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Quickstep sales increase 229% to $39.5 million

News International-French

28 Aug 2015

Advanced manufacturing company Quickstep Holdings Limited reported a 229% increase in sales to $39.5 million, up from $12 million in FY2014.

Total revenue, including income from grants and tax rebates, was up 132% to $41.3, compared to $17.8 million. Aerospace manufacturing sales increased 181% to $33.7 million from $12.0 million, and income from the sale of Quickstep's technology for aerospace was $5.8 million. Quickstep's firm order book, which mostly comprises aerospace manufacturing work to be completed in the next two years, grew to $74.9 million at 30 June 2015. The company's net loss reduced to $3.9 million reflecting higher production and improved cash flow, compared to $11.2 million in FY14.

Quickstep managing director, David Marino, said: "Our aerospace manufacturing operations performed well being on or ahead of schedule by the year end. We delivered our first ever half year positive operating profit in H2 FY15 as sales of F-35 Lightning II Joint Strike Fighter carbon fibre doors and panels and C-130J wing flaps accelerated. Increasing manufacturing rates of JSF aircraft in the USA will drive production of Quickstep parts for the program in the next two years. Qualification prior to commencing manufacture of JSF vertical tail components is progressing well, with rollout expected to begin in the fourth quarter of FY2016, which will further accelerate sales growth.

"Consistent production of C-130 J wing flaps at a rate of three sets of flaps per month has showcased our ability to support global supply chains. This is an exclusive supply contract won by Quickstep against global competition and is expected to continue for several more years.”

"We are encouraged by winning our first contract with a global auto original equipment manufacturer, as it demonstrates the disruptive potential of our technology for curing carbon fibre faster and more efficiently. The German sponsored PRESCHE project in conjunction with Audi, completed after three years, has confirmed our Qure and resin spray transfer technology can outperform alternative technologies at volumes up to 10,000 parts per year. While our present focus is on securing niche volume contracts, we are investing in our technology to improve its volume production capability as part of a robot supported production cell primarily aimed at large volume parts principally for the automotive industry. We want to build on this achievement to develop 'RapidQure' to progress up to 50,000 parts per annum, offering a superior and more cost effective advanced manufacturing alternative.”

"Regulation is driving change in the aerospace and automotive industries with carbon fibre consumption increasing by over 8% pa. over the last 6 years. Aerospace and Automotive manufacturers are reducing the weight of their products to lower fuel consumption and emissions driving carbon fibre demand. This is an important catalyst for the uptake of Quickstep's technology as carbon fibre is much lighter than steel or aluminium.”

"Quickstep has commenced its repayment of debt and reducing its reliance on deferred payments during the financial year. This has been facilitated by increased production in our aerospace manufacturing operations, improved inventory management and favorable currency conditions.”

"With our production success and new technology acceptance there are significant increased enquiries for parts from industry. These high quality opportunities are being developed in both Aerospace and Automotive. Our market research indicates a worldwide shortage of capacity to meet parts demand in the industry which is further driving potential growth opportunities.”

"We have strengthened our management team to extend our automotive skills and ability to manage the group’s intellectual property internationally. Quickstep is today a much stronger company with a track record of production, focus on an improving our balance sheet and significant opportunities for growth."

Strong aerospace manufacturing sales
Quickstep has overall agreements to supply JSF parts to Northrop Grumman and BAE Systems valued at up to US$700 million over two decades.

The company currently manufactures fuselage parts for Northrop Grumman at a state of the art facility in Bankstown. Production increased to 464 parts in FY2015, including 136 components in the fourth quarter, compared to 188 for all of FY2014.

Qualification processes are underway to produce JSF vertical tail components for Marand Precision Engineering and BAE Systems. Over 14 years, Quickstep will supply 700 sets of vertical tail carbon fibre composite parts including skins, spars and fairings, and the first deliveries are expected in the fourth quarter of FY2016.

The company's program to manufacture C-130J wing flaps under a five-year, US$75 million memorandum of agreement with Lockheed Martin is now well established and 31 ship-sets of C-130J wing flaps were completed in FY2015, up from seven sets in the previous year. New C-130J purchase orders contributed to Quickstep's growing order book and a new memorandum of agreement, including an extension to the existing agreement, is expected to be signed in early FY2016.

The company's Bankstown facility achieved accreditation from Nadcap, the worldwide cooperative review of major companies administered by the Performance Review Institute for quality assurance within the aerospace and automotive industries. This is a necessary precursor for work from companies such as Airbus and Boeing, and will open new markets for Quickstep.

Qure commercial aerospace sale nears completion
Quickstep's patented 'Qure' is a disruptive technology which transfers heat through fluids to manufacture carbon fibre composite components more effectively, lowering the cost of manufacturing aerospace components. The company's first commercial sale neared completion as ORPE Technologiya completed testing at Quickstep’s Munich facility, and accepted the new machine for delivery and installation. Quickstep's performance bonds have been released, freeing working capital, and installation is expected to be completed in FY2016.

The company continued to market its technology to commercial and defence organisations, and has commenced qualification programs with several prime contractors. These programs are necessary to demonstrate the new technology's ability to manufacture parts exactly to clients' specifications. This activity has focused on Qure’s manufacturing for a broad range of specifications including cored and large integrated structures, and during complex curing cycles.

First automotive contracts
Quickstep's automotive solution combines Qure and an innovative resin spray transfer (RST) technology to make automotive parts with a Class A paint finish, at a lower cost. After balance date, the company secured an order to produce a series of 1,000 lightweight carbon fibre parts, and production of the first engine compartment parts is expected to begin in early 2016. This complements the letter of intent signed with Thales Australia to produce carbon fibre bonnets, side skirts and mud guards for the Hawkei protected armoured vehicle. Thales’ and Quickstep's joint design activity to prepare components for a pilot build of the vehicle is underway, and a government sourcing decision is anticipated later this year. This agreement is expected to be valued in excess of $8 million.

The PRESCHE project's final report to the German government and Audi confirmed the ability of Quickstep's Qure and RST processes to produce composite parts at lower costs in niche volumes up to 10,000 parts per annum. Smaller volume contracts remain Quickstep's focus while the company invests to develop its ‘next-generation’ high volume 'RapidQure' technology at Deakin University's Waurn Ponds' 'Carbon Cluster', near the Geelong automotive hub. The fit-out of Quickstep's automotive division's headquarters is continuing, partially funded by a Geelong Region Innovation and Investment Fund (GRIIF) grant of $1.76 million, and will be completed in the second quarter of FY2016.

Cash flow and balance sheet
Quickstep held $1.2 million cash and $0.7 million in restricted term deposits at 30 June 2015. The company maintains a $10 million debt facility and a $2.5 million short term debt facility, of which $0.5million was repaid in June 2015, with the Export Finance and Insurance Corporation (Efic). The company also has a fully drawn $3 million, 18-month facility with Newmarket Financing Management.

The aerospace and automotive markets are changing, driven by government regulation to control emissions. This favours advanced manufacturing systems such as Quickstep's Qure which can manufacture strong, light, highgrade carbon fibre components.

JSF production at Bankstown is scheduled to continue at rates similar to Q4 FY2015, increasing substantially over the next two years. Based on scheduled JSF and C-130J production for FY2016, the company's aerospace manufacturing operations are expected to become profitable during FY2016, with the first quarter cash flow positive. As the company grows, it plans to optimise use of its Bankstown assets to increase efficiency.

Quickstep's high international profile manufacturing programs provide a powerful endorsement of its capacity to serve global supply chains.

Quickstep continues to invest in and market its technologies for the aerospace and defence industries and has a strong portfolio of opportunities. The first commercial sale of the company's Qure product is expected to complete in FY2016 and, once installed, is expected to help reduce the client's production costs significantly.

Establishment of the company's automotive division at Waurn Ponds is progressing, and the company expects to benefit from access to the automotive hub's industry contacts and business networks. Quickstep has secured initial contracts and is confident of further success.