Quickstep : Dec 2015 Quarterly Report & Appendix 4C

1. STRONG Q2 SALES

   
   

   Sales for the second quarter of FY16 were $11.6 million. Production of parts for the F‐35 Lightning II Joint Strike Fighter (JSF) and C‐130J Hercules continues to increase. Quickstep expects FY16 sales of $48 million, which represents annual sales growth of 20% compared to FY15.

   
   

2. FIRM ORDER BOOK

   
   

   At 31 December 2015, Quickstep's order book was valued in excess of $120 million. This includes committed orders from Lockheed Martin for C‐130J wing flaps and from Northrop Grumman and BAE Systems for JSF Program components. Manufacturing under these orders will extend through to FY19.

   
   

3. PROFITABILITY

1. STEADY LOCKHEED MARTIN C-130J PRODUCTION

   
   

   Quickstep is the exclusive supplier of composite wing flaps to Lockheed Martin for the C‐130J Hercules aircraft under a five‐ year memorandum of agreement (MoA) valued at US$75 million.

   
   

   During the quarter, eight ship‐sets were completed, making 18 for the half which is consistent to plan. C‐130J orders extend through to 2019 in line with Lockheed Martin's recently announced multi‐year contract with the

   U.S Department of Defense.

   
   

2. JSF PRODUCTION GROWTH CONTINUES

   
   

   Quickstep is the sole supplier globally to Northrop Grumman for 21 JSF parts including doors, panels, lower skins and other composite parts. In Q2 FY16 Quickstep completed 132 parts compared to 155 parts in Q1 FY16 and 464 parts in total for FY15. Production is expected to increase three‐fold over the next three years.

   
   

   Qualification of vertical tail fairings components was completed in Q1, enabling commencement of production, and the first vertical tail fairings were delivered in December 2015. Four vertical tail fairings were delivered in Q2. The fairings are one of three fundamental components, which will be manufactured by Quickstep for JSF vertical tails. Qualification of vertical tail skins and spars continues and, subject to client approval, initial deliveries are expected to commence in Q4 FY16.

   
   

   Under the agreement with BAE's supplier Marand Precision Engineering, Quickstep will supply 700 sets of composite parts including skins, spars and fairings over the next 14 years.

   
   

   The company continues to progress discussions with current customers and targeted aerospace original equipment manufacturers (OEMs) regarding new contracts and mandates.

3. PREMIER'S NSW MANUFACTURING AWARD

1. WAURN PONDS AUTOMOTIVE PRODUCTION FACILITY AND R&D CENTRE

   
   

   During Q1 Quickstep established its Global R&D centre at Deakin University's Waurn Ponds campus near the Geelong automotive hub. The centre will manage ongoing development of all Quickstep technologies and intellectual property, supporting the company's aerospace and automotive facilities in Australia and Germany. Quickstep's relocation of R&D from Germany to Waurn Ponds was supported by the State Government of Victoria's investment promotion arm Invest Victoria. Quickstep maintains a long‐standing strategic relationship with Deakin University through a strategic R&D and education agreement.

   
   

   Fitout of the Automotive division's site for production at Waurn Ponds is expected to be completed during Q3, when it will become the production facility for Quickstep's contract to produce components for a global passenger vehicle manufacturer.

   
   

2. THALES HAWKEI UPDATE

   
   

   Quickstep is the exclusive supplier of the bonnet, side skirts and mud guards composite parts for Thales Australia's Hawkei vehicles, and work has begun on Quickstep's first orders for tooling and design and development. This follows the Australian government's decision to award Thales Australia a $1.3 billion supply contract to build 1,100 military vehicles and 1,000 trailers in October 2015. Production of composite parts using Quickstep's innovative Qure and resin spray transfer (RST) technologies is expected to commence in Q4.

   
   

3. AUTOMOTIVE COMMERCIALISATION

1. CORPORATE

   
   

2. CAPITAL RAISING

   
   

   During December 2015 Quickstep successfully completed a fully underwritten $22 million (before costs) capital raising. This included a $5 million placement to a strategic investor at $0.15 per share, followed by a 1 for 3.3 non renounceable pro rata entitlement offer at 13c per share. The raising will fund capital expenditure associated with the forward C‐130J and JSF sales pipeline, strengthen the company's balance sheet by reducing short term debt, set up Quickstep's new R&D facility at Waurn Ponds and enable Quickstep to continue to commercialise the application of the company's existing technologies.

   
   

3. CASH POSITION

   
   

   At the end of the quarter, the consolidated group cash balance was $15.4 million and the company held, in addition, $0.7 million in restricted term deposits to be held to maturity. Following completion of the capital raising Quickstep has repaid all short‐term debt including $2 million provided by Australia's export credit agency, Efic, and the $3 million loan from Newmarket Financing Management Pty Limited and associates.

   
   

4. CASHFLOW

   
   

   Operating cashflow for Q2 FY16 was $(2.4) million and $(0.8) million for the half year. Q2 operating cashflow was impacted by sales and customer payment timing and the investment of circa $1 million in inventory ahead of capital work shuts and ramp‐up of the JSF vertical tail program. Quickstep commenced a capital expenditure program in Q2 to support future contracted growth, with a $0.8m spend in Q2. It is expected that the company will return to positive cash flow in Q3 FY16. The net increase in cash for the quarter post loan repayments, capital raising costs and capital spend was $12.7 million.

   
   

5. BOARD APPOINTMENT

Quickstep Holdings Limited issued this content on 27 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 03 February 2016 02:44:16 UTC

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