Vertical Aerospace Ltd. — FY2023 Form 20-F
Reporting period: Year ended December 31, 2023. The company reports under IFRS in pounds sterling; amounts below are in £ millions unless stated otherwise. This is an annual report, not a standalone fourth-quarter report.
Business context
Vertical is a pre-revenue developer of electric vertical take-off and landing aircraft. Its principal program is the VX4, designed for a pilot and up to four passengers. The first full-scale prototype completed remote, thrustborne flight testing in August 2023; a second prototype was under construction. The company had not manufactured non-prototype aircraft or generated aircraft sales revenue.
Financial and liquidity highlights
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | £0 | £0 |
| Research and development expense | £65.4m | £49.1m |
| Administrative expense | £40.8m | £54.8m |
| Operating loss | £101.9m | £98.1m |
| Net finance income | £19.3m | £3.7m |
| Income tax credit | £22.7m | — |
| Net loss | £59.9m | £94.4m |
| Net cash used in operating activities | £74.7m | £103.7m |
| Cash and cash equivalents at year-end | £48.7m | £62.9m |
Gross margin is not meaningful because the company reported no revenue or cost of sales. FY2023’s lower net loss primarily reflected a £22.7m R&D tax credit and higher net finance income; operating loss increased 4%. Finance income included fair-value gains and foreign-exchange gains, so it should not be read as operating performance. Cash flow from investing was positive £61.4m, mainly due to maturity of short-term deposits, not operating cash generation.
At December 31, 2023, total assets were £84.1m, total liabilities £133.9m, and shareholders’ equity was negative £49.8m. The $200m principal convertible senior secured notes carried at a £109.3m fair value on the balance sheet; the company elected to pay interest in kind at 9% and reported £38.4m of accrued PIK interest as of year-end. The notes include a $10m cash-retention covenant; £7.8m of year-end cash was identified as subject to covenant restrictions. Lease liabilities totaled £2.6m.
Changes versus FY2022
- R&D expense rose 33%, reflecting work on the first VX4 prototype and design and build activity for the second.
- Administrative expense fell 26%, mainly because share-based compensation expense declined from £23.2m to £8.8m.
- Operating cash outflow decreased 28%, mainly due to increased R&D tax-relief receipts.
- Cash and cash equivalents declined by £14.2m. Financing cash inflow was only £0.2m, compared with £7.2m in FY2022.
- The quarterly disclosures identify a reclassification of SME R&D tax relief from operating income to income tax credit. The correction did not change reported net loss for the affected interim periods.
Outlook, risks and unusual items
- Funding and going concern: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern. Management forecast approximately £70m of net operating cash outflows over the 12 months following the report, after expected grants and R&D tax receipts of about £28m. The company said available funding was expected to extend its cash runway into Q2 2025, but further capital is required and is not assured.
- Subsequent financing: Under a February 2024 agreement with CEO and majority shareholder Stephen Fitzpatrick’s affiliate, the company received $25m gross proceeds in March 2024 and expected, subject to conditions, up to a further $25m in Q3 2024. The investment involves newly issued shares and warrants and creates dilution and related-party governance considerations.
- Certification and execution: Management targeted VX4 type certification by the end of 2026. Certification, production approval, manufacturing facilities, supplier readiness, aircraft performance and market adoption remain uncertain. All disclosed aircraft pre-orders—reported at 1,500—were conditional, non-binding and terminable; some deposits may be refundable.
- Supplier exposure: Rolls-Royce announced it was considering exiting or reducing its Rolls-Royce Electrical business, which is developing the VX4 powertrain. Vertical said its contract remained binding and it was exploring alternatives.
- Listing and debt: The company received an NYSE notice in November 2023 for trading below the $1 minimum share price. Failure to regain compliance could lead to delisting; delisting is a fundamental change under the notes and could permit noteholders to demand cash repurchase, potentially worsening liquidity.
- Controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at December 31, 2023 because previously identified material weaknesses remained unremediated. The auditor did not provide an internal-controls attestation.
- Chronology to check: The supplied filing text includes an account of an August 2024 flight-test incident, although the report is signed March 14, 2024. This date conflict is not reconcilable from the supplied text and should be checked against the filed original and any subsequent filings.
Most important facts for investors to verify
- Current cash, cash restrictions, actual cash burn and financing received or available after the reporting date; confirm whether the additional founder-funding tranche and other planned financing closed.
- Liquidity and repayment implications of the $200m notes, including PIK accrual, covenant compliance, anti-dilution provisions and potential consequences of NYSE delisting.
- Progress against VX4 certification and prototype milestones, including any revised timetable, production-facility plans and supplier arrangements following Rolls-Royce’s strategic review.
- Whether conditional pre-orders become binding purchase agreements, and the terms, refundability and timing of customer pre-delivery payments.
- Status of remediation and testing of the material weaknesses in financial reporting controls, and reconciliation of the filing’s inconsistent chronology concerning the reported 2024 flight-test incident.