to be embedded in a very predictable and growing supply chain. The story of Safran Nacelles (mainly engine composites)in Burnley is very similar. (These big plant investments are covered in loving detail by local newspapers.) VEL may be able to expand this model with existing and new clients. GE for example may take it into the Boeing supply chain, where the latest models have more composites than any others. There could be potential to serve other commercial aviation clusters (e.g. Hamburg or Tolouse). I also like the fact the management team are at the right point in their careers, have significant shareholdings and a clear vision. Hope this is helpful, but as always DYR.
dropside: At £1.6m cap it is very cheap, but the liabilities make this high risk. However there are still deals to be done - with Kenya direct or through arbitration; Seychelles and L9. Compensation from Kenya could be rolled onto the liabilities and Seychelles (once settled) and potentially L9 could be farmed down. The intellectual property (3D seismic etc) on 3A and B could be sold. In time the Glencore deal and Witkop could be worth something. Just can't imagine Passin is throwing the towel in while discoveries are being made near 3A and Seychelles is looking promising. It would certainly help of course if they communicated properly with shareholders, no doubt that has damaged the share price. On the principle of buy when there blood on the streets I've added some more. Its very high risk but potentially high reward. Definitely no advice intended!
dropside: £3.1m market cap. Even if they lose 3A and 3B licenses, the other licenses are worth more than that. Plus the old Tunisia agreement and Witkop. Now looking well oversold, but they are not helping themselves with their Trappist monk communications. James Passin may own most of the company but surely he cares about the share price, it affects the value of his Firebird fund for one thing. A few pounds spent on an RNS, even if it does not say much, would bring us more up to date than keep re-reading Februarys news.
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