- Contract with GKN Aerospace worth $100 million over five years
- Set to commence in 2023
- Represents first entry into the US
Micro cap aerospace firm Velocity Composites (VEL:AIM) may not have been too familiar to many investors before now but it will be on the radar of a fair few after today’s big contract win.
The company has snared a contract with GKN Aerospace (owned by Melrose Industries (MRO) worth $100 million over five years.
The size of the award is obviously material when put in the context of Velocity’s revenue for the 12 months to 31 October 2021 of £9.8 million but the significance of the agreement goes beyond that because it represents a first entry into the large US market. This is reflected in a 58.8% increase in the share price to 42.9p.
WHAT DOES VELOCITY DO?
Velocity supplies composite material kits to the aerospace industry and what it describes as ‘other high-performance manufacturers’. The selling point for its clients is that by having these pre-prepared kits they can limit waste in their supply chain and concentrate on their core activity of actually manufacturing parts.
The agreement with GKN is set to commence in the first quarter of the 2023 financial year and will cover a diverse range of composite structures across military, civil and business jet programmes.
This work will be carried out at a new 40,000 square foot facility in Alabama which is expected to be ready to go by February 2023. This latest agreement builds on existing contracts with GKN Aerospace in the UK, the relationship with the company dating back to 2015.
Velocity chair Andy Beaden commented: This is a major milestone for Velocity as we make a permanent entry into the US market and expand our long-standing relationship with GKN Aerospace. During the pandemic we worked hard to deepen our relationships with clients and further invest in our technology to prepare for the recovery.’
Separately Velocity guided for sales in the year to 31 October 2022 of £11.9 million with a EBITDA (earnings before interest, tax, depreciation and amortisation) loss of £500,000 - the same as the previous year. The company has cash of £2.3 million and access to two facilities with undrawn headroom of £1.3 million. Full year results will be published on 24 January.
