Annual Report 2012
Why wait for the future.
Corporate Directory
Company Secretary
Mr Phillip James MacLeod
Principal Office
361 Milperra Road
Bankstown Airport
New South Wales 2200
Australia
T +61 2 9774 0300
F +61 2 9771 0256
E info@quickstep.com.au
www.quickstep.com.au
Registered Office
136 Cockburn Road
North Coogee
Western Australia 6163
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 Singleton
Non-executive Director
Mr David Edward Wills
Non-executive Director
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KPMG
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Quickstep Holdings Limited
Annual Report 2012
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About Quickstep
Over the course of 2011-2012
Quickstep has consistently achieved
significant milestones to position
ourselves to become a leading
independent advanced composite
manufacturer.
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First A-Class finish flat
1 Maiden F35 Lightning
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panel produced via
II Joint Strike Fighter
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patented Resin Spray
(JSF) Purchase Order
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Transfer (RST) process
received from Northrop
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for the automotive
Grumman as part of
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industry
total agreement worth
up to $700 million
1 First A-Class finish flat
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panel produced via
patented Resin Spray
Transfer (RST) process
for the automotive
industry
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part for the JSF
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shipped ahead of
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schedule
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Lockheed Martin
selects Quickstep
as future sole
source supplier for
the C-130J ‘Super
Second Hercules’
composite wing flaps
in deal worth up to
$100 million
2 Quickstep raises $7.5m
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from a Rights Issue from
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existing shareholders
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Quickstep heads joint
development program
with leading car
manufacturer Audi to
deliver industrialised
composite car
manufacturing solutions
using RST technology
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$10M loan facility
secured with ANZ
backed by guarantees
provided by the
Australian Federal
Government’s Export
Finance Insurance
Corporation
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First JSF flying part
delivered on schedule
according to a plan
agreed 29 months
earlier
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prestigious major
international
innovation award at
the JEC Asia 2012
Show for its RST
process
2 Official opening of
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state-of-the-art facility
at Bankstown Airport.
Guests of honour,
NSW Premier Barry
O’Farrell and Northrop
Grumman’s President of
Aerospace Division Mr
Gary Ervin
2 Second Long Term
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Agreement signed with
Northrop Grumman
underpinning significant
cash flows through to
2020
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Chairman’s Report
“Ours is an exciting
business on the cusp of
a revolutionary change
impacting capital-intensive
industries such as automotive
and aerospace
Dear Shareholder,
I am pleased to report that your company made tremendous
progress in the 2012 financial year. We secured new contracts with
leading global companies, opened a state of the art manufacturing
facility at Bankstown in Sydney, were appointed to lead a joint
development program using our technology funded by the German
government and successfully raised finance in difficult markets to
maintain our momentum.
Quickstep is a manufacturer and supplier of advanced carbon
fibre composite components and manufacturing technologies to
the aerospace and automotive industries. It is the only ASX listed
company with direct exposure to the multibillion-dollar global
advanced carbon fibre composites market.
Carbon Fibre: The building
block replacing steel
Ours is an exciting business on the cusp of a revolutionary change
impacting capital-intensive industries. The trend of using carbon
fibre and carbon fibre composites as structural components for
the aerospace and automobile industries is growing. For example
composite materials in both the Boeing 787 Dreamliner and Airbus
A350 now make up more than 25 per cent of the aircraft and
lightweight carbon fibre composites are enabling next-generation
electric and hybrid cars to achieve performance and safety not
possible using traditional metal construction.
Carbon emissions legislation in Europe and the US is driving
development. Because weight determines the energy needed
for propulsion, these regulations are effectively forcing vehicle
manufacturers to lighten their cars in order to meet compulsory
standards in Europe by 2015 and in the US by 2017. Ultra-light,
ultra-strong carbon fibre composites enable engines to be smaller,
reducing both fuel consumption and emissions. Worldwide, carbon
fibre production capacity is increasing to accommodate demand,
which is expected to rise ten-fold to 350,000 tonnes annually by
2020. We expect this to drive demand for non-autoclave composite
curing technologies and are positioning Quickstep with the major
automotive and aerospace manufacturing companies in anticipation
of this need.
Quickstep is focused on automotive and
aerospace
In light of the expected considerable market growth, we have
focused our resources on exploiting opportunities in the aerospace
defence sector and the automobile industry. Our strategy is to build
consistent revenue streams through contract manufacturing for
the military aerospace industry, and to commercialise our patented
carbon fibre composite technology for the mass production of
passenger cars.
Quickstep’s automotive sector potential
A transformation is taking place in the global automotive industry.
While carbon fibre is mainly used in high-end sports cars and racing
cars, its potential broader use could substantially reduce the indus-
try’s capital costs of mass production. The market for carbon fibre
for automotive manufacturing is expected to be as little as 120,000
to as much as 400,000 tonnes in 2020.
We are excited by the opportunities for Quickstep, as our innovative
products and technologies are designed to serve a mainstream,
high-production market. Due to the size and geographic location
of major markets, our focus is to licence our technology rather than
manufacture the parts ourselves, a more profitable proposition
than investing heavily in large scale production facilities plant and
equipment. Quickstep plans to offer a fully automated process
through a standardised carbon fibre composite plant capable of
producing 350 tonnes of carbon fibre car panels annually. The
plants are designed to be reliable and easy to use, with specialised
resins developed by Quickstep and provided under license through
which the company may derive further royalty streams. We believe
this unique product provides a significant competitive advantage
and will soon begin to market this technology to the world’s leading
automotive companies.
Benefits for the automotive industry
We have now achieved a high level of quality and repeatability over
the extensive testing program undergone by our RST technology.
Much of this development was supported by the Australian Federal
government’s Climate Ready Grant program.
Since November 2011, we have been working with the German
government and leading car manufacturer Audi to produce composite
parts in volume cost-effectively, and this project will continue through
to October 2014. Quickstep’s German office manages development
and they anticipate that our technology can help reduce production
costs by up to 30 per cent compared to existing costs.
At present, carbon fibre composite panels are being used for cars’
outer skins, but there is potential to use composites in floor pans,
suspension members, drive trains and gearbox housings. The use of
carbon fibre composites to reduce weight, paves the way for hybrid
and electric cars as less power is needed and batteries can be smaller,
reducing emissions and lowering fuel consumption. Passenger safety
will not be sacrificed because composites can be substantially stronger
than steel at a fraction of the weight, and can absorb six to twelve
times the impact absorbed by steel. Also, the potential for higher
volume production is expected to offer manufacturers new options to
reduce costs.
The Joint Strike Fighter program
By 2017, our contract to supply global aerospace companies Lock-
heed Martin and Northrop Grumman with carbon fibre composite
components for the Joint Strike Fighter (JSF) program is expected to
generate annual revenues of $40 million for Quickstep. This is the
world’s largest military program and our contract provides a strong
opportunity for Quickstep to win further international business, based
on the high quality manufacturing operation that we have established
at Bankstown.
The JSF program is ramping up. 2011 was the best year in the JSF
program’s history with new heights achieved in flight testing and fac-
tory production. By September 2012, 36 F-35 Lightning II aircraft had
been delivered to the US Department of Defence and other partner
countries. More than 3,000 JSF aircraft will be delivered over the life
of the program and, importantly, Quickstep’s contracts have not been
impacted by the Australian government’s defence cuts to Military
contracts.
through our contract with Lockheed Martin to supply specialist
composite parts for the C-130J ‘Hercules’, which is the latest
generation of the longest continuously produced aircraft in history.
We have also signed a memorandum of understanding with global
helicopter manufacturer Sikorsky and are progressing discussions
to participate in Sikorsky’s global supply chain.
Management and staff
Under the leadership of managing director, Mr Philippe Odouard,
and his senior management team Quickstep achieved a great
deal in FY2012, and I would like to take this opportunity to
thank our staff, whose hard work and commitment contributed
to our achievements. It is our employees’ dedication and team
spirit which has enabled us to consistently meet tight production
schedules on time and on budget for our customers. I would also
like to thank our shareholders, who have supported us as we
progress our long-term plans to build an internationally-focused
business.
Looking ahead
The mass production automobile industry has shown considerable
interest in the carbon fibre composites technologies which we are
poised to commercialise. As Mr Odouard points out in his report,
our technologies are now proven and we believe have enormous
potential to create shareholder value.Our work over the past dec-
ade and breakthroughs in delivering these technologies suggest
that your company now has a competitive advantage; and there
is a substantial market of automobile manufacturers that need a
low-cost, high-speed carbon fibre composites solution to manage
changes in emissions legislation.
In FY2013 we anticipate revenue growth as contract
manufacturing for both the Joint Strike Fighter program and the
Lockheed Martin C-130J engagement increases. In addition, we
are bidding for substantial contract work which, if Quickstep is
successful, will add significantly to this activity. We believe that we
have a strong opportunity to establish a position as an efficient,
trusted provider of specialised manufacturing and technology to
the aerospace industry’s global supply chain. In parallel we expect
to further commercialise the new RST program and see sales of
the Quickstep Process to commercial end users commence.
These two industries offer Quickstep substantial opportunities,
giving us great confidence in the company’s future.
Yours sincerely,
Having successfully completed its ‘apprenticeship’, Quickstep is the
leading independent aerospace composites manufacturer in Australia.
This is a steady high-technology market and the significant skill and
reliability hurdles provide protection against competition from low
labour cost. Our reputation has already transformed into new business
Mark Jenkins
Chairman
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Annual Report 2012
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Managing Directors’ Review
“xx xxxxx
“Quickstep won the tender
to supply composite carbon
fibre wing flaps for Lockheed
Martin’s C130-J Super
Hercules aircraft against
international competition...
Dear Shareholder,
Manufacturing
The 2012 financial year saw major achievements across all of
Quickstep’s activities. We are now an internationally recognised
manufacturer of advanced carbon fibre composites, and have
made significant progress toward our goals of becoming a
leading supplier of advanced carbon fibre composite parts to
the global defence and aerospace industries. At the same time,
Quickstep was recognised by the world’s largest composite
industry body, JEC, as having a truly revolutionary technology for
the automotive industry, a technology we are now starting to
industrialise with car companies involved or closely watching our
progress.
During the year, Quickstep achieved a significant milestone when
it began to generate revenue from commercial manufacturing
contracts, following completion of the exacting qualification
processes demanded by our clients.
We continued to demonstrate strong progress against the
strategy we have presented to our shareholders in recent years.
As our manufacturing capability and innovative technology has
matured, our strategy has focused on two revenue generating
components.
During the year, Quickstep achieved
a significant milestone when it began
to generate revenue from commercial
manufacturing contracts.
The automotive industry requires car parts to
be produced at high-speed, low cost and with
high-quality finish. Quickstep’s patented RST
technology combines all three of these attributes.
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As previously reported, Quickstep has secured contracts to
supply the international F-35 Lightning II Joint Strike Fighter
(JSF) military aircraft program with carbon fibre composite
components. These contracts are expected to generate up to
$700 million in revenue for Quickstep over the next twenty
years.
The highlight of the year, therefore, was the on-time delivery of
our first JSF parts to the principal F-35 subcontractor Northrop
Grumman. This was a remarkable achievement as it met a
date specified in a Memorandum of Understanding 29 months
before. As a result, we established a reputation for being a
professional, reliable, high-performance company in the JSF
community; as well as throughout the aerospace industry.
In June 2012, we signed a second Long Term Agreement with
Northrop Grumman for further JSF parts and in July 2012
received the first purchase order against this contract.
These contracts represent a breakthrough for Quickstep. They
follow years of dedicated effort and hard work, surmounting
international defence industry requirements that pose perhaps
the highest barriers to entry of any industry in the world. The
rewards are expected to be substantial, as companies that
overcome these barriers stand to benefit from secure, large-scale
contracts and long-term work.
International recognition flowing from our work has already
resulted in additional significant contracts. In March 2012
Quickstep won the tender to supply composite carbon fibre
wing flaps for Lockheed Martin’s C-130J Super Hercules aircraft
against international competition. Quickstep subsequently
received a contract worth US$12million to produce 24 shipsets
of these flaps to be delivered from the end of 2013.Overall
this program is expected to generate revenue of between $75
million to $100 million over the next five years.
Our progress to date includes:
» Securing cooperation with leading automotive manufacturers
» Formulating resins (used in the Quickstep process)
» Demonstrating outstanding results in terms of the finished
quality of parts
» Proving most steps, leading towards a robust manufacturing
solution; and
» Designing business solutions that could generate substantial
revenues for shareholders.
A Climate Ready Grant awarded to Quickstep by the Australian
Department of Innovation has supported our development of this
technology.
Also, Quickstep has designed a fully robotic industrial cell capable
of automated production of small to medium quantities of
automotive panels. This is being commissioned, demonstrating
that the technology has now progressed from ‘research phase’ to
commercial deployment.
Further developments are being pursued to test the production of
automotive parts in larger quantities in cooperation with industrial
partners in Germany, including the car manufacturer, Audi.
Quickstep’s RST process received a prestigious JEC Innovation
Award at Singapore’s 2012 Asia Innovation Awards, recognising
the capability of our automotive technology.
In the aerospace sector, we have progressed the qualification of
the Quickstep Process for JSF within the US government’s Small
Business Innovation Research program.
In parallel to starting production, Quickstep was honoured by
having its new aerospace manufacturing facility at Bankstown
Airport in south-west Sydney jointly opened by President of
Northrop Grumman Aerospace Systems Division Mr Gary Ervin
and the NSW Premier, the Hon Barry O’Farrell. The facility was
previously used by US aerospace giant Boeing and together
with other surrounding buildings will secure our long-term
manufacturing expansion plans.
A number of other discussions have been held and offers have
been made to current and new customers for new business and
this activity is expected to bring in new contracts in the coming
months.
Quickstep Technology for the automotive
industry
Quickstep is also focused on developing licensing opportunities
in the global automotive sector, where we aim to drive revenue
through the use of our resins, licensing fees and the sale of
machines to component manufacturers.
Pursuing our strategy to develop one of our patents for the high-
volume automotive industry, we have now proven the potential of
our technology in that market.
Using the Quickstep Process and our patented resin spray transfer
(RST) technology, we can now manufacture carbon fibre composite
parts with superior surface finish ‘straight out of the mould’.
The parts do not show any signs of fibre ‘print through’ after
painting and ageing, which has been the critical issue for all other
automotive carbon fibre technologies.
We have also demonstrated consistent and repetitive high
quality finishes on complex shaped parts, an important feature
for modern day cars. Quickstep’s resin formulation and process
control, therefore, can develop strong automotive parts with an
A-grade finish. In a high-volume, high technology industry, this can
dramatically reduce finishing time, potentially making advanced
composites a competitive replacement for traditional metal
automotive bodies for the first time.
The automotive industry requires car parts to be produced at
high-speed, at low cost, and with high-quality finish. Because
Quickstep’s patented RST technology combines all three of these
attributes it offers a quantum leap in terms of improvement,
which can facilitate manufacture of carbon fibre car parts and
enable serial production of lightweight cars with a reduced carbon
footprint.
We believe there is substantial demand for such a solution, as
taxes being introduced by European and US governments to
reduce high levels of carbon dioxide emission will increase the
costs of traditional automobile manufacturing.
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Quickstep Holdings Limited
Annual Report 2012
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In addition, we have demonstrated that a fully integrated part
can be assembled, infused with resin and cured in one shot.
This technology is a breakthrough in terms of weight and cost
reduction for the aerospace industry, as it avoids the costly
and heavy bonding of parts. A new European program has
been structured around Quickstep’s technology, funded by the
aeronautical environmental research program Cleansky.
Corporate
In November 2011, Quickstep signed a loan guaranteed by the
Australian government’s Export Finance Insurance Corporation
(EFIC) and supplied by the Australian and New Zealand Banking
Group (ANZ). The loan comprises $10 million principal plus up to
$3.3 million in capitalised interest, and has a 10-year term.
Quickstep also undertook an entitlement offer to shareholders
raising A$7.5 million before cost in December 2011. Part of these
funds were used to repay and close the La Jolla convertible note
facility.
All of the above achievements were outlined as the main objectives
of the company in my presentation at last year’s annual general
meeting, and have been successfully delivered.
Outlook
In recent years Quickstep has experienced encouraging growth.
We continue to evolve and develop in order to build our portfolio
of patents, manufacturing skills and revenue base. In the coming
year we aim to achieve four major milestones:
» Ramping up production for the Joint Strike Fighter project
» Transferring all Western Australia activity at Coogee to our
NSW-based Bankstown Airport manufacturing facility by the
end of 2012
» Beginning qualification and delivery of first parts on the C-130J
wing flaps contract; and
» Commercialising and delivering the first automotive parts using
Quickstep’s RST.
These four milestones will provide the Company with a solid base
from which we can continue to expand.
We expect to continue bidding for new programs. The aerospace
and defence sectors offer scope for growth and our focus is on
ensuring that Quickstep is well positioned to capitalise on the
opportunities.
Concurrently, our efforts to commercialise Quickstep’s technology
are starting to bear fruit. We believe we have a number of
opportunities to licence technology, sell Quickstep machines and
associated support services, and form partnerships in specific
programs to advance our position in the aerospace and automotive
sectors.
Yours sincerely,
Philippe Odouard
Chief Executive Officer
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Annual Report 2012
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Financial Report
For the year end 30 June 2012
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Annual Report 2012
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DIRECTORS’ REPORT
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 2012 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 48, 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.
Philippe Odouard M.Sc (Bus)
Managing Director and CEO - appointed 13 October 2008
Mr Philippe Odouard aged 57 was appointed Chief Executive Officer and Managing Director in October 2008. He
has significant management experience within the global aerospace and defence sectors - both of which are
primary target markets for Quickstep's technology.
Prior to joining Quickstep, Mr Odouard 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.
Mr Odouard has also held a number of senior management roles with profit and loss responsibility within
Thomson-CSF (now Thales Group) - a world leader in information systems for the aerospace, defence and
security markets. During this time, which included roles in both Australia and Europe, Mr Odouard was
responsible for managing large contracts with innovative developments as well as technology transfers. He
negotiated and managed long term contracts with major global aerospace and defence groups including several
worth in excess of $1 billion.
Significantly, Mr Odouard managed the Minehunter project, which at the time was the largest user of composites
in Australia. In addition, he negotiated and managed significant contracts with Eurocopter when they sold the all-
composite Tiger helicopter to the Australian Defence forces.
Mr Dale Edwin Brosius, B. Sc. (Chem. Eng.), MBA
Executive Director and President Quickstep Composite LLC - appointed 13 August 2004
Mr Brosius, aged 54, as President of Quickstep Composites LLC is responsible for the commercial development of
the Company’s technology in 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 , 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.
D I R E C T O R S ’ R E P O R T
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.
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 51, has over 25 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, software
development and marine industries.
Mr Graham assists Quickstep on corporate communication and marketing strategy in addition to his role as
director.
Mr Graham holds a Diploma of Company Directors from the Australian Institute of Company Directors.
Mr Peter Chapman Cook, MPharm., PhC, CChem, FMonash, FRMIT, MPS, MRACI, MAICD.
Independent Non-Executive Director - appointed 14 July 2005
Mr Cook, aged 65, 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, post graduate qualifications in Management from
RMIT University and is a Fellow of Monash University.
Air Marshal Errol John McCormack (Ret’d), AO
Independent Non-Executive Director - appointed 11 August 2010
Air Marshal McCormack, aged 71, 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.
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DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
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.
Mr David Patrick Alexander Singleton, BSc (Hons)
Independent Non-Executive Director - appointed 11 October 2010
Mr Singleton, aged 52, 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 successful 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 Austal Ships based in Perth WA and also Deputy Chair of
Council to Methodist Ladies College in Perth. 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 64, 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
Company Secretary
Mr Phillip James MacLeod, B. Bus., ASA. MAICD
Mr MacLeod, aged 47, 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 company 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.
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
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:
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
Board
Meetings
B
A
11
11
11
11
11
11
11
11
10
11
9
11
7
11
9
11
Audit, Risk
and
Compliance
Committee
Meetings
Remuneration,
Nominations
and Diversity
Committee
Meetings
A
B
A
B
3
3
3
3
2
3
2
2
2
2
2
2
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 including delivery of first production parts and
establishment of the Bankstown manufacturing facility;
proposing and securing additional manufacturing workload through the Lockheed Martin C-130 program
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;
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 employee 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 $11,801,601 for the year ended 30 June 2012 which was better than
expectations and consistent with the strategic development phase of the business (2011: loss of $13,734,713).
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.
16
7
Quickstep Holdings Limited
Annual Report 2012
8
17
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
8. Events Subsequent to Reporting Date
Since the end of the financial year the Group:
• Has entered into a lease for an additional building at the Bankstown site; and.
• Obtained a purchase order for $12 million for first deliveries of C-130 parts, commencing in late 2013
9.
Likely Developments
The Group’s key areas of focus for the 2012/13 financial year will include;
•
Finalising process qualifications to support JSF production, transfer of production to the Bankstown
facility and closure of the Coogee facility;
• Obtaining further contracts for JSF production in accordance with the initial MOU signed in 2009;
• Commencing production of C-130 wing flaps;
• Obtaining contracts for the commercial application of the Group’s patented process technology; and
• Expanding 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.
Note 1(d) in the financial statements sets out the effect of projected operating cash flow requirements on the
Group’s financial positon.
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
Mr D E Wills(4)
-
2,134,205
600,000
26,039,341
145,758
294,315
-
460,107
-
2,575,334
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
11. Share Options and Rights
During the financial year, 706,373 options were granted under the Quickstep Employee Incentive Plan (EIP) to
the CEO, Mr Philippe Odouard, as part of his remuneration with vesting based on future conditions. No options
granted in prior years were exercised during the year ending 30 June 2012. No other options have been granted
during or since the end of the financial year.
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
During the financial year, the Company granted rights for no consideration over unissued ordinary shares in the
Company to the five most highly remunerated officers, including key management personnel of the Group as part
of their remuneration:
Executives
Exercise
Price
Number of Rights
Granted
Mr S Godbille
Mr J Johnson
Ms M Withers
$0.00
$0.00
$0.00
764,818
688,337
434,847
None of these rights have vested during or since the end of the financial year. The rights do not have an expiry
date.
No rights have been granted since the end of the financial year.
Unissued shares under options and rights
At the date of this report, unissued ordinary shares of the Company under options and rights are:
Executive
Earliest Possible
Vesting Date
Expiry Date
Exercise Price
Options
Mr P Odouard
Mr P Odouard
Mr P Odouard
Rights
Mr S Godbille
Mr S Godbille
Mr J Johnson
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Ms M Withers
Mr B Pillay
Total
1/7/2012
1/7/2013
31/8/2014
12/7/2013
31/12/2013
1/7/2013
31/12/2013
1/7/2013
1/10/2012
31/12/2013
31/12/2013
30/03/2017
26/11/2017
23/11/2018
-
-
-
-
-
-
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
Number of
Shares
1,397,624
471,337
706,373
267,605
764,818
471,698
688,337
250,000
184,000
434,847
312,620
5,949,259
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 the prior financial year, the Company issued ordinary shares as a result of the exercise of rights as follows
(there were no amounts unpaid on the shares issued):
Number of
Shares
Amount paid on
each Share
680,235
$0.00
No ordinary shares were issued as a result of exercise of options
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.
18
Quickstep Holdings Limited
Annual Report 2012
19
9
10
DIRECTORS’ REPORT
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
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 2012, is set out on page 75.
15. REMUNERATION REPORT - AUDITED
The remuneration report is set out under the following main headings:
A:
B:
C:
D:
Principles of compensation
Service agreements
Details of remuneration
Share-based compensation
E:
Analysis of bonuses in remuneration
Remuneration is referred to as compensation throughout this report.
A.
Principles of compensation
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.
The report includes details relating to:
Non Executive directors
Mr M Jenkins
Mr P Cook
Chair of Board
Chair of Remuneration, Nomination and Diversity Committee
Air Marshal E McCormack
Chair of Government Liaison Committee
Mr D Singleton
Mr D Wills
Executive Directors
Chair of Audit Risk and Compliance Committee
Mr P Odouard
Managing Director and Chief Executive Officer
Mr D Graham (Jnr)
Business Development Manager - Australia
Mr D Brosius
President Quickstep Composite LLC
D I R E C T O R S ’ R E P O R T
Executives and Officers
Mr P McLeod
Mr J Johnson
Company Secretary
Chief Financial Officer
Dr J Schlimbach
Joint CEO, Quickstep GmbH
Ms M Withers
Mr S Godbille
Mr A Vihersaari
Mr M Schramko
Mr P Salvati
Mr W Beckles
Human Resources Manager
General Manager of Quickstep Process Systems
Vice President of Global Business Development
Operations Manager (appointed 25/7/2011)
Quality Manager (appointed 01/7/2011)
Operations Manager (resigned 12/8/2011)
The Board has established a remuneration committee which assists the Board in formulating policies on and in
determining:
•
•
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
payments proposed and plan eligibility criteria.
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. The Corporate Governance
Statement provides further information on the role of this committee.
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
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,
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.
The Group does not have any scheme relating to retirement benefits for its key management personnel.
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis), as well as employer
contributions to superannuation funds.
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 Linked compensation
Performance linked compensation includes both short and long term incentives and is designed to reward key
management personnel for meeting or exceeding their financial and personal objectives. Other than as disclosed
in this report, there have been no performance-linked payments made by the Group to key management
personnel.
(i)
Short-term incentives
Certain key management personnel receive short-term incentives (STI) in cash based on achievement of key
performance indicators (KPIs). Each year, the remuneration committee considers the appropriate targets and
KPIs and the alignment of the individuals rewards to the Groups performance. These targets may include
measures related to the annual financial performance of the Group or specified parts of the group and are
measured against actual outcomes.
The committee is responsible for assessing whether the KPIs meet the criteria set out at the beginning of the
year. No bonus is awarded where performance fall below the minimum level of performance. The remuneration
committee recommends the total incentive to be paid to the individuals for approval by the Board.
20
Quickstep Holdings Limited
Annual Report 2012
21
11
12
DIRECTORS’ REPORT
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
(ii)
Equity-based compensation (long-term incentives)
(ii.a) Employee Incentive Plan
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 actual share price performance over a
period of 3 years. The incentives are considered to promote continuity of employment and encourage superior
performance.
(ii.b) Share based payments
Certain key management personnel received long-term incentives (LTI) as share based payments based on
achievement of key performance indicators (KPIs). The remuneration committee considered the appropriate
targets and KPIs and the alignment of the individual’s contribution to the Groups performance. These targets may
include measures related to the annual financial performance of the Group or specified parts of the group and are
measured against actual outcomes.
(ii.c) Other Equity-based Compensation
Other long term incentives may be provided to key management personnel as rights over ordinary shares of the
company. These rights have been provided as;
•
•
loyalty bonuses as an incentive for continuity of employment; and
executive performance and retention bonuses (EPRB) for performance against objectives relating to the
Company’s relocation objectives and continuity of employment. The EPRB will be evaluated against
specific criteria vital to the success of the transfer of manufacturing to NSW.
The committee considers that the above performance linked compensation structure is generating the desired
outcomes. In considering the benefits for shareholder’s wealth the committee recognizes the developmental stage of
the Groups’ business and considers that current financial performance is not representative of the achievements of
the group. Factors such as the attraction and retention of key staff, securing long term contracts and
commercialisation and development of technology will provide longer term shareholder wealth.
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. In 2011 a fee for Chairmanship of a committee of $5,000 p.a. was introduced. The
table below indicates the maximum annual fees. Non-executive directors do not receive performance related
compensation.
Executives
Mr M Jenkins
Mr P Cook
Mr E McCormack
Mr D Singleton
Mr D Wills
Directors Fees
127,600
Committee
Chairmanship
N/A
60,000
84,000
60,000
50,000
5,000
N/A
N/A
5,000
D I R E C T O R S ’ R E P O R T
B.
Service agreements
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
Mr P M Odouard
13 October
2008
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
Dr J Schlimbach
1 Jan 2012
Mr A J Vihersaari
1 July 2011
Ms M A Withers
1 October
2009
12
months
12
months
Mr M Schramko
25 July 2011
Mr P Salvati
1 July 2011
Mr W Beckles
1 September
2009
Resigned
12
August
2011
6
months
3
months
3
months
1
month
3
months
3
months
1
month
3
months
3
months
3
months
3
months
STI (1)
% of
salary
LTI (2)
% of
salary
Other
Benefits
(4)(5)
25
50(3)
588,235
rights(4)
• 12 months annual salary and
pro-rated annual bonus (at
board’s discretion)
• 6 months of annual salary
33.3 (6)
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
12.5
12.5
25
20
-
20
12.5
12.5
12.5
12.5
• 6 months of annual salary
12.5
12.5
package; and
• Pro rated annual bonus (at
board’s discretion)
• 3 months of annual salary
12.5
12.5
package; and
• Pro-rated annual bonus (at
Board’s discretion).
• 3 months of annual salary
12.5
12.5
package; and
• Pro-rated annual bonus (at
Board’s discretion).
• 6 months of annual salary
12.5
12.5
package; and
• Pro rated annual bonus (at
board’s discretion)
267,605
rights(4)
764,818
rights (5)
-
471,698
rights(4)
688,337
rights
(5)
-
250,000
rights(4)
276,000
rights(4)
434,847
rights (5)
468,750
rights(4)
(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.
Long term loyalty bonus based on years of services, payable in shares.
Executive Performance and Retention bonus for performance against objectives relating to the
Company’s relocation objectives, payable in shares.
(6)
Maximum US$30,000
22
Quickstep Holdings Limited
Annual Report 2012
23
13
14
DIRECTORS’ REPORT
DIRECTORS’ REPORT
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24
Quickstep Holdings Limited
Annual Report 2012
25
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
Notes in relation to the table of remuneration:
(1)
Other Long Term incentives accrued in the prior year have been settled through share based payments
during the year, valued at the market value on the day of issue
(2)
Share based payments include:
a.
Adjustments to the prior year accrued cash LTI for actual amounts paid through share based
payments during the prior financial year
b. Shares issued as Long term incentives
c. Accrual of estimated Long term incentives relating to the current year to be settled through
share based payments
d. The portion attributable to the current year of :
i. Options (EIP)
ii. Loyalty bonuses
iii. Executive performance and retention bonuses (EPRB)
( 3 )
The Short Term Incentive (STI) is comprised of an accrued cash bonus plus adjustments to the accrued
STI for actual amounts paid during the prior financial year.
D.
Share based compensation
(i)Shares
Other Long term incentives accrued in the prior year have been settled through share based payments during the
year, valued at the market value on the day of issue:
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Dr J Schlimbach
Total
No of Shares
granted and
vested
67,992
133,513
35,203
66,773
36,342
339,823
Fair Value
Total Fair Value
($)
$0.1979
$0.1979
$0.1979
$0.1979
$0.1979
($)
13,456
26,422
6,967
13,214
7,192
67,251
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
Unvested options at 30/6/2012 are as follows:
Earliest
possible
vesting date
No. of
options
granted
Fair value
per option at
grant date
Total fair
value
($)
($)
Tranche 3 -
30/06/2011
Tranche 4 -
30/06/2012
2010 Year –
30/06/2013
2011 Year –
31/8/2014
925,926
$0.3150
291,667
471,698
$0.2700
127,358
471,337
$0.3620
170,624
706,373
$0.1730
122,203
Total
2,575,334
711,852
All of the above options have an exercise price of $nil and an expiry date of 4 years after their earliest possible
vesting date.
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
Mr P Odouard
Mr P Odouard
925,926
471,698
471,337
706,373
30/03/2010
30/03/2010
26/11/2010
23/11/2011
0
0
0
0
0
0
0
0
2013
2013
2014
2015
Long term incentives accrued in the current year, $121,258 are expected to be settled through share based
payments during the next financial year, valued at the market value on the day of issue.
(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.
(ii)Options
During 2012, Mr Odouard has accepted offers of 706,373 (2011: 471,337) options from the Quickstep Employee
Incentive Plan (EIP) in accordance with the resolutions passed at the 2011 Annual General Meetings. The
number of options granted was calculated with reference to the volume weighted average of the ASX quoted price
for QHL shares at 31 August 2011 (22.79 cents). (2011: 32.62 cents)
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, as calculated under the accounting standards, (refer note
32), 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 fair value of options granted in 2012 is $122,203
(2011:$170,624).
No options granted during 2012 were vested, exercised or lapsed
The expense recorded in the financial statements of $139,110 (2011: $272,039) is the portion of the current offer
and all prior offers, attributable to the current financial year as required by accounting standards.
No options vested or were exercised in the current year. (2011:1,851,852 options). 925,926 options issued in prior
years were evaluated against performance criteria and failed to meet the vesting criteria. These option will be re-
evaluated at 30/6/2013.
Exercise of options granted as compensation
During the reporting period no shares were issued on the exercise of options previously granted as compensation.
No options lapsed.
(iii)Rights to shares
(iii.a) Executive Performance and Retention Bonus
Mr Godbille, Mr Johnson and Mrs Withers were granted, as compensation during the reporting period rights to
shares offered through a performance and retention bonus scheme. The rights vest on 31/12/2013 upon
performance of criteria related to the company’s relocation objectives and are conditional upon continued
employment. Refer to the table below for further details
The rights have a $nil exercise price and have no expiry date. No rights granted during 2012 were vested,
exercised, lapsed or forfeited.
The rights have been valued at fair value based on a Monte Carlo simulation (refer note 32) at the issue date. An
expense of $96,046 (2011:nil) has been included in the financial statements as the portion of the current offer,
attributable to the current financial year as required by accounting standards
26
Quickstep Holdings Limited
Annual Report 2012
17
18
27
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
Number of
rights granted
during 2012
Grant date
Fair value at
grant date ($)
Expensed
($)
Number vested
during the year
764,818
688,337
434,847
1,888,002
10/02/12
10/02/12
10/02/12
$190,400
$171,360
$108,254
38,908
35,017
22,121
96,046
0
0
0
Executives
Mr S Godbille
Mr J Johnson
Mrs M Withers
Total
(iii.b) Loyalty Bonus
Rights have been issued to a number of key management personnel in prior years as long term retention
incentives. The rights vest in two tranches provided the employee remains employed with the Group. 1/3 vest 2
years from the date granted, 2/3 vest 3 years from the date granted.
The rights are valued at market value of the Group’s share on the date of grant of the rights. An expense of
$135,502 (2011:118,507) has been included in the financial statements as the portion of the offer, attributable to
the current financial year as required by accounting standards.
680,235 rights vested (2011; 468,750 rights lapsed) during the period
The value disclosed is the portion of the fair value of the options recognised in the reporting period
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
(iii.c) Vesting profile of Rights
Details of the vesting profile of the rights to shares granted as remuneration to each key management person of
the Group are detailed below.
Number of
rights granted
Grant date
No of
rights
vested in
year
%
vested
in year
Market
Value of
rights
vested
Financial years
in which grant
vests
882,353
13/10/2008
588,235
66.66%
108,823
2011 & 2012
(B)
(C)
(B)
(C)
(B)
(B)
(C)
267,605
764,818
471,698
688,337
250,000
276,000
434,847
12/07/2010
10/02/2012
01/04/2011
10/02/2012
01/07/2010
01/10/2009
10/02/2012
-
-
-
-
-
92,000
-
-
-
-
-
-
33.33%
-
-
-
-
-
-
17,020
-
2013 & 2014
2014
2013 & 2014
2014
2013 & 2014
2012 & 2013
2014
Directors
Mr P Odouard
Executives
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
(A)
(B)
(C)
No rights were forfeited or lapsed during the period
During the year 680,235 rights were exercised at $nil consideration. The market value of the rights
exercised was $125,843
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 grant date
(D)
Rights vest subject to performance conditions.
(iv) 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.
28
Quickstep Holdings Limited
Annual Report 2012
29
19
20
DIRECTORS’ REPORT
D I R E C T O R S ’ R E P O R T
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:
Short-term incentive bonus 2012
Included in
remuneration
$ (A)
% vested
in year
% forfeited
in year (B)
Directors
Mr P Odouard
Mr D Brosius
Mr D Graham
Executives
Mr S Godbille
Mr J Johnson
Dr J Schlimbach
Mr A Vihersaari
Ms M Withers
Mr M Schramko
Mr P Salvati
Mr W Beckles
51,851
10,655
(2,250)
15,664
27,909
10,011
10,908
14,799
15,768
10,938
5,516
70%
28%
-
64%
61%
53%
56%
76%
73%
72%
28%
30%
72%
112%
36%
39%
47%
44%
24%
27%
28%
72%
(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 2012 year. The amounts included in
remuneration for the current reporting period include adjustments to the 2011 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 performance , personal performance or service criteria not
being met in relation to the current financial year.
Dated at Perth, Western Australia this 28th day of September 2012.
Signed in accordance with a resolution of the Directors:
P M Odouard
Managing Director
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
This statement outlines the main corporate governance practices in place throughout the financial year, which
comply with the ASX Corporate Governance Council recommendations, unless otherwise stated.
1.
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 that 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 currently held 13 scheduled meetings each year, including strategy meetings and extraordinary
meetings at such other times as were 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 education
The Group has a formal process to educate 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 formal process to educate 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.
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
30
Quickstep Holdings Limited
Annual Report 2012
31
22
CORPORATE GOVERNANCE STATEMENT
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 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
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 prior 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.
2.
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.
4.
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; and
recommend to the Board the appointment of external auditors.
•
•
•
32
•
oversees the establishment, implementation and review of the Group’s risk management systems
The Audit Committee comprises three independent non-executive directors and is Chaired by Mr David Wills who
has both relevant financial qualifications and business experience required for this role.
5.
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 provide the risk profile on a regular basis to the Audit, Risk and Compliance Committee that outlines
the material business risks to the company. Risk reporting includes the status of risks through integrated risk
management programs aimed at ensuring 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 regular
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, 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, including:
•
•
•
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 matters; and
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 note 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;
23
Quickstep Holdings Limited
Annual Report 2012
24
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
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
the quality and integrity of personnel (see below);
Trading in general company securities by directors and employees
financial reporting accuracy and compliance with the financial reporting regulatory framework (see below);
and
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.
6.
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.
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.
•
•
•
•
•
•
•
34
A security Trading Policy has been established and is published on the Company web site. It reqires 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.
7.
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.
8.
Diversity
The board is committed to having an appropriate blend of diversity on the board and in the Group’s senior
executive positions. However, at this time it has not developed a gender diversity policy due to the constraints
relating to the current size and nature of operations.
The Group’s current gender representation at Board and key management level is as follows:
Gender representation
Female (%)
Male (%)
Female (%)
Male (%)
30 June 2012
30 June 2011
Board representation
Key management personnel
representation
Group representation
0%
13%
13%
100%
87%
87%
0%
13%
13%
100%
87%
87%
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 formally reviewed annually by the full Board. The
performance of each director is continually monitored by the Chairman and the other directors and is reviewed by
each director with the Chairman. The performance of the Chairman is reviewed by the other directors and the
results discussed with the Chairman by a nominated director.
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. Quickstep 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.
I N D E P E N D E N T P R O F E S S I O N A L A D V I C E
Individual directors have the right, in connection with their duties and responsibilities as directors, to seek
independent professional advice at the Company’s expense. With the exception of expenses for legal advice in
relation to a director’s rights and duties, the engagement of outside advisors is subject to prior approval of the
Chairman, which will not be unreasonably withheld.
A S X G U I D E L I N E S O N C O R P O R A T 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.
25
Quickstep Holdings Limited
Annual Report 2012
35
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2012
P a g e 3 4
C O N S O L I D A T E D S T A T 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 01 2
Revenue
Cost of sales
Gross profit
Government grant income
Other income
Operational expenses
Marketing expenses
Corporate and administrative expenses
Research and development expenses
Other expenses
Loss from operating activities
Financial income
Financial expense
Net financing income/(cost)
Loss before income tax
Income tax benefit
Loss for the period
Other comprehensive loss, net of income tax
Foreign currency translation difference for
foreign operations
Effective portion of changes in fair value of cash
flow hedges
Note
2012
$
2011
$
5
5
5
6
8
8
503,168
471,524
(1,502,637)
(535,256)
(999,469)
(63,732)
4,257,448
5,054,944
393,532
141,658
(7,130,207)
(7,785,973)
(1,072,049)
(907,565)
(5,882,128)
(5,711,712)
(2,968,978)
(2,615,573)
(261,596)
(218,168)
(13,663,447)
(12,106,121)
2,072,655
752,612
(210,809)
(2,381,204)
1,861,846
(1,628,592)
(11,801,601)
(13,734,713)
-
-
(11,801,601)
(13,734,713)
(70,601)
(124,049)
71,065
(71,065)
Page 35
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2012
C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N
A S A T 3 0 J U N E 2 01 2
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
Note
i)
ii)
2012
$
2011
$
12
13
14
15
16
17
18
3,000,672
4,915,978
418,591
690,400
326,301
13,406,217
796,731
185,036
690,400
133,784
9,351,942
15,212,168
16,491,346
230,776
-
12,769,447
496,226
14,020
TOTAL NON-CURRENT ASSETS
16,722,122
13,279,693
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
26,074,064
28,491,861
3,352,297
10,700
292,961
5,038,611
17,645
252,074
3,655,958
5,308,330
561,365
5,241,938
421,221
12,622
-
2,820,000
20
21
23
20
21
22
TOTAL NON-CURRENT LIABILITIES
5,803,303
3,253,843
Total comprehensive loss for the period
(11,801,137)
(13,929,827)
TOTAL LIABILITIES
9,459,261
8,562,173
Loss attributable to:
Owners of the company
Total comprehensive loss attributable to:
Owners of the company
Earnings per share
(11,801,601)
(13,734,713)
(11,801,137)
(13,929,827)
Basic loss (cents/share) for Quickstep Holdings Ltd
Diluted loss (cents/share) for Quickstep Holdings Ltd
11
11
(3.96)
(3.96)
(6.65)
(6.65)
NET ASSETS
16,614,803
19,929,688
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
24
25
26
74,754,828
2,322,699
(60,462,724)
66,854,895
1,735,916
(48,661,123)
16,614,803
19,929,688
The consolidated statement of comprehensive income is to be read in conjunction with the accompanying notes.
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
36
Quickstep Holdings Limited
Annual Report 2012
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
37
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2012
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P
Quickstep Holdings Limited
Annual Report 2012
39
CONSOLIDATED STATEMENT OF CASH FLOWS
P a g e 3 8 – 2 0 1 1 d o l l a r a m o u n t s t o N O T b e b o l d .
FOR THE YEAR ENDED 30 JUNE 2012
C O N S O L I D A T E D S T A T E M E N T O F C A S 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 12
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Note
2012
$
2011
$
1.
Significant accounting policies
(a)
Reporting entity
Cash flows from operating activities
Cash receipts in the course of operations
Interest received
Interest paid
Research and development tax incentive and
government grants
Cash payments in the course of operations
489,172
392,192
(211,604)
590,986
949,777
(6,133)
392,778
(16,332,179)
5,480,845
(15,093,949)
Net cash used in operating activities
29
(15,269,641)
(8,078,474)
Cash flows from investing activities
Acquisition of plant and equipment
Acquisition of intangibles
Investment in term deposit
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares
Payment of transaction costs
Proceeds from convertible loans
Repayment of convertible note
Proceeds from borrowings
Payment of borrowing costs
Government grants
Finance lease payments
(10,180,301)
-
-
(4,843,826)
(350,118)
9,309,660
(10,180,301)
4,115,716
7,520,000
(557,509)
468,456
(604,017)
6,106,048
(871,400)
3,000,000
(17,645)
4,696,285
(137,800)
808,875
-
-
-
-
(17,163)
Net cash from financing activities
15,043,933
5,350,197
Net (decrease) / increase in cash and cash
equivalents
Effects of exchange rate changes on cash held in
foreign currencies
(10,406,009)
1,387,439
464
(207,045)
Cash and cash equivalents at 1 July
13,406,217
12,225,823
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 2012 comprise the Company and its subsidiaries
(together referred to as the “Group” and individually as “Group Entities”). The Group is a for profit entity and 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 28th September
2012.
Basis of measurement
The financial statements are prepared on the historical cost basis except for financial liabilities measured at fair value
through the profit and loss (refer note 22). 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; and
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,.
Cash and cash equivalents at 30 June
12
3,000,672
13,406,217
(d)
Financial position
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
The Group has incurred a loss after tax for the year ended 30 June 2012 of $11.8 million (2011: $13.9 million). The
loss was in line with the corporate strategy and consistent with the development phase of the business. The Group
has successfully completed major milestones necessary for supplier approval to the JSF program, with the final
approval of the Bankstown facility to be assessed in late 2012. The Group, in line with its strategy, anticipates
continuing to incur losses in FY 2013 until significant delivery rates are achieved in 2014 . The Group has a surplus
in working capital at 30 June 2012 of $5.7 million (2011: $9.9 million).
40
Quickstep Holdings Limited
Annual Report 2012
41
32
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Since 30 June 2011, the Group has continued to;
•
•
•
•
pursue its objectives of securing further Long Term Agreements (LTA) for the supply of Joint Strike Fighter
(JSF) parts;
develop a process capability to ready itself for advanced aerospace manufacturing activities;
pursue other high value aerospace, automotive and consumer product manufacturing opportunities; and
develop its program of research into composite curing technologies in the automotive and aerospace
industries.
Consistent with these objectives the Group has during the 2012 financial year:
•
•
invested $10.2 million in capital equipment to develop its composite manufacturing capability;
utilised net cash resources of $16.3 million for operations, a majority of which has been to develop process
capability for advanced aerospace manufacturing activities and research and development relating to the
automotive and aerospace industries.
These activities have been the principal contributors to the reduction in cash reserves since 30 June 2011.
Since 30 June 2011, the Group has:
•
•
•
•
•
secured additional purchase orders and negotiated long term contracts with JSF contractor Northrop
Grumman and commenced delivery of products;
been confirmed as preferred tenderer for supply of C-130 J wing flaps to Lockheed Martin and received its
first purchase order for the non-recurring activities for the manufacturing program. Contracts for the
manufacturing stage are under negotiation;
substantially completed production facilities in Bankstown, NSW and commenced qualification of the
facility to Northrop Grumman’s quality requirements;
continued to enhance and innovate on its manufacturing technology, including generating new knowledge
through enhancing and improving manufacturing processes for the aerospace industry; and
continued its research and development programs to improve the Quickstep Process technology through
partially funded programs to enhance capability in the automotive and aerospace sectors.
To fund these on-going activities, during the 2012 financial year, the Group has;
•
•
•
established in November 2011 a 10 year loan facility of $10 million plus capitalised interest of $3.3 million
for the purposes of providing capital expenditure funding for the Group’s JSF project. At 30 June 2012, the
Group has utilised $6.2 million of the facility including capitalised interest;
executed an agreement in the prior financial year 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. Performance conditions have been met and further funding from this grant have been received;
and
Issued 47,000,000 shares to existing shareholders and underwriters under the terms of the non
renounceable rights issue which closed on 23 December 2011. The issue raised $7,520,000 at an issue
price of $0.16. Cost incurred in raising these funds amounted to $557,555.
The activities of the Group, in the opinion of the Directors, warrant the ongoing commitment of the Group’s financial
resources to enable future profitable operations. Such operations are expected to enable the recovery of the Group’s
investment in property plant and equipment.
As at 30/6/2012 the Group has cash and deposits of $3.7 million and has an undrawn balance of $3.9 million under
its long term loan facilities which can be used for funding of capital expenditure. In 2013 production deliveries
pursuant to the JSF project increase and new contracts are expected to commence.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
The Group has substantially completed the building of its production facility in Bankstown and is now receiving
increasing enquiries from major companies in order to quote on high value projects in the aerospace, automotive
and consumer products sectors. Certain sale contracts are in the process of being negotiated and the directors are
confident that they will be finalised shortly. These contracts, together with other fund raising alternatives and the
proposed sale of certain plant and equipment, which will become excess to requirements following the closure of the
Western Australian facility, are expected to enable the Group to meet its commitments for at least the next 12
months, subject to there being no unforeseen circumstances.
(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 2012 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.
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, including goodwill and fair value adjustments arising on
acquisition, 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. 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.
42
Quickstep Holdings Limited
Annual Report 2012
43
33
34
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(g)
Financial instruments
(i)
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.
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.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Dividends
Dividends are recognised as a liability in the period in which they are declared.
(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
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 and cash equivalents
Cash flow hedges
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
All 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 recorded at amortised cost:
Trade and other payables,
Royalties payable (refer note 20).
Loans and borrowings including secured loan facility from the ANZ Bank of $10 million plus capitalised
interest of $3.3 million
(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.
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.
Separable embedded derivatives
Changes in the fair value of separable embedded derivatives are recognised immediately in profit or loss.
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.
44
Quickstep Holdings Limited
Annual Report 2012
35
36
45
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(h)
Property, plant and equipment
(j)
Leased assets
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.
Government grants that compensate the Group for the cost of an asset are recognised as a deduction in arriving at
the carrying value of the asset.
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
Depreciation rate
6.67% to 37.50%
6.67% to 50.00 %
(i)
(i)
Intangible assets
Research and development
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 only 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 Assets
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
Capitalised development costs
Software
10 years
5 – 10 years
2 ½ years
•
•
•
•
46
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. The cost of inventories is based on the
first in first out principle, and includes expenditure incurred in acquiring the inventories, production or conversion
costs and other costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate share of production overheads
based on normal operating capacity. 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 a
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.
37
Quickstep Holdings Limited
Annual Report 2012
47
38
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(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.
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 that compensate the group for expenses incurred 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 and 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 as a deduction in arriving at
the carrying value 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.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
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 (including available-for-sale financial assets),
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 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.
(r)
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.
48
39
Quickstep Holdings Limited
Annual Report 2012
40
49
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(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.
(v)
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 2012, and have not been applied in preparing these consolidated financial statements are
set out below. 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 2012, but
have not been applied in preparing these financial statements.
Transitional
Provisions
Retrospective
application
General provisions of
AASB 108 apply
Early adoption is NOT
permitted
AASBs and
Interpretation
AASB 2012-3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities
AASB 2011-4
Amendments to Australian
Accounting Standards to
remove individual key
management personnel
disclosure requirements
AASB 9 Financial
Instruments (Dec 2010)
Application
date
1 January
2014
Key requirements
to set-off
The amendments to AASB 132 clarify
when an entity has a legally enforceable
right
financial assets and
financial liabilities permitting entities to
present balances net on the balance
sheet
these
disclosures
1 July 2013 Removes the requirements to include
individual key management personnel
disclosures in the notes to the financial
statements. Companies will still need to
provide
the
Remuneration Report under s.300a of the
Corporations Act 2001
In AASB 9 (Dec 2010), the AASB added
requirements for the classification and
measurement of financial liabilities that
are generally
the
equivalent requirements in AASB 139
except in respect of the fair value option;
and certain derivatives linked to unquoted
equity instruments.
1 January
2013
consistent with
in
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
1 January
2013
AASB 2010-7
Amendments to Australian
Accounting Standards
arising from AASB 9 (Dec
10)
AASB 9 Financial
Instruments (Dec 09)
(Financial asset
requirements only)
AASB 10 Consolidated
Financial Statements
1 January
2013
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
contractual cash flow characteristics of
the financial asset.
in AASB 139 on
The guidance
impairment of financial assets and on
hedge accounting continues to apply.
IASB has deferred
NB: The
the
application of IFRS 9 until 1 January
2015, however the AASB has yet to issue
a corresponding amendment to AASB 9
(2010) and AASB 2009 (see table 1)
AASB 10 introduces a new approach to
determining which investees should be
consolidated. An investor controls an
investee when the investor is exposed, or
has rights, to variable returns from its
involvement with the investee and has
the ability to affect those returns through
its power over the investee
AASB 13 Fair Value
Measurement
1 January
2013
AASB 2011-8
Amendments to Australian
Accounting Standards
arising from AASB 13
AASB 13 explains how to measure fair
value when require to by other AASB’s. It
fair value
introduce new
does not
measurements, nor does it eliminate the
practicability exceptions to fair value that
currently exist in certain standards.
Retrospective
application where
there is a change in
the control conclusion
between AASB
127/Interpretation 112
and AASB10. There
are specific
requirements when
retrospective
application is
impracticable. Early
application is only
available if AASB 11,
AASB 12, AASB 127
(2011) and AASB 128
(2011) are applied at
the same time
Propective application
The disclosure
requirements in
AASB 13 need not be
applied in
comparative
information for
periods before initial
application.
The AASB also added the requirements
in AASB 139 in relation to the de-
recognition of
financial assets and
financial liabilities to AASB 9.
50
41
Quickstep Holdings Limited
Annual Report 2012
51
42
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
AASB 119 Employee
Benefits (Sep 2011)
1 January
2013
AASB 119 is amended focusing on but
not limited to the accounting for defined
benefit plans. In addition it changes the
definition of short-term and other long-
term employee benefits and some
disclosure requirements.
Retrospective
application
General provisions of
AASB 108 apply
AASB 2011-10
Amendments to Australian
Accounting Standards
arising from AASB 119
(Sep 2011)
AASB 2012-2
Amendments to Australian
Accounting Standards –
Disclosures – Offsetting
Financial Assets and
Financial Liabilities (June
2012)
AASB 2012-5
Amendments to Australian
Accounting Standards
arising from Annual
Improvements 2009 –
2011 Cycle
1 January
2013
AASB 7 is amended to increase the
disclosures about offset provisions,
including
the
nature of the arrangements.
the gross position and
Retrospective
application
General provisions of
AASB 108 apply.
1 January
2013
A collection of non-urgent but necessary
improvements to the following accounting
standards: AASB 1, AASB 101, AASB
116, AASB 132, AASB 134 and
Interpretation 2
Retrospective
application
General provisions of
AASB 108 apply
Early adoption of
amendments to
individual permitted
Retrospective
application
General provisions of
AASB 108 apply
1 July 2012
AASB 2011-9
Amendments to Australian
Accounting Standards –
Presentation of Items of
Other Comprehensive
Income
Makes a number of changes to the
presentation of other comprehensive
income including presenting separately
those items that would be reclassified to
profit or loss in the future and those that
would never be reclassified to profit or
loss and the impact of tax on those items
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 Incentive Plan (EIP) is measured using Monte Carlo Simulation. 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 EIP transactions are not taken into account in determining fair
value.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(d)
Derivatives
The fair value of forward exchange contracts is based on their quoted market price, if available. If a quoted 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)
Fair value of derivatives recognised through profit and loss
The fair value of the derivatives associated with the La Jolla convertible notes was determined by Monte Carlo
simulation in the prior year. This facility was terminated during the year.
3.
Financial risk management
(a)
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 other characteristics including the demographics of the Group’s customer
base, 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 A+ 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.
52
Quickstep Holdings Limited
Annual Report 2012
43
44
53
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Typically, the Group ensures that it has sufficient cash or funds otherwise reasonably available to it from
fundraising activities to meet expected operational expenses, including the servicing of financial obligations; this
excludes the potential impact of circumstances that cannot reasonably be predicted. Further details are set out in
Note 1(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.
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.
The Group has entered into a variable rate secured loan agreement for a period of 10 years. The facility includes
an allowance to capitalise interest up to $3,333,333 over the first 5 years of the loan. Interest is re-set on a
monthly basis in accordance with the 30 days bank bill rate. The facility includes an interest rate cap which limits
the bank bill rate component of the variable rate to a maximum of 5.1%. This limit will ensure that the interest to
be capitalised will not exceed the capitalisation limit.
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), Euro (EUR)
and US Dollar (USD). 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 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
borrowings 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 monthly basis.
The following summary describes the operations in each of the Group’s reportable segments:
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
There is integration between the segments in the form of use of the Manufacturing segment assets for Research
and Development purposes.
Manufacturing
Quickstep Process
Research and Development
Total
2012
130,068
-
2011
-
4,302,582
2,225,082
805,438
2012
-
-
-
2011
-
-
2012
373,100
4,650,980
2011
471,524
894,021
2012
503,168
4,650,980
2011
471,524
5,196,603
-
273,980
715,351
2,499,062
1,520,789
(6,451,746)
(3,654,983)
(393,754)
(330,619)
(1,347,396)
(1,544,583)
(8,192,896)
(5,530,185)
17,135,012
10,842,346
7,123,044
2,022,198
9,073,926
-
-
-
1,425
5,101,709
417,658
22,236,721
11,261,429
-
-
1,357,297
35,634
8,480,341
2,057,832
105,285
-
9,179,211
-
External revenues
Other income
Depreciation,
amortisation and
impairment
Reportable
segment
profit/(loss) before
income tax
Reportable
segment assets
Reportable
segment liabilities
Reportable Capital
Expenditure
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
Consolidated
2012
$
2011
$
(8,192,896)
(3,608,705)
(11,801,601)
(5,530,185)
(8,204,528)
(13,734,713)
22,236,721
3,837,343
26,074,064
11,261,429
17,230,432
28,491,861
8,480,341
978,920
9,459,261
2,057,832
6,504,341
8,562,173
Geographical information
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.
•
•
•
54
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.
46
45
Quickstep Holdings Limited
Annual Report 2012
55
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Australia
Germany
United States of America
Total
5.
Revenue and Income
Sales
Total revenue from operating actives
Government grant income
R & D tax incentive
Climate ready grant
SADI program grant
NSW relocation grant (i)
Other government grant income
Total government grant income
Other Income
Profit on foreign exchange transactions
Profit on sale of assets
Other income
Total other income
2012
$
Revenue
130,068
103,739
269,361
Non-current
assets
16,188,012
425,360
108,750
2011
$
Revenue
-
157,739
313,785
Non-current
assets
12,649,662
543,852
86,179
503,168
16,722,122
471,524
13,279,693
Note
Consolidated
2012
$
2011
$
503,168
503,168
471,524
471,524
3,267,459
670,821
170,413
-
148,755
4,257,448
-
710,641
300,934
4,000,000
43,369
5,054,944
120,993
30,490
242,049
393,532
-
-
141,658
141,658
(i)
Prior year NSW relocation grant requires the Group to operate a manufacturing facility in NSW until 30
June 2019.
6.
Other Expenses
Amortisation of intangibles
7.
Personnel expenses
Wages and salaries
Other associated personnel expenses
Increase/(decrease) in liability for annual leave
Expense of share based payments
Note
Consolidated
2012
$
2011
$
18
261,596
218,168
32
6,484,098
812,032
(23,618)
490,321
7,762,833
7,063,826
762,058
(96,348)
390,545
8,120,081
Note
Consolidated
2012
$
2011
$
22
22
8.
Finance income and expense
Recognised in profit and loss
Interest income
Change in fair value of derivatives at fair value through profit or
loss
Finance income
Finance lease interest paid
Convertible loan costs
Amortisation of convertible note costs
Borrowing cost
Other
Change in fair value of derivatives at fair value through profit or
loss
Interest expense on liabilities measured at amortised cost
Finance expense
Net finance income
Recognised in other comprehensive income
Foreign currency translation differences for foreign operations
Effective portion of changes in fair value of cash flow hedges
Finance income recognised in other comprehensive income, net
of tax
Attributable to:
Owner of the company
Finance income recognised in other comprehensive income, net
of tax
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
in
income
(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
Effect of different tax rate for overseas subsidiaries
Deferred tax asset not brought to account
Income tax benefit
325,675
1,746,980
2,072,655
(4,450)
(15,436)
(10,312)
(3,748)
752,612
-
752,612
(6,143)
(393,936)
-
-
-
(1,981,125)
(176,863)
(210,809)
-
(2,381,204)
1,861,846
(1,628,592)
(70,601)
71,065
464
464
464
(124,049)
(71,065)
(195,114)
(195,114)
(195,114)
-
-
-
-
-
-
Consolidated
2012
$
2011
$
(11,801,601)
(13,734,713)
(3,540,480)
1,916,529
11,650
1,612,301
-
(4,120,414)
756,871
(10,726)
3,374,269
-
56
47
Quickstep Holdings Limited
Annual Report 2012
57
48
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Note
Consolidated
2012
$
2011
$
(c)
Tax losses not brought to account
The tax effect of unused tax losses for which no deferred tax
asset has been recognised.
11,714,066
10,317,568
(d)
Temporary differences not brought to account
Deferred tax assets/(liabilities):
Accrued income
Interest receivable
Prepayments
Other provisions
Borrowing costs
Deductible capital raising costs and black hole expenditure
Property, plant and equipment
Intangibles
Deferred tax assets relating to temporary differences not
recognised
-
-
-
234,347
45,600
163,962
1,458,314
443,386
(23,363)
-
-
322,050
342
311,383
494,048
419,830
(2,345,609)
(1,524,290)
-
-
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 at this time 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 formed a tax consolidated
group effective from 1 July 2010.
(f)
R&D tax offset incentive
An R&D tax offset incentive of $3,267,459 has been recorded as a receivable as at 30 June 2012 based on eligible
expenditure incurred during the year of tax. This amount has been recorded as a government grant (refer Note 5).
10.
Auditor’s remuneration
Amounts received or due and receivable by the auditor for:
Audit services
KPMG – current year
KPMG – under/(over) accrual from prior year
Note
Consolidated
2012
$
2011
$
128,000
70,000
198,000
124,000
(5,558)
118,442
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
11.
Loss per share
The calculation of basic loss per share at 30 June 2012 was based on the loss attributable to ordinary
shareholders of $11,801,601 (2011: $13,734,713) and a weighted average number (W.A.N.) of ordinary shares
outstanding during the financial year ended 30 June 2012 of 297,979,266 (2011: 206,683,922) calculated as
follows:
2012
2011
Note
24
Actual No.
W.A.N.
Actual No.
W.A.N.
270,038,762
270,038,762
251,416,900
202,961,683
47,000,000
23,693,151
16,475,892
2,144,270
4,689,810
3,623,998
-
-
1,020,058
623,355
294,118
152,297
24
322,748,630
297,979,266
270,038,762
206,683,922
1,851,852
1,425,672
Issued ordinary shares 1
July
Effect of shares issued
Effect of conversion of
notes
Effect of shares issued
on exercise of rights
and to executives as
remuneration
Effect of share options
exercised
Issued ordinary shares
at 30 June
Potential ordinary shares on issue are not considered to be dilutive and therefore the diluted loss per share
equals the basic loss per share
2012
$
2011
$
Weighted average number of ordinary shares (basic)
Basic loss cents per share
297,979,266
(3.96)
206,683,922
(6.65)
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 incentive and government grants receivable
GST and VAT receivable
Accrued interest
Other
14.
Inventories
Raw materials and consumables
Work in progress
Note
Consolidated
2012
$
2011
$
1,000,672
2,000,000
3,000,672
7,706,217
5,700,000
13,406,217
497,800
130,814
3,906,594
401,265
14,717
95,602
4,915,978
347,427
71,164
418,591
274,623
310,059
81,235
-
796,731
185,036
-
185,036
50
58
Quickstep Holdings Limited
Annual Report 2012
59
49
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
15. Other financial assets
Held-to-maturity investments
16. Other current assets
Prepayments
Other
Note
690,400
690,400
Consolidated
2012
$
2011
$
302,959
23,342
326,301
133,165
619
133,784
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
17. Property, plant & equipment
Consolidated
Plant &
Equipment
Assets Under
Construction
$
$
Office
Furniture &
Equipment
$
Total
$
Costs
Balance at 1 July 2010
8,338,537
2,362,443
564,387
11,265,367
31,524
6,127,987
150,186
6,309,697
-
-
-
-
-
(327,354)
Transfer to intangible assets
2,817,225
(3,144,579)
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
Balance at 1 July 2011
11,198,333
5,345,851
667,571
17,211,755
Government Grant deducted in arriving at the
carrying value of assets (i)
(3,000,000)
Effect of movements in exchange rates
(33,443)
-
-
5,278,477
3,719,356
181,378
9,179,211
(1,658,564)
-
(137,595)
(1,796,159)
7,403,900
(7,403,900)
-
-
-
(3,000,000)
(24,318)
(57,761)
Additions
Transfers
Additions
Disposals
Transfers
Balance at 30 June 2012
19,188,703
1,661,307
687,036
21,537,046
Accumulated depreciation and impairment losses
Balance at 1 July 2010
Depreciation for the year
Effect of movements in exchange rates
Balance at 30 June 2011
Balance at 1 July 2011
Depreciation/Impairment for the year
Disposals
Transfers
2,686,377
1,209,436
(26,339)
3,869,474
3,869,474
2,220,967
(1,623,408)
235,802
252,006
3,174,185
-
-
75,709
1,285,145
9,317
(17,022)
235,802
337,032
4,442,308
235,802
337,032
4,442,308
-
-
156,270
2,377,237
(132,482)
(1,755,890)
235,802
(235,802)
-
-
Effect of movements in exchange rates
Balance at 30 June 2012
(8,664)
4,694,171
-
-
(9,291)
(17,955)
351,529
5,045,700
Carrying Amounts
At 1 July 2010
At 30 June 2011
At 1 July 2011
5,652,160
2,126,641
312,381
8,091,182
7,328,859
5,110,049
330,539
12,769,447
7,328,859
5,110,049
330,539
12,769,447
At 30 June 2012
(i) The grant has been received by the Group in connection with its relocation and establishment of manufacturing operations in
14,494,532
1,661,307
335,507
16,491,346
60
Quickstep Holdings Limited
Annual Report 2012
61
51
52
Bankstown, NSW. The terms of the grant include operating within NSW until 30 June 2019 manufacturing composite
components for the defence and aerospace industries including work done in respect of the Joint Strike Fighter program.
(ii) Refer to Note 21 for details of fixed and floating charges over certain of the above assets
(iii) During the year the Group established plans to close its Coogee manufacturing operations. As a result an impairment write-off
of $646,094 relating to certain non-relocating assets has been recorded during the period to record them at their recoverable
amount.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
19. Group entities
Country of
incorporation
Entity interest Entity interest
2011
2012
Parent entity
Quickstep Holdings Limited
Controlled entities
Quickstep Technologies Pty Ltd
Quickstep Operations Pty Ltd
Quickstep GmbH
QuickBoats Pty Ltd (i)*
Quickstep Composites LLC
Quickstep Australia Pty Ltd (ii)
Commercial Aerospace Composites Pty Ltd (ii)
Australia
Australia
Australia
Germany
Australia
USA
Australia
Australia
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
-
-
(i)
(ii)
Previously wholly owned entity QuickBoats Pty Ltd was sold on 5 April 2012 (refer Note 30)
Incorporated during the year
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
18. Intangibles
Costs
Patents &
Rights
$
Royalty
Buy-Back
$
Computer
Software
Total
$
Balance at 1 July 2010
649,027
94,419
385,940
1,129,386
Additions
Transfer from proper ty, plant &
equipment
-
-
-
-
26,104
26,104
327,354
327,354
Balance at 30 June 2011
649,027
94,419
739,398
1,482,844
Costs
Balance at 1 July 2011
649,027
94,419
739,398
1,482,844
Additions
Disposals
Transfer from property, plant
& equipment
5,307
(7,426)
-
-
-
-
-
5,307
(7,426)
-
Balance at 30 June 2012
646,908
94,419
739,398
1,480,725
Accumulated amortisation and
impairment losses
Balance at 1 July 2010
548,858
66,098
132,927
747,883
Amortisation for the year
51,935
9,441
174,268
235,644
Transfer from property, plant
& equipment
Effect of movement in
exchange rates
-
3,091
-
-
-
-
-
3,091
Balance at 30 June 2011
603,884
75,539
307,195
986,618
Balance at 1 July 2011
603,884
75,539
307,195
986,618
Amortisation for the year
30,607
8,655
222,334
261,596
Disposals
Transfer from property, plant
& equipment
Effect of movement in
exchange rates
-
-
-
-
-
-
-
-
-
-
1,735
1,735
Balance at 30 June 2012
634,491
84,194
531,264
1,249,949
Carrying amounts
At 1 July 2010
At 30 June 2011
At 1 July 2011
At 30 June 2012
100,169
28,321
253,013
381,503
45,143
18,880
432,203
496,226
45,143
18,880
432,203
496,226
12,417
10,225
208,134
230,776
62
53
Quickstep Holdings Limited
Annual Report 2012
63
54
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
20. Trade and other payables
Current
Unsecured trade payables
Sundry payables and accrued expenses
Royalties payable (i)
Non-current
Royalties payable (i)
Consolidated
2012
$
2011
$
1,387,109
1,482,637
482,551
3,352,297
356,199
4,023,779
658,633
5,038,611
561,365
421,221
(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 7.03%.
21. Loans and borrowings
Current
Finance lease liability
Non-current
Secured bank loan
Capitalised interest
Prepaid borrowing cost
Finance lease liability
Consolidated
2012
$
2011
$
10,700
17,645
6,106,048
131,825
(997,857)
1,922
5,241,938
-
-
-
12,622
12,622
Term and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
2012
2011
Effective
interest
rate %
Year
maturity
of
Maximum
Facility
Value
Carrying
amount
Maximum
Facility
Value
Carrying
amount
9.981
2021
10,000,000
6,106,048
9.981
2021
3,333,333
131,825
-
-
-
-
12.990
2014
n/a
12,622
n/a
30,267
Secured
bank loan
Capitalised
Interest
Finance
lease
liabilities
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Secured Bank Loan
On 1 November 2011 Quickstep Technologies Pty Ltd, a subsidiary company of the Group executed an Export
Finance Facility Agreement with Australian and New Zealand Banking Group Limited (ANZ) (Financier) and Export
Finance and Insurance Corporation (EFIC)(Guarantor) to fund certain capital expenditure. The Agreement provides
for a loan facility of up to $10,000,000 plus capitalised interest of up to $3,333,333. At 30 June 2012 the facility had
been drawn to $6,106,048 with together with capitalised interest of $131,825 .
Interest is to be capitalised for the first five years of the facility after which it is payable half yearly in arrears.
Loan repayments commence in the fifth year of the facility, with the final repayment due in year 10.
The interest rate on the facility comprises a variable base rate, a fixed margin payable to the Financier and a fixed
guarantee fee payable to the Guarantor. Unused limit fees are payable to both the financier and the Guarantor on
the undrawn principle balance.
The facility includes an interest rate cap which limits the maximum rate applicable to the base rate for the duration of
the capitalisation period to 5.03%. This cap ensures that the interest accruing on the facility remains within the
capitalised interest limit. The cost of the cap ($680,400) has been recorded as prepaid borrowing cost and is
recognised in the profit and loss through the effective interest rate method.
EFIC has agreed to guarantee certain of the subsidiary’s obligations under the facility. The subsidiary has provided
EFIC with a fixed and floating charge over its assets and undertakings. The carrying value of total assets pledged as
collateral at 30 June 2012 is $20,135,012
Quickstep Holdings Limited has entered into subordination agreement which subordinates certain intercompany
debts due to it from Quickstep Technologies Pty Ltd to the amounts due under the Export Finance Facility. The face
value of this subordinated intercompany debt at 30 June 2012 is $64,529,157 and its carrying value net of
impairment is $13,011,968.
Finance lease liabilities
Interest
Future
minimum
lease
payments
Present
value of
minimum
lease
payments
Future
minimum
lease
payments
$
$
$
$
2012
2012
2012
2011
Less than one year
11,717
1,017
Between one and five years
1,953
31
10,700
1,922
22,115
13,670
13,670
1,048
12,622
35,785
Interest
$
2011
4,470
1,048
5,518
Present
value of
minimum
lease
payments
$
2011
17,645
12,622
30,267
64
Quickstep Holdings Limited
Annual Report 2012
65
55
56
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
22. Financial liabilities at fair value through profit and loss
Non-current
Derivative Financial liabilities at fair value through Profit and
Loss (Convertible Note)
Consolidated
2012
$
2011
$
-
2,820,000
On 24 April 2011 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$15,000,000 of convertible notes. The
Agreement included an initial issue of a convertible note for US$ 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 elected to account for these instruments at fair value through the profit and
loss.
During the period, $468,456 (2011: $838,875) of convertible notes were drawn down. $750,000 of notes were
converted to 4,689,810 shares at a market value of $937,488.
In December 2011 the Group executed a termination agreement, under which the balance of the convertible notes at
20 December 2011,of $604,016 was repaid. There were no termination costs. On termination, the resulting net
decrease in fair value of the financial instrument, $1,746,980, was recognised through the profit and loss as finance
income.
Valuation
The fair value of the convertible notes has been determined using a Monte Carlo simulation.
Reconciliation of Fair Value Measurement
Balance 1 July
Loss recognised through Profit and Loss at inception
Convertible note drawdowns
Convertible notes repaid
Conversion to Equity
(Gain) / Loss recognised through Profit and Loss
Balance 30 June
Consolidated
2012
$
2,820,000
2011
$
-
-
1,930,000
468,456
838,875
(603,988)
(937,488)
-
-
(1,746,980)
51,125
-
2,820,000
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
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$7,500,000 for the Subsequent Note, are subject to the
same terms and conditions of this Agreement applicable to the Initial Note
Term / Maturity Date
Each note has a term of 4 years from the date of initial drawdown
Conversion Option
At the investors option, a note may be converted into ordinary shares at the
Conversion Price, either in whole or in part,,
Conversion Option
Quickstep has the option to force conversion of the outstanding principal amount into
ordinary shares. This election can be made in the six months prior to maturity of the
note
Conversion price
The number of shares to be issued on conversion is calculated as:
US$ 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 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.
There are certain circumstances in which Quickstep may be required to settle /
redeem the notes for cash.
Contingent Settlement
Provisions / Cash
Settlement
66
57
Quickstep Holdings Limited
Annual Report 2012
67
58
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
23. Employee benefits
Current
Liability for annual leave
Other employee benefits
24. Contributed equity
Issued capital
(i)
322,748,630 (2011: 270,038,762) fully paid ordinary shares
The following movements in issued capital occurred during the year:
Consolidated
2012
$
2011
$
154,259
138,702
292,961
177,877
74,197
252,074
74,754,828
66,854,895
Note
2012
No. of
shares
$
2011
No. of
shares
$
Balance at the beginning of the year
270,038,762
66,854,895
251,416,900
62,296,410
Shares issued for cash (a), (b)
Shares issued on exercise of options (ii)
Shares issued on conversion of notes
Shares issued on exercise of rights (c)
Shares issued to executives as
remuneration (c)
Shares issued to consultants
Shares issued under share purchase plan
Share issue and capital raising costs
22
47,000,000
-
4,689,810
680,235
339,823
-
-
-
7,520,000
-
937,488
-
-
-
-
(557,555)
10,277,500
1,851,852
-
294,118
3,288,800
-
-
-
-
-
1,800,000
4,398,392
-
-
1,407,485
(137,800)
Balance at the end of the year
322,748,630
74,754,828
270,038,762 66,854,895
(a)
(b)
(c)
During the year the company issued 47,000,000 shares at an issue price of 16 cents to raise $7,520,000.
During the prior year, the Company issued 10,277,500 shares at an issue price of 32 cents per share to
raise $3,288,800.
During the year, the Company issued 1,020,058 (2011: 294,118) shares 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.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
(ii) Options
Options granted during the year
During the financial year, the Company granted options as follows.
Expiry Date
Exercise Price
23 November 2018
26 November 2017
$0.00
$0.00
Number of Options
2012
706,373
-
2011
-
471,337
Unissued shares under option
At 30 June 2012, unissued ordinary shares of the Company under option are:
Expiry Date
30 March 2017
26 November 2017
26 November 2018
Exercise
Price
$0.00
$0.00
$0.00
Number of Options
2012
1,397,624
471,337
706,373
2011
1,397,624
471,337
-
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Exercise of options
No options were exercised during the year. In 2011, the company issued 1,851,852 ordinary shares as a result of
the exercise of options at the exercise price of nil and the share price at date of expiry was $0.34.
Lapse of options
During the current and prior financial yeasr, no options lapsed:
(iii) Rights
At 30 June 2012, unissued ordinary shares of the Company under rights totalled 3,373,924 (2011: 1,853,528).
The rights are issued pursuant to;
•
•
executive services agreements which vest at various times in the future according to years of service
completed; and
an executive performance and retention bonus scheme which vest on 31/12/2013 upon performance of
criteria related to the company’s relocation objectives and are conditional upon continued employment
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 32
During the year, 2,200,622 rights (2011: 989,303) were granted.
During the year, 680,235 shares (2011: 294,118 shares), were issued as a result of the exercise of rights.
468,750 rights were forfeited in the prior year on the termination of employment of employees
68
Quickstep Holdings Limited
Annual Report 2012
69
59
60
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 A T 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 2
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
Note
Consolidated
2012
$
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
Issue of shares to key management personnel
Exercise of options
Balance at the end of the year
2,027,637
379,958
139,110
67,251
-
2,613,956
1,157,091
118,507
272,039
-
480,000
2,027,637
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
Note
Consolidated
2012
$
2011
$
(220,656)
(70,601)
(291,257)
(96,607)
(124,049)
(220,656)
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
Foreign currency translation differences
Balance at the end of the year
(71,065)
71,065
-
-
(71,065)
(71,065)
The hedging reserve comprises difference arising from the translation of foreign currency hedges being the ,
variation between the original hedge exchange rate and the revaluation rate on balance date
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
2,322,699
1,735,916
(48,661,123)
(34,926,410)
(11,801,601)
(13,734,713)
(60,462,724)
(48,661,123)
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
27. Financial instruments
Credit risk
Exposure to credit risk
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:
Cash and cash equivalents
Held-to-maturity financial assets
Trade and other receivables
3,000,672
690,400
4,915,978
8,607,050
13,406,217
690,400
212,049
14,308,666
As at 30 June 2012, no financial asset was considered past due (2011: nil).
At 30 June 2012, no financial asset is considered impaired (2011: nil).
The Group’s maximum exposure to credit risk for trade and other receivables at the reporting date by geographic
region was:
Australia
Germany
USA
Liquidity risk
4,594,621
225,708
95,649
4,915,978
81,235
104,419
25,395
211,049
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
30 June 2012
Carrying
amount
Contractual
Cash Flows
6 mths or less
6-12 mths
1-2 years
2-5 years
5 years+
1,043,916
(1,065,629)
(239,692)
(239,692)
(586,245)
2,869,746
(2,869,746)
(2,869,746)
-
-
12,622
(12,622)
(5,177)
(5,523)
(1,922)
-
-
-
-
-
-
5,240,015
(10,687,961)
(97,526)
(100,770)
(211,744)
(1,739,939)
(8,537,982)
9,166,299
(14,635,958)
(3,212,141)
(345,985)
(799,911)
(1,739,939)
(8,537,982)
1,079,854
(1,105,168)
(329,316)
(329,316)
(446,535)
4,308,913
(4,308,913)
(4,173,384)
71,065
(71,065)
(71,065)
-
-
(135,529)
-
-
-
-
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)
-
-
-
-
-
-
VCAMM royalties
payable
Trade and other
payables
Finance lease
liabilities
Secured Bank
Loan
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
61
8,310,099
(5,621,596)
(4,597,406)
(352,957)
(618,947)
(52,285)
70
Quickstep Holdings Limited
Annual Report 2012
62
71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Currency risk
Exposure to currency risk
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Interest rate risk
Profile
The Group’s exposure to foreign currency risk at balance date was as follows, based on notional amounts:
At the reporting date the interest rate profile of the Group’s interest-bearing financial assets/(liabilities) was:
2012
Cash
Trade payables
Receivables
2011
Cash
Trade payables
Receivables
USD
54,590
(55,961)
125,822
124,451
USD
64,438
(16,786)
25,395
73,047
EUR
25,203
(152,516)
225,708
98,395
EUR
60,775
(136,625)
105,419
29,569
The following significant exchange rates applied during the year:
Average Rate
Reporting Date
Spot Rate
2012
2011
2012
2011
1.0314
0.7705
0.9881
0.7245
1.0191
0.8092
1.0739
0.7405
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 2011.
2012
2011
(Increase)/decrease
consolidated loss
(Increase)/decrease
consolidated loss
+10%
$
(12,445)
(9,839)
(22,284)
-10%
$
12,445
9,839
22,284
+10%
$
(6,641)
(2,688)
(9,329)
-10%
$
8,116
3,285
11,401
2012
(Increase)/decrease
consolidated
Equity
+10%
$
-10%
$
-
-
-
-
-
-
2011
(Increase)/decrease
consolidated
Equity
+10%
$
(15,209)
(54,711)
(69,920)
-10%
$
18,589
66,869
85,458
USD
EUR
USD
EUR
72
Fixed rate instruments
Held-to-maturity term deposits
Convertible notes
Finance lease liabilities
Variable rate instruments
Cash and cash equivalents
Secured bank loan
Consolidated
2012
$
2011
$
690,400
-
(12,622)
677,778
690,400
(838,875)
(30,267)
(178,742)
3,000,672
(6,237,873)
(3,237,201)
13,406,217
-
13,406,217
Cash includes funds held in short term deposits during the year, which earned a weighted average interest rate
5.33% (2011: 4.27%).
The interest rates applicable to the Group’s finance leases are 12.99% (2011: 12.99%).
Financial assets held-to-maturity includes a 12 month term deposit for $300,000 with an interest rate of 5.30% which
matures on 1 October 2012 and a security deposit for $390,400 with an interest rate of 5.1%, which matures
maturing on 10 November 2012.
The secured loan balance (inclusive of capitalised interest) incurs a variable rate of interest, inclusive of a base rate
plus margin. The Group has purchased an interest rate cap which limits the base rate for the first five years of the
loan to 5.03%. The base rate plus margin of this facility was 5.22% at 30 June 2012.
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 and liabilities at fair value through profit or loss.
Therefore a change in interest rates at the reporting date would not affect profit or loss.
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 2011.
Effect in AUD
30 June 2012
Variable rate instruments
Cash flow sensitivity (net)
30 June 2011
Variable rate instruments
Cash flow sensitivity (net)
(Increase)/decrease
Consolidated
loss
100 bp
increase
100 bp
decrease
(32,372)
(32,372)
32,372
32,372
134,062
134,062
(134,062)
(134,062)
63
Quickstep Holdings Limited
Annual Report 2012
64
73
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Fair values
The carrying amounts of financial assets and liabilities approximate fair value.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Note
Consolidated
2012
$
2011
$
Consolidated
2012
$
2011
$
30. Related parties
Key management personnel compensation
The key management personnel compensation included in “personnel expenses” in note 7 is as follows:
28. Capital and other commitments
Operating lease commitments
Non-cancellable operating lease contracted for but not
capitalised in the financial statements
Payable
-
-
- more than 5 years
less than 1 year
between 1 and 5 years
759,895
3,024,358
2,269,206
6,053,459
733,243
3,784,253
2,269,205
6,786,701
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
Reconciliation of cash flows from operating activities to loss
after income tax:
Loss for the year
Adjustments for:
-
- Depreciation
-
-
- Change in fair value of derivatives at fair value through
Share based payment expense
Finance costs
Amortisation of intangibles
profit and loss
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 trade and other payables
Increase in employee benefits
Increase in unearned income
Increase in prepaid interest
Net cash used in operating activities
18
17
32
8
22
799,935
799,935
670,359
670,359
(11,801,601)
(13,734,713)
261,596
2,377,238
586,319
176,863
(1,746,980)
(10,146,565)
(4,119,265)
(219,535)
(192,517)
(461,198)
40,887
-
(171,448)
(15,269,641)
235,398
1,285,145
870,546
-
1,981,125
(9,362,499)
953,147
(122,371)
159,547
460,402
31,308
(198,008)
-
(8,078,474)
Short-term employee benefits
Post-employment benefits
Share based payments
Other long term benefits
2,427,150
139,871
368,420
-
2,935,441
2,295,916
126,490
390,546
190,022
3,002,974
Individual directors and executives compensation (key management personnel remuneration) disclosures
Information regarding individual directors’ and executives’ compensation and some equity instruments disclosures
as required 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.
Key management personnel transactions
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)
(ii)
Transaction value
2012
$
24,000
50,000
2011
$
18,931
-
(i) A company associated with Mr Graham, Offshore Marine 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. An amount of $24,000 was outstanding to this entity at 30
June 2012 (2011: nil).
(ii) A company associated with Mr Graham, Quickboat Holdings Pty Ltd, purchased 100% of the share capital of
QuickBoats Pty Ltd on 5 April 2012 for a consideration of $50,000 paid in full at that time. At the time of the sale,
QuickBoats Pty Ltd had net assets of $24,942. Associated with the sale, the Group has entered into an
agreement to supply technical services to Quickboat Holdings Pty Ltd in return for ongoing fees amounting to
$100 per unit up to $500,000 and then $50 per unit for a further $1,000,000 capped at $1,5 million and subject to
the intellectual property remaining in good stead. No services were provided during the period.
74
65
Quickstep Holdings Limited
Annual Report 2012
66
75
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
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 2012, are as follows:
(i)
Rights
2012
Directors
Mr P M Odouard
Executives
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
Held at
1 July
Granted as
Compensation
Exercised
Other changes
Held at 30 June
Vested during
the year
Vested and
exercisable at
30 June
588,235
-
(588,235) (1)
267,605
471,698
250,000
276,000
1,853,538
764,818
688,337
-
434,847
1,888,002
-
-
-
(92,000) (1)
(680,235)
-
-
-
-
-
-
-
588,235
1,032,423
1,160,035
250,000
618,847
3,061,305
-
-
-
92,000
680,235
(1) Share price at date of exercise $0.185
2011
Directors
Mr P M Odouard
Executives
Mr W Beckles
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
Ms M Withers
882,353
-
(294,118)
-
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
* Other changes represent rights that were forfeited during the year
-
-
-
-
-
-
-
-
-
-
-
-
-
(ii)
Options
2012
Directors
Mr P M Odouard
2011
Directors
Mr P M Odouard
Held at
1 July
Granted as
compen-
sation
Exercised
Other changes
Held at 30 June
Vested during
the year
Vested and
exercisable at
30 June
1,868,961
706,373
-
-
2,575,334
-
-
Held at
1 July
Granted as
compen-
sation
Exercised
Other changes
Held at 30 June
Vested during
the year
Vested and
exercisable at
30 June
3,249,476
471,337
(1,851,852)
-
1,868,961
-
-
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
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
Purchases
Disposals
Received on
exercise or
options / rights
Issued as
compensation
Held at 30
June
2012
Directors
Mr P M Odouard
Mr D E Brosius
Mr D F G Graham
Mr P C Cook
Mr E J
McCormack
Mr D Wills
Executives
Mr J F Johnson
M. Withers
Mr A . Vihersaari
Mr S. Godbille
Mr J Schlimbach
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
1,545,970
600,000
26,039,341
145,758
-
-
-
-
50,250
210,106
244,065
250,001
71,250
-
-
-
-
-
600,000
26,651,529
137,946
19,000
163,231
48,180
-
-
-
-
-
-
-
7,812
31,250
46,875
20,000
51,250
-
-
-
-
-
-
-
-
-
-
-
588,235
-
-
-
-
-
-
92,000
-
-
-
(600,000)
-
(612,188)
-
2,145,970
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
133,513
66,773
35,203
67,992
36,342
-
-
-
-
-
-
-
2,134,205
600,000
26,039,341
145,758
294,315
460,107
252,943
158,773
35,203
67,992
36,342
1,545,970
600,000
26,039,341
145,758
50,250
210,106
71,250
(1) Mr E J McCormack was appointed to the board ion 11 August 2010
(2) Mr D Wills was appointed to the Board on 26th November 2010
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.
76
67
Quickstep Holdings Limited
Annual Report 2012
77
68
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
P a g e 7 6
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
11. Share based payments
Options - Quickstep Employee Incentive Plan
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.
At 30 June 2012, the Group’s CEO is the only employee to be granted options pursuant to the EIP.
The number and weighted average exercise prices (WAEP) of options issued under the EIP are as follows:
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
2012
Number
1,868,961
706,373
-
2,575,334
-
2012
WAEP
$0.00
$0.00
$0.00
$0.00
$0.00
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
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 a test date (30 June or 31 August). The options vest on the day after the test date.
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.
All options are subject to a three year performance condition from their grant date.
The specific TSR targets for each Tranche are set out below.
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. Re-testing will
occur over the longer performance period and against the higher TSR hurdle.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
P a g e 7 7
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 A T 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 2
Grant
Earliest vesting date
TSR Hurdle VWAP as at
% Annual
Growth (TP)
% Vesting
Tranche 3
01/07/11
2010 Year
1/7/2013
30 June 2011 30 June 2012 30 June 2013
Tranche 4
01/07/12
2011 Year
1/9/2014
31 Aug 2014
Initial value
Threshold
Target
Stretch
5
8
12
25
50
100
$0.165
$0.188
$0.204
$0.227
$0.250
$0.290
$0.315
$0.352
$0.326
$0.378
$0.410
$0.458
$0.228
$0.264
$0.287
$0.320
If the employee ceases employment with the 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 hold 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 the date of
cessation unless the Board determines otherwise, and any vested options must be exercised within three
months.
Details of the fair value of unvested options granted are set out below
Grant
Tranche 3
Tranche 4
2010 Year
2011 Year
Total
No. of options
925,926
471,698
471,337
706,373
2,575,334
Fair value per option
at the grant date
$
0.3150
0.2700
0.3620
0.1730
Total fair value
$
291,667
127,358
170,624
122,203
711,852
During 2012, an expense of $139,100 (2011:$272,039) has been included in the financial statements as the
portion of the attributable to the current financial year as required by accounting standards.
A Monte-Carlo simulation has been used to value Tranche 3 and 4 and the 2010 year and 2011 year grants
that had a future vesting condition at the grant date of the options. Assumptions used in the valuation of the
options in Tranche 3, 4 and 2010 year and 2011 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
3
4
2010 Year
2011 Year
30/03/2010
30/03/2010
26/11/2010
23/11/2011
30/06/2011
30/03/2017
$0.35
Nil
30/06/2012
30/03/2017
$0.35
Nil
30/06/2013
26/11/2017
$0.41
Nil
31/8/2014
23/11/2018
$0.21
Nil
1.3
80%
4.66%
0%
2.3
80%
5.01%
0%
2.9
75%
5.07
0%
3.1
75%
3.08%
0%
78
Quickstep Holdings Limited
Annual Report 2012
79
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Rights
Executive Performance and Retention Bonus
During the period the company has granted rights over 2,200,621 shares with a fair value of $547,840
through an executive performance and retention bonus scheme. The rights vest on 31/12/2013 upon
performance of criteria related to the company’s relocation objectives and are conditional upon continued
employment. In the event that the share price of the company at the exercise date is below $0.18, the
number of shares to be issued will be increased by the percentage variation of the share price from $0.18.
The rights have been valued at fair value based on a Monte Carlo simulation at the issue date. An expense of
$111,950 (2011:nil) has been included in the financial statements as the portion of the current offer,
attributable to the current financial year as required by accounting standards.
A Monte-Carlo model was utilised to value the rights per dollar issued. The key assumptions utilised were as
follows:
Input / assumption
Valuation/Grant Date
Maturity Date
Share price at grant date
Volatility
Risk free rate
Dividend yield
Trigger price
Issue price
Value
10 February 2012
31 December 2013
$0.17
70%
3.55%
Nil
$0.18
$0.2092
Loyalty Bonus
Rights have been issued to a number of key management personnel in prior years as long term retention
incentives. The rights vest in two tranches provided the employee remains employed with the Group. 1/3 vest
2 years from the date granted, 2/3 vest 3 years from the date granted
The rights are valued at the market value of the Group’s share on the date of issue of the rights. An expense
of $135,502 (2011:118,507) has been included in the financial statements as the portion of the offer,
attributable to the current financial year as required by accounting standards
680,253 rights vested (2011; 468,750 rights lapsed) during the period.
Performance rights issued were as follows:
2012
Number
2011
Number
Vesting conditions
Loyalty bonus
Performance rights on issue July 1
1,853,538
1,627,103
Performance rights terminated
-
(468,750)
Performance rights exercised
(680,235)
(294,118)
Performance rights granted
-
989,303
Performance rights on issue 30 June
1,173,303
1,853,538
Executive performance and retention
bonus
Performance rights on issue July 1
Performance rights granted
Performance rights on issue 30 June
-
2,200,621
2,200,621
-
-
-
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
Vest on 31/12/2013 provided the
employee remains with the Group and
achieves defined performance
objectives.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
Shares
The Company issued 339,823 shares as long term incentives accrued for in the prior year (refer Note 30).
The fair value of shares granted is determined as the quoted price on the ASX of the shares of the Company
on the day of the grant.
Long term incentives accrued for in the current year of $121,258 are expected to be settled through share
based payments during the next financial year.
Employee Expenses
The expense recorded in the financial report for the portion attributable to the current financial year as
required by accounting standards is:
Employee expenses
Shares
Share rights granted
Options
33. Parent entity
Consolidated
2012
$
2011
$
103,759
247,452
139,110
490,321
-
118,507
272,039
390,546
Company
2012
$
2011
$
As at, and throughout, the financial year ending 30 June 2012 the parent company of the Group was Quickstep
Holdings Limited.
Results of the parent entity
Profit/(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
Accumulated losses
Total equity
(11,801,140)
-
(11,801,140)
(13,929,826)
-
(13,929,826)
6,703,537
20,192,457
414,374
20,534,233
3,577,654
3,577,654
604,542
604,542
74,754,828
2,613,956
(60,753,981)
16,614,803
66,854,895
2,027,637
(48,952,841)
19,929,691
80
Quickstep Holdings Limited
Annual Report 2012
72
81
71
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2012
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 A T 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 2
34. Subsequent events
Since the end of the financial year the Group:
• Has entered into a lease for an additional building at the Bankstown site; and.
• Obtained a purchase order for $12 million for first deliveries of C-130 parts, commencing in late 2013
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.
DIRECTORS’ DECLARATION
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 2
In the opinion of the directors of Quickstep Holdings Limited:
1.
(a)
the consolidated financial statements and notes and Remuneration Report in the Directors’ Report,
set out on pages 27 to 73 and pages 11 to 21 respectively, are 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 2012 and their
performance, for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001;
(b)
(c)
the financial statements comply with International Financial Reporting Standards as described in
Note 1 (b);
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
2.
The directors have been given the declarations required by s.295A of the Corporations Act 2001 for the
financial year ended 30 June 2012.
Dated at Perth, Western Australia this 28th day of September 2012.
Signed in accordance with a resolution of the directors:
P M Odouard
Managing Director
82
73
Quickstep Holdings Limited
Annual Report 2012
83
74
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDITOR’S REPORT
Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
To: the directors of Quickstep Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2012 there have been:
(i)
(ii)
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
KPMG
Matthew Beevers
Partner
Perth
28 September 2012
Independent auditor’s report to the members of Quickstep Holdings Limited
Report on the financial report
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 2012,
and consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated 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 Company and the Group comprising Quickstep Holdings
Limited and the entities it controlled at the year’s end or from time to time during the financial
year.
Directors’ responsibility for the financial report
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 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 note1(b), the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
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 to obtain reasonable assurance whether the
financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the 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 of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
84
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Quickstep Holdings Limited
Annual Report 2012
85
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity.
Professional Standards Legislation.
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER INFORMATION
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
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 2012 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 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 2012. 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 2012, complies with Section 300A of the Corporations Act 2001.
KPMG
Matthew Beevers
Partner
Perth
28 September 2012
86
SHAREHOLDER INFORMATION
DETAILS OF SHARES AND OPTIONS AS AT 2 OCTOBER 2012
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
WSF Pty Ltd
63,172,570
26,039,341
10,245,339
%
19.57
8.07
3.17
On-Market buy back
There is no current on-market buy back.
Distribution schedules
Distribution of each class of security as at 2 October 2012:
Ordinary fully paid shares
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - -100,000
100,000 - Over
Holders
465
921
867
2,353
4,955
Options exercisable at $0.00 on or before 30 March 2017 (unlisted)
Range
1 - 1,000
1,001 - 5,000
5,001 -10,000
10,001 - 100,000
100,000 - Over
Holders
-
-
-
-
1
1
Units
163,668
2,898,031
7,277,159
79,625,206
232,784,566
322,748,630
Units
-
-
-
-
1,397,624
1,397,624
%
0.05
0.9
2.25
24.67
72.13
100.0
%
-
-
-
-
100.00
100.00
Quickstep Holdings Limited
Annual Report 2012
87
SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION
DETAILS OF SHARES AND OPTIONS AS AT 2 OCTOBER 2012
Options exercisable at $0.00 on or before 25 November 2017 (unlisted)
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 - Over
Holders
-
-
-
-
1
1
Options exercisable at $0.00 on or before 23 November 2018 (unlisted)
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 - Over
Unmarketable parcels
Holders
-
-
-
-
1
1
Units
-
-
-
-
471,337
471,337
Units
-
-
-
-
706,373
706,373
Holdings less than a marketable parcel of ordinary shares (being 2,778 shares at $0.18 per share):
Holders
872
Top Holders
Units
935,018
The 20 largest registered holders of each class of quoted security as at 2 October 2012 were:
Name
1. Washington H Soul Pattinson and Company Limited
2. Decta Holdings Pty Ltd
3. WSF Pty Ltd
4. Romadak Pty Ltd
5. M F Custodians Limited
6. Mr David Creighton Gellatly & Mrs Evelyn May Gellatly
7. HSBC Custody Nominees (Australia) Limited
8. State One Stockbroking Ltd
9. Yarraandoo Pty Ltd
10. Mr Julius Solomons & Mrs Dianne Solomons
11. Prunelle Holdings Pty Ltd
12. Code Nominees Pty Ltd
13. State One Equities Pty Ltd
14. Equilibrium Pensions Limited
15. Boldbow Pty Ltd
16. Mr Carmine De Vitis
17. Davmin Pty Ltd
18. Patel Pradip
19. Farjoy Pty Ltd
20. FWMI Pty Ltd
No. Of
Shares
63,172,570
26,039,341
10,245,339
7,560,798
3,699,270
3,400,000
3,198,646
2,693,141
2,196,576
2,109,567
2,077,692
1,900,000
1,891,301
1,836,301
1,832,830
1,610,000
1,600,000
1,520,000
1,500,000
1,326,983
%
-
-
-
-
100.00
100.00
%
-
-
-
-
100.00
100.00
%
19.57
8.07
3.17
2.34
1.15
1.05
0.99
0.83
0.68
0.65
0.64
0.59
0.59
0.59
0.57
0.50
0.50
0.47
0.46
0.41
88
Quickstep Holdings Limited
141,410,355
43.82
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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.
Principal Address
Quickstep Holdings Limited
361 Milperra Road
Bankstown Airport
New South Wales 2200
Australia
Registered Office
Quickstep Holdings Limited
136 Cockburn Road
North Coogee
Western Australia 6163
Australia
T +61 2 9774 0300
F +61 2 9771 0256
T +61 8 9432 3200
F +61 8 9432 3222
E info@quickstep.com.au
www.quickstep.com.au