Vertical Aerospace Ltd. — FY2021 Form 20-F
Reporting period: Year ended December 31, 2021; filed April 28, 2022. Although the request refers to 2021 Q4, this is an annual report, not a standalone quarterly filing. Financial statements use IFRS and are presented in pounds sterling (£), unless otherwise noted.
Business context
Vertical is a pre-revenue developer of electric vertical takeoff and landing (eVTOL) aircraft. Its principal program is the VX4, designed for a pilot and up to four passengers. The company completed its SPAC business combination in December 2021 and began trading on the NYSE. It had not sold aircraft or generated aircraft-manufacturing revenue by year-end; reported revenue came from small, ad hoc engineering consultancy engagements.
Key financial metrics
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | £132,000 | £87,000 |
| Gross profit | £68,000 | £43,000 |
| Research and development expense | £24.291 million | £9.971 million |
| Administrative expense | £264.260 million | £3.760 million |
| Other operating income, including grants and R&D credits | £11.352 million | £2.317 million |
| Operating loss | £277.239 million | £11.515 million |
| Net loss | £245.224 million | £12.326 million |
| Net cash used in operating activities | £27.550 million | £12.012 million |
| Net cash used in investing activities | £3.354 million | £0.688 million |
| Net cash from financing activities | £244.713 million | £12.510 million |
| Cash at year-end | £212.660 million | £0.839 million |
Gross margin was approximately 52% on minimal consultancy revenue and is not representative of future aircraft economics. At December 31, 2021, total assets were £233.329 million, total liabilities £171.768 million, and equity £61.561 million. Current liabilities were £51.319 million; lease liabilities totaled £1.942 million.
The company issued $200 million principal amount of 2026 convertible senior secured notes for $192 million in proceeds. They bear 7% annual cash interest or, at the company’s option, 9% paid-in-kind interest. Their year-end fair-value carrying amount was £112.799 million; this accounting value is not the principal repayment amount. The notes are convertible into shares and create potential dilution. The filing also reports £10.730 million of warrant liabilities.
Changes and unusual items
- Revenue rose 52% year over year, but remained immaterial relative to development costs.
- Administrative expense surged largely due to business-combination and listing-related items: £111.996 million of share-based payment expense and £111.611 million of warrant expense. The filing separately identifies an £84.712 million non-cash listing expense within share-based payment expense, as well as transaction, advisory, and stamp-duty costs.
- Net finance income of £32.015 million included £32.578 million of fair-value gains, principally on the convertible notes and warrants; these non-cash valuation movements materially reduced the reported net loss.
- The business combination and financing substantially increased cash. The filing reports approximately $253 million of net proceeds available from the transaction and related financing, including the PIPE and notes; it also describes a £286 million increase in cash compared with the June 2021 balance sheet.
- UK government grants and R&D tax credits contributed £8.829 million and £2.388 million, respectively, to 2021 other operating income.
Outlook, risks, and contingencies
- Management targeted VX4 certification and initial manufacturing and deliveries in 2025, subject to CAA and EASA certification; FAA validation was expected later. These are projections, not achieved milestones.
- Management estimated approximately $450 million of funding would be needed from the business combination through expected profitability in 2025, including approximately $130 million over the next 12 months after the report date. Management concluded the company could continue as a going concern for at least 12 months, but future funding remains essential and may require additional debt or equity.
- Management projected break-even at about 100 aircraft annually. It estimated that 1,350 aircraft of announced pre-orders and options could represent approximately $5.4 billion in revenue; the orders were conditional, subject to final purchase agreements, and had generated no customer deposits as of the report date. They should not be treated as firm backlog or revenue.
- Core risks include certification or manufacturing delays, inability to scale production, supplier dependence, safety and technical performance, uncertain eVTOL adoption, competition, and the need for additional capital. COVID-19, supply-chain pressures, inflation, and the Russia-Ukraine conflict could affect costs and schedules.
- Disclosure controls and procedures were ineffective at year-end because of material weaknesses in accounting staffing and expertise, segregation of duties, formal accounting controls, and timely accounting for complex matters. Remediation was underway but not yet complete. The independent auditor issued an unmodified opinion on the IFRS financial statements.
- Stephen Fitzpatrick controlled approximately 71.7% of shares reported as beneficially owned in the filing, creating concentrated voting control. The company did not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- Progress against VX4 testing, certification, production-facility, and 2025 delivery milestones.
- Available cash, restricted or committed cash, cash burn, and the timing and terms of any additional financing.
- Conversion of conditional pre-orders into binding purchase agreements, deposits, and enforceable delivery commitments.
- Actual unit costs, aircraft performance, production capacity, and whether the projected break-even volume and economics remain credible.
- Remediation and independent testing of the disclosed internal-control material weaknesses.
- Potential dilution from convertible notes, warrants, incentive awards, earn-out shares, and other share-linked arrangements.