Company Issues Shareholder Letter
Vertical Aerospace Ltd. (“Vertical” or the "Company") (NYSE:
EVTL; EVTLW), a global aerospace and technology company that is
pioneering zero emission aviation, announces its financial results
for the third quarter ended September 30, 2022. The Company has
also issued a shareholder letter discussing its operating results
and management commentary, which is posted to its investor
relations website at investor.vertical-aerospace.com.
Stephen Fitzpatrick, Vertical Founder and CEO, said: “We
recently celebrated ‘wheels up’ with our VX4 aircraft a few weeks
ago which was an incredibly proud moment for the whole team. As we
ramp up our flight test programme, with a close eye on capital
spend, we are moving onwards and upwards. I look forward to sharing
more news about our flight test programme in the coming
months.”
Third Quarter 2022 and Recent Operational Highlights
- On September 22, 2022, the UK’s Civil Aviation Authority (CAA)
issued a Permit to Fly for the VX4, and on September 24, 2022, the
full-scale VX4 Prototype successfully lifted from the ground under
tethered conditions with pilot Justin ‘Jif’ Paines on board.
- To date, under its CAA Permit to Fly, Vertical has undertaken
14 piloted flight tests and 5.5 hours of continuous propeller
turning test operations.
- Vertical welcomed Amy Round as Chief People Officer, who joined
on October 17, 2022, from OVO Energy where she was Director of
Talent, having previously spent nine years at Google running its
EMEA people division.
- We have continued to progress our joint working group with
American Airlines. A joint Vertical and American team has been
regularly engaging during the third quarter, collaborating on a
framework for exploration of the future of advanced air mobility
and potential markets for eVTOL operations in the United States. As
a result of this workstream, and the increased depth of our joint
operational planning, we have agreed with American to extend the
timeline for entering into a master purchase agreement that will
contain the final terms for the purchase of our aircraft for up to
one year from the date of this release, to ensure it reflects the
final corporate framework and outputs of the detailed operational
planning.
Third Quarter 2022 Financial Highlights
- Vertical reported a net operating loss of £19m for the three
months ended September 30, 2022, compared to a net operating loss
of £8m for the three months ended September 30, 2021.
- As of September 30, 2022, Vertical had cash at bank and
short-term deposits totalling £145m, which will be invested in the
development of the company’s test and certification activities and
in the people, systems and processes that support the company.
- In August 2022, to support ongoing capital requirements,
Vertical established an equity subscription line with Nomura, which
will allow Vertical to issue up to $100 million in new ordinary
shares. This facility is intended to provide flexibility around the
timing of issuing new stock to minimise dilution.
- As of September 30, 2022, Vertical had issued 1,103,863
ordinary shares using the equity subscription line for an aggregate
gross purchase price of $8.9m, and up to $91.1m in aggregate gross
purchase price of ordinary shares remained available for sale under
the equity subscription line.
Financial Outlook
- The 2022 capital plan continues to remain on track, with net
cash outflows to be used in operating activities in the fourth
quarter of the year expected to be between £20m and £25m.
The above forward-looking statements reflect our expectations
for the three months ending December 31, 2022 as of November 9,
2022, and are subject to substantial uncertainty. Our results are
based on assumptions that we believe to be reasonable as of this
date, but may be materially affected by many factors, as discussed
below in “Forward-Looking Statements.”
About Vertical Aerospace
Vertical Aerospace is pioneering electric aviation. The company
was founded in 2016 by Stephen Fitzpatrick, an established
entrepreneur best known as the founder of the OVO Group, a leading
energy and technology group and Europe’s largest independent energy
retailer. Over the past six years, Vertical has focused on building
the most experienced and senior team in the eVTOL industry, who
have over 1,700 combined years of engineering experience, and have
certified and supported over 30 different civil and military
aircraft and propulsion systems. Vertical has forged strong
relationships with industry-leading players to develop the various
components of its aircraft and build a sophisticated eVTOL
ecosystem, creating efficiencies across the manufacturing
processes, aircraft operations and maintenance.
Vertical’s ordinary shares and warrants commenced trading on the
NYSE in December 2021 under the tickers “EVTL” and “EVTLW,”
respectively.
About the VX4 eVTOL Aircraft
The piloted zero operating emissions four-passenger VX4, is
projected to be capable of travelling distances over 100 miles,
achieving top speeds of up to 200mph, while producing minimal noise
and has a low cost per passenger mile. The VX4 is expected to open
up advanced air mobility to a whole new range of passengers and
transform how we travel. Find out more: vertical-aerospace.com
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Any express or implied statements contained in this press
release that are not statements of historical fact may be deemed to
be forward-looking statements, including, without limitation,
statements regarding the certification and the commercialization of
the VX4 and related timelines, including with respect to the US
market and expectations surrounding pre-orders and commitments,
Vertical’s differential strategy compared to its peer group, the
features and capabilities of the VX4, the transition towards a
net-zero emissions economy, the sufficiency of Vertical’s cash and
cash equivalents to fund operations, the plans and objectives of
management for future operations and capital expenditures, expected
financial performance and operational performance for the quarter
and fiscal year ending December 31, 2022, as well as statements
that include the words “expect,” “intend,” “plan,” “believe,”
“project,” “forecast,” “estimate,” “may,” “should,” “anticipate,”
“will,” “aim,” “potential,” “continue,” “are likely to” and similar
statements of a future or forward-looking nature. Forward-looking
statements are neither promises nor guarantees, but involve known
and unknown risks and uncertainties that could cause actual results
to differ materially from those projected, including, without
limitation: Vertical’s limited operating history without
manufactured non-prototype aircraft or completed eVTOL aircraft
customer order; Vertical’s history of losses and the expectation to
incur significant expenses and continuing losses for the
foreseeable future; the market for eVTOL aircraft being in a
relatively early stage; the potential inability of Vertical to
produce or launch aircraft in the volumes and on timelines
projected; the potential inability of Vertical to obtain the
necessary certifications on the timelines projected; any accidents
or incidents involving eVTOL aircraft could harm Vertical’s
business; Vertical’s dependence on partners and suppliers for the
components in its aircraft and for operational needs; the potential
that certain of Vertical’s strategic partnerships may not
materialize into long-term partnership arrangements; all of the
pre-orders Vertical has received for its aircraft are not legally
binding, conditional and may be terminated without penalty at any
time by either party, and if these orders are cancelled, modified,
delayed or not placed in accordance with the terms agreed with each
party, Vertical’s business, results of operations, liquidity and
cash flow will be materially adversely affected; any potential
failure by Vertical to effectively manage its growth; the impact of
COVID-19 on Vertical’s business; Vertical has identified material
weaknesses in its internal controls over financial reporting and
may be unable to remediate the material weaknesses; Vertical's
dependence on our senior management team and other highly skilled
personnel; as a foreign private issuer Vertical follows certain
home country corporate governance rules, is not subject to U.S.
proxy rules and is subject to Exchange Act reporting obligations
that, to some extent, are more lenient and less frequent than those
of a U.S. domestic public company; and the other important factors
discussed under the caption “Risk Factors” in our Annual Report on
Form 20-F filed with the U.S. Securities and Exchange Commission
(“SEC”) on April 29, 2022, as such factors may be updated from time
to time in Vertical’s other filings with the SEC. Any
forward-looking statements contained in this press release speak
only as of the date hereof and accordingly undue reliance should
not be placed on such statements. Vertical disclaims any obligation
or undertaking to update or revise any forward-looking statements
contained in this press release, whether as a result of new
information, future events or otherwise, other than to the extent
required by applicable law.
Unaudited Condensed Consolidated
Interim Statements of Operations and Comprehensive Loss
(in pounds thousands, except share and
per share data)
3 months ended September
30,
9 months ended September
30,
2022
2021
2022
2021
Revenue
-
66
-
132
Cost of sales
-
(40)
-
(65)
Gross profit
-
26
-
67
Research and development expenses
(9,747)
(5,120)
(29,143)
(11,627)
Administrative expenses
(9,783)
(5,247)
(33,249)
(30,377)
Related party administrative expenses
(15)
12
(15)
(115)
Other operating income
916
1,920
4,323
11,606
Operating loss
(18,629)
(8,409)
(58,084)
(30,446)
Finance income
238
14
238
14
Finance costs
(99,504)
(109)
(77,070)
(146)
Related party finance costs
-
-
-
(483)
Net finance income/(costs)
(99,266)
(95)
(76,832)
(615)
Loss before tax
(117,895)
(8,504)
(134,916)
(31,061)
Income tax expense
-
-
-
-
Net loss for the period
(117,895)
(8,504)
(134,916)
(31,061)
Foreign exchange translation
differences
8,947
-
18,429
-
Total comprehensive loss for the
period
(108,948)
(8,504)
(116,487)
(31,061)
Basic and diluted loss per share
£(0.66)
£(0.07)
£(0.76)
£(0.26)
Number of shares
178,427,999
129,727,235
178,376,519
120,003,967
Unaudited Condensed Consolidated
Interim Statements of Financial Position
(in pounds thousands)
September 30, 2022
December 31, 2021
Non-current assets
Property, plant and equipment
1,712
1,834
Right of use assets
2,007
1,969
Intangible assets
3,776
4,208
7,495
8,011
Current assets
Trade and other receivables
18,397
12,658
Short term deposits
61,076
-
Cash at bank
83,686
212,660
163,159
225,318
Total assets
170,654
233,329
Equity
Share capital
16
16
Other reserve
90,047
63,314
Share premium
256,837
248,354
Accumulated deficit
(384,980)
(250,123)
Total equity
(38,080)
61,561
Non-current liabilities
Long term lease liabilities
1,588
1,580
Provisions
99
95
Derivative financial liabilities
179,459
112,799
Trade and other payables
7,210
5,975
188,356
120,449
Current liabilities
Short term lease liabilities
430
362
Warrant liabilities
12,764
10,730
Trade and other payables
7,184
40,227
20,378
51,319
Total liabilities
208,734
171,768
Total equity and liabilities
170,654
233,329
Unaudited Condensed Consolidated
Interim Statements of Cash Flows
(in pounds thousands)
9 months ended September
30,
2022
2021
Cash flows from operating
activities
Net loss for the period
(134,916)
(31,061)
Adjustments to cash flows from non-cash
items
Depreciation and amortization
1,320
565
Depreciation on right of use assets
294
105
Finance (income)/costs
76,832
56
Related party finance costs
-
483
Share based payment transactions
8,025
16,815
Income tax expense/(benefit)
-
-
(48,445)
(13,037)
Working capital adjustments
Decrease/(Increase) in trade and other
receivables
1,652
(9,778)
(Decrease)/increase in trade and other
payables
(31,808)
5,972
Net cash flows used in operating
activities
(78,601)
(16,843)
Cash flows from investing
activities
Increase in short term deposits
(60,835)
-
Acquisitions of property plant and
equipment
(256)
(620)
Acquisition of intangible assets
(464)
(1,001)
Net cash flows used in investing
activities
(61,555)
(1,621)
Cash flows from financing
activities
Proceeds from secured convertible
notes
-
25,000
Proceeds from the issuance of share
capital
215
-
Proceeds from related party borrowings
-
2,208
Payments to lease creditors
(358)
(132)
Net cash flows (used)/generated from
financing activities
(143)
27,076
Net (decrease)/increase in cash at
bank
(140,299)
8,612
Cash at bank, beginning of the
period
212,660
839
Effect of foreign exchange rate
changes
11,325
52
Cash at bank, end of the period
83,686
9,503
Selected Notes and Supplemental
Disclosures
(in pounds thousands)
Other operating income
3 months ended September
30,
9 months ended September
30,
2022
2021
2022
2021
Government grants
187
891
1,401
9,890
R&D tax credit
729
1,029
2,922
1,716
916
1,920
4,323
11,606
Expenses by nature
3 months ended September
30,
9 months ended September
30,
2022
2021
2022
2021
Research and development staff costs
3,589
2,241
10,278
5,268
Research and development consultancy
3,608
692
11,544
1,744
Research and development components, parts
and tooling
2,550
2,187
7,321
4,615
Total research and development
9,747
5,120
29,143
11,627
Staff costs excluding share-based payment
expenses
2,556
1,871
8,284
4,390
Share based payment expenses
732
-
8,025
16,815
Consultancy costs
1,144
355
2,135
1,195
Legal and financial advisory costs
746
676
2,221
3,339
HR advisory and recruitment costs
538
837
1,682
1,422
IT Hardware and software costs
1,145
496
2,810
1,008
Related party administrative expenses
15
(12)
15
115
Insurance expenses
916
20
2,646
28
Marketing costs
621
529
1,376
1,019
Other administrative expenses
206
102
1,471
238
Premises expenses
587
91
985
208
Depreciation expense
163
96
423
258
Amortization expense
324
139
897
307
Depreciation on right of use property
assets
105
35
294
105
Total administrative costs
9,798
5,235
33,264
30,492
Total administrative and research and
development expenses
19,545
10,355
62,407
42,119
Share based payments In March 2022 the extant Vertical
Aerospace Group Ltd Enterprise Management Incentive (“EMI”) was
modified whereby all option holders exchanged their existing
options for newly issued options in the Company resulting in
23,213,933 replacement options being granted. A total credit of
£7,276 thousand has been recognised within other reserves during
the nine months ending September 30, 2022 relating to equity
settled share-based payment transactions in relation to employees
(September 30, 2021: £117 thousand). An additional £749 thousand
was recognised with respect to third parties (September 30, 2021:
£16,815 thousand).
Finance income/(costs)
3 months ended September
30,
9 months ended September
30,
2022
2021
2022
2021
In-kind interest on convertible loan
notes
(4,522)
-
(11,527)
-
Interest on loans from related parties
-
-
-
(483)
Foreign exchange loss
(17,861)
-
(30,842)
-
Fair value movements
-
(2)
-
(5)
Interest expense on leases
(35)
(17)
(102)
(51)
Fair value movements on convertible loan
notes
(71,260)
-
(33,167)
-
Fair value movements on warrant
liabilities
(5,795)
-
(1,422)
-
Other
(31)
(90)
(4)
(90)
Total finance costs
(99,504)
(109)
(77,070)
(629)
3 months ended September
30,
9 months ended September
30,
2022
2021
2022
2021
Interest on loans to related parties
238
-
238
-
Foreign exchange gain
-
14
-
14
Fair value movements on convertible loan
notes
-
-
-
-
Fair value movements on warrant
liabilities
-
-
-
Total finance income
238
14
238
14
Share capital and reserves
Allotted, called up and fully paid
shares
September 30, 2022
December 31, 2021
No.
£
No.
£
Ordinary of $0.0001 each
210,389,355
15,915
209,135,382
15,804
210,389,355
15,915
209,135,382
15,804
In addition, 101,350,465 shares had been authorised for
allotment at September 30, 2022.
Other reserves During the nine months ended September 30,
2022 other reserves increased by £1,010 thousand as a result of the
reclassification of warrants; £7,276 thousand in respect of share
based payments as a result of the modification of the EMI scheme;
and £18,429 thousand reflecting cumulative translation
differences.
Share Premium On June 5, 2022, a total of 150,000 shares
were issued to third parties resulting in increase in share premium
of £749 thousand. Following the establishment of an equity
subscription line, during the three months ended September 30, 2022
a total of 1,103,863 shares were issued resulting in an increase in
share premium of £7,734 thousand.
Warrant Liability As at September 30, 2022 and December
31, 2021, the following warrants were issued but not exercised and
therefore recorded as a liability:
September 30,
December 31,
2022
2021
Public Warrants
15,265,146
15,265,146
Mudrick Warrants
4,000,000
4,000,000
Outstanding, end of period
19,265,146
19,265,146
The following table shows the change in fair value of the
warrants during the period ended September 30, 2022:
£ 000
December 31, 2021
10,730
Addition/(Disposal) of private placement
warrants
-
Reclassification of options to equity
(1,010)
Change in fair value
1,422
Exchange differences on translation
1,622
As at September 30, 2022
12,764
Each public warrant entitles the registered holder to purchase
one share of common stock at a price of $11.50 per share. Once
exercisable, the Company may redeem public warrants at a price of
$0.01 per warrant if the closing price of common stock equals or
exceeds $18.00 per share for any 20 trading days within a 30
trading day period.
Derivative financial liabilities Convertible Senior
Secured Notes consists of the following:
Mudrick
£ 000
As at December 31, 2021
112,799
Fair value movements
33,167
In-kind interest accrued
11,527
Exchange differences on translation
21,996
As at September 30, 2022
179,459
On December 16, 2021, Mudrick Capital Management purchased
Convertible Senior Secured Notes of an aggregate principal amount
of £151,000 thousand ($200,000 thousand) for an aggregate purchase
price of £145,000 thousand ($192,000 thousand). The Convertible
Senior Secured Notes are initially convertible into up to
18,181,820 ordinary shares at an initial conversion rate of 90.9091
ordinary shares per £824 ($1,000).
In accordance with International Financial Reporting Standards
9: Financial Instruments, this is treated as a hybrid instrument
and is designated in its entirety as fair value through profit or
loss.
The Company has elected to pay interest in-kind at 9% per annum.
Interest is paid semi-annually in arrears and on June 15, 2022 the
Company authorised the payment of interest by increasing the
nominal amount of the outstanding Convertible Senior Secured Notes
by £7,005 thousand ($8,950 thousand).
Several covenants exist including retention of $10 million cash.
Accordingly, cash at bank includes £8,953 thousand deemed to be
restricted as at September 30, 2022.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221109005188/en/
For more information: Vertical Media Victoria Madden (Head of
Communications) Victoria.madden@vertical-aerospace.com +44 7885
571989 Ambika Sharma nepeanverticalteam@nepean.co.uk +44 7596 474
020 Vertical Investors Eduardo Royes
investors@vertical-aerospace.com +1 (646) 200-8871
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