Velocity Composites (LSE:VEL) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the VELOCITY COMPOSITES PLC Interim Results Investor Presentation. Situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the investor meet company platform.

0:32 And before we begin, as usual, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to the board of VELOSITI COMPOSITES PLC. Andy, good morning, sir. Good morning, everyone, and welcome to the twenty twenty four First Half Year Results Presentation. Before we kick off, I'd like remind people who we have today. So we have myself we have John Bridges, Founder and CEO and we're really pleased to have with us Rob Smith, our new CFO, who has joined us very recently and has, as you can see there, the longest CV of all of us and

1:17 heavily extensive experience within manufacturing and international manufacturing as well as being a recognized successful CFO of multiple paying companies and also as Salina's CEO as well. And not to forget that on our Board, we have two very respected aerospace experts in terms of both procurement, in terms of Annette Rockwell and operations management and sustainability and composite knowledge in terms of Doctor. David Bailey. So I'm going to hand you over to John, who's going to lead through the first half of the presentation, and Rob is going to cover some of the numbers and I'll join you later on.

2:03 Let me

2:06 Thanks, Andy. Good morning, everyone. So first of all, a few slides just to recap for any people not familiar with the company, who we are, what we do. So as the name suggests, we're in the Advanced Composites business within aerospace, really, which is substituting aluminum as the main raw material for aerostructures. And that increase in the use of composites is growing and there's some slides that we'll talk about in a moment. And what you see there in diagram is how those composite materials are spread over a typical airliner nowadays, so 50% by weight, but as you can see pretty much the vast majority of the primary structure is composite materials.

2:53 And the reason why it obviously improves performance, improves range, reduces fuel burn and is an important part of the moves to sustainable aviation. And what VELLOCITY does is we sit within the supply chain of those raw materials and are focused on removing waste from our customers. And again, we'll talk about that in the slide in a moment. The typical savings are greater than 10% material cost just by removing the sheer amount of waste that ends up not flying, but also reducing the process times and both of those are important as the industry ramps up to meet the challenges of the production rates that it faces. It also brings greater consistency. We bring a very well polished standardized approach to the preparation of those materials and the procurement of those materials to really give our customers not just those efficiency benefits, but also the consistency that sort of data management, the traceability benefits of a very well regulated industry.

3:56 As we feel from discussions with our customers and potential customers, there is a real need and want for that outsourcing now as they look to sort of define their future businesses, what is their core business, what isn't and how they as a collective supply chain for the whole industry meets these important and positive challenges of significant growth within the use of composites. As we sort of as we scale FY24 this year, we're going to be $27,000,000 in terms of our turnover with contracted business. Last year was $16,400,000 So we're growing and that $27,000,000 on a full year basis contracted business is $33,000,000 next year. So we are growing significantly and have grown significantly.

4:49 And we also have a very strong pipeline of new business with existing and new customers, which again we'll talk about later. But it is a very large multi billion dollar multinational industry which we're addressing. And internally, we've talked about it and we're focused around delivering on our five year target of to be 100,000,000 business with the 10% margins as we grow and scale.

5:21 I'll try and get my keyboard to work. There we go. So again, for those not familiar with the company, this is where we sit within this large industry. So there's already a well established very successful group of material suppliers, most of which are there, some other smaller ones. We're So not a material supplier and we don't make parts. Where we sit is between those two groups of people to procure, to manage, to transition those raw materials into the form of use for our customers to make the parts in a much more efficient way. So you can see, you know, some of the large global groups of aerospace customers and potential customers for us there.

6:07 To do what we do, and there's some graphics around in a moment, but essentially, it's all about managing that procurement of the raw materials, which are expensive and on long lead times to use that technology to procure that much more effectively and to not over or under procure over those extended lead times. To manage that inventory, it needs to be controlled, it needs to be stored correctly, it needs to be like cases frozen to preserve life, manage that demand from our customers as well, again over those extended lead times. And then really it's about using those raw materials to pre manufacture the kits required for our customers to manufacture the parts and all the associated activities there about managing the finished goods, warehousing, transport and then the on-site support of those kits as well again on behalf of our customers.

7:04 So we manage all that. As I say, they're very long lead times, which is part of the challenge. And really what we're substituting here is from our customers having to do that themselves to recognize that's non core business and for us to manage it on their behalf using our technology to drive

7:31 improvements. And as it says there in red, agreements, so there's no advantage of anyone buying this differently from, you know, like a distribution model. This is all about value adds and delivering that to customers under that control pricing. So we don't get squeezed. It's all negotiated on our behalf. It will pass us through. And it's about utilizing that material much more effectively to make sure much more of it ends up flying on the finished aircraft. And what's driving this move to composites is a huge push for net zero by 2,050. And as you can see there, these both Boeing and Airbus have very detailed market forecast information which you can download on their websites. Essentially what you're seeing here there on the chart, you can see not only are we seeing the fleet size double, but the amount of composite within that fleet double as well. So essentially a sort of 10 times growth in the amount of composites that will be flying by 2041.

8:32 And that brings opportunities, of course, for us. But also, we need to help the industry utilize that material a lot more effectively and control its use and the sort of data management around its use to make sure that that's done in a sustainable way with excellent traceability and our processes and technology helps drive that on behalf of our customers.

8:59 Okay, so that's the introduction to VELLOCITY for any new people. And then in terms of our H1 highlights for the year, clearly revenue has grown significantly as we not only see rate growth in Europe, but also the onboarding and transport of our large launch projects in North America. Associated with that as we work through improved efficiencies of as we grow, but also as the inflation pricing gets passed through the inflation that we've seen over the last few years works through into new contracts, we've seen our margin improve and continue to improve there.

9:48 The H1 is always going to be H2 weighted because of the growth in the transfer of the program, but still a significant improvement there in sort of the H1 EBITDA. And as we talked about recently in the Mallard presentation, but also at the sort of year end in January, the huge program in The U. S. Which we're working through progresses well and the FAI process and also the ramp up and the transfer processes is continuing to add to those figures as we grow and onboard all that work. FY 2024 guidance remained unchanged. As we say, dig through that program now and sort of turning that corner into the sort of finish line as we get through the FEI process.

10:37 And we still expect and everything we see is around the profitability and the cash positive trading in the second half, which Rob will take you through in a bit more detail. I hand you over to Rob. Thank you, John. Good morning, everybody. So as John has just said, the sales grew half one twenty twenty four, 54% versus half one twenty twenty three, largely driven by the onboarding of The US customer. Margins improved year on year as we saw greater facility utilization in The U. S. Going up the learning curve, etcetera, and we expect that improvement to continue into H2 twenty twenty four.

11:30 The EBITDA loss reduced considerably, again through volume, and I'll take you through a little bit more detail on that in a minute. Cash at the bank improved, that was largely as a result of the funding that was received in the second half of twenty twenty three, less of course the investment in the factory in The U. S.

11:53 And working capital. CapEx expenditure, you can see first half of twenty four was quite quiet as opposed to '23 which was a big year for CapEx.

12:09 So looking more into the detail of the income statement, you can see the cost of sales improvement there, which resulted in a gross profit of $2,400,000 as against $1,500,000 previous year. Administration costs increased. Now that was a direct result of The US factory, the additional overheads in The US to run the site over there. As a small amount of other operating income, which resulted from R and D credits, which are taken above the line where they're funded outside The UK. All of that resulted in improved operating loss reducing from 1,300,000 to 861,000.

13:00 Increasing finance expenses that was largely as a result of increased rates plus the fact that we've got higher working capital utilization in The US where our customer has funded the receivables. All in all, a loss for the year of $1,000,000 versus one for the half year of $1,000,000 in 2024 versus $1,400,000 in 2023 and an adjusted EBITDA of just under $200,000 versus $900,000 in '23.

13:38 The balance sheet has stayed very controlled. The reduction in inventory since the full year and slightly up from H1 twenty twenty three reflecting the additional work that's going on. Trade receivables naturally increased as we have more customers and the tax receivable is the full amount of the R and D tax credit claims that we have in at the moment. That 450,000 represents two years worth covering the periods 2223. All in all, gross assets increased to just under 800, so just under 8,000,000 from just under 6,000,000 in previous years. So a strong balance sheet.

14:30 The loans refer to that's the current portion of the CBILS that we took out during COVID and trade payables for the utilization of working capital for the new contracts.

14:50 But all in all, a controlled balance sheet, some improvements still possible, and we'll be working to work on those over the coming months and years. The cash flow summary set out for you there, which really just explains the the the income. So the reduced operating loss meant that we've got through less cash running the business,

15:17 movements in working capital source and outflow during the period, but not huge considering the size of contract that we took on, giving us an operating cash outflow of 400,000 just under $500,000 versus $1,800,000 in the year ago half year. Small amounts of cash used in investing activities is repaying interest

15:48 sorry, small amounts of cash outflow in investing activities and cash used in financing the business. So this repayment of the seed laws is the main chunk of that as well as interest. So our cash moved down from 3,000,000 to 1,800,000,

16:09 but we expect cash generation in H2. So all in all, a very good position. But if I hand you back to John. Thanks, Ron. So I think we've covered a lot of the highlights so far, but our focus for FY 'twenty four and the remainder of remains strong and as we've indicated previously. So yes, we've grown as that project transfers and then the rates improve in Europe as well. But it's all around delivering the sort of U. S. Project and moving on to other projects there and both in Europe as well. We've done a huge progress in using the sort of challenges of the previous few years into our contracts going forward to mitigate any inflation lag, but also move to more of an annual review rather than a contract renewal review to build that into future agreement, which our customers fully understand and agree with. So that's been huge progress there and we'll assist going forward.

17:22 We announced previously in the year another big milestone of an OEM approval to allow the sort of final chunk of FY twenty twenty four transfer and FAI to take place in The U. S.

17:34 That sort of progressed very well and now moving through the ramp up post FAI to complete that in FY24 as well. So again, OEM approval was a big milestone, of course, to achieve. But again, we can use that going forward with other customers once we approve at the OEM level.

17:56 Obviously, there's been some well publicized issues in parts of the global supply associated with Boeing. That has no impact on our current FY or FY 2025 contracted business. But it does have a bearing on future business. So whilst we've made some good progress within some Boeing supply chain customers,

18:22 whilst those bids are still current, they're obviously parked whilst those issues are resolved at the regulatory level. And of course, the whole industry needs both manufacturers to be building aircraft. So we wish for a swift and safe conclusion of that work.

18:41 But that does mean that we've switched a little bit of focus there to non Boeing supply chain going forward, which there's still huge opportunities. But also as we said previously within Europe, it's around more business with existing customers, which progressed as well. So that term is still progressing well.

19:05 But again, we're forecasting on contracted revenue and those ranges remain unchanged as we move forward. And so in terms of a conclusion, I'll hand you back over to Andy to pick up those points. Thank you, John. Thank you, Rob. So in terms of this year, we're still on track for approximately $27,000,000 revenue, which we have from the $16,000,000 You can see the half year is up 50%. You can see that in the first half of the year, losses being slightly eliminated,

19:42 but at the run rates that we're starting to hit and expected in the second half of the year, we should be in clear profitability. That will be a very important milestone for the business.

19:54 It will then move into cash generation as well. We have to and I just looked at some of the questions, I thought I'd cover one here. Remember that we were held very significantly by a large U. S. Customer. It was also a customer in The UK, who supported the company with a very a very generous cash flow package, in terms of supporting the inventory financing themselves and then only transferring

20:26 that across to us in terms of our need to finance it ourselves once we've ramped up and started to generate cash. So in fact, the cash generation in the second half of the year that Rob speaks about is also net of onboarding

20:45 more of the burden and the full burden of the working capital of a new large contract in The States. And that's why that again is a great achievement. And of course, once that's done once, it doesn't need to be done again, which means in 2025, we should be generating quite a few million of net cash.

21:06 We also have the undrawn facility in The UK at $3,000,000 which can be expanded further if we needed it to be. It reflects the size of The UK business and would support additional work also in Europe because it can finance our UK business and release cash if we have new business starting up anywhere really in Europe coming out of The UK. So we have thanks to refinancing last year, turning to profitability. We're starting to have a strong balance sheet, strong cash flows, a lot of dry powder there to expand the business in the short term, exploit the fact that we have three NOW facilities, which can all be expanded as well.

21:55 And we are certainly well on track to start to achieve some of our key objectives, which is a 10% EBITDA margin, it's a 25% return on capital employed

22:08 as we go into as we look into 2025. And I think that what we are also seeing strategically and is very important here is customers recognizing and valuing the efficiency gains that we help them achieve. And there are certainly challenges within the aerospace industry in terms of ramping up production. And you'll see you are seeing OEMs under pressure there. So Spirit being sold to Boeing and then broken up, so part of it sold back onto Airbus. You're seeing across the Airbus supply chain challenges in terms of trying to hit new numbers, which they need to hit, even in defense now in programs like the F-thirty five, where actually production rates are maybe 20 planes a year below what they need to be now for the next fourteen years. So all that points to a need for greater efficiency, ways to open up the invest in supply chain to increase outputs.

23:17 And this is exactly where VELOSITES positioning itself. And so the success of the Telesee project, which actually has those outcomes now helps with not just with that customer, with other customers. And one of the other things that that Tallahassee project gives us is though, yes, it's one customer, and we also work within The UK, where it actually opens up three or four key new large OEMs because we work in partnership with GKM in The States, and we both share the fact that ultimately, we're looking to deliver a service to OEM manufacturers, service providers and engineering providers. So we actually have more OEM exposure and different exposures now and larger range of those than actually we did two years ago. So and we see that continuing as well. So even though we may work through one or two major Tier one manufacturers, we're actually expanding the number of platforms that we're providing our technology to ultimately. And again, that strengthens the ultimate portfolio and the portfolio risk for ourselves.

24:36 So I feel we are very much on the front foot now, very much feeling confident in the next phase of growth and we are delivering that growth. And another key point is that even the current contracts that we have all have opportunities of growing themselves, particularly in The States where there is upturn in volumes, our customers winning new business as well. And that it means that there is organic growth opportunity now in 2025 and 2026, just based on the current contracts with the opportunity of further new contracts coming through in that time frame as well.

25:27 So I'd like to thank you all, pass you back to the main speaker. Perfect. Andy, John, Rob, if I may just jump back in there. And thank you very much indeed for your presentation this morning. I will just bring back up your camera there. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the company take a few moments to review those questions that were submitted already, I would just like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. John, Andy, Rob, as you can see there, we have received a number of questions throughout your presentation this morning. And thank you to all of those on the call for taking the time to submit their questions. But, guys, at this point, if I may just hand back to you just to read out those questions and give your responses where it's appropriate to do so, and then I'll pick up from you at the end. Thank you.

26:22 Okay. Thanks again. So I'll sort manage the questions. I'm not necessarily going to answer them. And so I think the first question, John, a classic question we get from all investors really is, maybe just a discussion around when we say we have this pipeline, 100,000,000 at the moment qualified, what really is that? So obviously, no one expects you to name customers and say, oh, this might just happen here or there. But just to explain the amounts of work that has actually gone in the last year into various new customers and why we believe we do have that strong pipeline. Yeah, of course. So yeah, I think there's obviously a lot of commercial sensitivities around that both, say, for us and the customer. But as we've talked about before, the focus is obviously customer beyond our launch customer in North America. And again, as Andy said, the fact we've opened the facility now took the answers a lot of questions that customers had or potential customers had prior to that. So the fact that that site is open, it's delivering, it allows us to look at the next customers.

27:39 In the appendices of the presentation, there's some indicative maps there of potential customers around close to that facility and also that can be initially serviced from that facility. So we have been progressing there. As I mentioned earlier, it's been some of those have been paused whilst the regulatory issues in Boeing are resolved, but we're expecting that to be a transient issue and obviously, of course, till everything's resolved successfully to the regulator. But again, we've made some good progress and some nice strong mutually beneficial bids are in place there. But then we look beyond the Boeing supply chain, there are other large customers in the area and as we've talked about, it's about working through those TCO business cases and getting those in front of those customers for to launch the initial programs.

28:36 And whilst of course, a huge effort is still ongoing to have completed the FAI, but also to ramp up the transfer from our launch customer as well. So yes, the sites over in The U. S, our customer size and potential customer size are orders of magnitude larger than what we see in Europe. But we can we've got to be selective really in who we approach when and how to make sure those business cases land and are deliverable afterwards. But that work has continued. As Andy said, we'll obviously announce progress when it gets to the sort of contractual level, but nothing that we've seen in the last year changes.

29:22 Certainly my opinion that there's a huge amount of opportunity there with customers who are open and very, very receptive to seeing this as non core business and part of their solution in their own ramp up. In Europe, that's obviously continued as well and we'll again announce progress. But as we said, there's significant opportunity with existing customers and that's a combination of smaller scale business cases as we complete full site transfers or new packages of work with existing customers. But there are also some larger opportunities we've been progressing as well. And again, those will be updated when they reach their contractual stage.

30:08 Okay. Thanks, John. I'll just cover a couple of questions. I'm going bring Robin. Noticed one late question has come in is where I described The U. S. Policy facility, all our major customers, we see we are working in partnership with them. That does not mean that it is a legal JV, but the very fact that what we're doing is taking on the front end, from supporting their procurement to ensuring that they can double or triple even their stock turns, that they can eliminate quality issues.

30:54 We see ourselves more than just a supplier, just someone who's, yeah, we make these which is to sell them to you. We see ourselves in that context of a genuine partner, which everyone I know many, many people companies claim to be a partner of someone else, but it is in that context. So it's not a JV. Someone said, oh, I didn't realize it was a JV. It's not a JV. It's merely the that is a very big facility. We've been heavily supported by our customer to get it set up. It isn't there's no stake from the customer in in the facility, but it's just a way that we operate together as in a in a partnership to work together in servicing the industry.

31:40 In terms of other questions, one of the other questions which has come up is around the size of our facility in The UK and we will be considering utilizing it. I think I explained that before. It's there to be used with the cash that we're generating as well and raised. If you look at the cash that we raised, it got utilized, but now it's coming back. As we absorb that contract and expand, that cash comes back into the bank accounts. And we paid off The UK facility. So we really still have 5,000,006 million dollars potential by the end of this year or early into next year of cash capability.

32:28 The I did cover the purchase of raw materials. So we were supported and have been supported by our customer in The States in terms of that ramp up. But it was always once we can get the stock turns up and the efficiencies in that we would take on the full cash cost of that. And that is fully costed within these projections that we're talking about. And in fact, I'll pass you now to Rob, maybe you can talk about your deep dive joining us on cash flow management, everything else, how you feel that's looking now for the next six months. Yes. So clearly cash is always going to be critical as we go through this phase.

33:17 Have utilized cash in the first half in growing the business, particularly in The US. We have done, as John has Andy just said, deep dive into the numbers. And looking at those, clearly, we start to move into profitability. We do take on more of the procurement of inventory directly ourselves. So the very generous terms of our customer has provided to us, we move on to slightly less generous terms. So there will be a lagging cash generation, but we're still expecting a generation of cash in the second half. And that is just driven by profitability and being more efficient in the inventory purchases.

34:05 Great. Thanks, Rob. John, do you want to just cover again the disruption that Airbus had warned about and their challenges and reiterate how we feel that is a positive for us. Yes. So you've probably seen the news of, say, A350 ramping up and then subsequent sort of review of the number. There's still a huge ramp up even, you know, if you take the the sort of cautious end of that that guidance. But as we're saying, it's it's a challenge for the whole industry. You you know, none nothing that we're seeing in composites is is affecting that. It seems to be a metallic driven challenges also around engines as well. So it's just an example of any ramp up is only as quick as its as its slowest component, you know, and, you know, we've seen those issues curtailing the scale of the ramp up, but it is still a a huge ramp up on on that platform, which everyone's minded and, you know, anyone who's on that program is already got their rate readiness plans in place to to support. So, yeah, it's not it's not something from COMPOSIT, but from a from a wider perspective then it'll ramp up as quick as the slowest component.

35:28 From our point of view, we have capacity as we've talked about. We've our plans are already in place to meet those rate increases on behalf of customers. And, you know, we also look forward to the single aisle doing doing the same increases as as well. And, you know, particularly the the resolution of the the Boeing supply chain issues and, you know, that platform move from the sort of late thirties a month to the fifties and sixties a month and beyond. Great. I know someone put a question about noting the higher fixed costs that have been coming through. Obviously, the main elements of that really is just establishing a U. S. Facility.

36:18 And as we probably still doing quite a lot centrally, so it's not just the duplication of everything in The UK and The States. A lot of finance procurements, back office work is all done centrally. Clearly, we do need some capability in The US, but we also manage things with a lot of capability from The UK and from Berlin. And therefore, we believe as we know it's one of the reasons for the profitability flipping significantly in the second half of the year is taking those revenues and being able to spread large amounts of revenues over an element of fixed cost that's in the system. So we don't expect overhead to continuously ramp up at the same speed as revenues.

37:10 Clearly, you have to manage growth and there always is a need to invest in people and develop the team and not become constrained in that. But each year, we also have a cost down initiatives ourselves like you expect with most manufacturers. I can see that another question is how big is our largest customer? And I think I explained this before, our largest customer once The US is fully ramped up will be, you know, more than 50% of of revenue. However, if you look beyond the immediate customer into the actual programs that we and that customer are qualified on, And if you think about the FAI process that we've all talked about quite a lot and the aerospace qualifications, they're all to do with the OEMs.

38:08 So whether that's, like the Sikorsky helicopters or a HondaJet or Boeing or an Airbus, you know, all these different final manufacturers and assemblers who, and we are, we've doubled probably the number of those through going into The U. S. So though, yes, the actual concentration of our Tier one customers is very tight. The OEMs behind that, we're actually increasing and therefore getting more qualifications onto our books and then broadening the opportunities therefore long term for us with other customers, whether they're the tier one manufacturers that we supply, whether they're the OEMs themselves.

39:07 I think someone has asked about the 10% EBITDA margin, is that the maximum, is it the staging point? One of the things that we are focused on is not just the EBITDA margin, but the return on capital. And Rob, do you want to you've looked at that in the forecast, the return on capital, haven't you? And you feel that's going in the right direction too for 2025? Absolutely. It's definitely a focus, and it is going in the right direction. We are exploring targets at the moment, and and we'll drive towards better return of capital employed. And the whole ethos of the business is on efficiency of production using just in time methodologies to make sure that we turn inventory at far greater rate than our customers are used to.

40:03 So we typically talk of customers turning inventories four to five times a year, and we target 10 times a year. And so we drive the return on capital employed through that metrics. And that's not just for us, but also it benefits our customer. Indeed. I can say someone's actually written and asked about capacity. As we've talked before, the current three factories could in theory double their output. Obviously, you have to have some more machinery, but also, one of the main ways of doubling the output is more shifts. John, do you want to cover how many because it's actually the number of shifts that can significantly change the output as well, isn't it? Not just machinery themselves.

40:55 Yeah. So as Andy says, we know with the sort of infrastructure costs, there's the ability to double. Obviously, that's with 20 foursix working. Currently, sites are probably one, one point five shifts, we do, as Andy said, with probably more freezer capacity, more shifts, maybe some equipment capacity, current capacities can be increased significantly without the cost of more sites, more clean room space, etcetera. You know, the fourth machine has just been installed in in The US as part of that ramp up. That obviously brings an extra do the math 25% capacity there per shift, but obviously, as those shifts grow as well, an additional machine, you know, does does improve that significantly as well. So that's all costed into those rate increase plans and the transfer plans accordingly.

41:58 But, yeah, relatively minor investment in in shifts gives us, you know, much much larger capacity for shift working. Okay. Next question is about the size of contracts, duration, size. Very nature when you have long term contracts that often starts off at three or five year initially is they then tend to get renewed and extended. And so the most so yes, our longest term contract is probably only five years. But we do believe we can with new customers potentially extend that initial contract to even aim for eight years or higher.

42:46 But then it's more the fact that obviously they've transferred the business to us. We're now the qualified partner in that may even themselves may not be qualified to do the bit that we now do that we then enter this long term contractual relationship where you find that the contracts renewal of the contract is merely, yes, that's a point of negotiation of terms and conditions. But John, you've been moving everyone really on to the template that we used in The States. You spent a lot of time working on, haven't you? Yeah. And I think, you know, the wider team as well, it's been a it's been an important transition. Think, as Andy said, when our customers make this decision, it's a very strategic long term decision to outsource this.

43:35 It, you know, it does become non core business to them. And so they lose the capability and we're happy for VELOSITI to take up the supply of those products. And as Andy also said, during that time, we do build very deep relationships with all levels of that organization. These are quite large organizations, not just to delivering into the operations team and you're not under the guidance of the procurement teams, but you've got the quality teams, you've got engineering teams, you've got a myriad of lots of different relationships, managing demand, managing procurement, all those deep strategic relationship is important because we are managing the first part of that process and six months of raw material lead time that goes with it. So our technology and our way of working is seen as the sort of yardstick in performance, but linked to that is building these deep long term strategic relationships to the point where, you know, the con contract renewals are are term renewals, you know, we we do, you know, see those rolling on with ease because by by that, I mean, you know, we make it easy for the customers to roll them on because all the work's been done and all the sort of review points and pricing points are covered on an annual basis to the point where the term is just a renewal of term.

45:02 And again, don't take it very lightly, but as Andy said, there's a lot of work goes into the transition. We talked about the FAI and the ownership of the supply chain and the approved capability to deliver the products. That would all feel need doing in reverse should that strategic decision be reversed by the customers. So again, as long as we're performing, we keep maintain those those deep structural relationships, keep delivering the products, the high quality, you know, the right first time, the on time in full performance remains as high and industry leading as they are, then again, the strategic decision has been obtained by customers and we become that very close partner in meeting their long term operational improvement and delivery performance of the supplier. Fantastic.

45:56 The next question is really just about the split geographically of the pipeline. And if I just answer that. In terms of shorter term, it's probably quite evenly balanced with Europe and The U. S. And just to be clear, it is Europe and The U. S. That we're focused on, including obviously The UK. And in the longer, more medium to long term, The U. S. Is by far the larger opportunity. But in the maybe medium term, we've got some big opportunities still within Europe, particularly with current customers. Longer term, I would say that you're more looking at 75% plus in The U. S. Would you agree, John?

46:43 Yeah, I think it's just a recognition that there's some very large diverse sites over there compared to Europe, but that doesn't mean that we won't continue to grow in Europe as well. I think our services location agnostic is the same service wherever we operate, same specifications, same approvals and we plan is to continue to grow in both areas. Fantastic. And final question about when do you expect to pay dividends and what will your policy be in terms of cover? I think that we're not at the moment laid out that policy. We would be great to get to a position where we could pay a dividend.

47:31 But equally at the moment, the generation of cash is about then funding growth. But we certainly don't discount the opportunity to potentially pay some form of dividend, which would open up more types of investors for us, particularly on the AIM. So there's a strategic value to doing that, though maybe at modest levels, if you want to reinvest, particularly if we can achieve the 25% plus return on capital, then it is common sense to reinvest that dividend, sorry, that cash flow. But certainly, we'd probably love to revisit this question in maybe twelve months' time, to see where we are at that point.

48:21 I don't know, Rob, what's your views on when people pay dividends and not? Yes. I mean, the textbook answer is if we can get a better return for investors from investing and growing the business, that's what we should do. However, clearly, there are some funds on AIM that we would like to tap into that have a policy of only invest in Yeah. In businesses which do pay a dividend. So we have to balance those two drivers there. And I can't imagine us paying a dividend for this year No. No. Or next year. But into the longer term, medium, long term, I think, as the business turns into a a solid cash generator, it would be something we'd minded to do.

49:11 Yeah. I agree. And I think, as I said, it's something to visit next year, balanced with the opportunities that we have at the time and how we're doing. But we what is important here is we are heading to a position where we can make that decision. We can make look at that. We will have earnings that we can distribute and cash that we are generating. And we would have paid down our COVID CBIL loans as well. So at the moment, obviously, some of our cash is going into that, paying all those loans back that we were very grateful to receive and support the company at the time. And in the long term, we'll have that cash will be free as well. And so maybe that's the sort of free cash flow that the moment of paying off the loans could be used to look at the dividend in the future.

50:09 So I think that's all the questions that have been put to us and I think we've answered them all. So again, I'm back to yourselves. Perfect, Andy, John, Rob, absolutely. And thank you very much indeed for being so generous of your time there in addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended, just for you to review to then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform. But, Andy, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great. Yes.

50:55 So again, it's a thanks to all our long term holders, people that have supported the company during the period of COVID in particular in that difficult time. We got through that. We won the big contract in The States that is now becoming a very big success with that customer and seeing an industry as a showcase. We now have three facilities that we've opened in the last ten years because the Burnley one was a new facility ten years ago. Then in one of the South Of England and now one in The U. S. We have developed our services very significantly to digitalize them as well, take advantage of some of the latest technologies that are available.

51:44 And we really now feel that we are at that crossover heading back into profitability and hoping to start to think about posting record years going forward. And therefore, that has been a very tough journey. But what it's done is it's given us, we think, a strong moat in terms of new competition and a great opportunity as you see us growing the business very rapidly still, and yet starting to look at generating cash as well. So thank you for listening today. Thank you for being patient in the time it's taken to get to where we are now. And hopefully, we could all enjoy the benefits of moving into profitability in the next six months.

52:33 Andy, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of VELOSITES PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.