Why wait for the future.
Annual Report 2011
Corporate Directory
Auditors
KPMG Chartered Accountants
235 St Georges Terrace
Perth Western Australia 6000
Solicitors
Clifford Chance
London House, 216 St Georges Terrace
Perth Western Australia 6000
Patent Attorney
Watermark
21st Floor, 77 St Georges Terrace
Perth Western Australia 6000
Share Registry
Security Transfer Registrars Pty Ltd
770 Canning Highway
Applecross Western Australia 6153
Stock Exchange
Australian Securities Exchange Limited
Exchange Plaza, 2 The Esplanade
Perth Western Australia 6000
ASX Code: QHL
Directors
Mr Mark Bernard Jenkins
Chairman
Mr Philippe Marie Odouard
Managing Director
Mr Dale Edwin Brosius
Executive Director
Mr Deryck Fletcher Gow Graham
Executive Director
Mr Peter Chapman Cook
Non-executive Director
Air Marshal Errol John McCormack (Ret’d) AO
Non-executive Director
Mr David Patrick Alexander Singleton
Non-executive Director
Mr David Edward Wills
Non-executive Director
Company Secretary
Mr Phillip James MacLeod
Principal Office
136 Cockburn Road
North Coogee Western Australia 6163
T +61 8 9432 3200
F +61 8 9432 3222
E
www.quickstep.com.au
info@quickstep.com.au
Registered Office
136 Cockburn Road
North Coogee Western Australia 6163
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Contents
About Quickstep
Chairman’s Report
Managing Director’s Report
Operations Review
Financial Report
Directors’ Report
Corporate Governance Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Change in Equity
Consolidated Statement of Cash Flows
2
4
6
8
11
12
29
35
36
37
39
Notes to and forming part of the Financial Statements 40
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About Quickstep
Over the course of 2010-2011 Quickstep has
consistently achieved significant milestones
to position ourselves to become a leading
independent advanced composite manufacturer.
October 2010
November 2010
February 2011
March 2011
March 2011
Vector Composites signs
licensing agreement for
the patented ‘Quickstep
Process’, enabling it to
develop and produce
composite structural
parts for the North
American market.
Vector Composites and
Quickstep Composites
enter into strategic
teaming agreement
to enable future
collaboration on
business opportunities
in funded research and
development, prototype
development and
aerospace production
programs.
Quickstep produces first
proof-of-concept painted
carbon fibre flat panel
with A grade finish for
the automotive industry.
By using the patented
Resin Spray Transfer
(RST) process, Quickstep
plans to overcome the
cost and time normally
incurred in automotive
part manufacturing of
this standard.
Quickstep and Sikorsky
sign Memorandum of
Understanding (MOU)
on defence contracts
and Quickstep Process
development. Under the
terms of the MOU, the
two companies plan to
work together to enable
Quickstep to become
a recognised supplier
to Sikorsky’s supply
chain and to conduct
joint development work
aimed at preparing the
‘Quickstep Process’ for
use in the supply chain.
Quickstep signs Long
Term Agreement (LTA)
with Northrop Grumman
for the supply of group
one parts for the F-35
Joint Strike Fighter. The
LTA is the first of several
agreements planned
in the Memorandum
of Understanding that
Quickstep signed with
F-35 OEM Lockheed
Martin and prime
contractor Northrop
Grumman in November
2009.
Quickstep signs heads of
agreement for 10 year
lease on 4000+ sqm
facility in Bankstown,
NSW along with
deed outlining NSW
government financial
support.
2
Quickstep Holdings Limited
April 2011
May 2011
May 2011
June 2011
Quickstep secures $17.3
million funding through
an agreement with
USA-based financier
La Jolla Cove Investors
Inc. along with funds
raised through share
placements and share
purchase plan.
Quickstep wins two
awards – Manufacturer
of the Year and the
Global Integration
Award at the 2011
Manufacturers’ Monthly
Endeavour Awards.
Quickstep commissions
first industrialised plant
that will be available
to customers as a
‘turn-key’ off-the-shelf
product that simplifies
and streamlines the
manufacturing process
for end users.
Sikorsky wins Australian
Government Air 9000
Phase 8 naval helicopter
contract, allowing for
Quickstep to progress
negotiations on its MOU
with Sikorsky.
Annual Report 2011
3
Chairman’s Report
Our focus is on
the aerospace
and automotive
industries as they are
truly global sectors
where many billions
of dollars are being
invested to improve
fuel economy by
reducing overall
weight
Dear Shareholder,
Market Overview
Even in these days of globalisation,
building a business with a truly worldwide
footprint does not happen overnight. To
become a globally recognised company
takes vision, sustained hard work and a
strong belief in the products and services
being delivered.
Quickstep has continued to grow over the
past year and has steadfastly maintained
its focus on aerospace and defence
manufacturing including the F-35 contract
and the commercialisation of its patented
Quickstep Technologies for automotive and
aerospace use.
This has been supported by:
1. Investment in our own manufacturing
facilities, which means that Quickstep
is now poised to become Australia’s
largest independent producer of
advanced composite materials for the
aerospace and defence sector; and
2. Continued development of the
patented Quickstep fluid-based curing
process and associated technologies,
which have demonstrated significant
reductions in production costs and
time when compared to a conventional
autoclave approach.
This two-pronged approach to building
sustainable revenues is starting to be
reflected in both top and bottom lines.
While the Company continued to report
a loss in FY2011, revenue streams have
improved and are projected to continue
growing with the start of manufacturing
for the Joint Strike Fighter Project in early
2012. Similarly, we are seeing strong
interest for our patented Quickstep Process
from both the aerospace and automotive
industries.
As these revenue streams develop, the
Board and management are confident
of the potential for Quickstep to create
shareholder value in the coming years.
Globally, the advanced composite sector
is still in its infancy, with many industries
still researching ways to use the inherent
qualities of these exciting new materials.
Our focus is on the aerospace and
automotive industries, as they are truly
global sectors where many billions of
dollars are being invested to improve fuel
economy by reducing overall weight.
While advanced composites have been
around for a number of years, it is only
in recent times that fuel economy has
been a major driver, and that production
processes have created a competitive
tension between the traditional use of
metals and the use of modern, innovative,
lightweight, advanced composite
materials. With a growing emphasis
on fuel economy, and European and
American markets mandating new car
fuel consumption parameters, Quickstep
is well positioned to become a leading
player in its chosen sectors.
Quickstep expects to license technologies
to not only manufacture advanced
composites to standards that were
previously considered only possible for
the aerospace sector, but also within
the stringent economic demands of the
automotive sector.
The defence sector is by its very nature
a difficult market to break into. This is
not surprising when there is so much at
stake in the production of fighter planes
and helicopters. The fact that Quickstep
has achieved qualified manufacturing
status in such a short time is a credit to
the drive, determination and vision of
all the Company’s staff. The defence
and aerospace sectors are tough routes
to market for any company. However,
with Quickstep achieving acceptance as
a manufacturer to US majors Northrop
Grumman and Lockheed Martin, we have
met a standard that opens doors into many
other aerospace and defence opportunities.
4
Quickstep Holdings Limited
Chairman’s Report
New Board members
Air Marshall Errol
McCormack AO
Retired former
Chief of the Royal
Australian Air Force
David Singleton
Former senior
executive with
BAE Systems
David Wills
Former managing
partner of
PriceWaterhouse
Coopers Sydney
Directors in past financial year: Air Marshall
Eric McCormack AO, a former Chief of the
Royal Australian Air Force; David Singleton,
former senior executive with BAE Systems;
and David Wills, a former managing partner
of PriceWaterhouseCoopers Sydney.
We now have a Board of highly
experienced and skilled Directors who
bring to the table a diverse range of
talents, knowledge and experience.
Their extensive industry experience and
knowledge have already contributed
much to the success of this past year. The
Board has been successful in one of its
most important tasks this year—providing
Philippe Odouard and his team with a
highly experienced multifaceted support
as he grows and shapes Quickstep.
My confidence in Quickstep is based
on the belief that we have the people,
technologies, infrastructure and facilities in
place to ensure the coming financial year is
a strong and positive year for Quickstep.
Yours sincerely,
Mark Jenkins
Chairman
We acknowledge the intense pressure
that the strong Australian dollar and high
employment costs are having on industry
competitiveness in this country. We believe,
however, that the application of world
class technology and innovation to the
aerospace and automotive industries can
make Quickstep competitive. Our model
includes licensing our technology to OEM’s
and key industry suppliers which will further
strengthen our position. The support of
the Australian Government in providing
innovation grants and industry funding
packages has been an important element of
our ability to reach our current position.
Management and Staff
Quickstep is the sum of its people.
Advanced composite technologies don’t
just happen, manufacturing facilities do
not just appear and nor do contracts just
sign themselves – they are the result of
collaboration, innovation and vision by
many people. What we have achieved over
the past year, in particular, could not have
been done without the strong and positive
leadership and the vision of our Managing
Director, Philippe Odouard, and his senior
management team.
Despite all of the challenges we face as a
growing company, the Board is particularly
proud of the depth of talent the Company
has been able to attract and retain at all
levels of staff and executive. It is certainly
another indicator of Quickstep’s positive
future that we have been able to build
such a strong team with a deep knowledge
of manufacturing and production in the
aerospace sector. The result is a highly
talented team focused on maximising the
global opportunities available to Quickstep.
The Board
As the Company achieved its stated
milestones and gained recognition within
the aerospace industry, we were able to
attract strong candidates at the Board
level and have welcomed three additional
Annual Report 2011
5
Managing Director’s Report
The major highlight
of the year was the
signing of a Long
Term Agreement
to manufacture
parts for the
international F-35
Joint Strike Fighter
Dear Shareholder,
Manufacturing
The 2011 financial year has seen the
achievement of some critical milestones
by Quickstep in our progress towards
becoming a prominent supplier of advanced
composite products to the global aerospace
industry and manufacturing technology
solutions in the automotive industry.
During this year the Company secured
substantial grant support from Federal
and State governments and increased
its revenues demonstrating its ability
to access funding above and beyond
shareholder funding.
We have continued to develop the strategy
presented to our shareholders in the last
few years. The three components of that
strategy are:
01 Winning manufacturing
contracts using traditional
manufacturing technologies,
such as autoclaves, and “next
generation” technologies,
such as our patented
Quickstep Process.
02 Licensing the Quickstep
Process to Original
Equipment Manufacturers
(OEM’s) and their suppliers,
and providing them with
Quickstep machines,
technology transfer and
support services.
03 Conducting Research &
Development on Quickstep
and associated technologies,
where possible on a paid
basis on behalf of customers,
to validate its suitability for
their specific needs.
The major highlight of the year was the
signing of a Long Term Agreement (LTA)
to manufacture parts for the international
F-35 Joint Strike Fighter (JSF) program
which should continue for the next
20 years. Since year end the first of an
annual series of planned orders has been
received and the first Destruct Test Article
delivered in October 2011. The first flying
parts will be delivered in early 2012. The
achievement of these milestones on or
ahead of the original schedule committed
to 24 months ago has demonstrated
Quickstep’s capability to the JSF community
and the wider Aerospace industry.
This production order represents a major
breakthrough for the Company following
years of dedicated effort and hard
work, particularly considering that the
international defence industry has perhaps
one of the highest barriers to entry of any
industry in the world. For companies that
are successful in overcoming these barriers
to entry, the contracts are generally large
scale and long-term as exemplified to the
20 year potential of the JSF contract.
The international recognition flowing
from the signing of this LTA has already
resulted in discussions and proposals being
submitted on a number of substantial
Aerospace and Defence programs – such
as the Sikorsky naval helicopter – which,
if concluded could deliver solid long-term
business opportunities in conventional
composite manufacturing as well as
utilising the patented Quickstep Process.
In parallel with the signing of the LTA, the
Company announced plans to establish
a major new aerospace manufacturing
facility at Bankstown Airport in south-
west Sydney, New South Wales - a facility
previously used by the US aerospace giant
Boeing - which will secure our long-term
manufacturing capabilities.
6
Quickstep Holdings Limited
Quickstep Process
Commercialisation
We have:
» commissioned the first production-
ready manufacturing plant capable
of curing composites based on the
Quickstep Process;
» progressed the qualification of our
process in co-operation with Lockheed
Martin through the US Government-
funded Small Business Innovation
Research program; and
» successfully delivered against our
milestones in the European market
through our German subsidiary.
Research and Development
– Automotive
This is probably one of the major highlights
of the year for Quickstep. Following our
strategy to develop one of our patents
for the automotive industry, we have
progressed considerably in validating its
major potential in that market.
Parts manufactured to date using the
Quickstep Process and our patented resin
spray transfer (RST) technology exhibit
superior surface finish straight out of
the mould. With carefully specified resin
formulation and process control, the parts
display an A-grade automotive finish a
critical feature for the automotive industry
and currently a significant barrier to carbon
fibre commercialisation. In addition to our
demonstrated and superior fast production
cycles, this should dramatically reduce
part costs – making advanced composites
a competitive replacement for traditional
steel automotive bodies for the first time
in history.
Quickstep patented RST combines the
three attributes of high quality finish,
speed of production and low cost
together in a unique way that should
provide broad market acceptance when
introduced into production.
We have secured cooperation with leading
automotive manufacturers, validated
resins, demonstrated outstanding results in
terms of finish quality, proven most of the
steps leading to a robust manufacturing
solution and designed business solutions
to generate substantial revenues for our
shareholders. This has been financially
supported by the Climate Ready Grant
awarded to Quickstep by the Australian
Department of Innovation.
Corporate
» In February, Quickstep signed a major
grant with the Government of New
South Wales to set up a manufacturing
facility in NSW.
» In April, Quickstep secured up to US$15
million in funding through a Convertible
Note Facility. The Company also
undertook a share placement and Share
Purchase Plan and raised A$4.5 million.
» In recognition of Quickstep’s success
in entering the F-35 Joint Strike
Fighter global supply chain, the
Company was awarded both the
“Manufacturer of Year” and “Global
Integration” Awards at the 2011
Manufacturers’ Monthly Endeavour
Awards held in Melbourne in May. The
Global Integration Award recognises
manufacturers who have successfully
engaged in international supply chains.
The Manufacturer of the Year was
chosen from all nominees across all
award categories, and represents a very
positive endorsement of the Company’s
success in securing contracts within the
international JSF program.
» The Quickstep team was significantly
boosted by the appointment of Mike
Schramko, the former operations
manager of Boeing Aerostructures
Australia, as Operations Manager;
Sebastien Godbille, the former CEO of
Daher – Australian Aerospace, as the new
General Manager of Quickstep Process
Systems; and International Business
Development Manager Ari Vihersaari,
former Senior Business Development
Manager of Patria Aerostructures Ltd
Finland, a major supplier to Airbus,
Boeing and Bombardier.
Managing Director’s Report
Outlook
In recent years Quickstep has gone
through substantial growth and change.
We will continue to evolve, develop
and build our portfolio of patents, our
manufacturing skills and our revenue base.
In the coming year we aim to achieve three
major milestones:
» The delivery of our first parts for the
Joint Strike Fighter Project;
» The commissioning of our Bankstown
manufacturing facility;
» Finalising the research on RST and
completing its industrialisation for
the automotive industry to provide a
quantum leap in terms of composite
technology for this market.
Achieving these three milestones will
provide the Company with a solid base
from which we can continue to expand.
We expect to start ramping up production
from this base and to continue bidding
for new programs. The aerospace and
defence sectors offer so much scope for
growth that our focus is on ensuring that
Quickstep is well positioned to capitalise on
opportunities as they present themselves.
Concurrently, our efforts to commercialise
Quickstep’s technology are starting to
bear fruit. This is presenting itself with
solid enquiries to licence our technology
and to purchase Quickstep machines
(and the associated support services),
as well as form partnerships with us in
specific programs for the aerospace and
automotive sectors.
Philippe Odouard
Chief Executive Officer
Annual Report 2011
7
Operations Review
Aerospace Manufacturing
Contracts
» On 2 February 2011, Quickstep signed
a landmark Long Term Agreement
(LTA) with Northrop Grumman
Corporation to manufacture Group
One parts for the international F-35
Joint Strike Fighter (JSF) program.
Under the LTA, first JSF parts and first
cash flow will be delivered in early
2012, as envisaged in the MOU.
Quickstep signed a
landmark Long Term
Agreement with
Northrop Grumman
Corporation to
manufacture Group
One parts for the
international F-35 JSF
» The LTA is the first of several
agreements which will implement
the Memorandum of Understanding
(MOU) that was signed in November
2009 with F-35 Original Equipment
Manufacturer Lockheed Martin and
Prime contractor Northrop Grumman.
» In June, the Company successfully
passed the key “Toll Gate” review set
by Northrop Grumman which allows
Quickstep to start production of actual
production parts. This was achieved on
the date that was committed to in the
MOU signed 24 months ago.
» Quickstep received its first Purchase
Order covering Group 1 of the
components required for the F-35
contract for delivery up to July 2012. It
is anticipated that two more LTA’s will
follow for Group 2 and 3 respectively,
under which ongoing Purchase Orders
are placed for each buying period.
Quickstep is expected to supply up to
16 different JSF components, including
lower side skins, maintenance access
panels, fuel tank covers and lower
skins – projected to amount to over
36,000 parts over the life of the
program.
» The Company secured a further
opportunity for aerospace/defence
manufacturing work in Australia
following the signing of the MOU
with Sikorsky International Operations
Inc., which has secured a contract to
manufacture and support 24 MH-60R
Multi Mission helicopters under the
Australian Department of Defence’s
Air 9000 Phase 8 program with team
Lockheed Martin/Sikorsky valued at
around AUD$2 billion.
» Under the MOU, Quickstep is well
placed to become a recognised
supplier to Sikorsky’s global supply
chain, enabling the Company to be
a participant in Sikorsky’s Australian
Industry Participation Program and
seek opportunities to review the
application of the Quickstep Process.
» The Company is either in active
discussions or engaged in the Request
for Quote process with other large
US-based and European organisations
for further aerospace and defence
contracts. These opportunities are
significant and, if won by Quickstep,
will result in the commencement of
these contracts before peak production
occurs on the JSF program.
8
Quickstep Holdings Limited
Operations Review
Relocation to Bankstown
Manufacturing Facility
» In order to maintain its contractual
obligations relating to the international
F-35 Joint Strike Fighter (JSF) program,
Quickstep has secured a long-term,
large scale manufacturing facility
in Bankstown, New South Wales.
The new facility was previously
used by US aerospace giant Boeing,
meaning significant infrastructure is
in place to support Quickstep’s future
manufacturing requirements. The
facility comprises two buildings – a
1,250m2 office building and a 3,500m2
main hangar, which is being extended
to 4,000m2.
» The new location will enable the
Company to access a sophisticated
base of aerospace contractors and
industry, as well as highly skilled
workforce residing in New South Wales
and previously employed by Boeing.
The Company’s relocation will be
handled to minimise schedule risk and
ensure that the timeframe for the JSF
component delivery is met.
» Construction of the facility is on schedule
for completion in early 2012 with
production commencement expected in
the first half of 2012. The Company has
placed its initial permanent staff at the
Bankstown facility and office space has
been established.
Quickstep has secured
a long-term, large scale
manufacturing facility
in Bankstown, New
South Wales
Annual Report 2011
9
Operations Review
Quickstep Process
Activities
» During the year, the Company signed
a formal agreement with the Ohio-
based company Vector Composites,
Inc. to jointly promote the patented
Quickstep Process to the North
American aerospace and defense
industries. Under the agreement,
Vector and Quickstep will collaborate to
create business opportunities in funded
research and development, prototype
development and demonstration
of advanced composite structural
components, as well as aerospace
production programs. The agreement
resulted from Vector and Quickstep’s
success in winning a major United
States Air Force Small Business
Innovation Research Phase II program.
» The Company commissioned its first
production-ready manufacturing
plant at its German facility, which
will simplify and streamline the
manufacturing process for end users.
The plant has the ability to cure
composite components based on
the standardised Quickstep Process.
Discussions with potential customers
for the plant are already underway.
Research & Development
» Quickstep’s patented Resin Spray
Transmission (RST) has met numerous
milestones in the development
program to manufacture A Class finish
automotive panels. The program is
utilising funding from the $2.6 million
AusIndustry Climate Ready Grant
to ultimately enable fully robotic
production of carbon automotive parts
at a comparable cost to metal parts.
The development program is due for
completion in 2012.
The agreement
resulted from Vector
and Quickstep’s success
in winning a major
United States Air
Force Small Business
Innovation Research
Phase II program
10
Quickstep Holdings Limited
Financial Report
For the year ended 30th June 2011
Directors’ Report
D I R E C T O R S ’ R E P O R T
The Directors present their report together with the financial statements of the Group, being Quickstep Holdings
Limited (the “Company”) and its subsidiaries, for the financial year ended 30 June 2011 and the auditor’s report
thereon.
1. Directors
The Directors of the Company at any time during or since the end of the financial year are:
Mr Mark Bernard Jenkins, B. Comm., Grad. Dip. Bus.
Independent Chairman - appointed as director on 14 July 2005; appointed as Chairman 13 March 2007
Mr Jenkins, aged 47, has over 20 years consulting, operational/financial management and business development
experience in professional services firms (chartered accountants), investment banking, government agencies and
public companies.
Initially qualifying as a Chartered Accountant in Australia, his career includes two extended periods in London and
has involved successful and extensive investment, commercial, financial and government dealings in Australia,
Asia, the United States of America and Europe. Mr Jenkins has also been involved as an advisor and investor in
early stage technology companies, taking them through the initial funding and commercialisation stages.
Mr Jenkins holds a Bachelor Degree in Commerce from the University of Western Australia and a Graduate
Diploma in Business from Curtin University. He has also been involved in numerous professional development
programs, including Cranfield University in England.
Mr Philippe Marie Odouard, M.Sc (Bus.)
Managing Director and Chief Executive Officer - appointed 23 October 2009
Mr Odouard, aged 56, has significant management experience within the global aerospace and defence sectors –
both of which are primary target markets for Quickstep’s technology. Before joining Quickstep and since 2005, Mr
Odouard has held a dual role with Thiess Pty Ltd – one of Australia’s largest infrastructure and services
contractors – as Senior Manager of Strategy and Business Development: Defence, and Project Director for the
A$3 billion Melbourne desalination plant.
Prior to joining Thiess, Mr Odouard held a number of senior manager positions within Thomson-CSF (now Thales
Group) - a world leader in platforms and systems for the aerospace, defence and security markets. During his
time with Thomson, which included roles in both Australia and Europe, Mr Odouard negotiated and managed long
term contracts with major global aerospace and defence groups including major developments and technology
transfers. Significantly, Mr Odouard managed the Minehunter project, which at the time was the largest user of
composites in Australia. In addition, Mr Odouard negotiated and managed significant contracts with Eurocopter
when they sold the all-composite Tiger helicopter to the Australian Defence forces.
In 1977 Mr Odouard graduated with a Masters of Science in Business from École des Hautes Études
Commerciales de Paris.
Mr Dale Edwin Brosius, B. Sc. (Chem. Eng.), MBA
Executive Director and President Quickstep Composite LLC - appointed 13 August 2004
Mr Brosius, aged 53, as the Chief Operating Officer is responsible for the commercial development of the
Company’s technology in Europe and the Americas, and serves as president of Quickstep Composites LLC, the
Company’s USA subsidiary in Dayton, Ohio. He brings extensive practical experience in the composites field,
having led composites-oriented businesses in the USA and Europe, with a strong emphasis on materials. He is
based near Indianapolis, Indiana.
Mr Brosius spent eight years with Dow Chemical, in manufacturing and commercial development roles, with a focus
on automotive composites. He then spent twelve years in various commercial and general management roles at
Fiberite and Cytec Fiberite, gaining considerable exposure to advanced composites processes and applications in
aerospace, sporting goods, and industrial markets.
In 1999 Mr Brosius created a successful consulting business serving manufacturers of composite materials,
equipment and parts manufacturers worldwide. During this time he obtained a thorough understanding of the global
market and developed numerous relationships at the original equipment manufacturer (OEM) and supplier levels.
Mr Brosius is active in leadership levels in key composites professional associations and is the author of over forty
published articles in the field.
12
5
Quickstep Holdings Limited
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
1.
Directors (cont’d)
In 1979 Mr Brosius graduated with a Bachelor of Science in Chemical Engineering from Texas A&M University, and
in 1990 earned his MBA from the University of Phoenix.
Mr Deryck Fletcher Gow Graham, Dip. Co. Dir.
Executive Director (not classified as Independent) - appointed 16 June 2001
Mr Graham, aged 50, has over 20 years’ experience in senior management, administration and marketing
positions.
His experience includes five years as Managing Director of an ASX listed Company that designed, developed,
manufactured and distributed hardware and software products for the broadcasting and entertainment industries.
He has been a director of Eagle Aircraft Australia Limited, where he held the role of Marketing Director. Since
1986, Mr Graham has been involved in the composites and aerospace industries.
Mr Graham is also a founder and adviser to emerging technology companies in the mining, civil engineering and
software development industries.
Mr Graham holds the executive position of Business Development Manager – Australia.
Mr Graham holds a Diploma of Company Directors from the Australian Institute of Company Directors.
Mr Peter Chapman Cook, M. Pharm., PhC, C.Chem, FRMIT, MPS, MRACI, MAICD.
Independent Non-Executive Director - appointed 14 July 2005
Mr Cook, aged 64, has extensive business experience, both within Australia and overseas.
Prior to his current appointments as Managing Director and Chief Executive Officer of Biota Holdings Limited, Mr
Cook has held the positions of Managing Director and Chief Executive Officer of Orbital Corporation Limited,
Chief Executive Officer of Faulding Hospital Pharmaceuticals, President of Ansell’s Protective Products Division,
Deputy Managing Director of Invetech and Director of Research and Development for Nicholas Kiwi. Mr Cook
has had extensive experience in the commercialisation of innovation, both in new and established markets. Mr
Cook also has extensive experience in mergers and acquisitions, particularly with technology-based companies
and has a strong manufacturing background.
Mr Cook has over ten years of international commercial experience in Europe, USA and Asia, where he has both
lived and worked. He holds a Masters Degree in Pharmacy and post graduate qualifications in Management from
RMIT University.
Air Marshal Errol John McCormack (Ret’d), AO
Independent Non-Executive Director - appointed 11 August 2010
Air Marshal McCormack, aged 70, has extensive experience as a Senior Commander in the Royal Australian Air
Force.
Errol McCormack served in the Royal Australian Air Force for 39 years, retiring in 2001 as Chief of Air Force with
the rank of Air Marshal. During his period of service he commanded at unit, wing and command level, held staff
positions in capability development, operations and educational posts and attended both RAAF and Joint
Services Staff Colleges. His overseas postings included flying tours in Vietnam, Thailand, Malaysia and
Singapore, an exchange tour with the US Air Force flying the RF4C, Air Attaché Washington and Commander
Integrated Air Defence System in the Five Power Defence Agreement between Malaysia, Singapore, UK, New
Zealand and Australia.
Since his retirement from the RAAF he has established a company providing consultancy services for multi-
national companies working with the Australian Department of Defence.
He is also Non-Executive Chairman of Chemring Australia Pty Ltd, a countermeasures and pyrotechnic
manufacturing company based in Victoria, and consults for Chemring Group PLC and General Electric Military
Engines.
His pro-bono work includes Chairman of the Board of the Sir Richard Williams Foundation, an independent think-
tank supporting development of Australian military aviation policy. He is a member of the Royal Aeronautical
Society and the Australian Institute of Company Directors.
Annual Report 2011
13
6
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
1.
Directors (cont’d)
Mr David Singleton, BSc (Hons)
Independent Non-Executive Director - appointed 11 October 2010
Mr Singleton, aged 51, worked for 19 years for BAE Systems (formerly British Aerospace) in a variety of roles.
He was the Group Head of Strategy, Mergers and Acquisitions for BAE Systems based in London. Prior to that,
Mr Singleton spent three years as the Chief Executive Officer of Alenia Marconi Systems (a BAE Systems
European Joint Venture) and was based in Rome, Italy. Mr Singleton has served as a member of the National
Defence Industries Council in the UK, and as a board member and Vice-President of Defence for Intellect. Mr
Singleton became the Chief Executive Officer and Managing Director of Poseidon Nickel in July 2007. He was
the Chief Executive Officer and Managing Director of Clough Limited between August 2003 and January 2007.
He is a non-executive Director of Triton Gold which was one of the few successful resource IPO’s on the ASX in
2009. Mr Singleton has over 20 years international business experience in senior executive roles, primarily in
Europe, USA and Australia.
Mr. Singleton has a degree in Mechanical Engineering from University College London.
Mr David Edward Wills, B Comm., FCA
Independent Non-Executive Director - appointed 26 November 2010
Mr Wills, aged 63, is a Chartered Accountant having been a Partner in PriceWaterhouseCoopers (and its
predecessor firm Coopers & Lybrand) for 25 years. He was Deputy Chairman of the firm from 2000 to 2004,
Managing partner of the Sydney office from 1997 until 2003 and Chairman of the firm’s manufacturing practice
from 1995 - 1997. Mr Wills’ major area of practice throughout all of his career was as an audit partner and his
client base included many large manufacturing companies, both publicly listed in Australia and subsidiaries of US
based companies. In addition to audit, Mr Wills was experienced in mergers and acquisitions and special
investigations of companies.
Mr Wills is now (or has been) a director of the following publicly listed companies:
Washington H Soul Pattinson Limited (since 2006);
Clover Corporation Limited (since 2004);
Souls Private Equity Limited (since 2005); and
Dyno Nobel Limited (2006 – 2008).
In addition, Mr Wills is Chairman of Sir David Martin Foundation, a charity that raises funds to support youth
programs undertaken by Mission Australia.
Mr Wills graduated from the University of New South Wales with a Bachelor of Commerce in 1970 and qualified
as a Chartered Accountant in 1972.
2. Company Secretary
Mr Phillip James MacLeod, B. Bus., ASA. MAICD
Mr MacLeod, aged 46, was appointed to the position of Company Secretary on 13 November 2009. Mr MacLeod
has over 20 years commercial experience and has held the position of Secretary with listed companies since
1995. Mr MacLeod has provided corporate, management and accounting services to domestic and international
public companies involved in the technology, resources, healthcare and property industries.
Mr MacLeod holds a Bachelor Degree in Business from Edith Cowan University and is an associate member of
CPA Australia having qualified as a CPA and a member of Australian Institute of Company Directors.
14
Quickstep Holdings Limited
7
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
3. Directors’ Meetings
The number of Directors’ meetings (including meetings of committees of Directors) and the number of meetings
attended by each of the Directors of the Company during the financial year are:
Directors’ Report
Audit, Risk
and
Compliance
Committee
Meetings
Remuneration,
Nominations
and Diversity
Committee
Meetings
A
2
-
-
-
2
2
2
2
B
2
-
-
-
2
2
2
2
A
-
-
-
-
2
-
2
2
B
-
-
-
-
2
-
2
2
Board
Meetings
B
A
13
13
13
13
13
13
9
7
13
12
8
13
11
13
9
5
Director
Mr M B Jenkins
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham
Mr P C Cook
Mr E J McCormack
Mr D Singleton
Mr D E Wills
A – Number of meetings held during the time the Director held office during the year
B – Number of Meetings attended
4. Principal Activities
During the financial year, the principal activities of the Group consisted of:
building the capability and capacity of the organisation to achieve accredited supplier status with Northrop
Grumman in relation to the Joint Strike Fighter (JSF) project;
working closely with potential customers through the international network of Quickstep ‘Centres of
Excellence’ to qualify the Quickstep Process as a viable and effective alternative to traditional autoclave-
based composite manufacturing techniques;
development work and securing initial small-scale prototype contracts to accelerate entry to the global
aerospace sector;
further expansion of the Group’s existing portfolio of international research and development alliances and
partnerships with major aerospace, industrial and automotive groups and their Tier One suppliers;
coordination of a cohesive strategic plan for the Group’s global Research & Development initiatives; and
expansion of the global management team to ensure that the Group is positioned to take full advantage of
new business opportunities as they arise.
5. Results
The Group incurred a loss after tax of $13,734,713 for the year ended 30 June 2011 (2010: loss of $10,970,613).
6. Operating Review
A review of operations and activities for the financial year is set out in the Managing Director’s Review.
7.
Dividends
No dividend has been declared or paid by the Company to the date of this report.
Annual Report 2011
8
15
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
8. Events Subsequent to Reporting Date
Since the end of the financial year the Group:
Has received its first purchase order to manufacture parts for the JSF program. The purchase order covers
production of Group 1 parts over the next 12 months; and
Is in advanced stages of negotiation of a 10 year loan facility of $10,000,000 plus capitalised interest.
Other than the matters referred to above or in the financial statements, there has not arisen in the interval
between the end of the financial year and the date of this report any item, transaction or event of a material and
unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group, in future financial years.
9.
Likely Developments
The Group’s key areas of focus for the 2011/2012 financial year will include:
Commence production of JSF group 1 parts for Northrop Grumman;
Obtain further contracts for JSF production in accordance with the initial MOU signed in 2009;
Commence process qualification for additional process to support JSF production; Complete the
installation of production equipment in the Bankstown facility and qualify the facility to AS9100 quality
standard to support JSF production ;
Capital commitments of the Group pertaining to the above are set out in Note 28 in the financial statements. Note
1(d) in the financial statements also sets out the updated future operating cash flow requirements on the Group’s
financial position.
Further information about likely developments in the operations of the Group and the expected results of those
operations in future financial years has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
10.
Directors’ Interests
The relevant interest of each Director in the shares, rights and options at the date of this report is as follows:
Director
Shares
Options
Rights
Mr M B Jenkins
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham (1)
Mr P C Cook (2)
Mr E McCormack(3)
Mr D Singleton
(4)
Mr D E Wills
-
1,545,970
600,000
26,039,341
145,758
76,350
-
210,106
-
1,868,961
-
-
-
-
-
-
-
588,235
-
-
-
-
-
-
1.
2.
3.
4.
The registered holder of the shares is Decta Holdings Pty Ltd. Decta Holdings Pty Ltd is trustee for a
discretionary trust. Mr Graham is a potential beneficiary of that trust.
The registered holder of the shares is Bond Street Custodians Limited as custodian for the Lloyds Wharf
Super Fund of which Mr Cook is a trustee.
The registered holder of the shares is Aviops Pty Ltd for which Mr McCormack is a director.
The registered holder of the shares is Jammit Pty Ltd for which Mr Wills is a director.
16
9
Quickstep Holdings Limited
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
11. Share Options and Rights
Options and Rights granted to directors and executives of the Company
Share Options
During the financial year, 471,337 options were granted or vested under the Quickstep Employee Incentive Plan
(EIP) (2010: 3,249,476) to the CEO, Mr Philippe Odouard, as part of his remuneration with vesting based on
future conditions. 1,851,852 options granted in prior years were exercised on 23 September 2010. No other
options have been granted during or since the end of the financial year.
Rights
During or since the end of the financial year, the Company granted 989,303 rights for no consideration over
unissued ordinary shares in the Company to the five most highly remunerated officers, including key management
personnel of the Company as part of their remuneration. 294,118 of the granted rights held at the beginning of the
financial year have vested during the financial year. 468,750 rights have lapsed since the end of the financial
year.
Executives
Mr P Odouard
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Expiry Date
13/10/11
12/07/2013
01/07/2013
01/07/2103
01/10/2102
Exercise
Price
$0.00
$0.00
$0.00
$0.00
$0.00
Number of
Rights Held
588,235
267,605
471,698
250,000
276,000
Unissued shares under option and rights
At the date of this report, unissued ordinary shares of the Company under options and rights are:
Executive
Exercise Price
Expiry date
Number of Shares
Mr P Odouard
Mr P Odouard
$0.00
$0.00
30/03/2017
25/11/2017
1,397,624
471,337
At the date of this report, unissued ordinary shares of the Company under rights:
Executives
Mr P Odouard
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Expiry Date
13/10/2011
12/07/2013
01/07/2013
01/07/2013
01/10/2012
Exercise
Price
$0.00
$0.00
$0.00
$0.00
$0.00
Number of
Rights Held
588,235
267,605
471,698
250,000
276,000
Annual Report 2011
10
17
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
11
Share options and rights (cont’d)
These options and rights do not entitle the holders to participate in any share issue of the Company or any other
body corporate.
Shares issued on exercise of options and rights
During or since the end of
options and rights as follows (there were no amounts unpaid on the shares issued):
financial year, the Company issued ordinary shares as a result of the exercise of
Number of
Shares
Amount paid on
each Share
1,851,852
294,118
$0.00
$0.00
12.
Indemnification and Insurance of Officers
Indemnification
The Group has indemnified the Directors (as named above) and all executive officers of the Group and of any
related body corporate against any liability incurred as a Director, secretary or executive officer to the maximum
extent permitted by the Corporations Act 2001.
The Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer of the
Group or of any related body corporate against a liability incurred as an officer.
Insurance Premiums
The Group has paid a premium in respect of a directors’ and officers’ liability insurance policy, insuring the directors
of the Company, the Company secretary and all executive officers of the Company and Group against a liability
incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The
directors have not included details of the nature of the liabilities covered or the amount of the premium paid in
respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is
prohibited under the terms of the contract.
13. Non-audit Services
During the financial year, KPMG, the Group’s auditor, has not performed any additional services to their statutory
duties.
14. Lead Auditor’s Independence Declaration
The lead auditor’s independence declaration as required under Section 307C of the Corporations Act 2001, which
forms part of this Directors’ Report for the financial year ended 30 June 2011, is set out on page 71
15. Remuneration Report - Audited
The remuneration report is set out under the following main headings:
A:
B:
C:
D:
E:
Principles of compensation
Service agreements
Details of remuneration
Share-based compensation
Analysis of bonuses in remuneration
Remuneration is referred to as compensation throughout this report.
18
11
Quickstep Holdings Limited
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
Remuneration Report (cont’d)
15.
Remuneration Report (cont’d)
15.
Directors’ Report
Principles of compensation.
Principles of compensation.
A.
A.
Key management personnel have authority and responsibility for planning, directing and controlling the activities
of the Group, including directors of the Company. Key management personnel comprise the directors of the
Key management personnel have authority and responsibility for planning, directing and controlling the activities
of the Group, including directors of the Company. Key management personnel comprise the directors of the
Company and executives for the Group including the five most highly remunerated Company and Group
executives.
Company and executives for the Group including the five most highly remunerated Company and Group
executives.
The report includes details relating to:
The report includes details relating to:
Non Executive directors
Non Executive directors
Mr M Jenkins
Mr M Jenkins
Mr P Cook
Mr P Cook
Air Marshal E McCormack (Ret’d)
Air Marshal E McCormack (Ret’d)
Mr D Singleton
Mr D Singleton
Mr D Wills
Mr D Wills
Chair of Board
Chair of Board
Chair of Remuneration, Nomination and Diversity Committee
Chair of Remuneration, Nomination and Diversity Committee
Chair of Audit Risk and Compliance Committee
Chair of Audit Risk and Compliance Committee
Executive Directors
Executive Directors
Mr P Odouard
Mr P Odouard
Mr D Graham (Jnr)
Mr D Graham (Jnr)
Mr D Brosius
Mr D Brosius
Executives and Officers
Executives and Officers
Mr J Johnson
Mr J Johnson
Dr J Schlimbach
Dr J Schlimbach
Ms M Withers
Ms M Withers
Mr W. Beckles
Mr W. Beckles
Mr S Godbille
Mr S Godbille
Mr A Vihersaari
Mr A Vihersaari
Mr G Beaton
Mr G Beaton
Managing Director and Chief Executive Officer
Managing Director and Chief Executive Officer
Business Development Manager - Australia
Business Development Manager - Australia
President Quickstep Composite LLC
President Quickstep Composite LLC
Chief Financial Officer
Chief Financial Officer
Joint CEO, Quickstep GmbH
Joint CEO, Quickstep GmbH
Human Resources Manager
Human Resources Manager
Operations Manager (resigned 5/8/2011)
Operations Manager (resigned 5/8/2011)
General Manager of Quickstep Process Systems
General Manager of Quickstep Process Systems
Vice President of Global Business Development
Vice President of Global Business Development
Quality Manager (10/6/2011)
Quality Manager (10/6/2011)
The Board has established a Remuneration, Nomination and Diversity Committee which assists the Board in
The Board has established a Remuneration, Nomination and Diversity Committee which assists the Board in
formulating policies on and in determining:
formulating policies on and in determining:
the remuneration packages of executive directors, non-executive directors and senior executives; and
the remuneration packages of executive directors, non-executive directors and senior executives; and
cash bonuses and equity based incentive plans, including appropriate performance hurdles, total
cash bonuses and equity based incentive plans, including appropriate performance hurdles, total
payments proposed and plan eligibility criteria.
payments proposed and plan eligibility criteria.
If necessary, the committee obtains independent advice on the appropriateness of remuneration packages given
If necessary, the committee obtains independent advice on the appropriateness of remuneration packages given
trends in comparable companies and in accordance with the objectives of the Group.
trends in comparable companies and in accordance with the objectives of the Group.
Compensation levels for key management personnel of the Group are competitively set to attract and retain
Compensation levels for key management personnel of the Group are competitively set to attract and retain
appropriately qualified and experienced directors and executives. The remuneration structures are designed to
appropriately qualified and experienced directors and executives. The remuneration structures are designed to
attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader
attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader
outcome of creation of value for shareholders. Compensation packages include a mix of fixed compensation,
outcome of creation of value for shareholders. Compensation packages include a mix of fixed compensation,
short-term incentives and equity-based compensation as well as employer contributions to superannuation funds.
short-term incentives and equity-based compensation as well as employer contributions to superannuation funds.
Shares and options may only be issued to directors subject to approval by shareholders in general meeting.
Shares and options may only be issued to directors subject to approval by shareholders in general meeting.
The Group does not have any scheme relating to retirement benefits for its key management personnel.
The Group does not have any scheme relating to retirement benefits for its key management personnel.
Fixed compensation
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as employer
Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as employer
contributions to superannuation funds.
contributions to superannuation funds.
Annual Report 2011
12
12
19
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15.
Remuneration Report (cont’d)
A.
Principles of compensation. (cont’d)
Compensation levels are reviewed annually through a process that considers individual achievement of objectives
and overall performance of the Group. Compensation is also reviewed in the event of promotion or significant
change in responsibilities.
Performance based compensation
Performance based incentives, including short term and long term incentives, are provided to certain key
management personnel to align their remuneration with the Company’s performance. Incentives are based on
achievement of Key Performance Indicators (KPI’s) which are set by the Remuneration, Nomination and Diversity
Committee at the time the incentive is offered,
KPI’s for short term incentives may include a mixture of individual, business unit and Company targets and may
include financial targets such as revenue and expenditure targets, capital expenditure, Net Profit and Loss and
available cash balances measured against planned performance. The targets are set and assessed for each
individual manager and may include performance related to specific portions of the business or may be related to
the Group performance. Both financial and non financial targets are related to the Group’s business plans and
objectives.
KPI’s for long term incentives include Total Shareholders Return, measured against projected share price
performance.
The committee is responsible for assessing whether the KPIs are met and recommends the total incentive to be
paid to the individuals for approval by the Board.
In considering the Groups performance and the benefits to shareholder wealth, the committee has regard to the
achievement by key management personnel of progress towards the execution of the Group’s business plan.
During
towards developmental and
commercialisation activities. Over that time the earnings and shares prices history is as follows:
the current and previous 4 years
the plan has been directed
2011
2010
2009
2008
2007
Earnings
($13,734,713)
($10,978,608)
($8,620,973
($6,305,069)
(3,823,120)
Share price 30 June
$0.260
$0.235
$0.170
$0.350
$0.970
The group does not have a policy that prevents those that are granted share based payments from entering into
other arrangements that limit their exposure to losses that would arise if share price decrease.
Short-term incentives
Certain key management personnel receive short-term incentives (STI) in cash and/or shares based on
achievement of KPIs’ which relate to the annual business plan including the company’s earnings.
Equity-based compensation (long-term incentives)
Long-term incentives may be provided to key management personnel via the Quickstep Employee Incentive Plan
(EIP) (refer to note 32 to the financial statements). The incentives are provided as options over ordinary shares of
the Company and the plan is open to eligible employees of the Group. The incentives include performance
targets related to Total Shareholders Return and are measured against projected share price performance over a
period of 3 years. The incentives are considered to promote continuity of employment and encourage superior
performance.
Other long term incentives may be provided to key management personnel as rights over ordinary shares of the
Company. These rights have been provided to attract and retain key management personnel and as an incentive
for achievement of the Company’s relocation objectives.
Other than as disclosed in this report, there have been no performance-linked payments made by the Group to
key management personnel.
20
Quickstep Holdings Limited
13
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15.
Remuneration Report (cont’d)
Non-executive directors’ fees
Total remuneration for all non-executive directors, last voted upon by shareholders at the 2010 Annual General
Meeting, is not to exceed $600,000 per annum. Fees are set with reference to fees paid to non-executive directors
of comparable companies. Directors are entitled to receive a fee which covers all main board activities and
membership of committees. Fees include an amount of $5,000 for Chairmanship of each committee. The table
below indicates the maximum annual fees payable. Non-executive directors do not receive performance related
compensation.
Non Executive Directors
Mr M Jenkins
Mr P Cook
Mr E McCormack
Mr D Singleton
Mr D Wills
B.
Service agreements
2011
2010
Directors Fees
$127,600
Committee
Chairmanship
N/A
Directors Fees
$120,000
Committee
Chairmanship
N/A
$60,000
$84,000
$60,000
$50,000
$5,000
N/A
N/A
$5,000
$59,500
$60,000
N/A
N/A
N/A
N/A
N/A
N/A
Key management personnel have entered into service agreements. The employment contracts outline the
components of compensation paid to the key management personnel and are reviewed on an annual basis.
Agreement
Date
Duration
Notice
Period
Termination Benefits
STI (1)
% of
salary
LTI (2)
% of
salary
Other
Benefits
(4)
Key
Management
Personnel
Mr P M Odouard
Mr G S Beaton
13 October
2008
3 February
2010
Mr W Beckles
1 September
2009
Mr D E Brosius
1 September
2005
Mr S Godbille
10 June
2010
Mr D F G Graham
Mr J Johnson
5 January
2009
1 April 2011
12
Months
Dr J Schlimbach
1 January
2009
Mr A J Vihersaari
1 July 2010
Ms M A Withers
1 October
2009
24
Months
12
Months
6
months
1
Month
3
Months
3
Months
3
Months
1
Month
3
Months
3
Months
1
Month
3
Months
12 months annual salary; and
Pro-rated annual bonus (at
board’s discretion).
1 month of annual salary
25
50(3)
588,235
rights
12.5
12.5
-
package; and
Pro rated annual bonus (at
board’s discretion).
6 months of annual salary
package; and
Pro rated annual bonus (at
board’s discretion).
6 months annual
remuneration package;
Any cash bonus due but not
paid; and
Pro rated current year cash
bonus (in accordance with
contract).
3 months of annual salary
package; and
Pro rated annual bonus (at
board’s discretion).
n/a
6 months of annual salary
package; and
Pro rated annual bonus (at
board’s discretion).
n/a
n/a
6 months of annual salary
package; and
Pro rated annual bonus (at
board’s discretion).
12.5
12.5
468,750
rights
33.3(5)
-
-
12.5
12.5
25
20
12.5
12.5
12.5
-
20
12.5
12.5
12.5
267,605
rights
-
471,698
rights
-
250,000
rights
276,000
rights
Annual Report 2011
21
14
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15.
Remuneration Report (cont’d)
(1)
(2)
(3)
(4)
(5)
STI (Short Term Incentive) is determined on performance against key performance indicators (KPI’s) set
and reviewed by the Remuneration, Nomination and Diversity committee, or the Board as appropriate.
Percent (%) of salary refers to the maximum amount payable (as per service agreement). The KPIs
include Company financial objectives, such as order intake, profit and cash flow, and personal objectives
including control of responsibility centre expenditure and functional outcomes aligned to the annual
strategic plan.
LTI (Long Term Incentive) is determined on performance against key performance indicators (KPI’s) set
and reviewed by the Remuneration, Nomination and Diversity committee, or the board as appropriate.
LTI determined on performance against total shareholder’s return.
Other benefits include the long term loyalty bonus based on years of services, payable in shares.
Maximum US$30,000
22
Quickstep Holdings Limited
15
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Quickstep Holdings Limited
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15.
C.
Remuneration Report – (cont’d)
Details of remuneration (cont’d)
Notes in relation to the table of remuneration
(1)
Mr Odouard accepted offers of 3,249,476 and 471,337 options from the Quickstep Employee Incentive
Plan (EIP) in accordance with the resolutions passed at the 2009 and 2010 Annual General Meeting. The
number of options granted was calculated partly with reference to the volume weighted average of the
ASX quoted price for QHL shares on the date of Mr Odouard’s appointment (16.2 cents) and partly with
reference to the volume weighted average of the ASX quoted price for QHL shares at 31 July 2009 (31.8
cents) and 31 July 2010 (32.62 cents). Some or all of the options will vest if certain performance hurdles
relating to an increase in share value are achieved at the prescribed testing dates. The fair value of the
options, (determined using Monte Carlo simulations), as calculated under the accounting standards, takes
into account a range of assumptions including the likelihood of the options vesting and the projected share
price at the time of vesting (see below). The value disclosed is the portion of the fair value of the options
recognised in this accounting period. The fair value of the options granted is $1,235,946 (2010: 1,065,322)
of which $272,039 (2010: $782,510) has been recorded as an expense in the financial statements for the
portion attributable to the current financial year as required by accounting standards.
Earliest
possible
vesting date
Tranche 1 -
30/06/09
Tranche 2 -
30/06/10
Tranche 3 -
30/06/11
Tranche 4 -
30/06/12
2010 Year -
30/06/13
Fair value per
option at
grant date
Total fair value
Expensed
($)
No. of options
($)
($)
925,926
0.3500
324,074
925,926
0.3480
322,222
2011
2010
-
-
324,075
322,222
925,926
0.3150
291,667
184,211
107,456
471,698
0.2700
127,359
49,300
28,758
471,337
0.3956
170,624
38,528
-
Total
3,720,813
1,235,946
272,039
782,511
(2)
Rights
Rights have been issued to a number of key management personnel as long term incentives. The rights
are valued at the market value of the Group’s shares on the date of issue of the rights. The value disclosed
is the portion of the fair value at the options recognised in this reporting period.
No of Share
Vesting date
Fair Value
($)
Total Fair Value
($)
Mr P Odouard
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
294,118
588,253
89,202
178,403
157,233
314,465
83,333
166,667
92,000
312,500
Annual Report 2011
$0.13
$0.26
$0.27
$0.27
$0.32
38,235
76,470
23,192
46,384
41,667
83,333
22,500
45,000
29,440
58,880
22/11/10
26/11/11
12/07/12
12/07/13
1/07/12
1/07/13
1/07/12
1/07/13
1/11/11
1/11/12
18
25
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15. Remuneration Report – (cont’d)
( 3 )
The Short Term Incentive (STI) is comprised of an accrued cash bonus plus adjustments to the accrued
STI for actual amounts paid during the prior financial year.
D.
Share based compensation
Options
Mr Odouard was granted as compensation during the reporting period options from the EIP. Refer to the table
below for further details.
Number of options
granted 2011
Grant date
Fair value per option
at grant date ($)
Vested during the
year
Directors
Mr P Odouard
471,337
26/11/2010
$0.3620
-
The above options have an exercise price of $nil and an expiry date of 26 November 2015.
Details of the vesting profile of the options granted in this and prior years are detailed below.
Number of options
granted
Grant date
% vested
in this
year
%
forfeited
in this
year (A)
Financial years in
which grant vests
Directors
Mr P Odouard
Mr P Odouard
3,249,476
471,337
30/3/2010
26/11/2010
28%
0%
-
-
2010,11,12 &13
2014
(A)
The % forfeited in the year represents the reduction from the maximum number of options available to vest
due to performance criteria not being achieved.
Exercise of options granted as compensation
During the reporting period 1,851,852 shares were issued to Mr P Odouard ($ nil paid per share) on the exercise of
options previously granted as compensation. No options lapsed. The value of options exercised during the year of
$620,370 is calculated as the market value of shares of the Company as at the close of trading on the day the
options were exercised after deducting the price paid.
Rights to shares
Mr Godbille, Mr Johnson and Mr Vihersaari were granted during the reporting period, rights to shares ($ nil
consideration) as compensation offered through their executive services agreements. Refer to the table below for
further details.
Number of rights
granted during 2011
Grant date
Fair value per right at
grant date ($)
Vested during the
year
Executives
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
267,605
471,698
250,000
12/07/10
01/04/11
01/07/10
$0.26
$0.27
$0.27
-
-
-
26
Quickstep Holdings Limited
19
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15. Remuneration Report – (cont’d)
D
Share based compensation (cont’d)
Details of the vesting profile of the rights to shares granted as remuneration to each key management person of
the Group and each of the Company executives and Group executives are detailed below.
Number of
rights granted
Grant date
% vested in
year
% forfeited
in year (A)
Financial years
in which grant
vests
882,353
13/10/2008
33.33%
-
2011 & 2012
468,750
267,605
471,698
250,000
276,000
1/09/2009
12/07/10
01/04/2011
01/07/10
1/10/2009
-
-
-
-
-
100%
-
-
-
-
2013 & 2014
2013 & 2014
2013 & 2014
2012 & 2013
Directors
Mr P Odouard
Executives
Mr W Beckles
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
(A)
(B)
(C)
The percentage forfeited in the year represents the reduction from the maximum number of rights available
to vest due to performance criteria not being achieved.
The value of the rights that lapsed ($145,313) during the year is calculated at the date the right lapsed
assuming the performance conditions had been achieved.
During the year 294,118 rights were exercised at $nil consideration. The market value of the rights
exercised was $ 113,235.
The above rights vest in two tranches provided the employee remains with the Group. 1/3 vest 2 years from
the date granted, 2/3 vest 3 years from the date granted.
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including options and rights granted as
compensation to a key management person) have been altered or modified by the issuing entity during the
reporting period or the prior period.
E.
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of
the Company and each of the named Company executives and relevant Group executives and other key
management personnel of the Group are detailed below:
Included in
remuneration $
(A)
% vested in
year
% forfeited in
year (B)
52,999
23,118
22,500
14,484
33,027
8,439
13,750
13,040
75%
61%
75%
75%
75%
69%
69%
75%
25%
39%
25%
25%
25%
31%
31%
25%
Directors
Mr P Odouard
Mr D Brosius
Mr D Graham
Executives
Mr W Beckles
Mr J Johnson
Dr J Schlimbach
Mr A Vihersaari
Ms M Withers
Annual Report 2011
27
20
Directors’ Report
D I R E C T O R S ’ R E P O R T ( c o n t ’ d )
15. Remuneration Report – (cont’d)
(A)
Amounts included in remuneration for the financial year represent the amount that vested in the financial
year based on achievement of Group and/or personal goals and satisfaction criteria. No amounts vest in
future financial years in respect of the bonus schemes for the 2011 year. The amounts included in
remuneration for the current reporting period include variances to the 2010 bonus paid during the current
reporting period compared to the bonus accrual made in the prior reporting period.
(B)
The amounts forfeited are due to the Group and/or personal performance or service criteria not being met in
relation to the current financial year.
Dated at Perth, Western Australia this 30th day of September 2011.
Signed in accordance with a resolution of the Directors:
P M Odouard
Managing Director
28
Quickstep Holdings Limited
21
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
Corporate Governance Statement
This statement outlines the main corporate governance practices in place throughout the financial year, which are
consistent with the ASX Corporate Governance Council recommendations, unless otherwise stated.
Board of directors
Role of the Board
The Board’s Charter identifies its key objectives as:
increasing shareholder value;
safeguarding shareholders’ rights and interests; and
ensuring the Company is properly managed.
The Board is responsible for:
guiding the development of an appropriate culture and values for the Group through the establishment and
review of Codes of Conduct and policies and procedures to enforce ethical behaviour and provide
guidance on appropriate work methods;
monitoring financial performance including approval of the annual and half-year financial statements and
liaison with the Company’s auditors;
appointment of, and assessment of the performance of the Chief Executive Officer;
monitoring managerial performance;
ensuring that an appropriate set of internal controls is implemented so that significant risks facing the
Company and its controlled entities have been identified;
reporting to shareholders and regulatory authorities; and
making all decisions outside the scope of powers and authorities otherwise delegated.
Day-to-day management of the Group’s affairs and the implementation of the corporate strategy and policy
initiatives are delegated by the Board to the Managing Director and senior executives.
Board Processes
To assist in the execution of its responsibilities, the board has established a number of board committees
including an Audit, Risk and Compliance Committee and a Remunerations, Nominations and Diversity Committee
These committees have written mandates and operating procedures, which are reviewed on a regular basis. The
board has also established a framework for the management of the Group including a system of internal control, a
business risk management process and the establishment of appropriate ethical standards.
The full board meets regularly throughout the year, including strategy meetings and extraordinary meetings at
such other times as are necessary to address any specific significant matters that arose.
The agenda for meetings is prepared in conjunction with the chairperson, chief executive officer and company
secretary. Standing items include the chief executive officer’s report, financial reports, strategic matters,
governance and compliance. Submissions are circulated in advance. Executives are regularly involved in board
discussions and directors have other opportunities, including visits to business operations, for contact with a wider
Group of employees.
Director and executive induction
The Group has a process for induction of new directors about the nature of the business, current issues, the
corporate strategy and the expectations of the Group concerning performance of Directors. Directors also have
the opportunity to visit Group facilities and meet with management to gain a better understanding of business
operations. Directors are given access to continuing education opportunities to update and enhance their skills
and knowledge.
The Group also has a process for induction of new senior executives upon taking such positions. The induction
program includes reviewing the Group’s structure, strategy, operations, financial position and risk management
policies. It also familiarises the individual with the respective rights, duties, responsibilities and roles of the
individual and the Board.
Annual Report 2011
22
29
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
Independent professional advice and access to company information
Each director has the right of access to all relevant Company information and to the Company’s executives and,
subject to prior consultation with the chairperson, may seek independent professional advice from a suitably
qualified adviser at the Group’s expense. The director must consult with an advisor suitably qualified in the
relevant field, and obtain the chairperson’s approval of the fee payable for the advice before proceeding with the
consultation. A copy of the advice received by the director is made available to all other members of the board.
Composition of the board
During the financial year, the Board composition changed to comprise five non-executive directors, one of whom
is the Chairperson, and three executive directors.
The Company’s Constitution provides that the number of directors shall not be less than three and not more than
nine. There is no requirement for any shareholding qualification.
The Board considers the mix of skills and the diversity of Board members when assessing the composition of the
Board. The Board assess existing and potential director’s skills to ensure they have appropriate industry
experience in the Group’s operating segments.
The Board, through its Remuneration, Nomination and Diversity Committee, is responsible for establishing criteria for
Board membership, reviewing Board membership and identifying and nominating directors. Board membership is
regularly reviewed to ensure the Board has an appropriate mix of qualifications, skills and experience. Directors
appointed by the Board hold office only until the next Annual General Meeting and are then eligible for re-
appointment.
Directors, (other than the Managing Director) are eligible for re-appointment by shareholders, no later than the
third anniversary following their last appointment. Subject to the requirements of the Corporations Act, there is no
maximum period of service as a director.
The Managing Director may be appointed for any period and on any terms the Directors, through its Remuneration,
Nomination and Diversity Committee, identify as appropriate, although they shall be guided by current market
practices and rates.
Remuneration, Nomination and Diversity Committee
The Remuneration, Nomination and Diversity Committee was established during the year to incorporate the
functions previously undertaken by the remunerations committee and the nominations Committee and to
incorporate responsibility for Corporate diversity. The committee is comprised of three non executive Directors.
The committee meets at least twice per year.
The function of the committee is to assist the Board in formulating policies on and in determining:
the remuneration packages of executive directors, non-executive directors and senior executives;
cash bonuses and equity based incentive plans, including appropriate performance hurdles and total
payments proposed.
determine the size and composition of the Board;
select new directors and senior executives; and
establish the evaluation methods used in determining the performance of directors and senior executives
The Remuneration, Nomination and Diversity Committee is chaired by Mr P Cook. Attendance at Remuneration,
Nomination and Diversity Committee meetings held during the financial year is disclosed in the Directors’
Meetings section of the Directors Report.
30
23
Quickstep Holdings Limited
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee was established during the year to incorporate the functions
previously undertaken by the Audit committee and introduce the expanded role of review and oversight of
Corporate Risk and Compliance. During the financial year, the Audit, Risk and Compliance Committee was
comprised of the independent non-executive directors. The Audit Committee meets at least twice per year and its
key roles are to:
monitor the integrity of the financial statements of the Group;
review significant financial reporting judgements;
recommend to the Board the appointment of external auditors; and
oversees the establishment, implementation and review of the Group’s risk management systems.
The Audit Committee which operated during the first half of the year was chaired by Mr M B Jenkins, who has
both relevant financial qualifications and business experience required for this role. The Audit, Risk and
Compliance Committee which operated in the second half of the year was chaired by Mr David Wills who has
both relevant financial qualifications and business experience required for this role.
Risk Management
Oversight of the risk management system
The Audit, Risk and Compliance Committee oversees the establishment, implementation and review of the
Group’s risk management systems which have been established by management for assessing, monitoring and
managing operational, financial reporting and compliance risks. The chief executive officer and the chief financial
officer have provided assurance, in writing to the committee and the board, that the financial reporting risk
management and associated compliance and controls have been assessed and found to be operating effectively.
The operational and other risk management compliance and controls have also been assessed and found to be
operating effectively.
Risk profile
Management has undertaken a detailed risk identification process and established an integrated risk
management program. Changes in the organisational risk profile are reported to the Audit, Risk and Compliance
Committee to outline the material business risks to the company. The risk management process ensures that
risks are identified, assessed and appropriately managed.
The Audit, Risk and Compliance Committee reports the status of material business risks to the board on a
quarterly basis. Further details of the Company’s risk management policy and internal compliance and control
system are available on the Company’s website.
Each business operational unit is responsible and accountable for implementing and managing the standards
required by the program.
Material business risks for the company may arise from such matters as actions by competitors, government
policy changes, the impact of exchange rate movements on the price of raw materials and sales, difficulties in
sourcing raw materials, environment, occupational health and safety, property, funding, financial reporting, and
the purchase, development and use of information systems.
Risk management and compliance control
The Group strives to ensure that its products are of the highest standard. Towards this aim it has undertaken a
program to achieve AS/NZS ISO 9002 accreditation for each of its business segments.
The board is responsible for the overall internal control framework, but recognises that no cost-effective internal
control system will preclude all errors and irregularities. The board’s policy on internal control is comprehensive,
details of which are available on the Company’s website. It comprises the Company’s internal compliance and
control systems, and will become fully operational when major manufacturing commences. This includes:
Operating unit controls – Operating units confirm compliance with financial controls and procedures
including information systems controls detailed in procedures manuals;
Functional speciality reporting – Key areas subject to regular reporting to the board include Treasury and
Derivatives Operations, Environmental, Legal and Self Insurance matters; and
Annual Report 2011
24
31
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
Investment appraisal – Guidelines for capital expenditure include annual budgets, detailed appraisal and
review procedures, levels of authority and due diligence requirements where businesses are being
acquired or divested.
Comprehensive practices have been established to ensure:
capital expenditure and revenue commitments above a certain size obtain prior board approval;
financial exposures are controlled, including the use of derivatives. Further details of the Company’s
policies relating to interest rate management, forward exchange rate management and credit risk
management are included in notes 3and 27 to the financial statements;
occupational health and safety standards and management systems are monitored and reviewed to
achieve high standards of performance and compliance with regulations;
business transactions are properly authorised and executed;
the quality and integrity of personnel (see below);
financial reporting accuracy and compliance with the financial reporting regulatory framework (see below);
and
environmental regulation compliance
Quality and integrity of personnel
Written confirmation of compliance with policies in the Ethical Standards Manual is obtained from all operating
units. Formal appraisals are conducted at least annually for all employees. Training and development and
appropriate remuneration and incentives with regular performance reviews create an environment of cooperation
and constructive dialogue with employees and senior management. A formal succession plan is also in place to
ensure competent and knowledgeable employees fill senior positions when retirements or resignations occur.
Financial reporting
The chief executive officer and the chief financial officer have provided assurance in writing to the board that the
Company’s financial reports are founded on a sound system of risk management and internal compliance and
control which implements the policies adopted by the board.
Monthly actual results are reported against budgets approved by the directors and revised forecasts for the year
are prepared regularly.
Appropriate risk management strategies and procedures are developed to mitigate any identified risks to the
business. The procedures include identifying the context, registering, analysing, evaluating, treating, monitoring
and escalating the identified risks accordingly.
Environmental regulation
The Group’s activities to date have not been subject to any particular and significant environmental regulation
under Laws of either the Commonwealth or a State or Territory. The Directors are not aware of any material
breach of environmental regulations as they relate to the Group.
Ethical standards
All directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all
times to enhance the reputation and performance of the Group. Every employee has a nominated supervisor to
whom they may refer any issues arising from their employment.
Conflict of interest
Directors must keep the board advised, on an ongoing basis, of any interest that could potentially conflict with
those of the Company. The board has developed procedures to assist directors to disclose potential conflicts of
interest.
Where the board believes that a significant conflict exists for a director on a board matter, the director concerned
does not receive the relevant board papers and is not present at the meeting whilst the item is considered.
Details of director related entity transactions with the Company and the Group are set out in note 30 to the
financial statements.
32
25
Quickstep Holdings Limited
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
Code of conduct
An Employee Code of Conduct has been developed and applies to all directors, managers, employees and
contractors. The code specifies the standards of behaviour and the following principles embody the Code:
To act with integrity and professionalism in the performance of duties and be scrupulous in the proper use
of Quickstep Technologies Pty Ltd information, funds, equipment and facilities;
To edify the company and colleagues when dealing with customers, visitors, suppliers and shareholders;
To exercise fairness, equity, proper courtesy, consideration and sensitivity in all dealings in the course of
carrying out duties;
To avoid real, apparent or perceived conflicts of interest; and
To increase shareholder value within an appropriate framework to safeguard the rights and interests of the
Company’s shareholders and the financial community.
Trading in general company securities by directors and employees
A security Trading Policy has been established and is published on the Company web site. It requires that
Directors, officers and employees who wish to trade in Company securities must have regard to the statutory
provisions of the Corporations Act 2001 dealing with insider trading. Furthermore, directors and officers are
required to observe Blackout Periods in accordance with ASX rulings and to notify the Chairman prior to
undertaking transactions at any other time.
Communication with shareholders
The Board encourages participation of shareholders at the Annual General Meeting. In addition, Quickstep
proactively provides additional information with its quarterly reports to the ASX and periodically produces
Shareholder newsletters to update on the latest developments and results for the Group.
Diversity
The board is committed to having an appropriate blend of diversity on the board and in the Group’s senior
executive positions. The Remuneration, Nomination and Diversity Committee has responsibility for oversight of
the Board’s policy regarding gender, age, ethnic and cultural diversity.
Key elements of the diversity policy are as follows:
Recognition of the benefits arising from employee, senior management and Board diversity, including a
broader pool of high quality employees, improving employee retention, accessing different perspectives
and ideas and benefiting from all available talent.
A commitment to :
o Complying with current best practice in diversity, as appropriate,
o
Promoting diversity among employees, consultants and senior management throughout
Company; and
Keeping shareholders informed of Quickstep’s progress towards achieving its diversity
objectives.
the
o
The gender analysis at the balance date is set out below
Gender representation
Female (%)
Male (%)
Female (%)
Male (%)
30 June 2011
30 June 2010
Board representation
Senior management representation
Group representation
0%
13%
13%
100%
87%
87%
0%
13%
13%
100%
87%
87%
Annual Report 2011
26
33
Corporate Governance Statement
C O R P O R A T E G O V E R N A N C E S T A T E M E N T ( c o n t ’ d )
D I R E C T O R P E R F O R M A N C E E V A L U A T I O N
The performance of the Board and the various committees is reviewed annually by the full Board.
Director’s Disclosure Obligations
This policy is included in the Code of Conduct to ensure trading in the Company’s securities is conducted on a fair
basis. Company directors are obliged (subject to specific exceptions) to advise the ASX of any information that a
reasonable person would expect to have material effect on the price or value of the Company’s issued securities.
A S X G U I D E L I N E S O N C O R P O R AT E G O V E R N A N C E
Pursuant to ASX Listing Rule 4.10.3, the Company advises that it has followed the best practice
recommendations set by the ASX Corporate Governance Council except as identified below:
Principle of Good Corporate Governance
and Best Practice Recommendations
2.1
A majority of the board should be independent
directors:
4.2
The audit committee should be structured so that
it:
consists only non-executive directors;
consists of a majority of independent
directors;
is chaired by an independent chair
who is not chair of the board; and
has at least three members.
Reasons if not adopted
The Company notes that at the beginning of the
year the Board consists of 6 directors, 3 of whom
are executives and 3 who are non-executives
independent.
to be
who are considered
Additional
independent Directors have been
appointed during the year providing a majority of
independent directors.
During the first half of the year the chair of the
Audit Committee (now
the Audit Risk and
Compliance Committee) was the chair of the
two directors. The
Board and consisted of
three
committee has been expanded
independent directors and is chaired by an
independent director who is not chairman of the
board.
to
34
27
Quickstep Holdings Limited
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2011
C O N S O L I D AT E D S T AT E M E N T O F C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1
Revenue
Cost of sales
Gross profit
Other income
Corporate and administrative expenses
Marketing expenses
Operational and accreditation expenses
Research and development expenses
Other expenses
Loss from operating activities
Financial income
Financial expense
Net financing costs
Loss before income tax
Income tax benefit
Loss for the period
i)
Note
5
5
6
8
9
2011
$
2010
$
471,524
448,322
(535,256)
(108,491)
(63,732)
339,831
5,196,602
1,064,787
(5,711,712)
(5,143,918)
(907,565)
(657,024)
(7,785,973)
(4,076,651)
(2,615,573)
(2,777,239)
(218,168)
(115,355)
(12,106,121)
(11,365,569)
752,612
669,153
(2,381,204)
(1,628,592)
(812,286)
(143,133)
(13,734,713)
(11,508,702)
-
538,089
26
(13,734,713)
(10,970,613)
Other comprehensive income, net of income tax
Foreign currency translation difference for
foreign operations
Effective portion of changes in fair value of cash
flow hedges
(124,049)
(127,995)
(71,065)
-
Total comprehensive income for the period
(13,929,827)
(11,098,608)
Loss attributable to:
Owners of the company
Total comprehensive income attributable to:
Owners of the company
(13,734,713)
(10,970,613)
(13,929,827)
(11,098,608)
Earnings per share
11
Basic loss (cents/share) for Quickstep Holdings Ltd
Diluted loss (cents/share) for Quickstep Holdings Ltd
6.65
6.65
5.41
5.41
The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes.
Annual Report 2011
35
28
Consolidated Statement of Financial Position
As at 30 June 2011
C O N S O L I D AT E D S T AT E M E N T O F F I N A N C I AL P O S I T I O N
A S A T 3 0 J U N E 2 0 1 1
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Work in progress
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Employee benefits
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Financial liabilities at fair value through profit and
loss
Note
ii)
iii)
2011
$
2010
$
12
13
14
15
16
17
18
20
21
23
20
21
22
13,406,217
796,731
185,036
690,400
133,784
12,225,823
1,156,488
76,673
10,238,422
496,385
15,212,168
24,193,791
12,769,447
496,226
14,020
8,091,182
381,503
-
13,279,693
8,472,685
28,491,861
32,666,476
5,038,611
17,645
252,074
3,626,875
9,890
119,892
5,308,330
3,756,657
421,221
12,622
471,093
8,242
2,820,000
-
TOTAL NON-CURRENT LIABILITIES
3,253,843
479,335
TOTAL LIABILITIES
8,562,173
4,235,992
NET ASSETS
19,929,688
28,430,484
EQUITY
Share capital
Other reserves
Accumulated losses
TOTAL EQUITY
24
25
26
66,854,895
1,735,916
(48,661,123)
62,296,410
1,060,484
(34,926,410)
19,929,688
28,430,484
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
36
29
Quickstep Holdings Limited
Consolidated Statement of Changes in Equity
For the year ended 30 June 2011
,
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Annual Report 2011
37
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38
Quickstep Holdings Limited
C O N S O L I D AT E D S T AT E M E N T O F C AS H F L O W S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1
Consolidated Statement of Cash Flows
For the year ended 30 June 2011
Note
2011
$
2010
$
Cash flows from operating activities
Cash receipts in the course of operations
Interest received
Interest paid
Research and development tax offset rebate and
government grants
Cash payments in the course of operations
590,986
949,777
(6,133)
292,608
390,753
(269,787)
5,480,845
(15,093,949)
1,390,484
(9,375,034)
Net cash used in operating activities
29
(8,078,474)
(7,570,976)
Cash flows from investing activities
Acquisition of plant and equipment
Acquisition of intangibles
Redemption/(Investment) in term deposit
(4,843,826)
(350,118)
9,309,660
(1,723,741)
(226,000)
(10,000,000)
Net cash from/(used in) investing activities
4,115,716
(11,949,741)
Cash flows from financing activities
Proceeds from issues of shares
Payment of transaction costs
Proceeds from convertible notes
Convertible note issue costs
Finance lease payments
Net cash from financing activities
Net (decrease) / increase in cash and cash
equivalents
Effects of exchange rate changes on cash held in
foreign currencies
4,696,285
(137,800)
808,875
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(17,163)
25,907,412
(836,294)
4,000,000
-
(9,890)
5,350,197
29,061,228
1,387,439
9,540,511
(207,045)
(130,564)
Cash and cash equivalents at 1 July
12,225,823
2,815,876
Cash and cash equivalents at 30 June
12
13,406,217
12,225,823
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
Annual Report 2011
32
39
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1
1.
(a)
Significant accounting policies
Reporting entity
Quickstep Holdings Limited (“the Company”) is a company domiciled in Australia. The consolidated financial
statements of the Company as at and for the year ended 30 June 2011 comprise the Company and its subsidiaries
(together referred to as the “Group” and individually as “Group Entities”). The Group is primarily involved in the
manufacture of composite components for the aerospace industry, and continuing research and development in
composite manufacturing processes.
(b)
Basis of preparation
Statement of compliance
The consolidated financial statements are general purpose financial statements, which have been prepared in
accordance with the Australian Accounting Standards (AASBs) (including Australian interpretations) adopted by
the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial
statements of the Group comply with the International Financial Reporting Standards (IFRS) adopted by the
International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue by the Board of Directors on 30th September
2011.
Basis of measurement
The financial statements are prepared on the historical cost basis except for the following items which are further
outlined in note 2:
Financial liabilities at fair value through the profit and loss are measured at fair value
Liabilities for cash settled share based payments arrangements are measured at fair value
Derivative financial instruments are measured at fair value.
These consolidated financial statements are presented in Australian dollars, which is the Company’s functional
currency.
Use of estimates and judgements
The preparation of financial statements in conformity with AASBs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amount recognised in the financial statements are described in the
following notes:
Note 17 – Recoverable amount of property, plant and equipment;
Note 20 – Royalties payable; and
Note 32 – Share-based payments.
Note 22 – Financial liabilities at fair value through profit or loss
(c)
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by all entities in the Group.
Certain comparative amounts have been reclassified to conform to the current year’s presentation.
(d)
Financial position
The Group has incurred a loss after tax for the year of $13,734,713 (2010: loss $10,970,613). The Group has a
surplus in working capital at 30 June 2011 of $9,903,838 (2010: surplus $20,437,134). During the 12 months ended
30 June 2011, Quickstep has accessed additional sources of funding through a placement of shares (net of costs) of
$3,151,000 and a share purchase plan raising $1,407,485.
40
33
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
1.
Significant accounting policies (cont’d)
Additionally, the Group:
Has signed a Long Term Agreement (LTA) with lead JSF contractor Northrop Grumman on 2 February 2011:
The LTA is the first of several agreements which will implement the Memorandum of Understanding
(MoU) that was signed in November 2009 with F-35 prime contractor Lockheed Martin and Northrop
Grumman, one of its principal F-35 contractors; and
The LTA allows for annual purchase orders to be issued for Group 1 parts. Subsequent to year end
the Group has received the first purchase order for parts covered by the LTA and the first delivery
of these parts and cash flow is anticipated to be in 2012.
Has signed a Memorandum of Understanding with Sikorsky International Operations Inc aimed at enabling
the Group to become a recognised supplier to Sikorsky’s global supply chain and to conduct joint
development on the Quickstep patented technology;
Continues to actively seek opportunities for the sale of Quickstep machines and licensing of its associated
technology; and
Is progressing its strategy of securing outsourced composite manufacturing contracts.
These activities, in the opinion of Directors, warrant the ongoing commitments of the Group’s financial resources to
enable future profitable operations. Such operations are expected to enable recovery of the Group’s investment in
property, plant and equipment and intangible assets.
The activities will require significant capital expenditure and working capital outflows over at least the next 12
months. To fund these on-going activities the Group has:
Established a convertible note facility for US$15 million (La Jolla funding) and issued the first of two
convertible notes of US$7.5 million. Under the term of the notes (refer note 22) minimum monthly
payments of US$500,000 are required with an additional payments of up to US$500,000 per month at
the option of the note holder. This facility is a key part of the funding of Quickstep. The directors note
that current market uncertainties could affect the full drawdown of this facility; and
Executed an agreement with the NSW State Government to provide grant funding for the
establishment and operation of manufacturing facilities in support of the JSF project in NSW. The
initial performance conditions have been met and an initial grant paid. Additional funding from this
grant will become available once the Group has met targets relating to qualifying capital expenditure
and employment targets.
The Group is in advanced negotiations for a 10 year loan facility of $10 million (plus capitalised interest) to fund
capital expenditure. Directors anticipate the receipt and execution of final documentation in the near term.
The Group plans to continue to invest in the development of its production capability. The funding facilities (including
the La Jolla notes and the potential $10 million loan facility mentioned above) should be sufficient to meet future
requirements. Nevertheless to address the business opportunities potentially available to the Group, Directors will
continue to seek access to funds under favourable conditions.
(e)
Basis of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Quickstep
Holdings Limited (“Company” or “parent entity”) as at 30 June 2011 and the results of all subsidiaries for the year
then ended. Quickstep Holdings Limited and its subsidiaries together are referred to in the financial statements
as the consolidated entity or the Group.
A subsidiary is any entity controlled by the Company. Control exists where the Company has the power, directly
or indirectly, to govern the financial and operating policies of another entity so as to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, and de-
consolidated from the date that control ceases.
Intragroup balances and any recognised gains and losses or income and expenses arising from intragroup
transactions, are eliminated in preparing the consolidated financial statements.
Annual Report 2011
34
41
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
1.
Significant accounting policies (cont’d)
Associates and jointly controlled entities (equity accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of
the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group
has joint control, established by contractual agreement and requiring unanimous consent for strategic financial
and operating decisions. Associates and jointly controlled entities are accounted for using the equity method
(equity accounted investees) and are initially recognised at cost. The Group’s investment includes goodwill
identified on acquisition, net of any accumulated impairment losses.
The consolidated financial statements include the Group’s share of the income and expenses and equity
movements of equity accounted investees, after adjustments to align the accounting policies with those of the
Group, from the date that significant influence or joint control commences until the date that significant influence
or joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee,
the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition
of further losses is discontinued except to the extent that the Group has an obligation or has made payments on
behalf of the investee.
(f)
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to
Australian dollars at the foreign exchange rate at that date. Foreign exchange differences arising on translation
are recognised in profit and loss. Non-monetary assets and liabilities that are measured in terms of historical cost
in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign operations
The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the
reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary
economies, are translated to Australian dollars at exchange rates at the dates of the transactions.
Foreign currency differences are recognised in other comprehensive income, and presented in the foreign
currency translation reserve (translation reserve) in equity. Since 1 July 2004, the Group’s date of transition to
AASBs, such differences have been recognised in the foreign currency translation reserve (FCTR). When a
foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to the statement
of comprehensive income.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form
part of a net investment in a foreign operation and are recognised directly in equity in the FCTR.
(g)
(i)
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other
financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade
date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial
assets that is created or retained by the Group is recognised as a separate asset of liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to
realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: held-to-maturity financial assets, and loans and
receivables.
42
35
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
1.
Significant accounting policies (cont’d)
Held-to-maturity financial assets
If the Group has the positive intent and ability to hold debt securities to maturity, then such financial assets are
classified as held-to-maturity. Held-to-maturity financial assets are recognised initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets are
Measured at amortised cost using the effective interest method, less any impairment losses. Any sale or
reclassification of a more than insignificant amount of held-to-maturity investments not close to their maturity
would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Group
from classifying investment securities as held-to-maturity for the current and the following two financial years.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest
method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents and trade and other receivables including service
concession receivables.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with
an original maturity of three months or less. For the purposes of the cash flow statement, cash consists of cash
and short-term deposits as defined above, net of outstanding bank overdrafts.
(ii)
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the
instrument. The Group derecognises a financial liability when its contractual obligations are discharged or
cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of
financial position when, and only when, the Group has a legal right to offset the amounts and intends either to
settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: loans and borrowings, and trade and other
payables.
Trade and other payables, other than royalties payable, are stated at their amortised cost.
Royalties payable are royalties due under contracts and are on initial recognition recorded at fair value
utilising discounted cash flows and then subsequently recorded at amortised cost (refer note 20).
(iii)
Share Capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Annual Report 2011
36
43
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
1.
Significant accounting policies (cont’d)
(iv)
Compound financial instruments
The liability component of a compound financial instrument is recognised initially at the fair value of a similar
liability that does not have an equity conversion option. The equity component is recognised initially at the
difference between the fair value of the compound financial instrument as a whole and the fair value of the liability
component. Any directly attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at
amortised cost using the effective interest method. The equity component of a compound financial instrument is
not re-measured subsequent to initial recognition.
Interest, dividends, losses and gains relating to the financial liability are recognised in profit or loss. Distributions
to the equity holders are recognised against equity, net of any tax benefit.
(v)
Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency risk exposure. Embedded derivatives
are separated from the host contract and accounted for separately if the economic characteristics and risks of the
host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the
embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair
value through profit or loss.
On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship
between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in
undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the
hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on
an ongoing basis, whether the hedging instruments are expected to be “highly effective” in offsetting the changes in
the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and
whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast
transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash
flows that could ultimately affect reported net income.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as
incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are
accounted for as described below.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised in
other comprehensive income to the extent that the hedge is effective and presented in the hedging reserve in equity.
To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain
or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity
remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the
amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset
is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive
income is recognised immediately in profit or loss. In other cases the amount recognised in other comprehensive
income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
Financial liabilities at fair value through profit and loss
During the year the Group has entered into a funding arrangement with La Jolla Cove Investors Inc (refer to note
22), which has been designated as a financial liability at fair value through the profit and loss.
The financial liability is recognised initially at fair value; attributable costs are recognised in the profit and loss as
incurred. Subsequent to initial recognition, the financial liability is measured at fair value and changes therein, other
than drawdowns and settlements, are recognised immediately in the profit and loss as a finance expense (refer 1
(g)). As the Group expects the settlement to occur by the issuance of equity, settlement is anticipated to be
recognised directly in equity.
Changes in the fair value of separable embedded derivatives are recognised immediately in profit or loss.
44
37
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
1.
Significant accounting policies (cont’d)
Other non-trading derivatives
When a derivative financial instrument is not held for trading, and is not designated in a qualifying hedge relationship,
all changes in its fair value are recognised immediately in profit or loss.
(h)
Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to brining
the assets to a working condition for their intended use, the costs of dismantling the items and restoring the site on
which they are located and capitalised borrowing costs.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) or property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds
from disposal with the carrying amount of property, plant and equipment and is recognised net within other
income/other expense in profit or loss.
Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are
assessed and if a component has a useful life that is different from the remainder of the asset, that component is
depreciated separately. Depreciation is recognised in profit and loss on a reducing balance basis over the estimated
useful lives of each component of an item of property plant and equipment. The depreciation rates used for each
class of depreciable asset for the current and prior years are:
Class of depreciable asset
Plant and factory equipment
Office equipment
(i)
(i)
Intangible assets
Research and development
Depreciation rate
6.67% to 37.50%
6.67% to 50.00 %
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the statement of comprehensive income as an expense as incurred.
Development activities involve a plan or design of new or substantially improved products and processes.
Development expenditure is capitalised only if development costs can be measured reliably, the product or process
is technically or commercially feasible, future economic benefits are probable and the Group intends to and has
sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the
cost of materials, direct labour and overheads costs that are directly attributable to preparing the asset for its
intended use and capitalised borrowing costs.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
(ii)
Other intangible
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and accumulated impairment losses.
(iii)
Amortisation
Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in profit and loss
on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that
they are available for use. The estimated useful lives in the current and comparative periods are as follows:
Licences, patents and rights to technology
10 years
Royalty buy-back
Software
10 years
2 ½ years
Annual Report 2011
38
45
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
1.
(j)
Significant accounting policies (cont’d)
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair
value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not recognised on the Group’s statement of financial
position.
(k)
Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated
selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(l)
(i)
Impairment
Non-Derivative Financial assets
A financial asset not carried at fair value through profit and loss is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired. A financial asset is impaired if objective evidence
indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event has
negative effect on the estimated future cash flows of that asset that can be measured reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash flows discounted at the original
effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment
loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss.
(ii)
Non-financial assets
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For
goodwill and intangible assets that have indefinite useful lives or are not yet available for use, the recoverable
amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset
or its related cash-generating unit (CGU) exceeds it estimated recoverable value.
An impairment loss is recognised whenever the carrying amount of an asset of its cash-generating unit exceeds its
recoverable amount. Impairment losses are recognised in the statement of comprehensive income unless the asset
has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that
previous revaluation with any excess recognised through the statement of comprehensive income.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of
any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the
other assets in the unit (group of units) on a pro rata basis.
An impairment write down to goodwill may not be reversed in future years. In respect of other assets, impairment
losses recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation,
if no impairment loss had been recognised.
(m)
Employee entitlements
Wages, salaries, annual leave and non-monetary benefits
Liabilities for employee benefits for wages, salaries, annual leave and other entitlements represent present
obligations resulting from employees’ services provided to reporting date, and are calculated at undiscounted
amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date
including related on-costs, such as, workers compensation insurance and payroll tax.
46
39
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
1.
Significant accounting policies (cont’d)
Provisions made in respect of other employee entitlements which are not expected to be settled within 12 months
(such as long service leave) are measured as the present value of the estimated future cash outflows to be made
by the Group in respect of services provided by employees up to the reporting date.
Share-based payment transactions
An expense is recognised for all equity-based remuneration and other transactions, including shares, rights and
options issued to employees and directors. The fair value of equity instruments granted is recognised, together
with a corresponding increase in equity, over the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting date’).
The amount recognised is adjusted to reflect the actual number of shares and options that vest, except for those
that fail to vest due to market conditions not being met. The fair value of equity instruments granted is measured
using a generally accepted valuation model, taking into account the terms and conditions upon which the equity
instruments were granted. The fair value of shares, options and rights granted is measured based on relevant
market prices at the grant date.
(n)
Revenue
Revenue from sale of goods is recognised in the statement of comprehensive income when persuasive evidence
exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have
been transferred to the buyer, recovery of consideration is probable, the associated costs and possible return of the
goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably. Revenue from the rendering of a service is recognised in the income statement
in proportion to the stage of completion of the transaction at balance sheet date. The stage of completion is
assessed by reference to analysis of work performed.
To the extent to which amounts are received in advance of the provision of the related services, the amounts are
recorded as unearned income and credited to the statement of comprehensive income as earned.
Licence fee revenue is recognised on an accruals basis when the Group has the right to receive payment under the
relevant agreement and has performed its obligations.
(o)
Government grants
Government grants are recognised initially as deferred income where there is a reasonable assurance that the grant
will be received and all grant conditions will be met. Grants that compensate the Group for expenses incurred are
recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are
recognised. Grants that compensate the Group for the cost of an asset are recognised in profit or loss on a
systematic basis over the useful life of the asset.
(p)
Lease payments
Payments made under operating leases are recognised in the statement of comprehensive income on a straight-
line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the remaining balance of the liability.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A
specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified
asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to
control the use of the underlying asset.
(q)
Finance income and finance costs
Finance income comprises interest income on funds invested, dividend income, gains on the disposal of
available-for-sale financial assets and fair value gains on financial assets at fair value through profit and loss.
Interest income is recognised as it is accrues in profit and loss, using the effective interest method.
Finance costs comprise interest expense on borrowings calculated using the effective interest method, dividend
income, transaction costs, unwinding discounting of provisions, fair value losses on financial liabilities at fair value
through profit and loss and foreign exchange gains and losses. The interest expense component of finance lease
payments is recognised in the profit and loss using the effective interest method.
Annual Report 2011
40
47
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
1.
(r)
Significant accounting policies (cont’d)
Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit and
loss except to the extent that it related to a business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantially enacted at reporting date, and any adjustment to tax payable in respect of previous
years. Current tax payable also included any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: goodwill, the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit, nor differences relating to investments in subsidiaries to the extent that they will probably not
reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been enacted or substantively enacted at
the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
Quickstep Holdings Limited and its subsidiaries have unused tax losses. However, no deferred tax balances
have been recognised, as it is considered that asset recognition criteria have not been met at this time.
(s)
Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from,
or payable to, the ATO is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows
arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as
operating cash flows.
(t)
Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise
share options and rights granted and convertible notes and convertible loans on issue.
(u)
Segment reporting
Determination and presentation of operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. All operating segments’ operating results are regularly reviewed by the Group’s CEO to make
decisions about resources to be allocated to the segment and assess its performance, and for which discrete
financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that
can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the
Company’s headquarters), head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment,
and intangible assets other than goodwill.
48
41
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
1.
(v)
Significant accounting policies (cont’d)
Presentation of financial statements
Key amendments to the Corporations Act 2001 were given royal assent on 28 June 2010 which removed the
requirement to include full parent entity financial statements when preparing consolidated financial statements.
This amendment is applicable for financial years ended on or after 30 June 2010 and therefore parent entity
financial statements are not included in this report. Disclosures regarding the parent entity are included in Note
33.
(w)
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 July 2010, and have not been applied in preparing these consolidated financial statements.
None of these is expected to have a significant effect on the consolidated financial statements of the Group,
except for AASB 9 Financial Instruments, which becomes mandatory for the Group’s 2014 consolidated financial
statements and could change the classification and measurement of financial assets. The Group does not plan to
adopt this standard early and the extent of the impact has not been determined.
The following standards, amendments to standards and interpretations have been identified as those which may
impact the entity in the period of initial application. They are available for early adoption at 30 June 2011, but
have not been applied in preparing these financial statements.
AASBs and
Interpretation
AASB 9 Financial
Instruments
Application
date
1 January
2013
AASB 2010-7
Amendments to Australian
Accounting Standards
arising from AASB 9
Key requirements
Added requirements for the classification
and measurement of financial liabilities
that are generally consistent with the
equivalent requirements in AASB 139
except in respect of the fair value option;
and certain derivatives linked to unquoted
equity instruments. The AASB also
added the requirements in AASB 139 in
relation to the de-recognition of financial
assets and financial liabilities to AASB 9.
AASB 2009-11
Amendments to Australian
Accounting Standards
arising from AASB 9
1 July 2011
AASB 2010-6
Amendments to Australian
Accounting Standards –
Disclosures on Transfers
of Financial Assets
1 July 2011
AASB 2010-9
Amendments to Australian
Accounting Standards –
Severe Hyperinflation and
Removal of Fixed Dares
for First time Adopters
introduce
amendments
AASB 9 retains but simplifies the mixed
measurement model and establishes two
primary measurement categories
for
financial assets; amortised cost and fair
value. The basis of classification depends
on the entity’s business model and the
contractual cash flow characteristics of
the
financial asset. The guidance in
AASB 139 on impairment of financial
assets and on
hedge accounting
continues to apply.
The
new
disclosure requirements about transfers
of financial assets including disclosures
for
that are not
derecognised
their entirety; and
financial assets that are derecognised in
their entirety but for which the entity
retains continuing involvement.
These amendments replace the fixed
dates in the de-recognition exemption
related
value
measurement of financial instruments. It
also adds a deemed cost exemption to
AASB 1 that an entity can apply at the
date of transition to IFRSs after being
subject to severe hyperinflation.
financial assets
initial
the
fair
to
in
Transitional
Provisions
Retrospective
application
Extensive transitional
provisions
For periods beginning
before 1 January
2013 entities may
elect whether to apply
IFRS 9 (2010) or
IFRS 9 (2009)
If adopted before 1
January 2012, the
prior period need not
be restated
Retrospective
application
Comparatives are not
required in first year
of adoption
Retrospective
application
General provisions of
AASB 108 apply
Annual Report 2011
42
49
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
AASB 2009-14
Amendments to Australian
Interpretation –
Prepayments of a
Minimum Funding
Requirement – AASB
interpretation 14
AASB 2010-4 Further
Amendments to Australian
Accounting standards
arising from the Annual
Improvement Project
1 January
2011
1 January
2011
to
from
unintended
Interpretation 14
The amendment
consequences
removes
arising
of
treatment
the
prepayments when there is a minimum
funding requirement. The amendment
results in prepayments of contributions in
certain circumstances being recognised
as an asset rather than an expense.
A collection of non-urgent but necessary
improvements to the following accounting
standards: AASB 1, AASB 7, AASB 101,
AASB 134 and Interpretation 13.
Retrospective
application
General provisions of
AASB 108 apply
Some amendments
have individual
transitional provisions
Early adoption of
amendments to
individual standards
may be permitted.
2.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value, for both
financial and non-financial assets and liabilities. Where applicable, further information about the assumptions
made in determining fair values is disclosed in the notes specific to that asset or liability.
(a)
Trade and other receivables
The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at
the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.
(b)
Non-derivative financial liabilities
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future
principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the
liability component of convertible notes and loans, the market rate of interest is determined by reference to similar
liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by
reference to similar lease agreements.
(c)
Share-based payment transactions
The fair value of the Employee Share Options Scheme (ESOS) and Employee Incentive Plan (EIP) are measured
using Monte Carlo Sampling. The fair value of the share rights is measured using the Black-Scholes formula.
Measurement inputs include share price on measurement date, the exercise price of the instrument, expected
volatility (based on weighted average historic volatility adjusted for expected changes expected due to publicly
available information), expected term of the instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on government bonds).
In the case of the
EIP, market performance conditions attaching to the grant are taken into account in the Monte Carlo Simulation in
determining fair value. Service and non-market performance conditions attached to the ESOS and EIP
transactions are not taken into account in determining fair value.
(d)
Derivatives
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market
price is not available, then fair value is estimated by discounting the difference between the contractual forward
price and the current forward price for the residual maturity for the contract using a risk-free interest rate.
(e)
Financial liabilities at fair value through the profit and loss
The fair value of the La Jolla convertible notes (refer note 22) are measured using a Monte Carlo simulation which
incorporates various assumptions including the amount and timing of drawdowns, the amount and timing of
conversions market interest rates, foreign exchange rates, equity prices and the Group’s own credit risk.
50
Quickstep Holdings Limited
43
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
3.
(a)
Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
credit risk;
liquidity risk; and
market risk.
This note presents information about the Group’s exposure to each of the above risks, their objectives, policies
and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures
are included throughout these financial statements.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework and is responsible for developing and monitoring risk management policies.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through training
and management standards and procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
The Group’s Audit, Risk and Compliance Committee oversees how management monitors compliance with the
Group’s risk management policies and formally documented procedures and reviews the adequacy of the risk
management framework in relation to the risks faced by the Group.
(b)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s receivables from customers and cash
balances and deposits.
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
However, management also considers the demographics of the Group’s customer base, including the default risk
of the industry and country in which customers operate, as these factors may have an influence on credit risk.
Geographically, other than in Australia for amounts due from the Australian Taxation Office,
there is no
concentration of credit risk. Goods are generally sold subject to retention of title clauses, so that in the event of
non-payment the Group may have a secured claim. The Group does not require collateral in respect of trade and
other receivables.
Cash balances and deposits
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that
have a credit rating of at least A1 from Standard & Poor’s. Given these high credit ratings, management has
assessed the risk that counterparties fail to meet their obligations as low.
(c)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial
liabilities that are settled by delivering cash or another financial asset. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquid assets to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a
period of at least 12 months, including the servicing of financial obligations; this excludes the potential impact of
extreme circumstances that cannot reasonably be predicted, such as natural disasters. The Group holds cash
reserves raised during the financial year from a share placement, a share purchase plan and drawdowns of funds
from a convertible note facility (refer to note 22). The Group anticipates settling its financial liability by delivery its
own shares. Also refer to note 1(d).
Annual Report 2011
44
51
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
3.
Financial risk management (cont’d)
(d)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect
the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return. The
Group does not enter into derivatives in order to manage market risks.
Interest rate risk
The Group is exposed to interest rate risk predominantly on cash balances and deposits. Given the relatively
short investment horizon for these, management has not found it necessary to establish a policy on managing the
exposure of interest rate risk.
Additionally, the Group has entered into a Convertible Note agreement for a fixed term of four years with a fixed
interest rate of 3% p.a.
Currency risk
The Group is exposed to currency risk on sales, purchases and cash holdings that are denominated in a currency
other than the respective functional currencies of Group entities, primarily the Australian dollar (AUD). The
currencies in which these transactions primarily are denominated are AUD, EUR and USD.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its
net exposure is kept to an acceptable level by hedging its estimated foreign currency exposure or by buying or
selling foreign currencies at spot rates when necessary to address short-term imbalances.
The Group’s investment in its German and USA subsidiaries are not hedged as the currency positions are
considered to be long-term in nature.
(e)
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern, so as to maintain a strong capital base sufficient to maintain future development in accordance with the
business strategy. In order to maintain or adjust the capital structure, the Group may return capital to
shareholders or issue new shares. The Group’s focus has been to raise sufficient funds through equity and/or
compound financial instruments so as to fund its working capital and commercialisation of technology
requirements.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
4.
Operating Segments
The Group has three operating segments, as described below. These operating segments are managed
separately because they address Quickstep’s three separate strategies to grow the business and are reported to
the CEO on at least a quarterly basis.
The following summary describes the operations in each of the Group’s reportable segments:
Manufacturing - Targeting manufacturing contracts utilising a range of manufacturing solutions including
traditional manufacturing technologies such as autoclaves and ‘next generation’ technologies such as the
patented “Quickstep Process”.
Quickstep Process - Licensing our “Quickstep Process” technology to Original Equipment Manufacturers
(OEM’s) and their suppliers, and providing them with Quickstep machines and support services.
Research and Development - Conducting research and development on Quickstep and associated
technologies where possible on a paid basis on behalf of customers to validate its suitability for their needs
and/or develop the technology to meet their specific requirements.
There is integration between the segments in the form of use of the Manufacturing segment assets for Research
and Development purposes.
The basis of segmentation has been changed from the geographical basis presented in the 2010 consolidated
financial statements Comparative segment information has been restated in conformity with the requirement of
AASB 8 Operating Segments.
52
45
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
4
Operating Segments (cont’d)
Manufacturing
2011
-
4,302,582
2010
-
3,850
Quickstep
Process
2011
-
2010
-
805,438
352,424
-
(3,654,983)
(4,566,491)
(330,619)
10,842,346
7,438,211
1,425
2,022,198
1,250,436
-
-
-
-
-
Research and
Development
2011
471,524
894,021
2010
448,322
1,050,937
Total
2011
471,524
5,196,603
2010
448,322
1,064,787
715,351
321,970
1,520,789
674,394
(1,544,583)
(1,041,198)
(5,530,185)
(5,607,689)
417,658
128,491
11,261,429
7,566,702
35,634
1,436,408
2,057,832
2,686,844
External revenues
Other income
Depreciation &
amortisation
Reportable segment
profit/(loss) before
income tax
Reportable segment
assets
Reportable segment
liabilities
Reconciliation of reportable segment loss
Total loss for reportable segments
Unallocated amount: other corporate expenses
Consolidated loss before income tax
Reconciliation of reportable segment assets
Total assets for reportable segments
Unallocated amount: other corporate assets
Consolidated total assets
Reconciliation of reportable segment liabilities
Total liabilities for reportable segments
Unallocated amount: other corporate liabilities
Consolidated total liabilities
Geographical information
Note
Consolidated
2011
$
2010
$
(5,530,185)
(8,204,528)
(13,734,713)
(5,607,689)
(5,901,013)
(11,508,702)
11,261,429
17,230,432
28,491,862
7,566,702
25,099,774
32,666,476
2,057,832
6,504,341
8,562,173
2,686,844
1,549,148
4,235,992
The Manufacturing, Quickstep Process and Research and Development segments are managed on a worldwide
basis with offices in Australia, Germany and the United States of America.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical
location of customers. Segment assets are based on the geographical location of the assets.
Australia
Germany
United States of America
Total
2011
$
Revenue
-
157,739
313,785
Non-current
assets
12,649,662
543,852
86,179
2010
$
Revenue
87,280
285,408
75,634
Non-current
assets
7,919,659
511,618
41,408
471,524
13,279,693
448,322
8,472,685
Annual Report 2011
46
53
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
5.
Revenue and Income
Sales
Total revenue from operating actives
Other Income
Income from government grants (i)
Other income
Total other income
Note
Consolidated
2011
$
2010
$
471,524
471,524
448,322
448,322
5,054,944
141,658
5,196,602
1,060,937
3,850
1,064,787
Income from government grants include amounts which require the Group to operate a manufacturing
(i)
facility in NSW until 30 June 2019.
Note
18
32
6.
Other Expenses
Amortisation of intangibles
Other
7.
Personnel expenses
Wages and salaries
Other associated personnel expenses
Increase/(decrease) in liability for annual leave
Expense of share based payments
8.
Finance income and expense
Recognised in profit and loss
Interest income
Finance income
Finance lease interest
Convertible note interest
Convertible loan costs
Amortisation of convertible note costs
Amortisation of convertible loan costs
Net foreign exchange loss
Net change in derivatives at fair value through profit or loss
Interest expense on liabilities measured at amortised cost
Finance expense
Net finance expense
Recognised in other comprehensive income
Effective portion of changes in fair value of cash flow hedges
Foreign currency translation differences for foreign operations
Finance income recognised in other comprehensive income, net
of tax
Consolidated
2011
$
2010
$
235,644
(17,476)
218,168
63,844
51,511
115,355
7,063,826
762,058
(96,348)
390,545
8,120,081
3,715,612
572,788
56,266
923,499
5,268,165
752,612
752,612
(6,143)
-
(393,936)
-
-
-
(1,981,125)
-
(2,381,204)
(1,628,592)
(71,065)
(124,049)
(195,114)
669,153
669,153
(2,868)
(190,248)
(306,571)
(105,535)
(156,164)
(2,568)
-
(48,332)
(812,286)
(143,133)
-
(127,995)
(127,995)
54
47
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
9.
(a)
Income tax
Income tax benefit
The major components of income tax benefit are:
Current income tax benefit
Adjustments in respect of current income tax of previous years
Income
statement
tax benefit reported
the consolidated income
in
(b)
Numerical reconciliation between tax benefit and
pre-tax net loss
A reconciliation between tax benefit and the product of
accounting loss before income tax multiplied by the Group’s
applicable income tax rate is as follows:
Loss before tax from continuing operations
At the statutory income tax rate of 30%
Expenditure not allowable for income tax purposes
Adjustments in respect of current income tax of previous years
Effect of different tax rate for overseas subsidiaries
Deferred tax asset not brought to account
Income tax benefit
(c)
Tax losses not brought to account
Consolidated
2011
$
2010
$
-
-
-
(537,062)
(1,027)
(538,089)
(13,734,713)
(11,508,702)
(4,120,414)
756,871
-
(10,726)
3,374,269
-
(3,452,611)
394,458
(1,027)
194,647
2,326,444
(538,089)
Unused tax losses for which no deferred tax asset has been
recognised calculated at 30% (2010: 30%)
10.317,568
7,818,987
(d)
Temporary differences not brought to account
Deferred tax assets/(liabilities) calculated at 30% (2010: 30%):
Interest receivable
Prepayments
Other provisions
Borrowing costs
Deductible capital raising costs and black hole expenditure
Property, plant and equipment
Intangibles
Deferred tax assets not recognised (excluding those on tax
losses)
(23,363)
-
322,050
342
311,383
494,048
419,830
(83,520)
(25,356)
210,727
25,311
381,571
540,537
406,979
(1,524,290)
(1,456,250)
-
-
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets
have not been recognised in respect of these items because it is not probable that future taxable profit will be
available against which the Group can utilise the benefits there from.
(e)
Tax consolidation legislation
Quickstep Holdings Limited and its 100% owned Australian resident subsidiaries have not formed a tax consolidated
group.
Annual Report 2011
48
55
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
10.
Auditor’s remuneration
Amounts received or due and receivable by the auditor for:
Audit and review of financial reports
KPMG – current year
KPMG – under/(over) accrual from prior year
Consolidated
2011
$
2010
$
124,000
(5,558)
118,442
74,500
26,450
100,950
11.
Loss per share
The calculation of basic loss per share at 30 June 2011 of 6.65 cents (2010: 5.41 cents) was based on the loss
attributable to ordinary shareholders of $13,734,713 (2010: $10,970,613) and a weighted average number
(W.A.N.) of ordinary shares outstanding during the financial year ended 30 June 2011 of 206,683,922 (2010:
202,961,683) calculated as follows:
2011
2010
Note
Actual No.
W.A.N.
Actual No.
W.A.N.
Issued ordinary shares 1 July
Effect of shares issued
Effect of conversion of notes
Effect of shares issued relating to rights
Effect of share options exercised
24
251,416,900
16,475,892
-
294,118
1,851,852
202,961,683
2,144,270
-
152,297
1,425,672
162,446,305
48,534,976
33,500,000
-
5,935,619
162,446,305
24,877,605
14,216,438
-
1,421,335
Issued ordinary shares at 30 June
24
270,038,762
206,683,922
251,416,900
202,961,683
Potential ordinary shares on issue are not considered to be dilutive and therefore the dilitued loss per share
equals the basic loss per share.
12.
Cash and cash equivalents
Cash at bank and on hand
Short-term bank deposits
13.
Trade and other receivables
Current
Trade receivables
Other receivables:
R&D tax offset rebate and government grants receivable
GST and VAT receivable
Accrued interest
FBT receivable
Other
14.
Inventories
Raw materials and consumables
Consolidated
2011
$
2010
$
7,706,217
5,700,000
13,406,217
7,225,823
5,000,000
12,225,823
130,814
274,623
310,059
81,235
-
-
796,731
228,701
577,060
302,002
39,978
8,052
695
1,156,488
185,036
76,673
56
49
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
15.
Other financial assets
Held-to-maturity investments
Consolidated
2011
$
2010
$
690,400
10,238,422
A 12 month term deposit for $300,000 with an interest rate of 6.06% matures on 1 October 2011 and a security
deposit for $390,400 matures on 10 November 2011 (2010: A 180 day term deposit for $10,000,000 with an
interest rate of 5.92% matured on 3 August 2010). This security deposit supports a bank guarantee provided for
the operating lease for the Banktowns facility.
16.
Other current assets
Prepayments
Deferred costs of borrowing
Consolidated
2011
$
2010
$
133,165
619
133,784
292,549
203,836
496,385
Annual Report 2011
50
57
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
17.
Property, plant & equipment
Consolidated
Plant &
Equipment
Assets Under
Construction
$
$
Office
Furniture &
Equipment
$
Total
$
Costs
Balance at 1 July 2009
5,658,101
3,487,346
580,773
9,726,220
Additions
Transfers
515,886
1,123,172
172,265
1,811,323
2,241,551
(2,246,854)
5,303
-
Transfer to intangibles
-
-
(159,940)
(159,940)
Effect of movements in exchange rates
(77,001)
(1,221)
(34,014)
(112,236)
Balance at 30 June 2010
8,338,537
2,362,443
564,387
11,265,367
Balance at 1 July 2010
8,338,537
2,362,443
564,387
11,265,367
Additions
31,524
6,127,987
150,186
6,309,697
Transfers to intangibles
2,817,225
(3,144,579)
-
(327,354)
Effect of movements in exchange rates
11,047
-
(47,002)
(35,955)
Balance at 30 June 2011
11,198,333
5,345,851
667,571
17,211,755
Depreciation and impairment losses
Balance at 1 July 2009
Depreciation for the year
Transfers
Transfer to intangibles
Effect of movements in exchange rates
2,168,860
235,802
295,542
2,700,204
534,840
(627)
-
(16,696)
-
-
-
-
75,710
610,550
627
-
(111,915)
(111,915)
(7,958)
(24,654)
Balance at 30 June 2010
2,686,377
235,802
252,006
3,174,185
Balance at 1 July 2010
Depreciation for the year
Effect of movements in exchange rates
2,686,377
1,209,436
(26,339)
235,802
252,006
3,174,185
-
-
75,709
1,285,145
9,317
(17,022)
Balance at 30 June 2011
3,869,474
235,802
337,032
4,442,308
Carrying Amounts
At 1 July 2009
At 30 June 2010
At 1 July 2010
At 30 June 2011
3,489,241
3,251,544
285,231
7,026,016
5,652,160
2,126,641
312,381
8,091,182
5,652,160
2,126,641
312,381
8,091,182
7,328,859
5,110,049
330,539
12,769,447
58
51
Quickstep Holdings Limited
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
18.
Intangibles
Costs
Patents &
Rights
$
Royalty
Buy-Back
$
Technology
$
Consolidated
Computer
Software
Goodwill
Total
$
$
Balance at 1 July 2009
649,027
94,419
1,320,970
-
175,000
2,239,416
Additions
Transfer from property, plant
& equipment
-
-
-
159,940
226,000
-
-
226,000
159,940
Balance at 30 June 2010
649,027
94,419
1,320,970
385,940
175,000
2,625,356
Costs
Balance at 1 July 2010
649,027
94,419
1,320,970
385,940
175,000
2,625,356
Additions
Transfer from property, plant
& equipment
-
-
-
-
-
-
26,104
327,354
-
-
26,104
327,354
Balance at 30 June 2011
649,027
94,419
1,320,970
739,398
175,000
2,978,814
Amortisation and impairment losses
Balance at 1 July 2009
515,468
56,656
1,320,970
-
175,000
2,068,094
Amortisation for the year
33,390
9,442
Transfer from property, plant
& equipment
-
-
-
-
21,012
111,915
-
-
63,844
111,915
Balance at 30 June 2010
548,858
66,098
1,320,970
132,927
175,000
2,243,853
Balance at 1 July 2010
548,858
66,098
1,320,970
132,927
175,000
2,243,853
Amortisation for the year
51,935
9,441
Transfer from property, plant
& equipment
Effect of movement in
exchange rates
-
3,091
-
-
-
-
-
174,268
-
-
-
-
-
235,644
-
3,091
Balance at 30 June 2011
603,884
75,539
1,320,970
307,195
175,000
2,482,588
Carrying amounts
At 1 July 2009
At 30 June 2010
At 1 July 2010
At 30 June 2011
133,559
37,763
100,169
28,321
100,169
28,321
45,143
18,880
-
-
-
-
-
253,013
253,013
432,203
-
-
-
-
171,322
381,503
381,503
496,226
Annual Report 2011
52
59
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
19.
Group entities
Parent entity
Quickstep Holdings Limited
Controlled entities
Quickstep Technologies Pty Ltd
Quickstep Operations Pty Ltd
QuickBoats Pty Ltd
Quickstep GmbH
Quickstep Composites LLC
20.
Trade and other payables
Current
Unsecured trade payables
Sundry payables and accrued expenses
Royalties payable (i)
Non-current
Royalties payable (i)
Country of
incorporation
Entity interest
2011
Entity interest
2010
Australia
Australia
Australia
Australia
Germany
USA
100%
100%
100%
100%
100%
Consolidated
2011
$
100%
100%
100%
100%
100%
2010
$
356,199
4,023,779
658,633
5,038,611
111,190
2,865,685
-
650,000
3,626,875
421,221
471,093
(i) On 21 July 2005, a Heads of Agreement was executed between Quickstep Holdings Limited (QHL), Quickstep
Technologies Pty Ltd (QTPL) and VCAMM Limited which agreed the value of services provided by VCAMM to the
Group during the period 1 July 2003 to 30 June 2005 and which formalised arrangements that existed before 30
June 2005 between the parties. The agreed consideration for services provided was $1,790,000, which was
satisfied by the grant of 2,160,000 ordinary fully paid shares in QHL (issued at $0.25 per share), with the balance
of $1,250,000 to be paid to VCAMM on a quarterly basis from total cash revenues received by QTPL on a
percentage basis (varying from 4% to 7% of QTPL’s cash revenues for the period), subject to a maximum annual
repayment of $650,000. The discount rate that has been used to calculate the royalties payable is 8.46%.
21.
Loans and borrowings
Current
Finance lease liability
Non-current
Finance lease liability
Finance lease liabilities
Less than one year
Between one and five years
Great than five years
Consolidated
2011
$
2010
$
17,645
9,890
12,622
8,242
Future
minimum
lease
payments
2011
22,115
13,670
-
Interest
2011
4,470
1,048
-
Present
value of
minimum
lease
payments
2011
17,645
12,622
-
Future
minimum
lease
payments
2010
12,478
10,398
-
Interest
2010
2,588
2,156
-
Present
value of
minimum
lease
payments
2010
9,890
8,242
-
35,785
5,518
30,267
22,876
,744
18,132
60
53
Quickstep Holdings Limited
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
22.
Financial liabilities at fair value through profit and loss
Non-current
Financial liabilities at fair value through profit and loss.
Consolidated
2011
$
2010
$
2,820,000
-
On 24th April the Group executed a Funding Agreement subject to conditions precedent with La Jolla Cove Investors
Inc (La Jolla); a US private equity firm, for the issue of US$15,000,000 of convertible notes. Under the Agreement,
there will be an initial issue of a convertible note for US$ 7,500,000 (initial note) with an option at the Group’s
discretion, to subsequently issue another convertible note of US$7,500,000 (Subsequent Note)
On 12 May 2011 the conditions precedent were satisfied and the Group issued the initial Note with the issue price of
US$7,500,000 to La Jolla. The Group has elected to account for these instruments at fair value through the profit
and loss. The key terms of the agreement include;
Key term/Note
component/Clause
Description
Number of notes
2
Face value of each
US$7,500,000
Coupon / Interest
Rate
Fixed rate of 3.00% p.a. payable monthly in arrears, calculated on the unconverted
principal amount.
Initial Note - (Note1)
The initial payment of US$400,000 for Note 1
Interest is payable in Ordinary shares at Quickstep’s election
The remaining US$7,100,000 of Note 1 is to be received in monthly payments:
of not less than US$500,000; and
not more than US$1,000,000 (or such higher amount as Quickstep agrees in
writing).
Subsequent Note –
(Note 2)
The form of and terms of the Subsequent Note, the purchase of the Subsequent Note,
and the payment of the US$7,500,000 for the Subsequent Note, are subject to the
same terms and conditions of this Agreement applicable to the Initial Note
Term / Maturity Date
Each note has a term of 4 years from the date of initial drawdown
Conversion Option
At the investor’s option, a note may be converted into ordinary shares at the
Conversion Price, either in whole or in part.
Conversion Option
Quickstep has the option to force conversion of the outstanding principal amount into
ordinary shares. This election can be made in the six months prior to maturity of the
note
Conversion price
The number of shares to be issued on conversion is calculated as:
US$ face value x exchange rate / Conversion Price
The Conversion Price is the lesser of:
AU$0.90 (as adjusted for any stock splits, stock dividends, combinations,
subdivisions, recapitalisations or the like); or
80% of the average Volume Weighted Average Price (VWAP) of Quickstep’s
shares during the 10 days prior to conversion
Cash settlement
option
If the investor elects to convert the notes, when the VWAP is below AU$0.28 then
Quickstep has the right to prepay that portion of the note
If Quickstep makes the election to prepay the cash amount, then the investor has the
right to withdraw the conversion notice.
Annual Report 2011
61
54
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
22.
Financial liabilities at fair value through profit and loss (cont’d)
Description
There are certain circumstances in which Quickstep may be required to settle /
redeem the notes for cash.
Key term/Note
component/Clause
Contingent Settlement
Provisions / Cash
Settlement
Valuation
The fair value of the convertible notes has been determined using a Monte Carlo simulation. The key assumptions
utilised in the valuation include:
Initial Closing date
Maturity date
Coupon Rate
Conversion Price
Floor Price
Default price
12 May 2011
12 May 2015
3.00%
Minimum of A$0.90 or 80% of 10 day VWAP
Volatility of Quickstep Shares
Dividend Yield
Foreign exchange Volatility A$/US$
Valuation Date
12 May 2011
Principal payments to Date
Principal amount converted to date
Closing price per share
Foreign exchange spot rate A$/ US$
A$0
US$0
A$0.310
1.0617
Reconciliation of Fair Value Measurement
Balance 1 July 2010
Fair value through Profit and Loss at inception
Convertible note drawdowns
Net change in fair value recognised through Profit and loss
Balance 30 June 2011
23.
Employee benefits
Current
Liability for annual leave
Other employee benefits
A$0.28
A$0.072
70%
0.0%
17%
30 June 2011
US$900,000
US$0
A$0.255
1.0739
Consolidated
2011
$
2010
$
-
1,930,000
838,875
51,125
2,820,000
-
-
-
-
-
177,877
74,197
252,074
119,892
-
119,892
62
Quickstep Holdings Limited
55
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
24.
Contributed equity
Issued capital
(i)
270,038,762 (2010: 251,416,900) fully paid ordinary shares
The following movements in issued capital occurred during the year:
Consolidated
2011
$
2010
$
66,854,895
62,296,410
Note
2011
No. Of
Shares
$
2010
No. of
shares
$
Balance at the beginning of the year
251,416,900
62,296,410
162,446,305
30,146,119
Shares issued for cash (a), (b)
Shares issued under share purchase plan
Shares issued on exercise of options (ii)
Shares issued on conversion of notes
Shares issued on conversion of loans
Shares issued on exercise of rights (c)
Shares issued to consultants
Shares issued to executives as
remuneration
Transfer from convertible instrument reserve
Share issue and capital raising costs
10,277,500
4,398,392
1,851,852
-
-
294,118
1,800,000
3,288,800
1,407,485
-
-
-
-
-
47,305,022
24,421,527
5,935,619
13,500,000
20,000,000
800,000
1,348,914
1,485,885
2,653,034
3,275,102
128,000
279,667
32
-
-
-
-
81,040
29,012
-
(137,800)
-
-
771,864
(893,800)
Balance at the end of the year
270,038,762
66,854,895
251,416,900
62,296,410
(a)
(b)
(c)
During the year the company issued 10,277,500 shares at an issue price of 32 cents to raise $3,288,800.
During the prior year, the Company issued 47,305,022 shares at issue prices varying from 25 cents to 52
cents per share to raise $24,421,527.
During the year, the Company issued 294,118 shares for $nil consideration pursuant to share-based
payment arrangements with certain key management personnel.
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are
fully paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to
one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual
assets.
(ii)
Options
Options granted during the year
During the current and previous financial years, the Company issued options as follows.
Expiry Date
Exercise Price
30 March 2017
26 November 2017
$0.00
$0.00
Number of Options
2011
-
471,337
2010
3,249,476
-
Annual Report 2011
56
63
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
22.
Contributed equity (cont’d)
Unissued shares under option
At 30 June, unissued ordinary shares of the Company under option are:
Expiry Date
Exercise Price
Number of Options
30 March 2017
26 November 2017
$0.00
$0.00
2011
1,397,624
431,337
2010
3,249,476
-
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Exercise of options
During the financial year, the Company issued ordinary shares as a result of the exercise of options as follows
(there were no amounts unpaid on the shares issued):
Expiry Date
15 April 2010
16 June 2010
23 September 2010
Lapse of options
Exercise Price
Share price on
expiry date
Number of Options
$0.25
$0.26
$0.00
$0.35
$0.29
$0.34
2011
-
-
1,851,852
2010
5,735,619
200,000
-
During the current and previous financial years, the following options lapsed:
Expiry Date
Exercise Price
Number of Options
15 April 2010 (a)
16 June 2010
$0.25
$0.26
2011
-
-
2010
655,870
240,000
(a) The options that lapsed on 15 April 2010 were subject to an underwriting agreement by State One Nominees Pty
Ltd. In accordance with that agreement, 655,870 shares were issued raising $163,968.
(iii)
Rights
At 30 June 2011, unissued ordinary shares of the Company under rights totalled 1,853,528 (2010: 1,627,103).
The rights are issued pursuant to executive services agreement and vest at various times in the future according
to years of service completed. The exercise price of the rights is nil and the rights are forfeited if employment is
terminated prior to the vesting date. Refer to Note 30(i).
During the year, 989,383 rights (2010: 744,750) were granted.
During the year, 294,118 shares (2010: 800,000 shares), were issued as a result of the exercise of rights.
468,750 rights were forfeited on the termination of employment of employees
64
Quickstep Holdings Limited
57
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
25.
Reserves
Share based payments reserve
Balance at the beginning of the year
Grant of rights to shares to key management personnel
Grant of options to key management personnel
Transfer to issued capital on vesting of rights
Non-vestment of rights to shares by key management personnel
Success fee payable on convertible note agreement
Balance at the end of the year
Note
32
32
Consolidated
2011
$
2010
$
1,157,091
118,507
272,038
-
-
480,000
2,027,637
369,084
108,086
782,511
(128,000)
(34,590)
60,000
1,157,091
This reserve is used to record the fair value of options over ordinary shares and rights to ordinary shares granted
as consideration for services provided.
Foreign currency translation reserve
Balance at the beginning of the year
Foreign currency translation differences
Balance at the end of the year
(96,607)
(124,049)
(220,656)
31,388
(127,995)
(96,607)
The foreign currency translation reserve comprises foreign currency differences arising from the translation of the
financial statements of foreign operations.
Hedging reserve
Balance at the beginning of the year
Effective portion of changes in fair value of cash flow hedges
Balance at the end of the year
-
(71,065)
(71,065)
-
-
-
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow
hedges related to hedged transactions that have not yet occurred.
Convertible instrument reserve
Balance at the beginning of the year
Issue of convertible instruments
Transfer to issued capital on conversion of instruments
Balance at the end of the year
24
-
-
-
-
46,966
724,898
(771,864)
-
The convertible instruments reserve is used to record the equity component of the convertible instruments.
Total reserves
26.
Accumulated losses
Accumulated losses at the beginning of the year
Loss for the year
Accumulated losses at the end of the year
27.
Financial instruments
Credit risk
Exposure to credit risk
1,735,916
1,060,484
(34,926,410)
(23,955,797)
(13,734,713)
(10,970,613)
(48,661,123)
(34,926,410)
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s
maximum exposure to credit risk at the reporting date was:
Annual Report 2011
58
65
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
27.
Financial instruments (cont’d)
Note
Cash and equivalents
Held-to-maturity financial assets
Interest receivable
Trade receivables
Other
Consolidated
2011
$
2010
$
13,406,217
690,400
81,235
130,814
-
14,308,666
12,225,823
10,238,422
39,978
228,701
695
22,733,619
As at 30 June 2011, no financial asset was considered past due (2010: $117,649).
At 30 June 2011, no financial asset is considered impaired (2010: nil).
The Group’s maximum exposure to credit risk for loans and receivables at the reporting date by geographic region
was:
Australia
Germany
USA
Liquidity risk
81,235
104,419
25,395
212,049
44,523
131,452
93,398
269,374
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
Consolidated
30 June 2011
VCAMM
royalties
payable
Trade and
other
payables
Foreign
Exchange
contract
Finance lease
liabilities
Financial
Liability at fair
value through
profit and loss
30 June 2010
VCAMM
royalties
payable
Trade and
other
payables
Finance lease
liabilities
66
Carrying amount
$
Contractual cash
flows
$
6 mths or less
6-12 mths
1-2 years
2-5 years
$
$
$
$
1,079,854
(1,105,168)
(329,316)
(329,316)
(446,535)
4,308,913
(4,308,913)
(4,173,384)
-
(135,529)-
71,065
(71,065)
(71,065)
-
-
30,267
(35,785)
(11,058)
(11,058)
(11,717)
(1,952)
2,820,000
(100,665)
(12,583)
(12,583)
(25,166)
(50,333)
8,310,098
(5,621,595)
(4,597,405)
(352,957)
(618,947)
(52,285)
1,121,093
(1,141,304)
(325,000)
(325,000)
(491,304)
2,976,875
(2,976,875)
(2,976,875)
-
-
18,132
(24,689)
(6,733)
(6,733)
(11,222)
4,116,100
(4,142,868)
(3,308,608)
(331,733)
(502,526)
-
-
-
-
59
Quickstep Holdings Limited
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
27.
Financial instruments (cont’d)
Currency risk
Exposure to currency risk
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
2011
Cash and cash equivalents
Trade payables
Receivables
2010
Cash and cash equivalents
Trade payables
Receivables
USD
64,438
(16,786)
25,395
73,047
USD
50,566
(426,819)
93,398
(282,855)
EUR
60,775
(136,625)
105,419
29,569
EUR
146,060
(983,159)
320,187
(516,912)
The following significant exchange rates to the Australian Dollar applied during the year:
Average Rate
2011
0.9881
0.7245
2010
0.8821
0.6355
Reporting Date
Spot Rate
2011
2010
1.0739
0.7405
0.8523
0.6979
USD
EUR
Sensitivity analysis
A 10 percent movement of the Australian dollar against the following currencies at 30 June would have increased
(decreased) profit or loss and equity on balances denominated in foreign currencies by the amounts shown below.
This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2010.
2011
2010
Profit / Loss
+10%
$
-10%
$
(6,641)
(2,688)
(9,329)
8,116
3,285
11,401
2011
Equity
+10%
$
(15,209)
(54,711)
(69,920)
-10%
$
18,589
66,869
85,458
Profit / Loss
+10%
$
-10%
$
25,714
46,992
(31,428)
(57,435)
72,706
(88,865)
2010
Equity
+10%
$
(13,793)
(65,950)
(79,743)
-10%
$
16,858
80,606
97,464
USD
EUR
USD
EUR
Annual Report 2011
67
60
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
27.
Financial instruments (cont’d)
Interest rate risk
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial assets/(liabilities) was:
Fixed rate instruments
Held-to-maturity term deposits
Convertible notes
Finance lease liabilities
Variable rate instruments
Cash and cash equivalents
Consolidated
2011
$
2010
$
690,400
(838,875)
(30,267)
(178,742)
10,238,422
-
(18,132)
10,220,290
13,406,217
12,225,823
Cash includes funds held in short term deposits and cheque accounts during the year, which earned a weighted
average interest rate 4.27% (2010: 4.93%).
The interest rates applicable to the Group’s finance leases are 9.55% (2010: 9.55%).
Financial assets held-to-maturity includes a 12 month term deposit for $300,000 with an interest rate of 6.06% which
matures on 1 October 2011 and a security deposit for $390,400 maturing on 10 November 2011. The interest rate
for the convertible note facility is 3%.
All other material financial assets and liabilities are non-interest bearing.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets at fair value through profit or loss. Financial
liabilities accounted for at fair value through profit and loss are valued using a Monte Carlo simulation which
recognises the sensitivity for interest rates.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or
loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency
rates, remain constant. The analysis is performed on the same basis for 2010.
Effect in AUD
30 June 2011
Variable rate instruments
Cash flow sensitivity (net)
30 June 2010
Variable rate instruments
Cash flow sensitivity (net)
Consolidated
profit or loss
100 bp
increase
100 bp
decrease
134,062
134,062
(134,062)
(134,062)
122,258
122,258
(122,258)
(122,258)
68
Quickstep Holdings Limited
61
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
27.
Financial instruments (cont’d)
Fair values
The carrying amounts of financial assets and liabilities approximate fair value.
28.
Capital and other commitments
Operating lease commitments
Non-cancellable operating lease contracted for but not
capitalised in the financial statements
Payable
-
-
-
less than 1 year
between 1 and 5 years
more than 5 years
Consolidated
2011
$
2010
$
733,243
3,784,253
2,269,205
6,786,701
240,389
20,834
-
261,223
The Group leases two properties. The first property is leased on a non -cancellable lease with a five year term
with provision for rent reviews on an annual basis. The second property is leased on a non -cancellable lease with
a ten year term with two options to renew for five years each. The lease contains provision for rent reviews on an
annual basis.
Capital commitments
The Group’s commitments in respect of plant and equipment contracted for but not provided for are set out below:
Payable
-
less than 1 year
29.
Cash flow information
Amortisation of intangibles
Depreciation
Amortisation of convertible note costs
Amortisation of convertible loan costs
Share based payment expense
Convertible note interest
Foreign exchange gain
Finance costs
Reconciliation of cash flows from operating activities to loss
after income tax:
Loss for the year
Adjustments for:
-
-
-
-
-
-
-
-
Operating loss before changes in working capital
(Increase)/decrease in trade & other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other current assets
(Increase)/decrease in work in progress
Increase/(decrease) in trade and other payables
Increase in employee benefits
Increase in unearned income
Net cash used in operating activities
18
17
8
8
8
8
8
670,359
670,359
552,420
552,420
(13,734,713)
(10,970,613)
235,398
1,285,145
-
-
870,546
-
-
1,981,125
(9,362,499)
953,147
(108,350)
159,547
(14,021)
460,402
31,308
(198,008)
(8,078,474)
63,844
610,550
105,535
156,164
1,224,687
-
2,568
48,332
(8,758,933)
(744,255)
38,802
(360,560)
-
2,197,704
56,266
-
(7,570,976)
Annual Report 2011
69
62
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
30.
Related parties
Key management personnel compensation
The key management personnel compensation included in “personnel expenses” in note 7 is as follows:
Short-term employee benefits
Post-employment benefits
Share based payments
Other long term benefits
Note
32
Consolidated
2011
$
2,295,916
126,490
390,546
190,022
3,002,973
2010
$
1,665,351
73,465
885,021
38,480
2,672,317
Individual directors and executives compensation (key management personnel remuneration) disclosures
Information regarding individual directors’ and executives’ remuneration and some equity instruments disclosures
as permitted by Corporations Regulations 2M.3.03 is provided in the Remuneration Report section of the
Directors’ Report.
Apart from the details disclosed in the Remuneration Report and below, no director has entered into a material
contract with the Company or the Group since the end of the previous financial year.
Loans to key management personnel and their related parties
Details regarding the aggregate of loans made, guaranteed or secured by any entity in the Group to key
management personnel and their related parties, and the number of individuals in each group, are as follows:
Total for key management personnel 2011
Total for key management personnel 2010
Key management personnel transactions
Opening
balance
$
-
58,609
Closing
balance
$
Interest not
charged
$
Number in group
at 30 June
-
-
-
-
-
1
A number of key management persons, or their related parties, hold positions in other entities that result in them
having control or significant influence over the financial or operating policies of those entities.
A number of those entities transacted with the Company or its subsidiaries during the financial year. The terms
and conditions of those transactions were no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions to unrelated entities on an arm’s length basis.
The aggregate amounts recognised during the year relating to key management personnel and their related
parties were as follows:
Director
Mr D Graham
Note
(i)
Consolidated
2011
$
18,931
2010
$
34,019
(i) A company associated with Mr Graham, Decta Holdings Pty Ltd, provided prototype design services, patent
portfolio management and development program coordination. Terms for such services were based on market
rates and amounts were payable on a monthly basis. No amounts were outstanding at 30 June 2011 (2010: nil).
70
63
Quickstep Holdings Limited
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
30. Related parties (cont’d)
Equity holdings
Options and rights over shares
The movement during the reporting period in the number of options and rights over ordinary shares in Quickstep
Holdings Limited held, directly, indirectly or beneficially by each key management persons, including their
personally-related entities at 30 June 2011, are as follows:
(i)
Rights
2011
Directors
Mr P M Odouard
Executives
Mr W Beckles
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Held at
1 July 2010
Granted as
compen-
sation
Exercised
Other changes
Held at 30 June
2011
Vested during
the year
Vested and
exercisable at
30 June 2011
882,353
-
(294,118)(i)
-
588,235
294,118
468,750
-
-
-
276,000
1,627,103
267,605
471,698
250,000
-
989,303
-
-
-
-
--
(294,118)
(468,750)
-
-
-
-
(468,750)
-
267,605
471,698
250,000
276,000
1,853,538
-
-
-
-
-
294,118
-
-
-
-
-
-
-
(i)Closing share price at date of exercise 24/12/2010, $0.385
Granted as
compen-
sation
Held at
1 July 2009
Exercised
Other changes*
Held at 30 June
2010
Vested during
the year
Vested and
exercisable at
30 June 2010
2010
Directors
Mr P M Odouard
Executives
Mr W Beckles
Mr A Myers
Mr P Williams
Ms M Withers
882,353
-
-
-
882,353
-
-
800,000
411,765
-
2,094,118
468,750
-
-
276,000
744,750
-
(800,000)
-
-
(800,000)
-
-
(411,765)
-
(411,765)
468,750
-
-
276,000
1,627,103
-
800,000-
-
-
800,000
-
-
-
-
-
-
* Other changes represent rights that were forfeited during the year
(ii)
Options
2011
Directors
Mr P M Odouard
2010
Directors
Mr P M Odouard
Held at
1 July 2010
Granted as
compen-
sation
Exercised
Other changes
Held at 30 June
2011
Vested during
the year
Vested and
exercisable at
30 June 2011
3,249,476
471,337
(1,851,852)(ii)
-
1,868,961
-
-
Held at
1 July 2009
Granted as
compen-
sation
Exercised
Other changes
Held at 30 June
2010
Vested during
the year
Vested and
exercisable at
30 June 2010
-
3,249,476
-
-
3,249,476
1,851,852
1,851,852
(ii)Closing share price at date of exercise 23/09/2010 , $0.335
Annual Report 2011
71
64
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
30.
Related parties (cont’d)
Shares
The movement during the year in the number of ordinary shares held, directly, indirectly or beneficially by each
key management person, including their personally-related entities, is as follows:
Held at 1
July 2010 or
date of
appointment
-
600,000
26,651,529
137,946
19,000
163,231
Purchases
Disposals
Received on
exercise or
options / rights
Issued as
compensation
Held at 30 June
2011
-
-
-
7,812
31,250
46,875
(600,000)
-
(612,188)
-
-
-
2,145,970
-
-
-
-
-
20,000
51,250
-
-
-
-
-
-
-
-
-
1,545,970
600,000
26,039,341
145,758
50,250
210,106
71,250
Held at 1
July 2009
-
800,000
38,651,529
344,300
-
-
-
Purchases
Disposals
Received on
exercise or
options / rights
Issued as
compensation
Held at 30 June
2010
-
-
-
28,846
-
-
20,000
-
(200,000)
(12,000,000)
(235,200)
-
-
-
-
-
-
-
-
-
-
-
800,000
-
-
828,438(3)
52,602(4)
-
-
600,000
26,651,529
137,946
n/a(3)
n/a(4)
20,000
2011
Directors
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham
Mr P C Cook
Mr E J McCormack(1)
Mr D Wills(2)
Executives
Mr J F Johnson
2010
Directors
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham
Mr P C Cook
Executives
Mr A M Myers
Mr P J Williams
Mr J F Johnson
(1)
(2)
(3)
(4)
Mr E J McCormack was appointed to the board on the 11th August 2010
Mr D Wills was appointed to the board on the 26th November 2010
On 1 October 2009, 800,000 ordinary fully paid shares were issued to Mr A Myers. On 9 December 2009,
a further 28,438 ordinary fully paid shares were issued. These were in accordance with the terms of the
Executive Service Agreement between the Company and Mr Myers. Mr A Myers ceased to be a key
management person on 15 February 2010.
On 9 December 2009, 52,602 ordinary fully paid shares were issued to Mr P Williams in accordance with
the terms of the Executive Service Agreement between the Company and Mr Williams. Mr P Williams
ceased to be a key management person on 13 November 2009.
31.
Equity accounted investments
On 1 May 2008 the Group acquired a 20 percent investment in QuickPipes Pty Ltd for the amount of $2. This
investee was established as an incorporated joint venture in conjunction with Vortex Pipes Ltd to research and
develop a composite pipe for industrial applications. At reporting date, the investee held no assets or liabilities
and had not entered into any transactions.
72
Quickstep Holdings Limited
65
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
32.
Share based payments
The Company previously established the Quickstep Holdings Limited Employee Share Option Scheme (ESOS).
All outstanding options under this scheme were either exercised or forfeited in 2010.
The Company has established the Quickstep Employee Incentive Plan (EIP). Under the EIP, the Board may grant
options to selected Quickstep employees on such terms as it determines appropriate. Participation in the EIP is
open to all employees of the Group, with the Board determining those employees eligible to participate in each
grant under the EIP. Each option is a conditional right to one Quickstep ordinary share, subject to the satisfaction
of the applicable performance conditions and payment of the exercise price (if any).
The EIP provides sufficient flexibility for the Board to grant short-term or long-term incentives to eligible
employees. That is, the performance conditions set by the Board may apply over the period of time the Board
determines appropriate in the circumstances. It is currently intended that the “short-term” grants under the EIP
will be in the form of an equity retention incentive, with the applicable performance condition based on the key
performance indicators set under the Company’s short term incentive program, and that the “long term” grants will
be subject to performance criteria based on achieving total shareholder return targets over a three year period.
In general, the options will not vest until the performance criteria specified by the Board at the time of the grant
have been achieved and provided the participant remains a Group employee. If the performance criteria are not
satisfied at the end of the applicable performance period the options will lapse. The options may lapse in other
circumstances provided for in the EIP rules, including forfeiture where the employee engages in dishonest or
fraudulent conduct, where there is a change in control and where the employee ceases employment. Subject to
the rules and the terms of grant, options will lapse on the seventh anniversary of their grant date.
The number and weighted average exercise prices (WAEP) of options issued under the ESOS and EIP are as
follows:
Employee Share Option Scheme
2011
Number
2011
WAEP
Outstanding at 1 July
Exercised during the period
Forfeited during the period
Outstanding at 30 June
Exercisable at the end of the year
Employee Incentive Plan
Outstanding at 1 July
Granted during the period
Exercised during the period
Outstanding at the end of the year
Exercisable at the end of the year
-
-
-
-
-
2011
Number
3,249,476
471,337
(1,851,852)
1,868,961
-
-
-
-
-
-
2011
WAEP
$0.00
$0.00
$0.00
$0.00
$0.00
2010
Number
440,000
(240,000)
(200,000)
-
-
2010
Number
-
3,249,476
-
3,249,476
1,851,852
2010
WAEP
$0.26
$0.26
$0.26
-
-
2010
WAEP
-
$0.00
$0.00
$0.00
$0.00
The options granted from the EIP are subject to performance conditions based on achieving pre-set accumulated
absolute Total Shareholder Return (TSR) targets over the applicable performance period. In summary, TSR
combines share price appreciation over a period and dividends paid during that period to show the total return to
shareholders over that period. For the purposes of the performance conditions attached to the options, TSR will
be calculated as the 45 day volume weighted average price (VWAP) of Quickstep shares as at 30 June. The
options vest on the 1 July. This calculation has been adopted bearing in mind Quickstep’s market capitalisation
and to ensure the performance hurdle and testing process remain appropriate in all the circumstances.
Tranche 1 will be subject to a one-year performance condition, Tranche 2 will be subject to a two-year
performance condition and Tranches 3 and 4 will each be subject to a three year performance condition. In
respect of each of Tranches 1, 2 and 3 the performance period will commence on 1 July 2008. The performance
period for Tranche 4 will commence on 1 July 2009 and for the 2010 year entitlement 1 July 2010.
Annual Report 2011
66
73
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
32.
Share based payments (cont’d)
The specific TSR targets for each Tranche are set out below. The targets are calculated from an initial value of
$0.165 for each of Tranches 1, 2 and 3, $0.25 for Tranche 4 and $0.3262 for 2010 Year entitlement.
If the Threshold hurdle of TSR is achieved at a test date, 25% of the Options in the tranche will vest. If the Target
hurdle of TSR is achieved at a test date in any given year, 50% of Options in the tranche will vest. If the Stretch
hurdle of TSR is achieved at a test date in any given year 100% of Options in the tranche will vest. After the initial
vesting period, re-testing of the performance conditions occurs annually. However, the re-tested Options will be
tested at the same time and on the same basis as the subsequent tranche. Re-testing will occur over the longer
performance period and against the higher TSR hurdle.
Grant
Tranche 1
Tranche 2
Tranche 3
Tranche 4
2010 Year
Earliest vesting date
01/07/09
01/07/10
01/07/11
01/07/12
1/7/2013
TSR Hurdle VWAP as at 30 June
% Annual
Growth
(TP)
% Vesting
Initial value
Threshold
Target
Stretch
5
8
12
25
50
100
2009
$0.165
$0.170
$0.175
$0.181
2010
$0.165
$0.179
$0.189
$0.203
2011
$0.165
$0.188
$0.204
$0.227
2012
$0.250
$0.290
$0.315
$0.352
2013
$0.326
$0.378
$0.410
$0.458
If the employee ceases employment with the Quickstep Group due to death, disability, bona fide redundancy or
any other reason which may meet with the approval of the Board, the Board may determine that any unvested
options he holds will vest as at his date of cessation, having regard to such factors as the Board considers
relevant, including pro rata performance against the performance condition over the period from the grant date to
the date of cessation.
If they cease employment in these circumstances and holds vested options they may exercise those options
within the 12 month period following his date of cessation (or, the remaining period until the expiry of the options,
if less than 12 months).
If they cease employment for any other reason any unvested options they hold will lapse on his date of cessation
unless the Board determines otherwise, and any vested options must be exercised within three months.
Details of the fair value of options granted are set out below:
Grant
Tranche 1
Tranche 2
Tranche 3
Tranche 4
2010 Year
Total
No. of options
925,926
925,926
925,926
471,698
471,337
3,720,813
Fair value per option
at the grant date
$
0.3500
0.3480
0.3150
0.2700
0.3620
Total fair value
$
324,074
322,222
291,667
127,359
170,624
1,235,946
74
Quickstep Holdings Limited
67
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
32.
Share based payments (cont’d)
Tranche 1 options had fully vested at the grant date of 30 March 2010 and therefore the fair value is based on the
ASX quoted price for QHL shares at grant date of the options. The Monte-Carlo simulation has been used to
value Tranches 2, 3 and 4 and the 2010 year grant that had a future vesting condition at the grant date of the
options. Assumptions used in the valuation of the options in Tranche 2, 3, 4 and 2010 Year at grant date
included:
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Dividend yield
Rights
2
30/03/2010
30/06/2010
30/03/2017
$0.35
Nil
0.3
80%
4.54%
0%
3
30/03/2010
30/06/2011
30/03/2017
$0.35
Nil
1.3
80%
4.66%
0%
4
2010 Year
30/03/2010
30/06/2012
30/03/2017
$0.35
Nil
2.3
80%
5.01%
0%
26/11/2010
30/06/2013
30/06/2015
$0.41
Nil
2.9
75%
5.07
0%
Performance rights issued during 2011 were as follows:
Performance right on issue July 1
Performance rights forfeited
Performance rights exercised
Performance rights granted
Vesting conditions
2011
Number
1,627,103
(468,750)
(294,118)
989,303 Vest in two tranches provided the employee
remains with the Group. 1/3 vest 2 years from
the date granted, 2/3 vest 3 years from the date
granted.
Total performance rights on issue 30 June
1,853,538
32. Share based payments (cont’d)
Performance rights issued during 2010 were as follows:
Performance rights on issue July 1
Performance rights forfeited
Performance rights exercised
Performance rights granted
Vesting conditions
2010
Number
2,094,118
(411,765)
(800,000)
744,750 Vest in two tranches provided the employee
remains with the Group. 1/3 vest 2 years from
the date granted, 2/3 vest 3 years from the date
granted.
Total performance rights on issue 30 June
1,627,103
Annual Report 2011
75
68
Notes to and forming part of the Financial Statements
For the year ended 30 June 2011
N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L S T AT E M E N T S
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1 ( c o n t ’ d )
32.
Share based payments (cont’d)
Employee Expenses
The expense recorded in the financial report for the portion attributable to the current financial year as required by
accounting standards is:
Shares
Share rights granted
Options
Consolidated
2011
$
-
118,507
272,039
390,546
2010
$
67,492
73,496
782,511
923,499
The Company issued shares as a performance bonus to specific key management personnel (refer Note 30).
The Company has entered into executive service agreements with its executive directors and key management
personnel. During the year, pursuant to the Executive Services Agreements with certain key management
personnel, the Company has granted the rights over 989,303 shares with a fair value of $264,155 (2010: 744,750
shares with a fair value of $283,320). During the year, $118,507 (2010: $73,469) was expensed in the income
statement representing the services performed by the key management personnel to 30 June 2011 as a percentage
of the period to full vesting of the rights.
The fair value of share rights and shares granted is determined as the quoted price on the ASX of the shares of the
Company on the day of the grant.
33.
Parent entity
As at, and throughout, the financial year ending 30 June 2011 the parent company of the Group was Quickstep
Holdings Limited.
Results of the parent entity
Loss for the period
Other comprehensive income
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Share based payments reserve
Convertible notes reserve
Accumulated losses
Total equity
34.
Subsequent events
Since the end of the financial year the Group:
(13,929,826)
-
(13,929,826)
(11,098,608)
-
(11,098,608)
414,374
414,374
234,241
28,862,398
604,542
(20,199,858)
431,914
431,914
66,854,895
2,027,637
-
(48,952,844)
19,929,691
62,296,410
1,157,091
-
(35,023,017)
28,430,484
Has received its first purchase order to manufacture parts for the JSF program. The purchase order covers
production of Group 1 parts over the next 12 months; and
Is in advanced stages of negotiation of a 10 year loan facility of $10,000,000 plus capitalised interest.
Other than the matters referred to above or in the financial statements, there has not arisen in the interval
between the end of the financial year and the date of this report any item, transaction or event of a material and
unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the
Group, the results of those operations, or the state of affairs of the Group, in future financial years.
76
Quickstep Holdings Limited
69
D I R E C T O R S ’ D E C L A R A T I O N
D I R E C T O R S ’ D E C L A R A T I O N
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1
F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 1 1
In the opinion of the directors of Quickstep Holdings Limited:
In the opinion of the directors of Quickstep Holdings Limited:
Directors’ Declaration
For the year ended 30 June 2011
1.
1.
(a)
(a)
the financial statements and notes and Remuneration Report in the Directors’ Report, set out on
the financial statements and notes and Remuneration Report in the Directors’ Report, set out on
pages 28 to 69 and pages 11 to 21 respectively, are in accordance with the Corporations Act 2001,
pages 28 to 69 and pages 11 to 21 respectively, are in accordance with the Corporations Act 2001,
including:
including:
(i)
(i)
(ii)
(ii)
giving a true and fair view of the Group’s financial position as at 30 June 2011 and their
giving a true and fair view of the Group’s financial position as at 30 June 2011 and their
performance, for the financial year ended on that date; and
performance, for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
Interpretations) and the Corporations Regulations 2001;
(b)
(b)
(c)
(c)
the financial statements comply with International Financial Reporting Standards as described in
the financial statements comply with International Financial Reporting Standards as described in
Note 1 (b); and
Note 1 (b); and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
they become due and payable.
2.
2.
The directors have been given the declarations required by s.295A of the Corporations Act 2001 for the
The directors have been given the declarations required by s.295A of the Corporations Act 2001 for the
financial year ended 30 June 2011.
financial year ended 30 June 2011.
Dated at Perth, Western Australia this 30th day of September 2011
Dated at Perth, Western Australia this 30th day of September 2011
Signed in accordance with a resolution of the directors:
Signed in accordance with a resolution of the directors:
Signed in accordance with a resolution of the directors:
P M Odouard
P M Odouard
Managing Director
Managing Director
Annual Report 2011
77
70
70
Auditor’s Independence Declaration
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Quickstep Holdings Limited
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended
To: the directors of Quickstep Holdings Limited
30 June 2011 there have been:
(i)
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended
30 June 2011 there have been:
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
(i)
no contraventions of any applicable code of professional conduct in relation to the audit.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
KPMG
Matthew Beevers
Partner
Perth
Matthew Beevers
Partner
30 September 2011
Perth
30 September 2011
78
Quickstep Holdings Limited
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.
71
71
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.
Independent Auditor’s Report
Independent auditor’s report to the members of Quickstep Holdings Limited
Report on the financial report
Independent auditor’s report to the members of Quickstep Holdings Limited
We have audited the accompanying financial report of Quickstep Holdings Limited (the company),
which comprises the consolidated statement of financial position as at 30 June 2011, and consolidated
Report on the financial report
statement of comprehensive income, consolidated statement of changes in equity and consolidated
We have audited the accompanying financial report of Quickstep Holdings Limited (the company),
statement of cash flows for the year ended on that date, notes 1 to 34 comprising a summary of
which comprises the consolidated statement of financial position as at 30 June 2011, and consolidated
significant accounting policies and other explanatory information and the directors’ declaration of the
statement of comprehensive income, consolidated statement of changes in equity and consolidated
Group comprising the company and the entities it controlled at the year’s end or from time to time
during the financial year.
statement of cash flows for the year ended on that date, notes 1 to 34 comprising a summary of
significant accounting policies and other explanatory information and the directors’ declaration of the
Directors’ responsibility for the financial report
Group comprising the company and the entities it controlled at the year’s end or from time to time
during the financial year.
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
Directors’ responsibility for the financial report
for such internal control as the directors determine is necessary to enable the preparation of the financial
report that is free from material misstatement whether due to fraud or error. In note 1(b), the directors
The directors of the company are responsible for the preparation of the financial report that gives a true
also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
Statements, that the financial statements of the Group comply with International Financial Reporting
for such internal control as the directors determine is necessary to enable the preparation of the financial
Standards.
report that is free from material misstatement whether due to fraud or error. In note 1(b), the directors
also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial
Auditor’s responsibility
Statements, that the financial statements of the Group comply with International Financial Reporting
Standards.
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
Auditor’s responsibility
to obtain reasonable assurance whether the financial report is free from material misstatement.
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
the financial report. The procedures selected depend on the auditor’s judgement, including the
to obtain reasonable assurance whether the financial report is free from material misstatement.
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
of the financial report that gives a true and fair view in order to design audit procedures that are
the financial report. The procedures selected depend on the auditor’s judgement, including the
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the
of the financial report that gives a true and fair view in order to design audit procedures that are
overall presentation of the financial report.
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
We performed the procedures to assess whether in all material respects the financial report presents
the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and
used and the reasonableness of accounting estimates made by the directors, as well as evaluating the
fair view which is consistent with our understanding of the Group’s financial position and of its
overall presentation of the financial report.
performance.
We performed the procedures to assess whether in all material respects the financial report presents
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and
our audit opinion.
fair view which is consistent with our understanding of the Group’s financial position and of its
performance.
Independence
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
In conducting our audit, we have complied with the independence requirements of the Corporations Act
our audit opinion.
2001.
Independence
Annual Report 2011
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
72
79
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.
72
KPMG, an Australian partnership and a member firm of the KPMG network
of independent member firms affiliated with KPMG International, a Swiss cooperative.
Independent Auditor’s Report
Auditor’s opinion
In our opinion:
(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Group’s financial position as
at 30 June 2011 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) the financial report of the Group also complies with International Financial Reporting Standards as
disclosed in note 1(b).
Report on the remuneration report
We have audited the Remuneration Report included in section 15 of the directors’ report for the year
ended 30 June 2011. The directors of the company are responsible for the preparation and presentation
of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the remuneration report, based on our audit conducted in
accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Quickstep Holdings Limited for the year ended 30 June 2011,
complies with Section 300A of the Corporations Act 2001.
KPMG
Matthew Beevers
Partner
Perth
30 September 2011
80
Quickstep Holdings Limited
73
Shareholder Information
D E T A I L S O F S H A R E S A N D O P T I O N S A S A T 2 6 S E P T E M B E R 2 0 1 1 :
Voting rights
The voting rights attaching to ordinary shares are:
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Options do not carry any voting rights.
Substantial shareholders
The names of substantial shareholders in the Company and the number of shares to which each substantial
shareholder and their associates have a relevant interest are set out below:
Substantial Shareholder
Number of Shares
Washington H Soul Pattinson and Company Limited
Decta Holdings Pty Ltd
State One Capital Group
31,922,570
26,039,341
18,093,224
%
11.72
9.56
6.64
On-Market buy back
There is no current on-market buy back.
Distribution schedules
Distribution of each class of security as at 26 September 2011:
Ordinary fully paid shares
Range
Holders
Units
1
1,001
5,001
10,001
−
−
−
−
1,000
5,000
10,000
100,000
460
1,029
969
2,342
187,873
3,209,626
8,177,792
76,158,849
100,001
− Over
312
184,607,047
%
0.07
1.18
3.00
27.96
67.79
Total
5,112
272,341,187
100.00
Options exercisable at $0.00 on or before 30 March 2017 (unlisted)
Range
Holders
Units
%
1
1,001
5,001
10,001
−
−
−
−
1,000
5,000
10,000
100,000
100,001
− Over
Total
−
−
−
−
1
1
−
−
−
−
−
−
−
−
1,397,624
1,397,624
100.00
100.00
Annual Report 2011
81
74
Shareholder Information
D E T A I L S O F S H A R E S A N D O P T I O N S A S A T 2 6 S E P T E M B E R 2 0 1 1 ( c o n t ’ d ) :
D E T A I L S O F S H A R E S A N D O P T I O N S A S A T 2 6 S E P T E M B E R 2 0 1 1 ( c o n t ’ d ) :
Options exercisable at $0.00 on or before 25 November 2017 (unlisted)
Options exercisable at $0.00 on or before 25 November 2017 (unlisted)
Range
Range
−
−
−
−
−
−
−
−
− Over
− Over
1,000
1,000
5,000
5,000
10,000
10,000
100,000
100,000
1
1
1,001
1,001
5,001
5,001
10,001
10,001
100,001
100,001
Total
Total
Holders
Holders
−
−
−
−
−
−
−
−
1
1
1
1
Units
Units
−
−
−
−
−
−
−
−
471,337
471,337
471,337
471,337
%
%
−
−
−
−
−
−
−
−
100.00
100.00
100.00
100.00
Unmarketable parcels
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 2,857 shares at $0.175 per share):
Holdings less than a marketable parcel of ordinary shares (being 2,857 shares at $0.175 per share):
Holders
Holders
942
942
Units
Units
1,112,501
1,112,501
Top holders
Top holders
The 20 largest registered holders of each class of quoted security as at 26 September 2011 were:
The 20 largest registered holders of each class of quoted security as at 26 September 2011 were:
No. of Shares
No. of Shares
Name
Name
Decta Holdings Pty Ltd
Decta Holdings Pty Ltd
1. Washington H Soul Pattinson and Company Limited
1. Washington H Soul Pattinson and Company Limited
2.
2.
3. WSF Pty Ltd
3. WSF Pty Ltd
4.
4.
5.
5.
6.
6.
7.
7.
8.
8.
9.
9.
10. Mr Julius Solomons and Mrs Dianne Solomons
Romadak Pty Ltd
Aileendonan Investments Pty Ltd
Aileendonan Investments Pty Ltd
Boldbow Pty Ltd
Boldbow Pty Ltd
State One Stockbroking Ltd
State One Stockbroking Ltd
HSBC Custody Nominees (Australia) Limited
HSBC Custody Nominees (Australia) Limited
Nicholas Michael Noble
Nicholas Michael Noble
Super Fund A/C>
Super Fund A/C>
11. Prunelle Holdings Pty Ltd
11. Prunelle Holdings Pty Ltd
12. Mr David Creighton Gellatly & Mrs Evelyn May Gellatly
Gellatly Super A/C>
13. Equilibrium Pensions Limited
13. Equilibrium Pensions Limited
14. Equity Trustees Limited
14. Equity Trustees Limited
15. Mr Carmine De Vitis
15. Mr Carmine De Vitis
16. Equity Trustees Limited
16. Equity Trustees Limited
17. Mr Philippe Odouard
17. Mr Philippe Odouard
18. Yarraandoo Pty Ltd
18. Yarraandoo Pty Ltd
19. Davmin Pty Ltd
19. Davmin Pty Ltd
20. Mr Paul Baster & Ms Catherine Bellemore
20. Mr Paul Baster & Ms Catherine Bellemore
31,922,520
31,922,520
26,039,341
26,039,341
10,025,061
10,025,061
6,838,838
6,838,838
2,805,500
2,805,500
2,742,676
2,742,676
2,693,141
2,693,141
2,611,813
2,611,813
2,175,000
2,175,000
2,092,567
2,092,567
2,077,692
2,077,692
2,000,000
2,000,000
1,836,000
1,836,000
1,614,200
1,614,200
1,610,000
1,610,000
1,600,000
1,600,000
1,545,970
1,545,970
1,535,324
1,535,324
1,500,000
1,500,000
1,307,692
1,307,692
106,573,335
106,573,335
%
%
11.72
11.72
9.56
9.56
3.68
3.68
2.51
2.51
1.03
1.03
1.01
1.01
0.99
0.99
0.96
0.96
0.80
0.80
0.77
0.77
0.76
0.76
0.73
0.73
0.67
0.67
0.59
0.59
0.59
0.59
0.59
0.59
0.57
0.57
0.56
0.56
0.55
0.55
0.48
0.48
39.12
39.12
82
Quickstep Holdings Limited
75
75
Disclaimer: Many of the images used throughout this
Annual Report are meant as representative examples
of the markets being pursued by Quickstep. Unless
otherwise indicated, Quickstep has not licensed any
technology to the manufacturer of products shown in
this Annual Report.
Quickstep Holdings Limited
136 Cockburn Road
North Coogee WA 6163
Australia
T. +61 8 9432 3200
F. +61 8 9432 3222
E. info@quickstep.com.au
www.quickstep.com.au
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