Vertical Aerospace Ltd. — FY2022 Form 20-F
Reporting period: Year ended December 31, 2022; this is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and presented in pounds sterling unless otherwise stated.
Business context
Vertical is a pre-revenue aerospace company developing the VX4 electric vertical takeoff and landing aircraft. It began early flight testing of a full-scale VX4 prototype in September 2022 and is pursuing certification by the U.K. Civil Aviation Authority and EASA, with subsequent validation sought from the FAA. The company had 330 employees at year-end.
Key financial metrics
| Metric | FY2022 / December 31, 2022 | FY2021 / December 31, 2021 |
|---|---|---|
| Revenue | £0 | £132,000 |
| Research and development expense | £49.1 million | £24.3 million |
| Administrative expense | £54.8 million | £264.3 million |
| Operating loss | £98.1 million | £277.2 million |
| Net loss | £94.4 million | £245.2 million |
| Basic and diluted loss per share | £0.53 | £1.98 |
| Net cash used in operating activities | £103.7 million | £27.6 million |
| Net cash used in investing activities | £63.0 million | £3.4 million |
| Net cash from financing activities | £7.2 million | £244.7 million |
| Cash and cash equivalents, including short-term deposits | £122.8 million | £212.7 million |
| Total assets / total liabilities | £151.2 million / £143.9 million | £233.3 million / £171.8 million |
There was no meaningful gross margin in 2022 because the company recorded no revenue. Cash at bank was £62.9 million, with a further £59.9 million in short-term deposits and £1.7 million in restricted cash. Operating cash outflow rose mainly with increased R&D spending; investing outflow largely reflected cash placed on short-term deposit.
The company issued $200 million principal amount of 2026 convertible senior secured notes, purchased for $192 million. Notes carry 7% annual cash interest or, at the company’s option, 9% paid-in-kind interest; Vertical elected PIK interest, and reported £18.4 million of incurred PIK interest at year-end. The notes’ IFRS fair-value liability was £115.2 million. Lease liabilities totaled £3.2 million. The filing reports £8.3 million of cash subject to note covenants, including a $10 million minimum-cash covenant.
Changes versus the prior comparable year
- Revenue fell to zero from £132,000 after the disposal of the engineering consultancy subsidiary that had generated the prior-period revenue.
- R&D expense more than doubled, reflecting higher aircraft testing and development activity, increased R&D staffing and consultancy spending.
- Operating and net losses narrowed substantially from 2021, but the comparison is distorted by large 2021 non-cash and transaction-related expenses, including share-based and warrant expenses associated with the business combination. 2022 included £23.2 million of share-based payment expense.
- Other operating income declined to £5.9 million from £11.4 million: higher U.K. R&D tax credits were offset by lower government grant income.
- Net finance income declined to £3.7 million from £32.0 million. 2022 included £31.6 million of fair-value gains, partly offset by PIK interest and foreign-exchange losses; these non-cash valuation movements make the reported result less indicative of operating performance.
- Cash and cash equivalents including short-term deposits decreased from £212.7 million to £122.8 million. Financing inflows were far lower than in 2021, when the business combination and related financings provided substantial proceeds.
Outlook, risks and unusual items
- Management estimated funding needs of approximately £90 million for the 12 months following the annual report and stated that additional capital would be needed to fund operations and maintain going-concern status. The auditor highlighted substantial doubt about the company’s ability to continue as a going concern; the statements assume continuation and include no adjustments for a failure to do so.
- The company had a three-year equity subscription facility with Nomura of up to $100 million gross. By year-end it had sold approximately 1.1 million shares and received about $8.5 million net; further use depends on market conditions and would dilute shareholders. The filing also describes plans to seek additional financing.
- Management reported early VX4 flight testing and planned further piloted and unpiloted testing in 2023. The report provides no firm numerical guidance for revenue, profitability, certification timing or commercial deliveries. Management said it was reviewing the program timeline.
- More than 1,400 aircraft were described as pre-ordered or subject to options, but these arrangements were conditional, non-binding and terminable without penalty until definitive purchase agreements are executed. Certain pre-delivery payments may be refundable. Marubeni paid a slot-reservation payment in January 2023; American Airlines’ payment was subject to conditions.
- Key risks include certification and production delays, the lack of a high-volume manufacturing facility, dependence on partners and suppliers, uncertain market adoption, and the need for substantial additional capital. The notes and equity facility also create interest, refinancing and dilution risks.
- U.S. export-control authorities issued a warning letter in January 2023 concerning an inadvertent release of controlled technology to third-party employees. The company said access was promptly terminated, disclosures were made, and the authorities closed the matter without criminal or administrative prosecution; the warning will remain on record.
- Material weaknesses in financial-reporting controls remained unremediated at December 31, 2022. Management concluded disclosure controls and internal control over financial reporting were not effective at year-end, although management stated the financial statements fairly present the company’s position and results in all material respects.
Important facts for investors to verify
- Whether Vertical can raise the capital needed on acceptable terms, and how long existing cash will support planned development and certification spending.
- Progress and timing of VX4 flight testing, type certification, production approvals and establishment of manufacturing capacity.
- Conversion of conditional pre-orders into binding purchase agreements, and the amounts, timing and refundability of any customer payments.
- Cash burn, deposit availability and compliance with the notes’ covenants, alongside the economics and dilution from further Nomura facility sales.
- Remediation and independent testing of the disclosed control weaknesses, plus the ongoing status of the export-control matter.