SECOND QUARTER FY19 UPDATE
29 January 2019: Quickstep Holdings Limited (ASX: QHL), Australia's leading independent carbon fibre composites manufacturer, today announced its quarterly update for the second quarter of FY19.
DECEMBER 2018 QUARTER SUMMARY (Unaudited)
Ð Total sales $15.8 million, up 3% on same period in FY18
Ð First half sales $33.4m, up 20% on H1 FY18 and up 7% on H2 FY18
Ð Positive EBIT in Q2 FY19 and for first half FY19
Ð Healthy pipeline of new business, with new contracts anticipated in FY19
Ð Chemring flare housing project now in development phase
FINANCIAL UPDATE
Quickstep delivered continued sales growth in Q2 compared to the same period last year with sales revenue of $15.8 million, up 3% compared to $15.4 million in Q2 FY18. Sales for the first half of FY19 of $33.4 million were up 7% on the second half of FY18 and 20% higher than the same period last year. Q2 sales were adversely impacted by an unforeseen and extended outage of a key machine and the limited industrial action. The machine outage and potential export licencing issues for raw materials associated with the US government shutdown will impact Q3. Despite these challenges Quickstep remains on track to deliver significantly higher Joint Strike Fighter (JSF) volumes over the next two years, with JSF revenue expected to increase by approximately 40% in FY19.
The business achieved positive EBIT in Q2 FY19 and for the first half of FY19 and expects to deliver positive EBIT for the full year FY19.
Operating cashflow of $0.9m million for Q2 FY19 includes EBITDA $1.4 million offset by an increase in net working capital.
The production delays from the equipment outage have resulted in a $3.3 million inventory increase in Q2 (largely raw materials). As production increases over H2 the inventory balance will normalise resulting in improved cashflow.
At 31 December 2018, the group held $3.2 million in cash (30 September 2018: $2.7 million) and $0.8 million in restricted term deposits (30 September 2018: $0.8 million). Total outstanding debt, including capitalised interest, was $15.5 million at 31 December 2018, down by $1.0 million from 30 September 2018. Government funding of $1.9 million was received in Q2 for the Chemring project.
361 Milperra Road Bankstown Airport NSW 2200www.quickstep.com.au | Tel: (02) 9774 0300 Fax: (02) 9771 0256 Email:info@quickstep.com.au | ASX Code: QHL |
The expected improvement in gross margin during FY19 is being delivered as JSF volumes continue to increase, the business benefits from the ongoing lean manufacturing program and from favourable exchange rate movements. Gross margin improvement is currently tracking ahead of plan.
SALES REVENUE AND GROSS MARGIN TREND
Operational Highlights:
Ð Lean and Continuous Improvement: initiatives continued across all functions at the Bankstown and Geelong sites in Q2 to improve efficiency, reduce cost and improve margins. Initiatives undertaken by our process improvement teams in Q2 include improvements to material and tool flow, workplace organisation improvements and quick tool changeover. The benefits of these changes are illustrated by the margin improvement delivered over the past 12 months.
Ð Qure / QPS: Quickstep has completed the design of the Flare Housing production process for the Chemring project and is currently procuring and implementing the associated equipment and manufacturing process to establish a manufacturing cell that demonstrates "cutting edge" carbon fibre production methods with integrated quality control and product traceability for high performance and precision products.
Business Development Highlights:
Ð General Atomics: General Atomics, the leader of the Team Reaper Australia Consortium, has been selected by the Australian Government to provide the Armed Remotely Piloted Aircraft System under Project Air 7003 for the Australian Defence Force (ADF). Quickstep is a member of this consortium and looks forward to negotiations with General Atomics on substantive composite manufacturing packages.
Ð
US Market: Quickstep has a clear focus on the US market (defence and commercial aerospace segments) and continues to make significant investment in business development and supply chain resources there. Based on the progress of confidential negotiations we anticipate significant new business awards during FY19.
These activities and others currently in discussion, are part of a comprehensive business plan to grow Quickstep's sales revenue and diversify its customer base in the Defence and Aerospace sectors, while expanding the company's capabilities to further increase business globally in the Aerospace, Defence and Automotive sectors.
OUTLOOK
Quickstep anticipates that the business will continue to strengthen over the remainder of FY19 as JSF deliveries ramp up towards peak production volumes over the next two years. The group's revenue is expected to grow by more than 20% in FY19 and gross margins will continue to improve as the group benefits from economies of scale and increasing efficiencies. The group expects to deliver positive EBIT for FY19 as well as positive operating cash flow over the full year notwithstanding the disruption caused by equipment failure over recent months.
Quickstep has significant growth potential through winning composite manufacturing contracts, primarily in the aerospace sector, using traditional techniques and its proprietary advanced manufacturing Qure and QPS technologies; these provide faster, more controllable methods for curing of parts and enable a Class A finish. Quickstep continues to focus on winning new customers and contracts, and supporting growth through partnerships to build scale. Quickstep will further accelerate its business development activities to win additional business, through its tiered growth strategy:
Ð Core Defence Aerospace: Increasing revenue and diversifying the company's customer base within the Defence/Aerospace sector utilising existing Bankstown facilities, while expanding core capabilities.
Ð Aerospace Qure/Advanced Manufacturing Deployment: Strategic growth within the Aerospace and other sectors, using Qure and innovative technology solutions to attract new business opportunities.
Ð Step-change Growth: Step change to Commercial Aerospace supply. Securing of large global programs and/or inorganic growth across the wider defence, commercial aerospace and automotive industries.
The company has a healthy project pipeline and is well positioned for future profitable growth. The group continues to be focused on high value, expanding global markets.
Key facts about Quickstep's major contracts | |
Joint Strike Fighter (JSF) |
|
Super Hercules C-130J |
|
For further information: | |
Investors | Media |
Mark Burgess - Managing Director | Ashley Rambukwella or Antonino Blancato |
Quickstep Holdings Limited | Financial & Corporate Relations |
Telephone: +61 2 9774 0300 | Telephone: +61 407 231 282 or +61 2 8264 1009 |
E:mburgess@quickstep.com.au | E:a.rambukwella@fcr.com.au |
About Quickstep Holdings |
Quickstep Holdings Limited (ASX: QHL) is the largest independent aerospace-grade advanced composite manufacturer in Australia, operating from state-of-the-art aerospace manufacturing facilities at Bankstown Airport in Sydney, NSW and a manufacturing and R&D/ process development centre in Geelong, Victoria. The group employs more than 220 people in Australia and internationally. More information about Quickstep is
available atwww.quickstep.com.au
Appendix 4C
Quarterly report for entities subject to Listing Rule 4.7B
Appendix 4C
+Rule 4.7B
Quarterly report for entities subject to Listing Rule 4.7B
Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16
Name of entity
ABN
Quarter ended ("current quarter")
1. Cash flows from operating activities
1.1 Receipts from customers
1.2 Payments for
(a) research and development
(b) product manufacturing and operating costs
(c) advertising and marketing
(d) leased assets
(e) staff costs
(f) administration and corporate costs
1.3 Dividends received (see note 3)
1.4 Interest received
1.5 Interest and other costs of finance paid
1.6 Income taxes paid
1.7 Government grants and tax incentives
1.8 Other (provide details if material)
1.9 Net cash from operating activities
18,045
33,604
(268) (9,543)
(419) (20,467)
(52) (91)
(20) (39)
(5,445) (11,034)
(1,670) (2,440)
- - (108)
- - (177)
- - -
- - -
939 (1,063)
2. Cash flows from investing activities
2.1 Payments to acquire:
(a) property, plant and equipment
(b) businesses (see item 10)
(c) investments
(1,183) (2,135)
- -- -
+ See chapter 19 for defined terms
1 September 2016
Page 1
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Quickstep Holdings Limited published this content on 29 January 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 29 January 2019 10:08:01 UTC