Velocity Composites FY2025: margins up, EBITDA doubled, revenue softer
Velocity Composites delivered a classic margin-over-volume year. Revenue came in at £20.7m, down 10.0% as key aerospace production ramps slipped, but gross margin jumped 360 bps to 29.5% and adjusted EBITDA more than doubled to £1.0m. There is still a statutory loss, cash is tight, and customer mix is shifting, but operational execution clearly improved.
The tone from management is cautious near term and optimistic medium term. With Airbus A350 rates expected to rise and Boeing’s re-acquisition of Spirit AeroSystems set to unclog the supply chain, Velocity is positioning to catch the upturn while managing programme transitions.
FY2025 headline numbers investors should know
| Revenue | £20.7m (FY2024: £23.0m) |
| Gross profit | £6.1m (FY2024: £6.0m) |
| Gross margin | 29.5% (FY2024: 25.9%) |
| Adjusted EBITDA (see definition below) | £1.0m (FY2024: £0.4m) |
| Adjusted EBITDA margin | c. 4.8% |
| Operating loss | £0.7m (FY2024: £0.9m) |
| Loss after tax | £1.1m (FY2024: £0.8m) |
| Cash at bank (year end) | £0.4m (FY2024: £1.7m) |
| Net (debt)/cash (year end) | £0.1m net debt (FY2024: £0.7m net cash) |
| Invoice discounting facility | £3.1m, undrawn at 31 October 2025 |
| Trade receivable days | 44 days (FY2024: 53 days) |
| Inventories | £2.1m (FY2024: £2.5m) |
Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation, exceptional items and share-based payments. Basis points (bps) are hundredths of a percent – 360 bps is 3.60 percentage points.
Margin improvement: why 29.5% matters
Gross margin stepped up from 25.9% to 29.5%, driven by a better sales mix and operational efficiency gains, particularly as the US facility bedded in. Admin costs were tightly controlled at £7.0m, flat year on year, despite inflation and a higher non-cash share-based payment charge.
This is the operating leverage you want to see before volumes recover. Velocity’s tech backbone – the Odoo-based Velocity Resource Planning system – is now live across the UK and US, automating repeat tasks and helping service levels. If production rates lift, margins have a chance to expand further without a linear rise in overheads.
Cash, debt and liquidity: tighter, but supported
Year-end cash was £0.4m with net debt of £0.1m, reflecting CBILS loans outstanding of £0.5m. Importantly, the £3.1m invoice discounting facility was undrawn at the year end. Operating cash flow improved to a £1.0m inflow, aided by better gross profit and working capital discipline, while investment outflows of £0.7m reflected ongoing R&D and capex.
Post year end, liquidity looks better than the year-end snapshot: as at 22 January 2026, the Group reported net cash of £0.3m. For clarity, that was on cash of £0.8m, £0.2m drawn on invoice discounting, and £0.4m of CBILS remaining. Bottom line – liquidity is adequate but tight. Watch cash conversion as volumes rebuild.
Invoice discounting is a working capital facility that advances cash against receivables. It flexes with sales, which can help through ramps and lulls.
US facility and programme transfers: 40% live, more expected in FY26
The US launch site has been substantially tooled, including a large freezer for materials handling. A technical issue between Velocity’s US customer and the OEM (not related to Velocity) delayed the full transfer of the final contracted programme, with around 40% of the project value now transferred.
Management now expects the delayed programme to move in FY26 and is evaluating additional programmes with the same US customer to offset timing effects. Quality credentials remain strong – the US site completed its second NADCAP audit with zero findings, and UK sites retain Merit 24 status.
Customer mix and end-market dynamics: A350, Boeing-Spirit, and UK shifts
The industry backdrop has been the main headwind. Airbus A350 production increases did not arrive in FY2025, and Boeing’s continued oversight slowed B737 rates. The expectation is that A350 rates will rise and Boeing’s re-acquisition of Spirit will help unblock supply chain bottlenecks during 2026.
On customers, Velocity extended a long-standing defence contract and expanded scope with a key A350 customer to cover all products at a customer site for ten years, with transfers starting early 2026. Offsetting that, one UK customer is off-shoring production to mainland Europe through 2026, and some legacy customers are in-housing as programmes wind down. Velocity is targeting new European work that can be serviced from UK sites and sees defence and eVTOL as emerging growth areas.
Concentration risk and prudent forecasting
Four customers represented 90.0% of FY2025 revenue. The split was 27.2%, 26.4%, 31.9% (a US customer) and 4.9%. That concentration cuts both ways – it can accelerate growth on ramps but amplifies the impact of delays or internalisation moves.
Management has removed certain revenues from FY2027 internal budgets where customer plans are unclear. That is prudent and protects credibility, but it also underlines the need to win and onboard new programmes in growth platforms.
Targets vs reality: how close is Velocity?
The Board’s key targets are 25% plus gross margin, 10% adjusted EBITDA margin, and 25% return on capital. Gross margin is already above target at 29.5% – a clear tick. Adjusted EBITDA margin is c. 4.8%, so roughly halfway to the 10% goal. Getting there likely requires two things: a) execution of delayed US transfers and new scope wins, and b) OEM rate increases that drive outsourcing of non-core tasks to Velocity.
The company has modelled FY2026 on flat production rates, which feels sensible. Upside comes if Airbus and Boeing deliveries inflect sooner, and if the US customer adds the additional programmes under evaluation.
What I like and what to watch
Positives
- Gross margin up to 29.5% and adjusted EBITDA more than doubled to £1.0m – operational proof points.
- Operating cash flow of £1.0m and improved debtor days to 44 – discipline showing.
- Ten-year scope expansion with a key A350 customer and a defence renewal – longer visibility.
- US quality accreditations and unified VRP system – scalable platform for growth.
Watchouts
- Cash remains tight at £0.4m year end, with small net debt – execution needs to stay sharp.
- Programme delays at the US customer and OEM timelines – the last 60% still to transfer.
- Customer concentration and UK site shifts to Europe or in-house – revenue risk until new wins land.
- Adjusted EBITDA margin at c. 4.8% – still work to do to reach the 10% target.
Outlook: set to benefit when rates rise
Velocity’s set-up is leaner, tech-enabled, and accredited. If Airbus A350 and Boeing supply chains normalise through 2026, this business could see a tailwind from both volumes and mix. In the meantime, expect a focus on cash, cost, and onboarding the contracted and in-bid work, especially in the US and Europe.
Given the industry’s backlog and the company’s long-term partnerships, the medium-term opportunity remains intact. The near-term execution task is navigating customer transitions while keeping margins elevated.
Join the investor presentation
Management will host a live presentation at 09:00 on Wednesday, 28 January 2026 via Investor Meet Company. You can register here: Investor Meet Company – Velocity Composites.
