Advanced Composite
Manufacturing
Annual Report 2014
Substantial
growth
anticipated
in FY2015
In FY2014 Quickstep
completed its move
into commercial
autoclave production
of carbon fibre
components
$12m
Sales rose
368% to
$12 million
in FY2014
Firm order
book of
$49 million,
and increasing
03 Milestones
04 Executive Chairman’s Review
08 Aerospace Manufacturing
10 Aerospace
11 Automotive
12 The Board
14 Our People
16 Directors’ Report
38 Corporate Governance Statement
47 Financial Statements
90 Directors’ Declaration
91 Lead Auditor’s Independence Declaration
92
94 Shareholder Information
97 Corporate Directory
Independent Auditor’s Report to the Members
Quickstep Holdings Limited I Annual Report 2014
Quickstep Holdings Limited I Annual Report 2014
01
Quickstep is today the largest independent carbon
fibre composites manufacturer in Australia
Milestones
Production accelerated on Quickstep’s cornerstone
aerospace contracts as total sales increased to
$12 million in FY2014, up 368%
Moved to production of the full range of Joint Strike
Fighter components that Quickstep will deliver
to the JSF program
Completed 188 carbon fibre composite parts
for the JSF program in FY2014
US$139 million long-term JSF component
agreement signed with Marand recision Engineering
Awarded $1 million Australian government grant
to progress qualification of Quickstep Process for
manufacturing JSF vertical tail spars
US $75 million Lockheed Martin C130-J wing flaps
Memorandum of Agreement signed
First seven Lockheed Martin C130-J ship-sets
of wing flaps delivered
First sale of Quickstep Process technology to
ORPE Technologiya; delivery expected in FY2015
Developed unique resin spray transfer (RST)
technology, enabling production of carbon
fibre automotive parts which can be painted
straight from the mould
RST technology passes tough paint finish and
environmental testing from luxury carmaker
Quickstep team grows to 110 staff, 101 in Australia
02
Quickstep Holdings Limited I Annual Report 2014
Quickstep Holdings Limited I Annual Report 2014
03
Executive Chairman’s Review
In FY2014 Quickstep
completed its
progress into being
a fully-fledged
manufacturer
of carbon-fibre
components.
Quickstep is an innovator of advanced composites technology capitalising on
the carbon-fibre market revolution that is driving change, particularly in the
aerospace and automotive industries. We are the largest independent carbon-fibre
composites manufacturer in Australia, and the only company listed on the
Australian Securities Exchange with direct exposure to the multibillion-dollar
global advanced carbon fibre composites market.
The JSF program is valued at
$700 million over two decades to
Quickstep, and as volume continues
to rise annual revenue is forecast to
peak at about $40 million per year.
Our five-year, US$75 million
memorandum of agreement with
Lockheed Martin to supply 120 sets
of C-130J wing flaps has moved into
production. Quickstep is the sole
producer of wing flap components
for the C-130J which is operated
by 16 countries worldwide, with
demand increasing. We completed
the necessary qualification steps
to manufacture components and
delivered seven sets of wing flaps in
FY2014. Further firm orders for 55
sets have been secured, and from
which production is planned to grow
to three sets per month in FY2015.
As the programs build they should
generate strong cash flow for
Quickstep. Our continued positive
progress in this highly specialised
industry ensures that we enjoy
excellent relationships with the
Australian government and our
clients.
Moving into Production
In FY2014 Quickstep completed
its transformation from a research
and development company into
being a fully-fledged manufacturer
of carbon-fibre components. Our
business includes manufacturing
contracts for aerospace and defence,
and we are moving toward licencing
our innovative Quickstep Process
to the aerospace and automotive
sectors.
Quickstep is an innovator of
advanced composites technology
capitalising on the carbon-fibre
market revolution that is driving
change, particularly in the aerospace
and automotive industries. We are
the largest independent carbon-fibre
composites manufacturer in Australia,
and the only company listed on the
Australian Securities Exchange with
direct exposure to the multibillion-
dollar global advanced carbon fibre
composites market.
Financial Overview
Our sales for FY2014 were $12.0
million, up 368% from $2.6 million in
FY2013 as production accelerated
underpinned by our strong order
book. This growth is a phenomenal
achievement in a short time, as
production only began at our state-
of-the-art Bankstown Airport facility
in 2013.
Total revenue, including income from
grants and R&D tax rebates, was
$17.8 million in FY2014, up from
$6.8 million. Quickstep remains in
a phase of fast-growth and our net
loss for the year was $11.2 million,
in line with expectations, compared
to a loss of $17.0 million in FY2013.
R&D expenditure for the year was
$3 million. Work is underway on the
ORPE project and in accordance with
accounting standards, the revenue
will be recognised on completion of
the project.
Net debt at 30 June 2014 was $10.5
million. After balance date, Quickstep
secured a $7 million Efic multi-option
facility, including a performance
bond facility that releases funds held
in restricted term deposits, and an
export working capital guarantee
which secures additional facilities
of up to $2.5 million through to
31 October 2015. This is intended
to provide working capital for the
company as we move toward a
cash-flow positive position.
Aerospace Manufacturing
Quickstep’s signature contracts
include component manufacturing
for the F-35 Lightning II Joint Strike
Fighter (JSF) and the C-130J “Super
Hercules” aircraft.
We are delighted to be a supplier
to the JSF, which is the world’s
largest military aerospace program.
More than 3,000 JSF aircraft will be
delivered over the life of the program.
In FY2014 we produced 188 JSF
components for Northrop Grumman,
including complex parts, and expect
to increase production to in excess
of 350 parts in FY2015. A highlight of
the year was completion of our $139
million long-term agreement to supply
700 sets of carbon fibre components
for JSF vertical tails, to be assembled
by Marand Precision Engineering for
BAE Systems. We began preliminary
work and our first components are
scheduled for delivery in the second
half of 2015.
04
Quickstep Holdings Limited I Annual Report 2014
Quickstep Holdings Limited I Annual Report 2014
05
Building on what we have achieved,
we anticipate steady sales growth,
and have a strong pipeline of
opportunities to win further contracts
in both the Aerospace & Defence and
Automotive sectors.
We completed FY2014 with 116 staff,
101 in Australia. With substantial
growth anticipated in FY2015, we
need to continue growing skills and
to strengthen our management team
and automotive capability.
I wish to thank our shareholders,
the management team, and our
employees. This has been a year of
exceptional momentum, and I look
forward to continued growth and a
successful year in FY2015.
Tony Quick
Executive Chairman
Executive Chairman’s Review
Quickstep Process: Aerospace
We have developed the Quickstep
Process, a revolutionary system
which uses liquid to cure
components. Our business model is
to both utilise and license Quickstep
Process technology, generating
revenue through sale of production
plants and royalties.
This liquid-heated technology offers
the potential to substantially cut the
cost of manufacturing parts in series,
with significant energy-efficiency and
process improvements. It reduces
cure times compared to traditional
autoclave methods. The Australian
Department of Defence has awarded
a $1 million grant to support the
qualification for the JSF program.
The grant is intended to be used over
three years to qualify the Quickstep
Process for the manufacture of JSF
components replacing the traditional
autoclave method.
The Quickstep Process is delivered
through a fully-automated plant which
can be tailored for specific business
needs. Our first commercial plant is
in production and will be assembled
at our Munich facility before handover
to ORPE Technologiya in FY2015.
The production unit will be six metres
by four metres in size, and capable
of curing components for shielding
satellites during launch in a single
machine cycle.
Completion of this $6 million contract
will pave the way for our entry into the
large integrated parts market, and we
believe this commercial endorsement
of our technology should provide a
catalyst for further sales.
Quickstep Process: Automotive
The Quickstep Process is a disruptive
technology for the automotive
industry, which is expected to
become the largest user of carbon
fibre composites. We are currently
engaging with a number of original
equipment manufacturers, providing
demonstration parts and qualifying
our technology. Our initial focus has
been automotive body panels such as
roofs and bonnets, which showcase
the high standard of finish that the
Quickstep Process enables.
Automakers are focused on
developing more lightweight vehicles
to reduce fuel consumption; change
is being driven by carbon dioxide
emissions legislation, particularly in
Europe where our PRESCHE project
with the German government and
Audi is underway. The project aims to
demonstrate the commercial benefits
of using the Quickstep Process.
One of our advantages is the unique
resin spray transfer technology which
can produce automotive components
at fast speeds, low cost and with a
superior finish, using robotic fibre and
resin placement, using the Quickstep
Process and resins developed by
Quickstep.
The automotive composite
components market is expected to
grow to US$95.5 million per annum
by 2017 from
$14.7 million in 2010, a compound
annual growth rate of more than
30%. Engagement with automotive
manufacturers is continuing, and we
are in advanced negotiations with an
original equipment manufacturer.
Outlook
The world’s economies are improving,
the industries in which we operate
are growing and demand for their
products is increasing. Quickstep’s
strong order book is valued at $49
million, with the majority of this
work to be completed in FY2015.
06
Quickstep Holdings Limited I Annual Report 2014
07
Quickstep Holdings Limited I Annual Report 2014 Aerospace
Manufacturing
In 2014 Quickstep’s aerospace manufacturing
operations accelerated production for the F-35
Lightning II Joint Strike Fighter program and the
‘Super Hercules’ C-130J aircraft.
Following establishment of JSF manufacturing at
Quickstep’s state of the art facility at Bankstown
Airport, a key focus of FY2014 was building capability
and capacity to serve this large-scale, long-term
program. Quickstep now manufactures a full range of
JSF composite components for Northrop Grumman.
The components include lower skins, fuel tank covers
and maintenance access panels.
In FY2014 Quickstep completed 188 JSF parts and is
expected to nearly double production in the next year
as the world’s largest military program continues to
build momentum. The company also signed a $139
million long-term agreement to supply JSF vertical
tail components, which will be assembled by Marand
Precision Engineering for BAE Systems. Planning for
production in FY2015 is well under way.
Quickstep supplied the first C-130J wing flaps
to Lockheed Martin in February 2014, and in
FY2014 delivered seven ship-sets. Production is
expected to increase to three ship-sets per month
in FY2015, and firm purchase orders have been
received for 55 ship-sets.
The substantial increase of volume manufacturing,
which began at Bankstown Airport in 2014,
is a key objective for Quickstep in FY2015.
08
Quickstep Holdings Limited I Annual Report 2014
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Quickstep Holdings Limited I Annual Report 2014
09
09
Production
accelerated
on Quickstep’s
cornerstone
aerospace
contracts
Aerospace
Automotive
Quickstep secured the first sale of its innovative
Quickstep Process Plant in July 2013. Our contract
with leading European aerospace composites
manufacturer, ORPE Technologiya (ORPE), is
progressing well. Having completed preliminary
design review and critical design review milestones,
the design of the Quickstep Process mini-plant that
will be delivered to ORPE is complete. Following
integration of the system at Quickstep’s German
facility, completion is anticipated in early 2015.
The technology will be used to manufacture large
carbon-fibre shielding - up to 6 x 4 metres in size –
for satellites during launching. Once operational,
this cornerstone contract will provide an important
endorsement of our technology.
Quickstep is working with the Australian Department
of Defence, the US JSF Program Office, BAE
Systems and Lockheed Martin Aerospace to
qualify the Quickstep Process for manufacturing
spars for the JSF tail structure. Once completed,
this will enable Quickstep to reduce the cost of
manufacturing spars for the JSF program.
Developmental programmes with Airbus, and
discussions with other aerospace manufacturers,
are continuing as we move toward establishing
the Quickstep Process as a key out-of-autoclave
manufacturing process for the aerospace industry.
Quickstep has made steady progress towards
providing global carmakers with a complete
manufacturing solution for composite components.
Quickstep’s patented process technology automates
the production of strong, lightweight carbon fibre body
panels and components, surpassing existing carbon
fibre techniques by producing parts at significantly
lower costs, at higher speed and with a superior
high-quality finish. The cornerstones of this are two
innovative technologies – Quickstep’s resin spray
transfer (RST) and the Quickstep Process, which
rapidly cures the components using heated liquids.
Combining appropriate carbon fibre weaving
techniques and advanced resin systems we can
prevent ‘print-through’ on components and enable
the painting of these parts without any further
surface treatment, achieving the highest quality
painted finish requirements. These results have been
validated in tests by a number of original equipment
manufacturers, including the most stringent painted
panel benchmarks of luxury European carmakers.
Quickstep’s process technology is now producing
parts reliably and repeatedly, and the capacity of our
automated mini-plant is currently around 5,000 parts
per annum. We are continuing to improve this volume
production capability.
Transport is the only major sector
in the European Union where
greenhouse gas emissions are still
rising, and light-weighting vehicles,
through the usage of carbon fibre,
offers an important way to reduce fuel
consumption and, thereby, carbon
dioxide emissions. Quickstep is a
partner with the German government
and Audi in the PRESCHE project,
which has been established to
demonstrate the commercial benefits
of the Quickstep Process and is
expected to complete in FY2015.
Quickstep’s automotive business
model involves the supply of a
complete manufacturing solution to
its customers which includes:
— design of the advanced
manufacturing equipment
— resin and carbon fibre material
specification
— supply and installation of
manufacturing equipment
— process optimisation
— prototype and initial parts
manufacturing
— maintenance, technical support
and services
Quickstep plans to accelerate
its advancement into the global
automotive market in 2015 through
collaboration with a select number of
automakers, tier one suppliers and
advanced research institutions.
10
11
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014 The Board
n1
n2
n3
n4
n5
n6
n7
n8
n PHILIPPE MARIE ODOUARD
1
M.Sc (Bus)
n BRUCE GRIFFITHS
2
OAM
n NIGEL IAN AMPHERLAW
3
B.Com, FCA, MAICD
n MARK BERNARD JENKINS
4
B. Comm., Grad. Dip. Bus
Executive Director
Independent Non Executive Director
Independent Non Executive Director
Independent Non Executive Director
Appointed 13 October 2008
Appointed 14 February 2013
Appointed 8 July 2013
Mr Nigel Ampherlaw, aged 59, joined
the Quickstep Board in July 2013 and
is chairman of the Audit, Risk and
Compliance Committee. He was a Partner
of PricewaterhouseCoopers for 22 years
where he held a number of leadership
positions, including heading the financial
services audit, business advisory services
and consulting businesses. He also held
a number of senior client Lead Partner
roles. Mr Ampherlaw has extensive
experience in Risk Management,
technology, consulting and auditing in
Australia and the Asia-Pacific region.
Mr Ampherlaw’s current corporate
Directorships include a Non-Executive
Directorship with Credit Union Australia,
where he is Chair of the Audit Committee
and a member of each of the Risk,
Remuneration and Strategy Committees;
a Non-Executive Director of Elanor
Investors Ltd where he is Chair of the
Audit and Risk Committee; and a
Non-Executive Director of the Australia
Red Cross Blood Service, where he
is a member of the Finance and Audit
Committee and of the Risk Committee.
Mr Ampherlaw has also been a member
of the Grameen Foundation Australia
charity Board since 2012.
Mr Bruce Griffiths OAM, aged 64, is a
member of the Remuneration, Nomination
and Diversity Committee. Bruce has
had a successful and extensive career,
spanning more than 40 years, in the
manufacturing industry. He has held a
number of senior Executive roles within
the industry and has a long history in
working with Government. Bruce was
recently awarded the Order of Australia
Medal for services to the automotive
manufacturing industry and to the
community.
Current appointments include: Board
Member - Industry Capability Network
Limited (ICNL), Director - Air International
Thermal Systems, Chairman - Sail
Melbourne ISAF Sailing World Cup.
Previous appointments include: Rail
Supplier Advocate from 2009 to 2014,
Chairman - Futuris Automotive Group
(2007-2012), Managing Director -
Futuris Automotive Group (1992 -2007),
Chairman - Air International Thermal
Systems (2008-2011), Board Member
- AutoCRC (Advanced Automotive
Technology Ltd) (Inception -2012), Vice
President of the Federation of Automotive
Products Manufacturers (FAPM) (1990-
2012). Member - Automotive Industry
Innovation Council, Advisory Board
Member - Enterprise Connect
Mr Griffiths’ honours include: Order
of Australia Medal - 2013, Centenary
Medal for Services to the Development
of the Auto Industry Policy, Victorian
Manufacturing Hall of Fame for services
to the Manufacturing Industry.
Mr Philippe Odouard, aged 59, was
appointed Chief Executive Officer and
Managing Director in October 2008.
Mr Odouard, is Executive Director and
manages all customer and strategic
relationships whilst focusing on
opportunities for the Quickstep Process
including RST with effect from 29 May,
2014. He has significant management
experience within the global aerospace
and defence sectors, which represent
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 $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 Mr Odouard was responsible for
managing large contracts with innovative
developments as well as technology
transfers in both Australia and Europe.
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 Force.
12
Appointed as director 14 July 2005;
appointed as Chairman 13 March 2006.
Resigned as Chairman 14 February 2013
Mr Mark Jenkins, aged 50, is a member
of the Audit, Risk and Compliance
Committee. Mark 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.
n TONY QUICK
5
MA (Cantab)
Executive Chairman
Appointed 14 February 2013
(interim appointment as Executive Chair
29 May, 2014)
Mr Tony Quick, aged 58, joined
Quickstep following a highly successful
career in the aerospace and defence
industries. He is Chair of the Defence
Materials Technology Centre, which is a
Defence funded Co-operative Research
Centre, and an Adjunct Professor at RMIT
University.
After graduating from Cambridge
University, Mr Quick spent most of
his career in International Business
Development, Program and Business
Management. He joined an Aerospace
composites business in 1988 and in
1993 he joined Westland Helicopters
in England where he held senior
international business development
and program management roles. In
October 2000 he left Westland to
emigrate to Australia and, in 2001, set
up GKN Aerospace Engineering Services
Pty Ltd to service global demand for
engineering services. The Company’s
parent, GKN Aerospace, is one of the
world’s largest independent first-tier
suppliers to the global aviation industry
providing integrated metal and composite
assemblies for aerostructures and engine
products. GKN Aerospace Engineering
Services Pty Ltd provided design services
to the F-35 Joint Strike Fighter program
for Lockheed Martin and Northrop
Grumman and grew to employ more
than 240 aerospace engineering staff in
Australia. He was the Managing Director
and General Manager of that company
until 2009. Mr Quick was the Director of
the Defence Industry Innovation Centre,
Enterprise Connect from 2009 to 2011.
n ERROL JOHN MCCORMACK
6
AO
Independent Non Executive Director
Appointed 11 August 2010
Air Marshal Errol McCormack, aged 73,
is a member of the Audit, Risk and
Compliance Committee. Errol has
extensive experience as a Senior
Commander in the Royal Australian Air
Force.
Errol McCormack served in the Royal
Australian Air Force for 39 years, retiring
in 2001 as Chief of Air Force with the
rank of Air Marshal. During his period of
service he commanded at unit, wing and
command level, held staff positions in
capability development, operations and
educational posts and attended both
RAAF and Joint Services Staff Colleges.
His overseas postings included flying
tours in Vietnam, Thailand, Malaysia
and Singapore, an exchange tour with
the US Air Force flying the RF4C, Air
Attaché Washington and Commander
Integrated Air Defence System in the
Five Power Defence Agreement between
Malaysia, Singapore, UK, New Zealand
and Australia.
Since his retirement from the RAAF he
has established a company providing
consultancy services for multi- national
companies working with the Australian
Department of Defence.
He is also Non-Executive Chairman
of Chemring Australia Pty Ltd, a
countermeasures and pyrotechnic
manufacturing company based in
Victoria, and consults for Chemring
Group PLC and General Electric Military
Engines.
His pro-bono work includes Chairman
of the Board of the Sir Richard Williams
Foundation, an independent think- tank
supporting development of Australian
military aviation policy. He is a member
of the Royal Aeronautical Society and the
Australian Institute of Company Directors.
n DAVID PATRICK ALEXANDER
7
SINGLETON
BSc (Hons)
n PETER CHAPMAN COOK
8
MPharm., PhC, CChem, FMonash,
FRMIT, MPS, MRACI, MAICD
Independent Non Executive Director
Independent Non Executive Director
Appointed 11 October 2010
Appointed 14 July 2005
Mr David Singleton, aged 54, is a member
of the Audit, Risk and Compliance
Committee and the Remuneration,
Nomination and Diversity Committee.
David 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 a degree in Mechanical
Engineering from University College
London.
Mr Peter Cook, aged 67, is the Chairman
of the Remuneration, Nomination
and Diversity Committee and Senior
Independent Director. He has extensive
business experience, both within Australia
and overseas.
Current appointments include Chair,
Pharmaceutical Science Advisory
Group (Monash University) and Director
Myostin Therapeutics. His most recent
Executive appointment was as Managing
Director and Chief Executive Officer of
Biota Holdings Limited, Mr Cook has
also 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 considerable experience in
mergers and acquisitions, particularly
with technology-based companies, and
has a strong manufacturing background.
Mr Cook has had a wide exposure 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.
13
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014 Our People
110 staff in
Australia up
46%
14
14
Quickstep Holdings Limited I Annual Report 2014
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15
15
Directors’ Report
Directors’ Report
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 2014 and the auditor’s report
thereon.
1. Directors
Mr Tony Quick, MA (Cantab)
Executive Chairman - appointed 14 February 2013 (interim appointment.
as Executive Chair 29 May, 2014)
Mr Tony Quick, aged 58, joined Quickstep following a highly successful career in the aerospace and defence
industries. He is Chair of the Defence Materials Technology Centre, which is a Defence funded Co-operative
Research Centre, and an Adjunct Professor at RMIT University.
After graduating from Cambridge University, Mr Quick spent most of his career in International Business
Development, Program and Business Management. He joined an Aerospace composites business in 1988 and in
1993 he joined Westland Helicopters in England where he held senior international business development and
program management roles. In October 2000 he left Westland to emigrate to Australia and, in 2001, set up GKN
Aerospace Engineering Services Pty Ltd to service global demand for engineering services. The Company’s
parent, GKN Aerospace, is one of the world’s largest independent first-tier suppliers to the global aviation
industry providing integrated metal and composite assemblies for aerostructures and engine products. GKN
Aerospace Engineering Services Pty Ltd provided design services to the F-35 Joint Strike Fighter program for
Lockheed Martin and Northrop Grumman and grew to employ more than 240 aerospace engineering staff in
Australia. He was the Managing Director and General Manager of that company until 2009. Mr Quick was the
Director of the Defence Industry Innovation Centre, Enterprise Connect from 2009 to 2011.
Mr Philippe Marie Odouard, M.Sc (Bus)
Executive Director - appointed 13 October 2008
Mr Philippe Odouard, aged 59, was appointed Chief Executive Officer and Managing Director in October 2008.
Mr Odouard, is Executive Director and manages all customer and strategic relationships whilst focusing on
opportunities for the Quickstep Process including RST with effect from 29 May, 2014. He has significant
management experience within the global aerospace and defence sectors, which represent 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 $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 Mr Odouard was responsible for managing large contracts with innovative
developments as well as technology transfers in both Australia and Europe. 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 Force.
Directors (continued)
Mr Nigel Ian Ampherlaw, B.Com, FCA, MAICD
Independent Non Executive Director - appointed 8 July 2013
Mr Nigel Ampherlaw, aged 59, joined the Quickstep Board in July 2013 and is chairman of the Audit, Risk and
Compliance Committee. He was a Partner of PricewaterhouseCoopers for 22 years where he held a number of
leadership positions, including heading the financial services audit, business advisory services and consulting
businesses. He also held a number of senior client Lead Partner roles. Mr Ampherlaw has extensive experience
in Risk Management, technology, consulting and auditing in Australia and the Asia-Pacific region.
Mr Ampherlaw's current corporate Directorships include a Non-Executive Directorship with Credit Union Australia,
where he is Chair of the Audit Committee and a member of each of the Risk, Remuneration and Strategy
Committees; a Non-Executive Director of Elanor Investors Ltd where he is Chair of the Audit and Risk
Committee; and a Non-Executive Director of the Australia Red Cross Blood Service, where he is a member of the
Finance and Audit Committee and of the Risk Committee. Mr Ampherlaw has also been a member of the
Grameen Foundation Australia charity Board since 2012.
Mr Peter Chapman Cook, MPharm., PhC, CChem, FMonash, FRMIT, MPS, MRACI, MAICD.
Independent Non Executive Director - appointed 14 July 2005
Mr Peter Cook, aged 67, is the Chairman of the Remuneration, Nomination and Diversity Committee and Senior
Independent Director. He has extensive business experience, both within Australia and overseas.
Current appointments include Chair, Pharmaceutical Science Advisory Group (Monash University) and Director
Myostin Therapeutics. His most recent Executive appointment was as Managing Director and Chief Executive
Officer of Biota Holdings Limited, Mr Cook has also 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 considerable experience in mergers and acquisitions,
particularly with technology-based companies, and has a strong manufacturing background.
Mr Cook has had a wide exposure 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.
Mr Bruce Griffiths, OAM
Independent Non Executive Director - appointed 14 February 2013
Mr Bruce Griffiths OAM, aged 64, is a member of the Remuneration, Nomination and Diversity Committee. Bruce
has had a successful and extensive career, spanning more than 40 years, in the manufacturing industry. He has
held a number of senior Executive roles within the industry and has a long history in working with Government.
Bruce was recently awarded the Order of Australia Medal for services to the automotive manufacturing industry
and to the community.
Current appointments include: Board Member - Industry Capability Network Limited (ICNL), Director - Air
International Thermal Systems, Chairman - Sail Melbourne ISAF Sailing World Cup.
Previous appointments include: Rail Supplier Advocate from 2009 to 2014, Chairman - Futuris Automotive Group
(2007-2012), Managing Director - Futuris Automotive Group (1992 -2007), Chairman - Air International Thermal
Systems (2008-2011), Board Member - AutoCRC (Advanced Automotive Technology Ltd) (Inception -2012), Vice
President of the Federation of Automotive Products Manufacturers (FAPM) (1990-2012). Member - Automotive
Industry Innovation Council, Advisory Board Member - Enterprise Connect
Mr Griffiths’ honours include: Order of Australia Medal - 2013, Centenary Medal for Services to the Development
of the Auto Industry Policy, Victorian Manufacturing Hall of Fame for services to the Manufacturing Industry.
4
16
5
17
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors (continued)
Mr David Edward Wills, B Comm., FCA
Independent Non Executive Director - appointed 26 November 2010, retired 5 July 2013
Mr David Wills, aged 65, was Chairman of the Audit, Risk and Compliance Committee until his recent retirement.
David 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 (from 2004 to July 2013); and
Souls Private Equity Limited (since 2005);
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.
Company Secretary
Mr. Jaime Pinto, B.Com, CA. - appointed 20 November 2012
Mr Pinto, aged 43, is a Chartered Accountant with over 20 years’ experience in both professional practice and
commerce. He has held senior finance roles in organisations of varying size and complexity, including small
private businesses, large national groups and ASX listed entities. He is currently the Company Secretary of a
number of ASX-listed and unlisted companies in the manufacturing, investing, real estate and advisory industries.
Mr Pinto holds a Bachelor Degree in Commerce from the University of NSW, and is a member of The Institute of
Chartered Accountants Australia.
Directors’ Report
Directors (continued)
Mr Mark Bernard Jenkins, B. Comm., Grad. Dip. Bus.
Independent Non Executive Director - appointed as director 14 July 2005; appointed as Chairman 13 March
2006. Resigned as Chairman 14 February 2013
Mr Mark Jenkins, aged 50, is a member of the Audit, Risk and Compliance Committee. Mark 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.
Air Marshal Errol John McCormack (Ret’d), AO
Independent Non Executive Director - appointed 11 August 2010
Air Marshal Errol McCormack, aged 73, is a member of the Audit, Risk and Compliance Committee. Errol has
extensive experience as a Senior Commander in the Royal Australian Air Force.
Errol McCormack served in the Royal Australian Air Force for 39 years, retiring in 2001 as Chief of Air Force with
the rank of Air Marshal. During his period of service he commanded at unit, wing and command level, held staff
positions in capability development, operations and educational posts and attended both RAAF and Joint
Services Staff Colleges. His overseas postings included flying tours in Vietnam, Thailand, Malaysia and
Singapore, an exchange tour with the US Air Force flying the RF4C, Air Attaché Washington and Commander
Integrated Air Defence System in the Five Power Defence Agreement between Malaysia, Singapore, UK, New
Zealand and Australia.
Since his retirement from the RAAF he has established a company providing consultancy services for multi-
national companies working with the Australian Department of Defence.
He is also Non-Executive Chairman of Chemring Australia Pty Ltd, a countermeasures and pyrotechnic
manufacturing company based in Victoria, and consults for Chemring Group PLC and General Electric Military
Engines.
His pro-bono work includes Chairman of the Board of the Sir Richard Williams Foundation, an independent think-
tank supporting development of Australian military aviation policy. He is a member of the Royal Aeronautical
Society and the Australian Institute of Company Directors.
Mr David Patrick Alexander Singleton, BSc (Hons)
Independent Non Executive Director - appointed 11 October 2010
Mr David Singleton, aged 54, is a member of the Audit, Risk and Compliance Committee and the Remuneration,
Nomination and Diversity Committee. David 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 a degree in Mechanical Engineering from University College London.
18
19
6
7
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
(continued)
Directors’ Report
Directors’ Report
Meetings of Directors
The numbers of meetings of the Company's board of Directors and of each board committee held during the year
ended 30 June 2014, and the numbers of meetings attended by each Director were:
Director
Mr T Quick
Mr P M Odouard
Mr N Ampherlaw
Mr P C Cook
Mr B Griffiths
Mr M B Jenkins
Mr E J McCormack
Mr D Singleton
Mr D Wills
Board
Meetings
Audit, Risk and
Compliance
Committee
Meetings
Remuneration,
Nomination and
Diversity
Committee
Meetings
A
12
12
12
12
12
12
12
12
-
B
12
12
12
11
12
11
12
10
-
A
-
-
5
-
-
5
5
5
-
B
-
-
5
-
-
4
5
4
-
A
-
-
-
4
4
-
-
4
-
B
-
-
-
4
4
-
-
4
-
A = Number of meetings held during the time the Director held office during the year
B = Number of meetings attended
Principal Activities
During the year the principal continuing activities of the Group consisted of:
a) increased the volume of JSF parts for Northrop Grumman including commencing manufacture of the
most complex parts;
b) commenced C130 production delivering the first seven shipsets and worked towards achieving three
shipsets per month production during FY15;
c)
seen significant growth in new orders finishing the year with a $49 million order book;
d) substantially progressed our resin spray technology for the auto sector
Results
The loss from ordinary activities after income tax amounted to $11,181,401 (2013 loss: $16,985,894).
Review of operations
A review of operations and activities for the financial year is set out in the Executive Chairman’s Review.
Dividends
No dividends have been paid during the financial year. The Directors do not recommend that a dividend be paid
in respect of the financial year (2013: $nil).
Events Since the end of the Financial Year (continued)
Since the end of the financial year the Group:
(a) secured support from Efic for the bonds of $3 million, disclosed within Other Financial Assets, associated
with the ORPE program. This has allowed the Group access to the previously restricted funds
(b) secured from Efic a $2.5 million working capital guarantee facility to support the anticipated growth in
production volumes
(c)
received a customer advance payment of $2.3 million
(d) commenced the process of closing down the US office and is in the advanced stages of transferring the
activities to a licensee.
Likely developments and expected results of operations
Strategies, prospects and risks by division
Manufacturing
Strategic Objective
Achieve sales revenue from
new and existing manufacturing
contracts
Prospects
Program schedules indicate a
significant increase in sales for
the 2015 financial year
Risks
Steep
ramp up over a short period,
mitigated by strong management team and
achievement to date.
Quickstep has a non-binding agreement
with Northrop Grumman
to produce
components for the JSF program. There is
a risk that the actual production orders may
not be issued by Northrop Grumman.
Quickstep Systems
Strategic Objective
Fully demonstrate RST cell
capability by producing motor
vehicle parts capable of sale
Prospects
Develop
manufacture
real
parts
for
Risks
Finalise all related technologies to the parts
(Tools, faster machine...)
Manufacture and deliver
motor vehicle part
Original
Manufacturer (OEM)
first
an
Equipment
to
Sign a contract with OEM to
produce such part
New technology needs to be accepted, risk
mitigated by a growing team of automotive
specialist
of
discussions.
advanced
stages
and
Progress
the qualification of
Aerospace parts manufactured
using the Quickstep process
Program in place to qualify a
spar for the JSF Vertical tail
supported by a grant from the
Australian Government. Other
opportunities being pursued.
Long process to demonstrate equivalency
within
qualification
Aerospace
an
environment.
8
9
20
21
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
Directors' Interests
Indemnification and Insurance of Officers
The relevant interest of each Director in the shares, rights and options at the date of this report unless
otherwise indicated is as follows:
Except as indicated below, 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.
Indemnification
The Group has indemnified the Directors (as named in this Report) 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.
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 by a Director, Secretary or executive officer to the maximum 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.
Non-Audit Services
During the financial year, KPMG, the Group’s auditor, has not performed any additional services to their statutory
duties.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 91.
Mr T Quick
Mr P M Odouard
Mr N Ampherlaw (1)
Mr P C Cook (2)
Mr B Griffiths
Mr M B Jenkins
Mr E J McCormack (3)
Mr D Singleton
Mr D Wills(4)
Shares
Options
Rights
100,000
2,440,685
275,000
220,758
91,000
100,000
369,315
100,000
460,107
-
3,256,593
-
-
-
-
-
-
-
-
802,000
-
-
-
-
-
-
-
(1) The registered holder of the shares is NIJS Fund which is a superannuation fund of which Mr Ampherlaw
is a trustee and member.
(2) The registered holder of the shares is Bond Street Custodians Limited as custodian for the Lloyds Wharf
Superannuation Fund, of which Mr Cook is a trustee.
(3) The registered holder of the shares is Aviops Pty Ltd, of which Mr McCormack is a Director.
(4) The registered holder of the shares is Jammit Pty Ltd, of which Mr Wills is a director. Mr Wills retired as a
Director on 5 July 2013. The interest disclosed is at the date of cessation as Director.
Share Options and Rights
During the financial year 802,000 rights were granted under the Incentive Rights Plan (IRP) to the Executive
Director, Mr P M Odouard, as part of his remuneration with vesting based on future conditions.
During the financial year 306,480 options were exercised with an exercise price of $nil and 2,204,589 rights were
vested. On the exercise/vesting of those options/rights ordinary shares of the company were issued. No other
options or rights have been granted during or 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:
Employee
Earliest possible
vesting date
Expiry date
Exercise price
Number of shares
Options
Mr P M Odouard
Mr P M Odouard
Mr P M Odouard
Mr P M Odouard
Rights
Mr P M Odouard
Total
1/7/2012
1/7/2013
31/8/2014
31/08/2015
30/03/2017
26/11/2017
23/11/2018
22/11/2019
31/08/2016
22/11/2018
$0.00
$0.00
$0.00
$0.00
$0.00
1,091,144
471,337
706,373
987,739
802,000
4,058,593
No option holder has any right under the options to participate in any other share issue of the Company or any
other entity.
10
11
22
23
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
Remuneration Report - Audited
The report contains the following sections:
1
2
3
4
5
Principles of compensation
Details of remuneration
Share based compensation
Analysis of bonuses included in remuneration
Services from remuneration consultant
1 Principles of Compensation
Key management personnel, including Directors of the Company, have authority and responsibility for planning,
directing and controlling the activities of the Group. Key management personnel comprise the Directors of the
Company and Executives for the Group.
The report includes details relating to:
Non Executive Directors
Mr N I Ampherlaw
Mr P Cook
Mr B Griffiths
Mr M Jenkins
Air Marshal (R’td) E McCormack
Mr D Singleton
Mr D Wills
Executive Directors
Mr T Quick
Mr P Odouard
Executive and Officers
Mr J Pinto
Mr J Johnson
Mr S Godbille
Mr P Robertson
Mr M Schramko
Ms T Swinley
Dr J Schlimbach
Mr A Vihersaari
Ms N Sharman
Chair of Audit Risk and Compliance Committee (appointed 8th July 2013)
Chair of Remuneration, Nomination and Diversity Committee and Senior
Independent Director from 29 May 2014
Chair of Audit, Risk and Compliance Committee (retired 5 July 2013)
Chairman, Interim Executive Chairman from 29 May 2014
Managing Director and Chief Executive Officer until 29 May 2014 and then
Executive Director from that date
Company Secretary
Vice President of Commercial and Admin
Vice President of Quickstep Systems (until 31 March 2014)
Vice President of Finance (until 25 November 2013)
Vice President of Manufacturing and Operations
Vice President of Human Resources
CEO, Quickstep GmbH
Vice President of Global Business Development (until 12 June
2014)
Chief Financial Officer (appointed 11th March 2014)
Remuneration Report - Audited (continued)
1 Principles of compensation (continued)
The Board has established a Remuneration, Nomination and Diversity (RN&D) 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 RN&D 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 the statutory employer contributions to
superannuation funds.
Shares, options or rights may only be issued to directors subject to approval by shareholders in a general
meeting.
The Group does not have any scheme relating to retirement benefits for its key management personnel other
than contributions defined under its statutory obligations.
The Company’s policy is to provide executives with a fixed compensation to meet the median of that paid by like
sized companies undertaking similar work and offers additional short and long term incentives to allow the
executive to achieve top quartile compensation, if all performance hurdles are met. All incentives are capped.
The Company’s policy is to provide non-executive directors with a fixed fee comparable to the median of that paid
by similar sized ASX listed companies operating in similar fields. Non-executive directors may also receive chair
fees and committee fees as additional payments. Non-executive directors are not eligible for participation in any
of the Company’s incentive schemes.
Fixed compensation
Fixed compensation consists of base compensation as well as employer statutory contributions
superannuation.
to
Compensation levels are reviewed annually through a process that considers current labour market rates, the
individual’s contribution 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, excluding non-executive directors, for meeting or exceeding the Company’s business
and their personal objectives. Each individual’s performance linked compensation is capped as a percentage
uplift of fixed compensation. Other than as disclosed in this report, there have been no performance-linked
payments made by the Group to key management personnel.
12
13
24
25
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
Remuneration Report – Audited (continued)
1 Principles of Compensation (continued)
(a) Short-term incentives
(i) Cash and equity settled short term incentive
Certain executives receive short term incentives (STI) in cash and/or shares based on achievement of key
performance indicators (KPIs). Each year the RN&D Committee considers the appropriate targets and KPIs and
the alignment of individual rewards to the Group’s performance. These targets may include measures related to
the annual performance of the Group and/or specified parts of the Group and are measured against actual
outcomes.
The RN&D 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 falls below the minimum level of performance. The RN&D
Committee recommends the total incentive to be paid to the individuals for approval by the Board.
The number of shares issued to executives is based on the accrued equity settled STI value divided by the
weighted average share price on the date the shares are granted.
(b) Long-term incentives
(i) Quickstep Employee Incentive Plan (EIP)
The Company previously 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 against the ASX’s all ordinaries accumulation index over a minimum 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 term of the grant, options will lapse on the seventh anniversary of their grant date.
The options granted from the EIP are subject to performance conditions based on achieving pre-set 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 minimum three year performance condition from their grant date and are tested
annually until they lapse seven years after grant date. At each re-testing date TSR hurdles are increased by an
annual growth rate as set out in the table below.
The specific TSR targets for each Option Tranche are as follows;
Remuneration Report – Audited (continued)
1 Principles of Compensation (continued)
(b) Long term incentives (continued)
(i) Quickstep Employee Incentive Plan (EIP) (continued)
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 annually until the
options lapse and against the higher TSR hurdle.
Grant
Earliest vesting date
TSR Hurdle VWAP as at
Tranche 3 Tranche 4
01/07/12
01/07/11
30 June
30 June
2012
2011
2010 Year 2011 Year 2012 Year
31/08/15
01/09/2014
01/07/13
31 Aug
31 Aug
30 June
2015
2014
2013
% Annual
Growth (TP)
%
Vesting
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
$0.169
$0.196
$0.214
$0.239
If an 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 they
hold will vest as at the 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 an employee ceases employment in these circumstances and hold vested options they may exercise those
options within the 12 month period following the date of cessation (or, the remaining period until the expiry of the
options, if less than 12 months).
If an employee ceases 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.
(ii) Quickstep Incentive Rights Plan (IRP)
During the year the Company established the Quickstep Incentive Rights Plan (IRP).
The IRP has been designed to facilitate the Company moving towards best practice remuneration structures for
executives.
The IRP authorises the granting of Rights to executives of the Company, in the form of Performance Rights (PRs)
and/ or Deferred Rights (DRs) (together, Rights). These rights represent an entitlement on vesting to fully paid
ordinary shares in the issued capital of the Company (Shares) and cash with the total value of cash and Shares
being equal to the value of vested Rights (number of vested Rights x market value of a Share). PRs may vest if
Performance Conditions are satisfied. DRs may vest if service conditions are satisfied. The 2013-14 offer to Mr P
Odouard consisted of PRs only.
The Board has the discretion to set the terms and conditions on which it will offer PRs under the IRP, including the
performance conditions and modification of the terms and conditions as appropriate to ensuring the IRP operates
as intended. All PRs offered will be subject to performance conditions which are intended to be challenging.
14
15
26
27
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
(continued)
Remuneration Report - Audited (continued)
1 Principles of compensation (continued)
(b) Long term incentives (continued)
(ii) Quickstep Incentive Rights Plan (IRP) (continued)
The PRs are subject to a performance condition based on achieving Total Shareholder Return (TSR) targets over
the performance period. In summary, TSR combines share price appreciation over a period and dividends paid
during that period (assuming that they are reinvested into Shares) to show the total return to shareholders over
that period. When calculating Quickstep's TSR, its share price at the beginning and end of the performance period
will be calculated as the 45 day volume weighted average price of Shares as at the relevant date. The
performance period is three years from 1 September 2013 for the current year’s offer.
For vesting to occur the Company's TSR over the performance period must be positive (i.e. if shareholders have
not gained then PRs will not vest) relative to the All Ordinaries Accumulation Index (AOAI). The AOAI measures
performance of securities in the All Ordinaries Index taking into account income as well as share price movement
and assumes dividends are reinvested. If the Company's TSR is positive but the AOAI movement is negative over
the performance period then vesting, if any, will be at the discretion of the Board (i.e. only applies if the Company
has outperformed a general fall in the market by protecting against a similar fall in the Company's Share price). If
the Company's TSR is positive and the movement in the AOAI is also positive then the following vesting scale will
apply:
Performance Level
Company’s TSR relative to AOAI movement over
the performance period
Vesting %
Below threshold
Threshold
Target
< Increase in the AOAI
= Increase in the AOAI
> 100% of AOAI increase & < 110% of AOAI
increase
110% of AOAI increase
> 110% of AOAI increase & < 120% of AOAI
increase
Stretch and above
120% of AOAI increase
0%
25%
Pro-rata
60%
Pro-rata
100%
Testing of the TSR hurdle will occur on the third anniversary of the commencement of the performance period (i.e.
31 August 2016) and then semi-annually until the rights lapse or the fifth anniversary of the commencement of the
performance period. Once a right has vested it may not become unvested based on performance at a subsequent
test date. If at a test date some rights have previously vested and the Company's performance at the test date is
higher than at previous test dates then additional rights will vest. Such vesting will apply on the basis that the total
number of rights that have vested from a tranche (previous and current vesting) is equal to the number that would
have vested at the current test date had no vesting occurred earlier.
Upon the satisfaction of the performance conditions, the value of PRs granted under the IRP will be evaluated.
The Board has discretion to vary vesting if it considers it to be appropriate to do so given the circumstances that
prevailed over the performance period. This provision aims to address situations where vesting may otherwise be
inconsistent with shareholder expectations. If the value that vests is greater than nil, vesting will give rise to a
$1,000 cash payment with the remainder of the value to be converted into Shares based on the then market value
of a Share.
The IRP contains provisions concerning the treatment of vested and unvested rights in the event that a participant
ceases employment. Unless the Board determines otherwise, if a participant ceases employment in other than
special circumstances (death, total and permanent disablement, retrenchment, redundancy, permanent retirement
from full-time work with the consent of the Board or other circumstances determined by the Board), all unvested
rights held by the participant will lapse.
Unless the Board determines otherwise, if a participant ceases employment under special circumstances, rights
that were granted to the participant during the financial year in which the termination occurred will be forfeited in
(continued)
the same proportion as the remainder of the financial year bears to the full year. All remaining rights for which
performance conditions have not been satisfied as at the date of cessation of employment will then remain "on
1 Principles of Compensation (continued)
(b) Long term incentives (continued)
(iii) Other Equity-based compensation
Other 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 such as the transfer of manufacturing to
NSW.
(c) 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 2013 a fee for membership of a committee of $2,500 p.a. was introduced and
the fee for Chairing a committee was increased from $5,000 to $10,000 pa. The table below indicates the
maximum annual fees based on directors responsibilities at the date of this report. Non-Executive directors do not
receive performance related compensation.
Non Executive Directors
T Quick (1)
N Ampherlaw (appointed 8/7/13)
P Cook
B Griffiths
M Jenkins
E McCormack
D Singleton
Fees
126,000
60,000
60,000
60,000
60,000
84,000
60,000
Committee Membership (2)
N/A
10,000
10,000
2,500
2,500
2,500
5,000
(1) Mr T Quick has been appointed on an interim basis from 29/5/2014 as Executive Chairman at a rate of
$2,000 a day.
(2) Committee Membership fees were approved by the RND Committee on 23 September 2013 and effective
from 1 October 2013. The directors were awarded the fees on a pro rata basis for FY14 from 1 October 2013
(i.e. all directors received 75% of annual entitlement).
(d) Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee has
regard to the following indices in respect of the current financial year and the previous four financial years.
Loss attributable to
owners of the company
Dividends paid
Operating income
Change in share price
Return on capital
employed
2014
2013
2012
2011
2010
$(11,181,401) $(16,985,894) $(11,801,601) $(13,734,713) $(11,508,702)
$nil
$12,001,752
35.7%
$nil
$2,562,621
(17.6%)
$nil
$503,168
(34.6%)
$nil
$471,524
13%
$nil
$448,322
35.3%
(66.4%)
(95.9%)
(60.9%)
(52.5%)
(39.3%)
The reduction in overall loss is one of the financial performance targets considered in setting the STI. Loss
amounts have been calculated in accordance with Australian Accounting Standards (AASBs). Return on capital
employed is calculated as EBIT divided by Total Assets less Current Liabilities.
The overall level of compensation takes into account the performance of the Group over a number of years.
Over the past five years the Group’s loss from ordinary activity after income tax has remained relatively
consistent at the group has worked towards achieving commercialization.
16
17
1 Principles of Compensation (continued)
(b) Long term incentives (continued)
(iii) Other Equity-based compensation
28
Other 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 such as the transfer of manufacturing to
NSW.
(c) 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 2013 a fee for membership of a committee of $2,500 p.a. was introduced and
the fee for Chairing a committee was increased from $5,000 to $10,000 pa. The table below indicates the
maximum annual fees based on directors responsibilities at the date of this report. Non-Executive directors do not
receive performance related compensation.
Non Executive Directors
N Ampherlaw (appointed 8/7/13)
T Quick (1)
P Cook
B Griffiths
M Jenkins
E McCormack
D Singleton
$2,000 a day.
Fees
126,000
60,000
60,000
60,000
60,000
84,000
60,000
Committee Membership (2)
N/A
10,000
10,000
2,500
2,500
2,500
5,000
(1) Mr T Quick has been appointed on an interim basis from 29/5/2014 as Executive Chairman at a rate of
(2) Committee Membership fees were approved by the RND Committee on 23 September 2013 and effective
from 1 October 2013. The directors were awarded the fees on a pro rata basis for FY14 from 1 October 2013
(i.e. all directors received 75% of annual entitlement).
(d) Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the remuneration committee has
regard to the following indices in respect of the current financial year and the previous four financial years.
Loss attributable to
owners of the company
Dividends paid
Operating income
Change in share price
Return on capital
employed
2014
2013
2012
2011
2010
$(11,181,401) $(16,985,894) $(11,801,601) $(13,734,713) $(11,508,702)
$nil
$nil
$12,001,752
$2,562,621
35.7%
(66.4%)
(17.6%)
(95.9%)
$nil
$503,168
(34.6%)
$nil
$471,524
13%
$nil
$448,322
35.3%
(60.9%)
(52.5%)
(39.3%)
The reduction in overall loss is one of the financial performance targets considered in setting the STI. Loss
amounts have been calculated in accordance with Australian Accounting Standards (AASBs). Return on capital
employed is calculated as EBIT divided by Total Assets less Current Liabilities.
The overall level of compensation takes into account the performance of the Group over a number of years.
Over the past five years the Group’s loss from ordinary activity after income tax has remained relatively
consistent at the group has worked towards achieving commercialization.
17
29
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
(continued)
Remuneration Report - Audited (continued)
1
Principles of Compensation (continued)
(e) Service agreements
Name
Initial
agreement
date
Duration
Notice
period
Termination benefits
STI cap as
a % of
TFR (1)
LTI cap as
a% of
TFR(2)
Mr T Quick
29 May 2014
Open
1 week
None
-
-
Mr P M Odouard
13 Oct 2008 Open
6 months
Mr D E Brosius
1 Sept 2005
30 Sep
2014
3 months
Mr J Johnson
1 Apr 2011
Open
3 months
12 months annual salary
and pro-rated annual
bonus (at Board’s
discretion)
6 months of annual salary
package;
Any cash bonus due but
not paid; and
Pro-rated current year
cash bonus (in
accordance with contract).
6 months of annual salary
package;
Pro-rated annual bonus
(at Board’s discretion).
30
50(3)
20(4)
-
20
20
Dr J Schlimbach
1 Jan 2012
Fixed term
external
contractor
3 months
n/a
20
20
Ms Tracy Swinley
26 Nov 2012
Open
3 months
Mr M Schramko
25 Jul 2011
Open
3 months
Ms Nicole
Sharman
17 Feb 2014
Open
1 week
3 months of annual salary
package; and
Pro-rated annual bonus
(at Board’s discretion).
3 months of annual salary
package; and
Pro-rated annual bonus
(at Board’s discretion)
3 months of annual salary
package; and
Pro-rated annual bonus
(at Board’s discretion)
20
20
20
20
20
20
(1) STI (Short Term Incentive) is determined on performance against key performance indicators (KPIs) set and
reviewed by the RN&D Committee or the Board as appropriate. The STI cap refers to the maximum amount
payable in cash as a percentage of Total Fixed Remuneration. The KPIs include company financial objectives,
such as order intake, profit and cash flow, and personal objectives including control of responsibility center,
expenditure and functional outcomes aligned to the annual strategic plan. The share based element of STI is
discussed at (2) below.
(2) LTI (Long Term Incentive) is determined on the Group’s performance against relative Total Shareholder
Return for 2015 Financial Year. This is the measure currently used in the IRP applicable to Mr P Odouard in
the 2014 financial year as per (3) below. For the purpose of this table, the LTI % also includes the share
based payments element of STI.
LTI determined on performance against relative Total Shareholder Return.
to a maximum of US$30,000.
18
(3)
(4)
30
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2
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
Remuneration Report – Audited (continued)
2 Details of Remuneration (continued)
(continued)
(1) Equity based STI includes:
a. Accrual adjustments
b. Accrual of estimated STI relating to the current year to be settled through share based
payments
(2) Options and rights include:
a. The accounting expense attributable to the current year of:
i. Employee Incentive Plan (EIP)
Incentive Rights Plan (IRP)
ii.
iii. Performance and retention bonuses (EPRB)
iv. Loyalty bonuses
(3) The Short Term Incentive (STI) is comprised of an accrued cash bonus plus adjustment to the accrued
STI for actual amounts paid during the prior financial year. This adjustment results in a negative
expense appearing in the tables above in relation to executives for whom the prior year accrual
exceeded the payment made in the current year in respect of FY13.
(4) Mr Quick has been appointed on an interim basis as Executive Chairman to manage the day to day
growth of the organization in addition to his role as Chairman of the Board.
Includes $1,576 back pay relating to payment errors over a three year period
(5)
-
-
-
-
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32
33
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
(continued)
(continued)
Remuneration Report - Audited (continued)
3 Share Based Compensation
(a) Short Term Incentives
(i) Equity settled short term incentive
Remuneration Report - Audited (continued)
3 Share Based Compensation (continued)
(b) Long Term Incentives (continued)
(ii) Quickstep Incentive Rights Plan
Short term performance 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:
At 30 June 2014 Mr P Odouard is the only employee to be granted rights pursuant to the IRP. Movements in IRP
rights during the year are set out below:
Name
Mr S Godbille
Ms T Swinley
Mr J Johnson
Dr J Schlimbach
Mr M Schramko
Mr A Vihersaari
Mr P Salvati
Total
No of shares granted and vested
during FY14 in respect of FY13
performance
Fair value
$
Total fair value
$
62,087
41,106
98,147
84,270
88,518
76,759
20,161
471,048
$0.217
$0.217
$0.217
$0.217
$0.217
$0.217
$0.217
13,473
8,920
21,298
18,287
19,208
16,657
4,374
102,217
Equity settled short term incentives accrued in the current year for FY14 performance are expected to be settled
through share based payments during the next financial year, valued at the market value on the day of issue.
(b) Long Term Incentives
(i) Quickstep Employee Incentive Plan (EIP)
Name
Tranche
Grant date
FV per
right at
grant
date (a)
Balance
at 30
June
2013
Granted
during
the year
(b)
Lapsed/
cancelled
during
the year
Balance
at 30
June 2014
Cumulative
vesting
level at end
of year
$
No
No
No
No
%
Mr P Odouard
2013 year
22/11/2013
$0.152
-
802,000
-
802,000
0%
(a) The fair value of rights granted was calculated using a Monte Carlo simulation analysis
(b) The fair value of rights granted in the year is $121,904. The total value of the rights is allocated to
remuneration over the vesting period
(iii) Executive performance and retention bonus (EPRB)
Mr Godbille and Mr Johnson were granted, as compensation during the 2012 reporting period, rights to shares
offered through a performance and retention bonus scheme. The rights vested on 31 December 2013 upon
achievement of performance of criteria related to the Company’s relocation objectives. Movements in EPRB
rights are set out below:
At 30 June 2014, Mr P Odouard is the only employee to be granted options pursuant to the EIP. No options were
granted during the 2014 financial year under the EIP, which has been replaced by the Incentive Rights Plan (IRP)
as set out at (ii) below. Movement in EIP options during the year are set out below:
Name
Grant date
Name
Tranche
Grant date
FV per
option
at grant
date (a)
Balance
at 30
June
2013
Exercised
/ vested
during
the year
(b)
Lapsed/
cancelle
d during
the year
Balance
at 30
June
2014
Cumulative
vesting
level at end
of year
$
No
No
No
No
%
Mr P Odouard
Tranche 3
30/03/2010
$0.315
925,926
(306,480)
Mr P Odouard
Tranche 4
30/03/2010
$0.270
471,698
Mr P Odouard
2010 Year
26/11/2010
$0.362
471,337
Mr P Odouard
2011 Year
23/11/2011
$0.173
706,373
Mr P Odouard
2012 Year
22/11/2012
$0.125
987,739
-
-
-
-
-
-
-
-
-
619,446
33%
471,698
471,337
706,373
987,739
0%
0%
0%
0%
(a)
(b)
The fair value of options granted was calculated using a Monte Carlo simulation analysis
Vesting is conditional on continuing employment and certain TSR hurdles. Refer to section 1 of this
remuneration report for details. The value of options exercised during the year is $64,361. This is calculated
as the market price of shares of the company as at close of trading on the date the options were exercised.
FV per
right at
grant date
(a)
Balance at
30 June
2013
Exercised/
vested during
the year (b)
Lapsed/
cancelled
during
the year
(c)
Balance
at 30
June
2014
Cumulative
vesting
level at end
of year
$
No
No
No
No
%
Mr S Godbille
10/02/2012
$0.17
764,818
(669,216)
(95,602)
Mr J Johnson
10/02/2012
$0.17
688,337
(602,295)
(86,042)
-
-
87.5%
87.5%
(a) The fair value of rights was calculated using a Monte Carlo simulation analysis
(b) The market price of shares of the company as at close of trading on the date the rights were exercised was
$0.23 per share
(c) The value of the rights cancelled during the year is $30,879. This is calculated at the date the right was
cancelled using the fair value of the right that assumed the performance criteria had been achieved.
(iv) Loyalty Bonus
Rights have been issued to a number of key management personnel in prior years as 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.
22
23
34
35
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Directors’ Report
Directors’ Report
(continued)
(continued)
Remuneration Report - Audited (continued)
3 Share Based Compensation (continued)
(b) Long Term Incentives (continued)
(iv) Loyalty bonus (continued)
Movements in the loyalty bonus rights during the year are set out below:
Name
Tranche Grant date
FV per
right at
grant
date (a)
Balance
at 30
June
2013
Exercised
/ vested
during
the year
(b)
Lapsed/can
celled
during the
year
Balance
at 30
June
2014
Cumulative
vesting
level at
end of year
$
No
No
No
No
%
Mr S Godbille
Mr J Johnson
Mr A Vihersaari
2
2
2
12/07/2010
$0.260
178,403
(178,403)
01/04/2011
$0.270
166,667
(166,667)
01/07/2010
$0.265
314,465
(314,465)
-
-
-
-
-
-
100%
100%
100%
(a)
(b)
The fair value of rights was calculated using a Monte Carlo simulation analysis
The market price of shares of the company as at close of trading on the date the rights were exercised was
$0.22 per share
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.
4 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 2014
Included in remuneration $ (1) % vested in year(2) % forfeited in year (2)
Directors
Mr P Odouard
Executives
Mr D Brosius
Mr S Godbille
Mr J Johnson
Mr P Robertson
Dr J Schlimbach
Mr M Schramko
Ms T Swinley
Mr A Vihersaari
60,890
-
2,020
42,596
-
37,795
39,591
37,340
5,662
50%
0%
50%
50%
0%
50%
50%
50%
50%
50%
100%
50%
50%
100%
50%
50%
50%
50%
(1) 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 2014 year. This represents the accounting
expense in FY14, which includes an accrual of estimated STI relating to the current year and in addition
accrual adjustments in relation to FY13.
(2) The amounts forfeited are due to the Group performance, personal performance or service criteria not
being met in relation to the current financial year. This represents estimated achievement level in respect
to FY14. FY14 actual performance will be finalised October 2014.
24
Remuneration Report - Audited (continued)
5 Services from Remuneration Consultant
During FY14 Quickstep engaged Godfrey Remuneration Group Pty Limited (GRG) to provide advice in relation to
the CEO’s employment agreement and long term incentive plan. The fees were $19,000 + GST.
The board is satisfied that the remuneration recommendations made by GRG were free from undue influence by
members of the key management personnel about whom the recommendations may relate, and GRG has
provided the RND committee with a written statement to this effect. The work was undertaken directly with a
non-executive director and no communication occurred between GRG and the CEO.
This report is made in accordance with a resolution of Directors on 30/9/2014.
Mr T Quick
Executive Chairman
Sydney, New South Wales
30 September 2014
25
36
37
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Corporate Governance Statement
Corporate Governance Statement
Corporate Governance Statement
This statement outlines the main corporate governance practices in place throughout the financial year, which
comply with the ASX Corporate Governance Council recommendations Edition 3, unless otherwise stated.
Principle 1:
Lay solid foundations for management and oversight
A listed entity should establish and disclose the respective roles and responsibilities of its board and
management and how their performance is monitored and evaluated.
Status
Recommendation 1.1 A listed entity should disclose:
(a)
(b)
the respective roles and
responsibilities of its board and
management; and
The Board Charter is contained in the
corporate Governance section of the
website
those matters expressly reserved to
the board and those delegated to
management.
Included in the Board Charter 1.1(a)
Recommendation 1.2 A listed entity should:
undertake appropriate checks
before appointing a person, or
putting forward to security holders a
candidate for election, as a director;
and
This is undertaken. See Policy and
Procedure for Selection and
Appointment of Directors at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
(a)
(b)
provide security holders with all
material information in its
possession relevant to a decision
on whether or not to elect or re-
elect a director.
The company seeks to provide full
information to all security holders as part
of the papers for each AGM. See Policy
and Procedure for Selection and
Appointment of Directors at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Contracts of appointment are in place
with all directors and contracts of
employment are in place with all
management staff.
The Company Secretary is accountable
directly to the Board, through the chair,
on all matters.
The Diversity Policy is available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Recommendation 1.3
A listed entity should have a written
agreement with each director and senior
executive setting out the terms of their
appointment.
Recommendation 1.4
The company secretary of a listed
entity should be accountable directly to
the board, through the chair, on all
matters to do with the proper functioning
of the board.
Recommendation 1.5
A listed entity should:
(a)
have a diversity policy which
includes requirements for the board
or a relevant committee of the
board to set measurable objectives
for achieving gender diversity and
to assess annually both the
objectives and the entity’s progress
in achieving them;
26
(b) disclose that policy or a summary of
it; and
(c)
disclose as at the end of each
reporting period the measurable
objectives for achieving gender
diversity set by the board or a
relevant committee of the board in
accordance with the entity’s
diversity policy and its progress
towards achieving them, and either:
(1)
(2)
the respective proportions of
men and women on the board,
in senior executive positions
and across the whole
organisation (including how
the entity has defined “senior
executive” for these
purposes); or
if the entity is a “relevant
employer” under the
Workplace Gender Equality
Act, the entity’s most recent
“Gender Equality Indicators”,
as defined in and published
under that Act.
Recommendation 1.6
A listed entity should:
(a) have and disclose a process for
the
periodically
performance of
its
committees and individual directors;
and
the board,
evaluating
The Diversity Policy is available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
A report on diversity is available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
The Board has a process for evaluating
the Board and
the performance of
Committees
(b)
disclose, in relation to each
reporting period, whether a
performance evaluation was
undertaken in the reporting period
An evaluation took place in March 2014
Recommendation 1.7
A listed entity should:
(a) have and disclose a process for
the
senior
evaluating
of
periodically
performance
executives; and
its
of
performance
The Board has a process for evaluating
all Senior
the
Management on an Annual basis as
detailed in the Executive remuneration
policy.
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
(b) disclose, in relation to each
reporting period, whether a
performance evaluation was
undertaken in the reporting period
in accordance with that process.
The performance evaluation was
undertaken in the first quarter of the
financial year.
38
39
27
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Corporate Governance Statement
Corporate Governance Statement
Recommendation 2.4
Recommendation 2.5
Recommendation 2.6
A majority of the board of a listed
entity should be independent
directors.
The chair of the board of a listed
entity should be an independent
director and, in particular, should not
be the same person as the CEO of
the entity.
A listed entity should have a
program for inducting new directors
and provide appropriate professional
development opportunities for
directors to develop and maintain the
skills and knowledge needed to
perform their role as directors
effectively.
Achieved, see Directors’ report
The Chair is independent but acting as
the Executive Chair for an interim
period.
This is addressed through the letter of
appointment and Induction Policy both
of which are available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Principle 3: Act ethically and responsibly
A listed entity should act ethically and responsibly.
Recommendation 3.1
A listed entity should:
(a) have a code of conduct for its
directors, senior executives and
employees; and
(b) disclose that code or a summary of
it.
The Company has developed separate
Non-executive Director
(NED) and
Employee Codes of Conduct. These
to all directors, managers,
apply
employees and contractors.
Both the NED and Employee Codes of
conduct are available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Principle 2: Structure the board to add value
A listed entity should have a board of an appropriate size, composition, skills and commitment to enable it to
discharge its duties effectively.
Recommendation 2.1
The board of a listed entity should:
(a) have a nomination committee
which:
(1) has at least three members,
a majority of whom are
independent directors; and
(2)
is chaired by an independent
director,
and disclose:
(3)
the charter of the committee;
(4)
the members of the
committee; and
(5) as at the end of each
reporting period, the number
of times the committee met
throughout the period and the
individual attendances of the
members at those meetings.
(a) The Board has a Remuneration,
Nomination and Diversity Committee.
(1) The Committee is comprised of
three non-executive independent
directors as per the Directors’
report
(2) The Chair is independent as per
the Directors’ report
(3) The Committee Charter is at
http://www.quickstep.com.au/Inves
tors-Media/Corporate-Governance
(4) The members of the Committee
are detailed in the Directors’ report
(5) The details of meetings held and
attended is listed in the Directors’
report.
(b) if it does not have a nomination
N/A
committee, disclose that fact and
the processes it employs to
address board succession
issues and to ensure that the
board has the appropriate
balance of skills, knowledge,
experience, independence and
diversity to enable it to discharge
its duties and responsibilities
effectively.
Recommendation 2.2
A listed entity should have and
disclose a board skills matrix setting
out the mix of skills and diversity that
the board currently has or is looking
to achieve in its membership.
The Board skills matrix is detailed in
the Policy and Procedure for Selection
and Appointment of Directors
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Recommendation 2.3
(a) See Directors’ report
(b) see Directors’ report
A listed entity should disclose:
(a) the names of the directors
considered by the board to be
independent directors;
(b) if a director has an interest,
position, association or
relationship that might cause
doubts about the independence
of a director, but the board is of
the opinion that it does not
compromise the independence
of the director, the nature of the
interest, position, association or
relationship in question and an
explanation of why the board is
of that opinion; and
(c)
the length of service of each
director.
(c) see Directors’ report
40
41
28
29
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Corporate Governance Statement
Corporate Governance Statement
Principle 4: Safeguard integrity in corporate reporting
Principle 5: Make timely and balanced disclosure
A listed entity should have formal and rigorous processes that independently verify and safeguard the integrity of
its corporate reporting.
A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person
would expect to have a material effect on the price or value of its securities.
Recommendation 4.1
The board of a listed entity should:
Recommendation 5.1
A listed entity should:
(a) have an audit committee which:
(1) has at least three members, all
of whom are non-executive
directors and a majority of whom
are independent directors; and
(2) is chaired by an independent
director, who is not the chair of the
board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and
experience of the members of the
committee; and
(5) in relation to each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
(b)
if it does not have an audit
committee, disclose that fact and
the processes it employs that
independently verify and
safeguard the integrity of its
corporate reporting, including the
processes for the appointment
and removal of the external
auditor and the rotation of the
audit engagement partner.
The board of a listed entity should,
before it approves the entity’s financial
statements for a financial period,
receive from its CEO and CFO a
declaration that, in their opinion, the
financial records of the entity have
been properly maintained and that the
financial statements comply with the
appropriate accounting standards and
give a true and fair view of the financial
position and performance of the entity
and that the opinion has been formed
on the basis of a sound system of risk
management and internal control which
is operating effectively.
A listed entity that has an AGM
should ensure that its external auditor
attends its AGM and is available to
answer questions from security holders
relevant to the audit.
(a) The Board has an Audit, Risk
and Compliance committee
(1) The Committee is comprised
of four non executive
independent directors, see
Directors report
(2) The Chair is an independent
director, see Director’s report
(3) The Charter is available at
http://www.quickstep.com.au/I
nvestors-Media/Corporate-
Governance
(4) The members of the
Committee are detailed in the
Directors’ report
(5) The details of meetings held
and attended is listed in the
Directors’ report
(b) N/A
This is achieved noting that the risk
management and internal controls
processes are being evolved in line with
the growth of the business
The external auditor will attend the AGM
and be available to answer questions
from security holders
Recommendation 4.2
Recommendation 4.3
(a)
have a written policy for
complying with its continuous
disclosure obligations under the
Listing Rules; and
(b) disclose that policy or a summary
of it.
The Company has a policy which
covers continuous disclosure.
The Policy is available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Principle 6: Respect the rights of security holders
A listed entity should respect the rights of its security holders by providing them with appropriate information and
facilities to allow them to exercise those rights effectively.
Recommendation 6.1
A listed entity should:
provide information about itself and its
governance to investors via its website.
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
Recommendation 6.2
A listed entity should:
implement an
design and
investor
relations program to facilitate effective
two-way communication with investors.
The Company has a policy for
stakeholder communication
Recommendation 6.3
A listed entity should:
disclose the policies and processes it
has in place to facilitate and encourage
participation at meetings of security
holders.
Recommendation 6.4
A listed entity should:
to
give security holders
receive communications
from, and
send communications to, the entity and
its security registry electronically.
the option
The Policy is available at
http://www.quickstep.com.au/Investors
-Media/Corporate-Governance
This is covered in the policy for
stakeholder communication at
http://www.quickstep.com.au/Investors
-Media/Corporate-Governance
42
43
30
31
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Corporate Governance Statement
Corporate Governance Statement
Principle 7: Recognise and manage risk
A listed entity should establish a sound risk management framework and periodically review the effectiveness of
that framework.
Recommendation 7.1
The board of a listed entity should:
(a) The Board has an Audit, Risk
and Compliance committee
(1) The Committee is comprised
of four non executive
independent directors, see
Directors’ report
(2) The Chair is an independent
director, see Directors’ report
(3) The Charter is available at
http://www.quickstep.com.au/I
nvestors-Media/Corporate-
Governance
(4) The members of the
Committee are detailed in the
Directors’ report
(5) The details of meetings held
and attended is listed in the
Directors’ report
(a)
have a committee or committees
to oversee risk, each of which:
(1) has at least three members, a
majority of whom are independent
directors; and
is chaired by an independent
(2)
director,
and disclose:
(3)
the charter of the committee;
the members of the
(4)
committee; and
(5) as at the end of each reporting
period, the number of times the
committee met throughout the
period and the individual
attendances of the members at
those meetings; or
N/A
(b)
if it does not have a risk
committee or committees that
satisfy (a) above, disclose that
fact and the processes it
employs for overseeing the
entity’s risk management
framework.
Recommendation 7.2
The board or a committee of the
board should:
(a)
review the entity’s risk
management framework at least
annually to satisfy itself that it
continues to be sound; and
The risk management framework is
evolving. Because of the nature of
Quickstep’s manufacturing contracts,
considerable attention was initially
focussed on managing manufacturing
and related risks. The organisation is
now in the process of implementing the
appropriate risk management framework
for non-manufacturing risks.
(b)
disclose, in relation to each
reporting period, whether such a
review has taken place.
As set out above, this is evolving and
expected to be subject to annual
reviews from 2015.
Recommendation 7.3
A listed entity should disclose:
No
(a)
(b)
if it has an internal audit
function, how the function is
structured and what role it
performs; or
if it does not have an internal
audit function, that fact and the
processes it employs for
evaluating and continually
improving the effectiveness of
its risk management and
internal control processes.
Recommendation 7.4
A listed entity should disclose
whether it has any material exposure to
economic, environmental and social
sustainability risks and, if it does, how it
manages or intends to manage those
risks.
The nature and size of Quickstep’s
operations do not warrant a separate
internal audit function. Given the low
volume of transactions, the external
audit work and management oversight
is considered sufficient to identify any
material breakdown in the control
environment. The Board will
periodically review the need for an
internal audit function.
The Company does not have any
material exposure to economic,
environmental and social sustainability
risks.
44
45
32
33
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Corporate Governance Statement
Financial Statements
Equity
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
— 1 Segment information
— 2 Revenue and income
Expenses
— 3
Finance income and expense
— 4
Loss per share
— 5
Income tax expense
— 6
— 7
Financial assets and liabilities
— 8 Non-financial assets and liabilities
— 9
— 10 Cash flow information
— 11 Financial instruments – fair values and risk management
— 12 Group entities
— 13 Capital and other commitments
— 14 Subsequent events
— 15 Related party transactions
— 16 Share-based payments
— 17 Remuneration of auditors
— 18 Parent entity financial information
— 19 Significant accounting policies
— 20 Determination of fair values
Directors’ declaration
Lead auditor’s independence declaration
Independent auditor’s report to the members
48
49
50
51
52
52
54
54
55
55
56
57
61
64
67
67
72
73
73
74
75
78
79
80
89
90
91
92
Principle 8: Remunerate fairly and responsibly
A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its
executive remuneration to attract, retain and motivate high quality senior executives and to align their interests
with the creation of value for security holders.
Recommendation 8.1 The board of a listed entity should:
(a) have a remuneration committee
which:
(1) has at least three members, a
majority of whom are
independent directors; and
(2)
is chaired by an independent
director,
and disclose:
(3)
the charter of the committee;
(4)
the members of the
committee; and
(5) as at the end of each
reporting period, the number
of times the committee met
throughout the period and the
individual attendances of the
members at those meetings;
or
(a) The Board has a Remuneration,
Nomination and Diversity Committee.
(1) The Committee is comprised of
three non-executive independent
directors as per Directors’ report
(2) The Chair is independent as per
Director’s report
(3) The Committee charter is at
http://www.quickstep.com.au/Inves
tors-Media/Corporate-Governance
(4) The members of the Committee
are detailed in the Directors’ report
(5) The details of meetings held and
attended is listed in the Directors’
report
N/A
(b)
if it does not have a remuneration
committee, disclose that fact and
the processes it employs for
setting the level and composition
of remuneration for directors and
senior executives and ensuring
that such remuneration is
appropriate and not excessive.
Recommendation 8.2 A listed entity should separately
disclose its policies and practices
regarding the remuneration of non-
executive directors and the remuneration
of executive directors and other senior
executives.
Recommendation 8.3
A listed entity which has an equity-based
remuneration scheme should:
(a)
have a policy on whether
participants are permitted to enter
into transactions (whether through
the use of derivatives or otherwise)
which limit the economic risk of
participating in the scheme; and
(b)
disclose that policy or a summary
of it.
34
The Company’s practices regarding the
remuneration of non-executive directors
and the remuneration of executive
directors and other senior executives are
outlined in the Remuneration report. The
Company’s remuneration policies are
available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
This is addressed by the Executive
Incentive Rights Plan and Executive
Remuneration Policy.
The Plan rules and policy is available at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance
46
47
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2014
Consolidated statement of profit or loss and other comprehensive income
for the year ended 30 June 2014
Consolidated statement of financial position
Consolidated statement of financial position
As at 30 June 2014
as at 30 June 2014
Consolidated statement of financial position
As at 30 June 2014
Revenue
Cost of sales of goods
Gross loss
Government grant income
Other income
Operational expenses
Marketing
Corporate and administrative expenses
Research and development expenses
Other
Loss from operating activities
Finance income
Finance expenses
Net financing costs
Loss before income tax
Income tax benefit
Net loss
Other comprehensive income/(loss) net of income tax
Item that may be reclassified to profit or loss
Notes
2
2
2
3(a)
4
4
6
2014
$
2013
$
12,001,752
2,562,621
(13,781,109)
(2,722,373)
(1,779,357)
5,329,751
457,107
(159,752)
3,725,596
502,585
(2,435,981)
(8,581,401)
(595,083)
(860,211)
(6,764,245)
(5,748,934)
(3,019,459)
(224,871)
(3,770,178)
(1,228,556)
(9,032,138)
142,642
(2,291,905)
(16,120,851)
355,157
(1,220,200)
(2,149,263)
(865,043)
(11,181,401)
-
(16,985,894)
-
(11,181,401)
(16,985,894)
Foreign currency translation difference for foreign operations
221,602
162,102
Total comprehensive income for the period
(10,959,799)
(16,823,792)
Earnings per share
Basic loss per share (cents)
Diluted loss per share (cents)
5
5
(2.93)
(2.93)
(5.25)
(5.25)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other current assets
Assets classified as held for sale
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Deferred income
Loans and borrowings
Employee benefits
Total current liabilities
Non-current liabilities
Trade and other payables
Deferred income
Loans and borrowings
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Total equity
Notes
2014
$
2013
$
7(a)
7(b)
8(a)
7(c)
7(d)
8(b)
565,583
6,180,827
8,260,333
3,848,833
394,718
445,385
1,393,320
4,564,303
1,650,674
390,400
387,430
1,878,000
19,695,679
10,264,127
8(c)
8(d)
13,454,853
36,557
13,799,229
65,422
13,491,410
13,864,651
33,187,089
24,128,778
7(e)
7(f)
7(g)
8(e)
7(e)
7(f)
7(g)
8(e)
5,290,832
13,809,490
7,394
473,720
2,569,237
2,795,014
1,696,785
261,289
19,581,436
7,322,325
-
-
10,456,325
61,337
654,118
6,086,391
9,773,722
26,668
10,517,662
16,540,899
30,099,098
23,863,224
3,087,991
265,554
9(a)
9(b)
9(c)
88,228,474
3,489,536
74,754,828
2,959,344
(88,630,019) (77,448,618)
3,087,991
265,554
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
36
37
48
49
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Consolidated statement of changes in equity
For the year ended 30 June 2014
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T
Consolidated statement of cash flows
For the year ended 30 June 2014
Consolidated statement of cash flows
for the year ended 30 June 2014
Cash flows from operating activities
Cash receipts in course of operations
Interest received
Interest paid
Research and development tax incentive and government grants
Cash payments in the course of operations
Net cash (outflow) from operating activities
Cash flows from investing activities
Acquisition of plant, equipment and intangibles
Proceeds from sale of plant and equipment
Receipts from (Investment in) restricted cash and term deposit
Net cash (outflow) from investing activities
Cash flows from financing activities
Net proceeds from issues of shares
Proceeds from borrowings
Repayment of borrowings
Payment of borrowing costs
Finance lease payments
Consolidated statement of cash flows
For the year ended 30 June 2014
Notes
2014
$
2013
$
15,601,190
10,732,977
97,430
(96,579)
95,829
(140,868)
5,226,829
4,763,093
(27,502,511) (18,495,694)
(3,044,663)
(6,673,641)
10
8(c)
(1,263,810)
(4,006,642)
189,501
-
(3,458,433)
300,000
(4,532,742)
(3,706,642)
12,625,293
-
-
8,353,192
(1,750,405)
(2,822,835)
(421,724)
(340,835)
(16,693)
(39,441)
10,436,471
5,150,081
(769,912)
(1,601,224)
(57,825)
1,393,320
565,583
(6,128)
3,000,672
1,393,320
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
7(a)
8
3
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
39
50
51
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
1 Segment information
(a) Description of segments
The Group has two operating segments, Manufacturing and Quickstep Systems.
The following summary describes the operations in each of the Group’s reportable segments:
Manufacturing - Targeting manufacturing contracts utilising a range of manufacturing solutions including
traditional manufacturing technologies such as autoclaves and ‘next generation’ technologies such as the
patented “Quickstep Process”.
Quickstep Systems - Licensing our “Quickstep Process” technology to Original Equipment Manufacturers
(OEM’s) and their suppliers, and providing them with Quickstep machines and support services.
(b) Segment results
2014
External revenues
Other income
Depreciation, amortisation and impairment
Interest expense
Reportable segment loss before income tax
Reportable segment assets
Reportable segment liabilities
Reportable capital expenditure
2013
External revenues
Other income
Depreciation, amortisation and impairment
Interest expense
Reportable segment loss before income tax
Reportable segment assets
Reportable segment liabilities
Reportable capital expenditure
(c) Understanding the segment results
Reconciliation of reportable segment loss
Total loss for reportable segments
Unallocated amount: other corporate expenses
Consolidated loss before income tax
Manufacturing
$
Quickstep
Systems
$
Total
$
11,955,593
3,292,333
2,236,083
987,468
46,159
2,393,514
195,842
130,662
12,001,752
5,685,847
2,431,925
1,118,130
(4,933,805)
23,671,724
(2,104,508)
6,376,586
(7,038,313)
30,048,310
23,810,203
1,217,643
4,260,905
21,493
28,071,108
1,239,136
Manufacturing
$
Quickstep
Systems
$
Total
$
2,225,997
1,982,433
2,908,176
960,807
336,624
2,245,748
372,358
224,948
2,562,621
4,228,181
3,280,534
1,185,755
(7,598,330)
17,381,122
20,913,124
3,160,200
(2,604,877)
5,097,790
1,177,744
321,924
(10,203,207)
22,478,912
22,090,868
3,482,124
2014
$
2013
$
(7,038,313)
(4,143,088)
(10,203,207)
(6,782,687)
(11,181,401) (16,985,894)
1 Segment information (continued)
(c) Understanding the segment results (continued)
Reconciliation of reportable segment assets
Total assets for reportable segments
Unallocated:
Other corporate assets
Consolidated total assets
Reconciliation of reportable segment liabilities
Total liabilities for reportable segments
Unallocated:
Other corporate liabilities
Consolidated total liabilities
(d) Major customers
(continued)
2014
$
2013
$
30,048,310
22,478,912
3,138,779
33,187,089
1,649,866
24,128,778
28,071,108
22,090,868
2,027,990
30,099,098
1,772,356
23,863,224
The revenues reported by the manufacturing segment include amounts primarily attributable to the following
customers:
Northrop Grumman ISS Int, Inc
Lockheed Martin Aeronautics
$6,267,326
$5,676,668
(e) Geographical information
The Manufacturing and Quickstep Systems segments are managed at Quickstep’s head office in Australia.
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.
2014
Australia
Germany
United States of America
Total
2013
Australia
Germany
United States of America
Total
Revenue
$
Non-current
assets
$
46,600
12,995,613
8,980
11,946,172
426,603
69,194
12,001,752
13,491,410
Revenue
$
Non-current
assets
$
3,300
13,233,270
53,972
2,505,349
544,855
86,526
2,562,621
13,864,651
41
42
52
53
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
2 Revenue and income
Sales revenue
Sale of goods
Government grant income
R & D tax incentive
Climate ready grant
SADI program grant
Other government grant income
NACC
Total government grant income
Other income
Profit on sale of assets
Other income
3 Expenses
(a) Other expenses
Amortisation of intangibles
Loss on disposal of assets
Impairment charge of assets held for sale
(b) Personnel expenses
Wages and salaries
Defined contribution plan expense
Other associated personnel expenses
Increase in leave liabilities
Share based payments expense
(continued)
2014
$
2013
$
12,001,752
2,562,621
4,463,253
-
157,326
481,453
227,719
5,329,751
3,310,882
(1,451)
128,695
287,470
-
3,725,596
-
457,107
457,107
1,200
501,385
502,585
Notes
2014
$
2013
$
8(d)
8(b)
16
53,795
171,076
-
209,060
11,785
1,007,711
224,871
1,228,556
9,379,829
6,949,944
857,769
1,422,536
247,100
308,590
599,779
987,249
107,029
474,543
12,215,824
9,118,544
4 Finance income and expense
Interest income
Change in fair value of deferred income through profit or loss
Gain on settlement of debt by equity instruments
Foreign currency gains
Finance income
Finance lease interest paid
Borrowing cost
Interest expense on liabilities measured at amortised cost
Foreign currency losses
Other
Finance expenses
Net financing costs
Recognised in other comprehensive income
Foreign currency translation difference for foreign operations
Finance income recognised in other comprehensive income, net of tax
(continued)
2014
$
2013
$
103,918
(201,460)
173,497
66,687
142,642
83,445
201,460
-
70,252
355,157
(1,606)
-
(3,003)
(3,227)
(1,118,130)
(1,185,755)
(1,038,675)
-
(133,494)
(28,215)
(2,291,905)
(1,220,200)
(2,149,263)
(865,043)
221,602
221,602
162,102
162,102
5 Loss per share
The calculation of basic loss per share at 30 June 2014 was based on the loss attributable to ordinary
shareholders of $11,181,401 (2013: $16,985,894) and a weighted average number (W.A.N.) of ordinary shares
outstanding during the financial year ended 30 June 2014 of 381,291,850 (2013: 323,412,485) calculated as
follows:
2014
2013
Note Actual No.
W.A.N.
Actual No.
W.A.N.
Issued ordinary shares 1 July
Effect of shares issued on exercise of
rights and options to Executives as
remuneration
Effect of shares issued
Effect of shares issued for debt settlement
Issued ordinary shares at 30 June
9(a)
9(a) 323,845,045 323,845,045 322,748,630 322,748,630
2,982,117
1,128,030
1,096,415
663,855
66,640,000
53,891,754
-
-
3,990,372
-
397,457,534 381,291,850 323,845,045 323,412,485
2,427,021
-
Potential ordinary shares on issue are not considered to be dilutive and therefore the diluted loss per share
equals the basic loss per share.
Weighted average number of ordinary shares (basic and diluted)
381,291,850
323,412,485
Basic and diluted loss (cents per share)
(2.93)
(5.25)
2014
2013
54
43
44
55
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
6
Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax benefit reported in the consolidated income statement
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2013 - 30.0%)
Expenditure not allowable for income tax purposes
Effect of different tax rate for overseas subsidiaries
Income not assessable
Deferred tax asset not brought to account
Income tax expense
2014
$
2013
$
-
-
-
-
-
-
-
-
(11,181,401)
(3,354,420)
2,496,813
108,711
(1,295,611)
2,044,507
-
(16,985,894)
(5,095,768)
2,719,443
28,981
(1,060,499)
3,407,843
-
(c) Tax losses not brought to account
The gross balance of unused tax losses for which no deferred tax asset has been
recognised.
59,957,561
54,997,902
(d) Temporary differences not brought to account
Deferred tax assets/(liabilities):
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
-
844,765
29,174
273,315
1,166,332
207,754
(2,521,340)
(3,213)
964,532
43,535
221,000
927,123
207,754
(2,360,731)
-
-
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 such benefits.
(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.
7 Financial assets and liabilities
(a) Cash and cash equivalents
Current assets
Cash at bank and in hand
2014
$
2013
$
565,583
565,583
1,393,320
1,393,320
Cash and cash equivalents of $397,929 have been pledged as collateral against a secured bank loan (refer to
Note 7(g)).
(b) Trade and other receivables
Trade receivables
Other receivables:
R&D tax incentive and government
grants receivable
GST and VAT receivable
Accrued interest
Payroll tax refund receivable
Other receivables
2014
Non-
current
$
Current
$
Total
$
Current
$
2013
Non-
current
$
Total
$
2,326,468
- 2,326,468 1,087,096
- 1,087,096
3,500,000
58,622
8,462
278,530
- 3,500,000 3,395,130
- 58,622 38,521
2,237
8,462
-
-
- 278,530
- 3,395,130
- 38,521
2,237
-
-
-
8,745 - 8,745 41,319
- 41,319
6,180,827
- 6,180,827 4,564,303
- 4,564,303
Trade and other receivables of $913,640 have been pledged as collateral against a secured bank loan (refer
Note 7(g)).
(c) Other financial assets
Current assets
Restricted cash deposits
Held to maturity term deposits
2014
$
2013
$
3,069,433
779,400
3,848,833
-
390,400
390,400
Restricted cash deposits as at 30 June 2014 include an amount of 2.120m EURO deposited with ANZ Banking
Group, the company’s bankers, as guarantee for an advance customer payment pending delivery of goods
related to the ORPE Contract. This contract is for the construction and delivery of a “Quickstep Process”
machine. Completion of this contract is planned for April 2015.
(f) R&D tax offset incentive
Held to maturity term deposit comprises of interest bearing term deposits:
An R&D tax offset incentive of $3,510,000 (2013: $3,310,882) has been recorded as a receivable as at 30 June
2014 based on eligible expenditure incurred during the year of tax.
-‐-‐-‐
-‐-‐-‐
-‐-‐-‐
$115,000 maturing on 7 July 2014
$274,000 maturing on 26 September 2014
$390,400 maturing on 10 May 2015
45
46
56
57
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
2014
$
2013
$
340,454
54,264
394,718
359,425
28,005
387,430
7 Financial assets and liabilities (continued)
(g) Loans and borrowings
Secured bank loan
Capitalised interest facility
Finance lease liability
Short term facility agreement
Prepaid borrowing cost
2014
Non-
current
$
Current
$
-
-
7,394
-
-
10,000,000
1,062,801
8,712
-
(615,188)
Total
$
Current
$
2013
Non-
current
$
Total
$
10,000,000
1,062,801
16,106
(615,188)
- 10,000,000 10,000,000
600,156
-
22,927
6,821
- 1,750,405
- 1,750,405
(842,540) (902,981)
(60,441)
600,156
16,106
7 Financial assets and liabilities (continued)
(d) Other current assets
Current assets
Prepayments
Other
(e) Trade and other payables
Trade payables
Sundry payables and accrued expenses
Royalties payable (i)
2014
Non-
current
$
Current
$
4,374,324
916,508
-
Current
$
Total
$
- 4,374,324
-
-
-
738,837
916,508 1,460,178
370,222
2013
Non-
current
$
Total
$
738,837
-
- 1,460,178
654,118 1,024,340
5,290,832
- 5,290,832 2,569,237
654,118 3,223,355
(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. In
December 2013, the company issued 3,990,372 Quickstep shares at $0.2126 to VCAMM Limited as full
and final repayment of the Heads of Agreement.
(f) Deferred income
Deferred income
2014
Non-
current
$
Total
$
Current
$
2013
Non-
current
$
Total
$
- 13,809,490 2,795,014 6,086,391 8,881,405
- 13,809,490 2,795,014 6,086,391 8,881,405
Current
$
13,809,490
13,809,490
The amounts reported as deferred income includes amounts received as a 90% prepayment of the first 24 ship
sets of C-130J wing flaps to be sold to Lockheed Martin, scheduled to be completed and therefore income
recognized by February 2015. It also includes a 70% prepayment received on the contract with ORPE
Technologiya for sale and delivery of the company's first “Quickstep Process” machine, scheduled to be
delivered and therefore income recognized in April 2015.
(i) Term and debt repayment schedule
7,394 10,456,325 10,463,719 1,696,785
9,773,722 11,470,507
2014
2013
Effective
interest rate
%
Year of
maturity
Maximum
facility value
Carrying
amount
Maximum
facility value
Carrying
amount
$
$
$
$
Secured bank loan
Capitalised Interest
Short
agreement
term
facility
Finance lease liabilities
9.131
9.131
19.897
8.397
(ii) Secured bank loan
2021
10,000,000 10,000,000
10,000,000 10,000,000
2021
3,333,333
1,062,801
3,333,333
600,156
2013
2014
-
n/a
-
2,400,000
1,750,405
16,106
n/a
22,297
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 2014 the
facility had been fully drawn to $10,000,000 together with capitalised interest of $1,062,801.
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 principal balance.
The facility includes an interest rate cap that 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 2014 is $24,333,395 which represents the cash and cash equivalents, plant and
equipment, inventory and other assets owned by Quickstep Technologies Pty Ltd.
47
48
58
59
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
8 Non-financial assets and liabilities
(a) Inventories
Current assets
Raw materials and consumables
Work in progress
2014
$
2013
$
5,162,989
3,097,344
8,260,333
1,404,184
246,490
1,650,674
Inventories of $6,905,757 (2013:$1,557,009) have been pledged as collateral against a secured bank loan (refer
to Note 7(g)).
(b) Assets classified as held for sale
During the previous financial year, following the decommissioning of the Company’s North Coogee facility, the
company identified $2,885,711 of plant and equipment which were deemed surplus to the needs of the Company
and classified as held for sale. After recognition of $1,007,711 impairment, the fair value and carrying value of
these assets was $1,878,000 at 30 June 2013.
During the current financial year the Company reassessed the benefits of the surplus assets to the Company in
facilitating future growth against the benefits to be derived from the sale of these assets. It was decided that the
majority of the surplus assets should be utilised for the JSF Project and were reclassified as plant and equipment.
The fair value less cost to sell the remaining assets held for sale at 30 June 2014 is $445,385.
The fair value measurement for assets held for sale of $445,385 has been categorized as a Level 2 fair value,
based on other observable market transactions for assets of a similar age and condition.
7 Financial assets and liabilities (continued)
(g) Loans and borrowings (continued)
(ii) Secured bank loan (continued)
Under this agreement, Quickstep Technologies Pty Ltd (Chargor) has agreed to the following restrictions on title
on any of the assets (Secured Property) that Efic (Chargee) has a fixed charge over. Without the consent of the
Chargee, the Chargor may not:
•
•
•
dispose of the Secured Property; or
lease or license the Secured Property or any interest in it, or deal with any existing lease or licence; or
part with possession of the Secured Property; or
• waive any of the Chargor’s rights or release any person from its obligations in connection with the Secured
Property; or
•
deal in any other way with the Secured Property or any interest in it, or allow any interest in it to arise or be
varied.
Quickstep Holdings Limited has entered into a 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 2014 is $87,355,883 and its carrying value net of
impairment is $47,976,213.
(iii) Short term facility agreement
On 29 October 2012 Quickstep Holdings Limited executed a Facility Agreement which provided for a loan facility
of up to $2,400,000 and was secured against the Australian Taxation Office R&D Tax Offset receivable (note
7(b)).
On 9 October 2013, the loan facility was repaid in full and the Facility Agreement was terminated.
(iv) Finance lease liabilities
Future minimum lease payments
Less than one year
Between one and five years
Interest
Less than one year
Between one and five years
Present value of minimum lease payments
Less than one year
Between one and five years
2014
$
2013
$
8,427
9,129
17,556
8,426
17,555
25,981
2014
$
2013
$
1,033
417
1,450
7,394
8,712
16,106
1,605
1,449
3,054
6,821
16,106
22,927
49
50
60
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
8 Non-financial assets and liabilities (continued)
(c) Property, plant and equipment
8 Non-financial assets and liabilities (continued)
(d) Intangible assets
At 1 July 2012
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Disposals
Transfers
Assets held for sale (ii)
Effect of movements in exchange rates
Depreciation for the year
Closing net book amount
At 30 June 2013
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Transfers
Assets held for sale (ii)
Effect of movements in exchange rates
Depreciation for the year
Closing net book amount
At 30 June 2014
Cost (i)
Accumulated depreciation
Net book amount
Plant and
equipment
$
Assets under
construction
$
Office
furniture &
equipment
$
Total
$
19,188,703
(4,694,171)
14,494,532
1,661,307
-
1,661,307
687,036
(351,529)
335,507
21,537,046
(5,045,700)
16,491,346
14,494,532
870,742
(32,641)
2,132,319
(2,885,711)
53,380
(2,874,587)
11,758,034
1,661,307
2,376,201
-
(2,587,199)
-
1,960
-
1,452,269
335,507
235,181
(121,980)
454,880
-
36,778
(351,440)
588,926
16,491,346
3,482,124
(154,621)
-
(2,885,711)
92,118
(3,226,027)
13,799,229
17,432,426
(5,674,392)
11,758,034
1,452,269
-
1,452,269
1,309,995
(721,069)
588,926
20,194,690
(6,395,461)
13,799,229
11,758,034
264,403
(163,565)
2,086,492
1,432,615
(7,680)
(2,453,055)
12,917,244
1,452,269
866,146
-
(2,225,892)
-
797
-
93,320
588,926
108,587
(197,012)
139,400
-
5,967
(201,579)
444,289
13,799,229
1,239,136
(360,577)
-
1,432,615
(916)
(2,654,634)
13,454,853
22,103,601
(9,186,357)
12,917,244
93,320
-
93,320
1,071,002
(626,713)
444,289
23,267,923
(9,813,070)
13,454,853
(i)
(ii)
Refer to Note 7(g) (ii) for details of fixed and floating charges over certain of the above assets.
Refer to note 8(b) for details regarding assets held for sale.
At 1 July 2012
Cost
Accumulation amortisation and impairment
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Disposals
Effect of movement in exchange rates
Amortisation for the year
Closing net book amount
At 30 June 2013
Cost
Accumulation amortisation and impairment
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Effect of movement in exchange rates
Amortisation for the year
Closing net book amount
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
(e) Employee benefits
Patents &
rights
$
Royalty buy-
back
$
Computer
software
$
Total
$
646,908
(634,491)
12,417
94,419
(84,194)
10,225
739,398
(531,264)
208,134
1,480,725
(1,249,949)
230,776
12,417
-
-
-
(12,417)
-
10,225
-
-
-
(10,225)
-
208,134
44,730
(2,599)
1,575
(186,418)
65,422
230,776
44,730
(2,599)
1,575
(209,060)
65,422
646,908
(646,908)
-
94,419
(94,419)
-
689,003
(623,581)
65,422
1,430,330
(1,364,908)
65,422
-
-
-
-
-
-
-
-
-
-
-
-
65,422
24,674
-
256
(53,795)
36,557
65,422
24,674
-
256
(53,795)
36,557
646,908
(646,908)
-
94,419
(94,419)
-
714,422
(677,865)
36,557
1,455,749
(1,419,192)
36,557
Liability for annual leave
Liability for long service leave
2014
Non-
current
$
Current
$
473,720
Total
$
Current
$
2013
Non-
current
$
Total
$
-
473,720
261,289
-
261,289
-
61,337
61,337
-
26,668
26,668
473,720
61,337
535,057
261,289
26,668
287,957
51
52
62
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
9 Equity
(a) Share capital
(i) Share capital
9 Equity (continued)
(a) Share capital (continued)
(iii) Options
Options granted during the year
Ordinary shares - fully paid
397,457,534
323,845,045
88,228,474
74,754,828
Expiry date
Exercise price
Number of options
2014
Shares
2013
Shares
2014
$
2013
$
During the financial year, the Company granted options as follows.
(continued)
(continued)
(ii) Movements in ordinary share capital
Details
Opening balance 1 July 2012
Shares issued on exercise of rights
Shares issued to employees as remuneration
Balance 30 June 2013
Opening balance 1 July 2013
Shares issued on exercise of rights
Shares issued to employees as remuneration
Shares issued on exercise of options
Shares issued for debt settlement
Issue of ordinary shares, net of costs
Balance 30 June 2014
Notes
Number of
shares
$
(a)
(a)
(a)
(a)
(a)
(b)
(c)
322,748,630
769,130
327,285
74,754,828
-
-
323,845,045
74,754,828
323,845,045
2,204,589
471,048
306,480
3,990,372
66,640,000
74,754,828
-
-
-
848,353
12,625,293
397,457,534
88,228,474
(a) During the year, the Company issued 2,982,117 (2013: 1,096,415) shares pursuant to share-based
payment arrangements with certain management personnel.
(b)
At 30 June 2013 Quickstep Holdings Limited (QHL) and Quickstep Technologies Pty Ltd (QTPL) had an
agreement with VCAMM (Victorian Centre for Advanced Materials Manufacturing). This agreement had
been in place since 2005. The agreement identified the value for future royalties to be attributed to
services provided to the Group by VCAMM and the mechanism for paying those royalties. The balance
owing at 30 June 2013 was $1,043,749.
In December VCAMM agreed to a full and final settlement of all outstanding amounts by way of shares in
QHL. A total of 3,990,372 shares were issued at a value of $848,353 ($0.2126/share).
(c) During August and September 2013 QHL raised a total of $12,625,293 in additional capital (after costs of
$702,798). The transactions involved raised a total of $5,539,010 across 2 institutional placements and
$7,086,238 from the Share Purchase Plan.
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.
22 November 2019
$0.00
Unissued shares under option
2014
-
2013
987,739
At 30 June, unissued ordinary shares of the Company under option are:
Expiry date
Exercise price
Number of options
30 March 2017
26 November 2017
23 November 2018
22 November 2019
$0.00
$0.00
$0.00
$0.00
2014
1,091,144
471,337
706,373
987,739
2013
1,397,624
471,337
706,373
987,739
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Exercise of options
During the year 306,480 (2013: Nil) options were exercised.
Lapse of options
During the current and prior financial years no options lapsed.
53
54
64
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
9 Equity (continued)
(a) Share capital (continued)
(iv) Rights
(continued)
10 Cash flow information
At 30 June 2014, unissued ordinary shares of the Company under rights totalled 802,000 (2013: 2,425,310). The
rights are issued pursuant to:
• Executive services agreements, which rights vest at various times in the future according to years of service
completed.
Offers under the Quickstep Incentive Rights Plan (IRP)., which rights vest at various times in the future upon
satisfaction of performance conditions
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 16.)
During the year 2,204,589 shares (2013: 769,130 shares) were issued as a result of the exercise of rights.
220,720 rights were forfeited in the current year (2013: 434,847).
(b) Reserves
Balance at 1 July 2012
Grant of rights to shares to employees
Grant of options to key management personnel
Issue of shares to key management personnel
Foreign currency translation differences
At 30 June 2013
Balance at 1 July 2013
Grant of rights to shares to key management personnel
Grant of options to key management personnel
Issue of shares to key management personnel
Foreign currency translation differences
At 30 June 2014
(c) Retained earnings / (Accumulated losses)
Balance 1 July
Net loss for the year
Balance 30 June
Share-
based
payments
$
2,613,956
278,219
141,340
54,984
-
3,088,499
3,088,499
89,469
87,035
132,086
-
3,397,089
Foreign
currency
translation
$
Total
$
(291,257) 2,322,699
278,219
141,340
54,984
162,102
(129,155) 2,959,344
-
-
-
162,102
(129,155) 2,959,344
89,469
87,035
132,086
221,602
92,447 3,489,536
-
-
-
221,602
2014
$
(77,448,618)
(11,181,401)
(88,630,019)
2013
$
(60,462,724)
(16,985,894)
(77,448,618)
Reconciliation of cash flows from operating activities to loss after income tax;
Loss for the year
Adjustments for:
Amortisation of intangibles
Depreciation
Interest income
Share based payment expense
Loss on disposal of assets
Non-cash finance costs
Impairment / (writeback)
-
-
-
-
-
-
-
- Gain on settlement of debt by equity instruments
Foreign currency losses
-
-
Foreign currency gains
- Other finance expense
-
Present value on deferred income
Operating loss before changes in working capital
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
Increase in inventories
Increase in other current assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in employee benefits
Increase in deferred income
(Increase)/decrease in prepaid interest
Net cash used in operating activities
(continued)
2014
$
2013
$
(11,181,401)
(16,985,894)
53,795
2,654,634
(103,918)
308,590
171,076
1,118,130
(27,898)
(173,497)
1,038,675
(66,687)
133,494
(201,460)
(6,276,467)
(1,615,524)
(6,609,659)
(7,288)
2,308,947
247,100
4,928,085
351,165
(6,673,641)
209,060
3,226,027
-
474,543
-
1,185,755
1,007,711
-
-
-
-
201,460
(10,681,338)
351,675
(1,232,083)
(61,129)
(65,999)
(5,004)
8,881,405
(232,190)
(3,044,663)
11 Financial instruments - fair values and 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.
55
56
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67
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
11 Financial instruments - fair values and risk management (continued)
11 Financial instruments - fair values and risk management (continued)
(b) Credit risk
(c) Liquidity 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.
(i) Trade 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.
(ii) 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.
As at the reporting date, no financial assets are neither past due or impaired.
(iii) 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
Restricted cash deposits
2014
$
565,583
779,400
6,180,827
3,069,433
2013
$
1,393,320
390,400
4,564,303
-
10,595,243
6,348,023
As at 30 June 2014, no financial asset was considered past due (2013: nil).
As at 30 June 2014, no financial asset was considered impaired (2013: 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
3,882,803
1,286,625
1,011,399
6,180,827
3,441,686
38,686
1,083,931
4,564,303
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquid assets to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking
damage to the Group’s reputation.
Typically, the Group ensures that it has sufficient cash 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 19(d).
(i) Maturities of financial liabilities
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
Contractual maturities of
financial liabilities
Contractual
Between 1 Between 2
Trade and other payables
Finance lease liabilities
Secured bank loan
5,290,832
16,106
(5,290,832) (5,290,832)
(4,213)
(17,555)
-
(4,213)
-
(8,427)
-
(702)
-
-
10,447,613 (15,550,315) (150,000) (150,000) (1,020,445) (8,309,809) (5,920,061)
15,754,551 (20,858,702) (5,445,045) (154,213) (1,028,872) (8,310,511) (5,920,061)
At 30 June 2013
VCAMM royalties payable
Trade and other payables
Finance lease liabilities
Secured bank loan
Short term facility
agreement
(d) Market risk
1,024,340
2,199,015
22,927
(1,043,749)
(183,989)
(2,199,015) (2,199,015)
(4,213)
(150,000)
(25,982)
9,757,616 (15,978,578)
(183,989)
-
(4,213)
(150,000)
(675,771)
-
(8,427)
-
-
(9,129)
(300,000) (6,177,885)
-
-
-
(9,200,693)
1,689,964
(1,878,455) (1,878,455)
-
-
-
-
14,693,862 (21,125,779) (4,415,672) (338,202) (984,198) (6,187,014) (9,200,693)
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.
(i)
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.
57
58
68
69
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
(continued)
11 Financial instruments - fair values and risk management (continued)
11 Financial instruments - fair values and risk management (continued)
(d) Market risk (continued)
The Group has entered into a variable rate secured loan agreement for a period of 10 years. The facility includes
an allowance to defer interest payments up to $3,333,333 over the first 5 years of the loan, with interest to be
accrued on the deferred amount. 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 5.03%. This limit will ensure that the interest to be capitalised will not exceed the capitalisation limit.
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial assets/(liabilities) was:
Fixed rate instruments
Held-to-maturity term deposits
Finance lease liabilities
Variable rate instruments
Cash and cash equivalents
Secured bank loan
Short term facility agreement
2014
$
2013
$
779,400
(16,106)
763,294
390,400
(22,927)
367,473
565,583
(11,062,801)
-
1,393,320
(10,600,156)
(1,750,405)
(10,497,218) (10,957,241)
Cash includes funds held in short term deposits during the year, which earned a weighted average interest rate of
1.6% (2013: 3.19%).
The interest rates applicable to the Group’s finance leases are 8.40% (2013: 12.99%).
Financial assets held-to-maturity includes three security deposits as follows;
•
•
•
$115,000 with an interest rate of 2.0%, maturing on 7 July 2014
$274,000 with an interest rate of 3.08%, maturing on 26 September 2014
$390,400 with an interest rate of 3.35%, maturing on 10 May 2015
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 4.26% at 30 June 2014.
The short term facility agreement incurred a rate of interest of the higher of 12.5% or the aggregate of the BBR
on the first day of the interest period and 9% per annum. This facility was repaid in full in September 2013 (refer
Note 7(g)(iii)).
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 in the following table. This analysis assumes that all other variables, in particular
foreign currency rates, remain constant. The analysis is performed on the same basis for 2013.
(d) Market risk (continued)
Effect in AUD
Variable rate instruments - increase by 100 basis points
Variable rate instruments - decrease by 100 basis points
Cash flow sensitivity (net)
(ii) Currency risk
2014
$
(104,972)
104,972
-
2013
$
(13,933)
13,933
-
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 investments in its German and USA subsidiaries are not hedged as the currency positions are
considered to be long-term in nature.
Exposure
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar,
was as follows:
Receivables
Cash
Trade payables
30 June 2014
30 June 2013
USD
$
3,251,010
132,646
(279,849)
EUR
$
1,429,419
46,261
(120,460)
3,103,807
1,355,220
USD
$
20,531
186,904
(80,538)
126,897
EUR
$
54,462
621,601
(24,249)
651,814
The following significant exchange rates applied during the year:
AUD v USD
AUD v EUR
Sensitivity analysis
Average rate
Reporting date
spot rate
2014
2013
2014
2013
0.9184
0.6770
1.0270
0.7936
0.9420
0.6906
0.9275
0.7095
A 10 percent movement of the Australian dollar against the Euro and US Dollar at 30 June would have increased
(decreased) profit or loss and equity on balances denominated in foreign currencies by the amounts shown in the
following table. This analysis assumes that all other variables, in particular interest rates, remain constant. The
analysis is performed on the same basis for 2013.
59
60
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
11 Financial instruments - fair values and risk management (continued)
(d) Market risk (continued)
Index
US/AUD exchange rate - increase (10%)
US/AUD exchange rate - decrease 10%
EUR/AUD exchange rate - increase (10%)
EUR/AUD exchange rate - decrease 10%
(e) Capital management
Increase/(decrease) in loss
Increase/(decrease) in equity
2014
$
299,537
(366,101)
178,398
(218,042)
(106,208)
2013
$
(38,146)
46,623
(32,042)
39,162
2014
$
(391,873)
478,956
(329,611)
402,858
2013
$
(118,127)
144,378
(235,335)
287,632
15,597
160,330
78,548
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.
The Company and its subsidiaries were subject to the requirement in the new Efic loan facility that the net asset
position at 30 June, 2014 exceeded $3,000,000.
Fair value hierarchy
As at the reporting date, all financial instruments held by Quickstep Holdings Limited are considered level 1 in the
fair value hierarchy. Quickstep Holdings Limited’s financial instruments are primarily made up of cash and cash
equivalents and trade receivables and payables, to which there is active market to ascertain its value. During the
year, there have been no transfers from levels in the fair value hierarchy.
12 Group entities
Name of entity
Parent entity
Quickstep Holdings Limited
Controlled entities
Quickstep Technologies Pty Ltd
Quickstep Operations Pty Ltd
Quickstep GmbH
Quickstep Composites LLC
Quickstep Australia Pty Ltd
Commercial Aerospace Composites Australia Pty Ltd
Country of
incorporation Ownership interest
2013
2014
%
%
Australia
100.0
100.0
Australia
Australia
Germany
USA
Australia
Australia
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
13 Capital and other commitments
(a) Non-cancellable operating leases
Non-cancellable operating lease contracted for but not capitalised in the financial
statements payable as follows:
- Within one year
-
-
Later than one year but not later than five years
Later than five years
2014
$
2013
$
1,234,730
8,096,621
7,253,238
998,662
7,685,481
8,852,388
16,584,589
17,536,531
The Company's operating lease commitments comprise of four property leases, and three capital finance
agreements for IT equipment.
The first property lease relates to premises at Bankstown, NSW. It is a non-cancellable lease with a ten year term
with two options to renew for five years each. This lease contains provision for rent reviews on an annual basis.
The second property lease relates to premises at Bankstown, NSW. It is a non-cancellable with a ten year term
with two options to renew for five years each. It contains provision for rent reviews on an annual basis.
The third property lease relates to premises at Ottobrunn, Germany. It is a non-cancellable with a ten year term
with two options to renew for five years each. It contains provision for rent reviews on an annual basis.
The fourth property lease relates to premises at Dayton, Ohio which is leased on a monthly basis.
(b) Capital commitments
The Group’s commitments in respect of plant and equipment contracted for but not provided for are set out
below:
Payable
-
within one year
14 Subsequent events
Since the end of the financial year the Group:
2014
$
2013
$
-
-
588,401
588,401
• Secured support from Efic for the bonds of $3m, disclosed within Other Financial Assets, associated
with the ORPE program. This has allowed the Group access to the previously restricted funds; and
• Secured from Efic a $2.5m working capital guarantee facility to support the anticipated growth in
production volumes; and
• Received a customer advance payment of $2.3m; and
• Commenced the process of closing down the US office and is in the advanced stages of transferring the
activities to a licensee.
Other than the matters referred to above, there have been no events subsequent to balance date which would
have a material effect on the Group’s financial statements as at 30 June 2014.
61
62
72
73
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
15 Related party transactions
(a) Key management personnel compensation
The key management personnel compensation included in “Personnel expenses” in note 3(b) is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination benefits
2014
$
2,638,893
141,323
238,080
28,846
2013
$
2,387,006
145,265
435,873
81,120
3,047,142
3,049,264
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.
(b) Disposal of 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. During the financial year, this investment was sold to London
Wall Investments Pty Limited, of which Mark Jenkins is a director.
16 Share-based payments
(a) Quickstep Employee Incentive Plan
The Company previously 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). Further details
regarding the EIP are set out in the Remuneration Report.
At 30 June 2014, Mr P Odouard is the only employee to be granted options pursuant to the EIP. No options were
granted during FY14 under the EIP, which has been replaced by the Incentive Rights Plan (IRP) as set out at
Note 16 (b) below.
The number and weighted average exercise prices (WAEP) of options issued under the EIP are as follows:
Employee Incentive Plan
As at 1 July
Granted during the year
Exercised during the year
As at 30 June
Exercisable as at 30 June
2014
2013
Number
WAEP
Number
WAEP
3,563,073
-
(306,480)
3,256,593
-
$0.00
-
$0.00
$0.00
$0.00
2,575,334
987,739
-
3,563,073
-
$0.00
$0.00
-
$0.00
$0.00
The weighted average share price at the date of exercise for share options exercised in FY14 was $0.21 (2013:
no options exercised).
Details of the fair value of unvested options granted are set out below
Grant
Tranche 3
Tranche 4
2010 year
2011 year
2012 year
Total
No. of options
Fair value per option at
the grant date
Total fair value $
619,446
471,698
471,337
706,373
987,739
3,256,593
$0.3150
$0.2700
$0.3620
$0.1730
$0.1250
$195,125
$127,358
$170,624
$122,203
$123,467
$738,777
During 2014, an expense of $87,035 (2013:$141,340) has been recognized in the financial statements in respect
of the portion of the fair value of options 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, 2011 year and 2012 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, 2011 year and 2012 year at grant date included the following:
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Dividend yield
30/03/2010
30/06/2011
30/03/2017
$0.35
Nil
1.3
80%
4.66%
0%
30/03/2010
30/06/2012
30/03/2017
$0.35
Nil
2.3
80%
5.01%
0%
26/11/2010
30/06/2013
26/11/2017
$0.41
Nil
2.9
75%
5.07%
0%
23/11/2011
31/08/2014
23/11/2018
$0.21
Nil
3.1
75%
3.08%
0%
22/11/2012
31/082015
23/11/2019
$0.17
Nil
3.0
55%
2.68%
0%
63
64
74
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
16 Share-based payments (continued)
(b) Quickstep Incentive Rights Plans
During the year the Company established the Quickstep Incentive Rights Plan (IRP).
The IRP has been designed to facilitate the Company moving towards best practice remuneration structures for
executives.
The IRP authorises the granting of Rights to executives of the Company, in the form of Performance Rights
(PRs) and/ or Deferred Rights (DRs) (together, Rights). These rights represent an entitlement on vesting to fully
paid ordinary shares in the issued capital of the Company (Shares) and cash with the total value of cash and
Shares being equal to the value of vested Rights (number of vested Rights x market value of a Share). PRs may
vest if Performance Conditions are satisfied. DRs may vest if service conditions are satisfied. The 2013-14 offer
to Mr P Odouard consisted of PRs only. Further details regarding the IRP are set out in the Remuneration
Report.
At 30 June 2014 Mr Odouard is the only employee to be granted rights pursuant to the IRP.
Details of the fair value of unvested rights are set out below.
Grant
2013 year
No. of rights
Fair value per right at
the grant date
Total fair value $
802,000
$0.1520
$121,904
Total
$121,904
During FY14 an expense of $26,569 (2013: nil) has been recognized in the financial statements in respect of the
portion of the fair value of rights attributable to the current financial year as required by accounting standards.
802,000
A Monte-Carlo model was used to value the rights per dollar issued. The model’s key assumptions were as
follows:
2013 year
31/08/2013
30/08/2016
30/08/2018
$0.195
Nil
3.3 years
55%
15%
0%
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Volatility of QHL
Volatility of AOAI
Dividend yield
Movements in the IRP are as follows:
Incentive Rights Plan
As at 1 July
Granted during the year
As at 30 June
Exercisable as at 30 June
2014
Number
2013
Number
-
802,000
802,000
-
-
-
-
-
(c) Executive performance and retention bonus
During the 2012 financial year the Company granted rights over 2,200,621 shares with a fair value of $547,840
through an Executive performance and retention bonus scheme. The rights were due to vest on 31 December
2013 subject to performance of criteria related to the Company’s relocation objectives, and were conditional upon
continued employment. In the event that the share price of the Company at the exercise date was below $0.18,
the number of shares to be issued was to be increased by the percentage variation of the share price from $0.18.
The rights were valued at fair value based on a Monte Carlo simulation at the issue date. An expense of $62,275
(2013:$210,413) has been included in the financial statements as the portion of the offer attributable to the
current financial year as required by accounting standards.
16 Share-based payments (continued)
(c) Executive performance and retention bonus (continued)
A Monte-Carlo model was used to value the rights per dollar issued. The model’s key assumptions 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
The performance conditions relating to these rights were partially satisfied, and the rights vested on 31 December
2013. 1,545,054 shares were subsequently issued and allotted to executives under the scheme who had also
fulfilled their employment conditions; being a 12.5% reduction on the full amount granted. The share price at the
date of allotment was $0.175. All rights under this scheme have either vested or been forfeited as at 30 June
2014, and all shares issued as required.
Movements in performance and retention bonus rights during the year were as follows:
Executive performance and retention bonus
Performance rights on issue July 1
Performance rights exercised
Performance rights forfeited
Performance rights on issue 30 June
(d) Loyalty bonus
2014
Number
2013
Number
1,765,774
(1,545,054)
(220,720)
-
2,200,621
-
(434,847)
1,765,774
Rights have been issued to a number of key management personnel in prior years as long term retention
incentives. The rights were to vest in two tranches, provided the employee remained employed with the Group,
with 1/3 vesting 2 years from the date granted and 2/3 vesting 3 years from the date granted.
The rights were valued at the market value of the Group’s shares on the date of issue of the rights. An expense
of $625 (2013: $104,509) has been included in the financial statements as the portion of the offer attributable to
the current financial year as required by accounting standards.
659,535 rights vested (2013: 769,131 rights vested) during the period. The weighted average share price at the
date of vesting of the 656,535 rights was $0.22. All rights under this scheme have vested as at 30 June 2014 and
all shares issued as required.
Movements in loyalty bonus rights during the year were as follows:
Loyalty bonus
Performance rights on issue July 1
Performance rights exercised
Performance rights granted
Performance rights on issue 30 June
2014
Number
2013
Number
659,535
(659,535)
-
-
1,173,303
(769,131)
255,363
659,535
65
66
76
77
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
16 Share-based payments (continued)
(e) Equity settled short term incentive
Certain executives receive short term incentives (STI) in cash and/or shares based on achievement of key
performance indicators (KPIs). Each year the RN&D Committee considers the appropriate targets and KPIs and
the alignment of individual rewards to the Group’s performance. These targets may include measures related to
the annual performance of the Group and/or specified parts of the Group and are measured against actual
outcomes. The number of shares issued to executives is based on the accrued equity settled STI value divided
by the weighted average share price on the date the shares are granted.
471,048 shares (2013: nil) were issued to employees as consideration for $102,217 of short term incentives paid
in respect of short term incentive achievement in the previous financial year.
Incentives accrued for in the current year of $125,673 (2013: $95,804) are expected to be settled through share
based payments during the next financial year.
(f) Employee expenses
The expense recorded in the financial report for the portion attributable to the current financial year as required
by accounting standards is:
Equity settled short term incentive
IRP, performance and retention and loyalty bonus share rights granted
EIP options
17 Remuneration of auditors
(a) KPMG
(i) Audit and other assurance services
Amounts received or due and receivable by the auditor for:
Audit services
KPMG - current year
KPMG - under accrual from prior year
2014
$
132,086
89,469
87,035
2013
$
101,307
231,896
141,340
308,590
474,543
2014
$
2013
$
179,600
30,000
209,600
171,100
100,667
271,767
18 Parent entity financial information
(a) Summary financial information
As at, and throughout, the financial year ending 30 June 2014 the parent company of the Group was Quickstep
Holdings Limited.
(continued)
Results of the parent entity
Loss for the period
Other comprehensive income
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Net Assets
Total equity of the parent entity comprises of:
Share capital
Share based payments reserve
Accumulated losses
Total Equity
2014
$
2013
$
(43,737,897)
221,602
1,694,792
162,102
(43,516,295)
1,856,894
4,217,115
4,217,115
3,869,695
35,541,672
640,207
640,207
2,358,178
2,358,178
3,576,908
33,183,494
88,228,474
3,334,983
74,754,874
2,677,272
(87,986,549) (44,248,652)
3,576,908
33,183,494
67
68
78
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
19 Significant accounting policies
(a) Reporting entity
Quickstep Holdings Limited (“the Company”) is a company domiciled in Australia. The consolidated financial
statements of the Company as at and for the year ended 30 June 2014 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
licensing its “Quickstep Process” technology to Original Equipment Manufacturers and suppliers, and providing
them with Quickstep machines and support services.
(continued)
(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) 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 30 September
2014.
Basis of measurement
The financial statements are prepared on the historical cost basis. These consolidated financial statements are
presented in Australian dollars, which is the Company’s functional currency.
(continued)
19 Significant accounting policies (continued)
(d) Going concern
The Group has incurred a loss after tax for the year ended 30 June 2014 of $11,181,401 (2013: loss after tax of
$16,985,894).
The loss reflects the ongoing commercialisation of the Group which was largely completed in the 2014 financial
year. This activity was funded through a combination of advanced payments from customers (which have been
recognized as deferred income in the financial statements), equity raisings and loan facilities. The level of
production of JSF components and C-130J wing flaps increased in the 2014 financial year, and Management and
the Directors expect this to continue as the Group has received orders to the value of $49 million with more than
50% of these orders to be fulfilled in 2015. Consequently, the Directors expect the Group to become cash flow
positive in 2015.
The revenue (and cash flow) of the Group however, is materially dependent on continuing firm orders for the JSF
project and C-130J wing flaps and the continued payment profile of those orders and that cash flows arising from
these payments are sufficient to fund ongoing operations. Should this not occur, the ability of the Group to
continue as a going concern in the ordinary course of business and to achieve its business growth strategies and
objectives would be dependent on the Group securing additional funding.
The Directors consider that there are reasonable grounds to expect the Group will be able to meet its
commitments and accordingly, the financial report has been prepared on the basis of a going concern. This
basis presumes that orders and prepayments for the JSF project and C-130J wing flaps will continue and will
fund operations and that the realisation of assets and settlement of liabilities will occur in the normal course of
business. However, should the flow of orders and prepayments for the JSF project and C-130J wing flaps not
continue as anticipated, there is some uncertainty as to whether the Group would continue as a going concern.
Use of estimates and judgements
(e) Basis of consolidation
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 19 (d) - Financial position and going concern;
• Note 8 (b) - Recoverable amount of assets held for sale;
• Note 8 (c) - Recoverable amount of property, plant and equipment;
• Note 7 (e) - Royalties payable; and
• Note 16 - Share-based payments
(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.
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Quickstep
Holdings Limited (“Company” or “parent entity”) as at 30 June 2014 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. The Group controls an entity when it is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group, and de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
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 unless there is appropriate evidence to the contrary. 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.
69
70
80
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
19 Significant accounting policies (continued)
(f) Foreign currency translation
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.
(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 de-recognises 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.
(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 de-
recognises 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 7 (e).
•
Loans and borrowings, including a secured loan facility from the ANZ Bank of $10 million plus capitalised
interest facility of $3.3 million. A secured loan from Macquarie Bank for the R&D factoring facility was repaid
in full during the year.
19 Significant accounting policies (continued)
(g) Financial instruments (continued)
(iii) Share Capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
(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.
(h) Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost
of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to
bringing 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) of 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
Depreciation rate
Plant and factory equipment
6.67% to 37.50%
Office equipment
6.67% to 50.00%
71
72
82
83
Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
(continued)
19 Significant accounting policies (continued)
19 Significant accounting policies (continued)
(i) Intangible assets
(i) 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 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:
(i)
Intangible assets (continued)
Licences, patents and rights to technology
Royalty buy-back
Capitalised development costs
Software
(j) Leased assets
10 years
10 years
5 – 10 years
2 ½ years
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)
Impairment
(i) 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 (the value in use of the asset in the cash generating unit (CGU) to which it relates) is estimated each
year at the same time. An impairment loss is recognised if the carrying amount of an asset exceeds its estimated
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.
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Notes to the consolidated financial statements
(continued)
Notes to the consolidated financial statements
19 Significant accounting policies (continued)
(m) Employee entitlements
Wages, salaries, annual leave and non-monetary benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave
expected to be settled within 12 months after the end of the period in which the employees render the related
service are recognised in respect of employee's services up to the end of the reporting period and are measured
at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating
sick leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations
are presented as payables.
The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after
the end of the period in which the employees render the related service. They are therefore recognised in the
provision for employee benefits and measured as the present value of expected future payments to be made in
respect of services provided by employees up to the end of the reporting period using the projected unit credit
method. Consideration is given to expected future wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the end of the reporting
period of government bonds with terms and currencies that match, as closely as possible, the estimated future
cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are
recognised in profit or loss.
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 profit and loss 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.
(continued)
19 Significant accounting policies (continued)
(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.
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 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 includes any tax liability arising from the declaration of dividends.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax
is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by
the end of the reporting period and are expected to apply when the related deferred income tax asset is realised
or the deferred income tax liability is settled.
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.
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Notes to the consolidated financial statements
Notes to the consolidated financial statements
(continued)
19 Significant accounting policies (continued)
(r)
Income tax (continued)
19 Significant accounting policies (continued)
(v) New accounting standards and interpretations not yet adopted (continued)
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.
Adoption of these standards and interpretations has not resulted in any material changes to the Group’s financial
statements.
(s) Goods and Services Tax (GST)
New accounting standards
(continued)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred
is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the
asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of
GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the
consolidated balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
•
the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary
shares
by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account:
•
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(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 accounting standards and interpretations not yet adopted
The Group has adopted all new and amended Australian Accounting Standards and Australian Accounting
Standards Board (AASB) interpretations that are mandatory for the current reporting period and relevant to the
Group.
Several new accounting standards have been published that are not mandatory for this reporting period and have
not yet been adopted by the Group.
• AASB 9 Financial Instruments (2010);
The impact of these changes are still being fully assessed, however, initial assessments indicate that there will be
no significant impact on the Group’s financial statements.
(w) Changing Comparatives
Where necessary, comparative disclosures have been reclassified to conform with current year presentation.
20 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.
(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.
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Directors’ declaration
Lead Auditor’s Independence Declaration
Directors’ declaration for the year ended 30 June 2014
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 47 to 89 are in accordance with the Corporations Act
2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2014 and of
its performance for the year ended on that date, and
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed group will be able to meet any obligations or liabilities to which they are, or may become, subject
by virtue of the deed of cross guarantee.
(b)
(c)
The level of production of JSF components and C-130J wing flaps increased in the 2014 financial year, and
Management and the Directors expect this to continue as the Group has received orders to the value of $49
million with more than 50% of these orders to be fulfilled in 2015. Consequently, the Directors expect the Group
to become cash flow positive in 2015. The revenue (and cash flow) of the Group, however, is materially
dependent on continuing firm orders for the JSF project and C-130J wing flaps and the continued payment profile
of those orders. Should this not occur, the ability of the Group to continue as a going concern in the ordinary
course of business and to achieve its business growth strategies and objectives would be dependent on the
Group securing additional funding. Further information can be found in Note 19 (d)
Note 19(b) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the chief executive officer and chief financial officer required
by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of Directors.
Mr. Tony Quick
Director
Sydney, New South Wales
30 September 2014
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Independent Auditor’s Report to the Members of Quickstep Holdings Limited
Independent Auditor’s Report to the Members of Quickstep Holdings Limited
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014 Shareholder information
Shareholder information
DETAILS OF SHARES AND OPTIONS AS AT 26 SEPTEMBER 2014
Voting rights
The voting attaching to ordinary shares are:
• On a show of hands every member present in person or by proxy shall have one vote
• 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
associated
have
a
relevant
interest
are
set
out
below:
Substantial Shareholder
No. Of Shares
%
Washington H Soul Pattinson and Company Limited
68,172,570
Brickworks Limited
State One Capital Group
68,172,570
21,248,389
17.71%1
17.71%2
6.09%3
1. Details included on substantial shareholder notice dated 24 September 2013
2. Details included on initial substantial shareholder notice dated 20 December 2013. Shares held by Brickworks Limited
represent a technical relevant interest as a result of Brickworks Limited’s shareholding in Washington H. Soul Pattinson and
Company Limited
3. Details included on substantial shareholder notice dated 29 August 2013
On Market buy back
There is no current on-market buy back.
Distribution Schedules
Distribution of each class of security as at 26 September 2014
Ordinary fully paid shares
Range
1
1,001
5,001
10,001
100,000
Total
1,000
5,000
10,000
100,000
Over
Holders
Units
430
1,051
906
2,677
558
5,622
130,426
3,446,697
7,618,299
100,135,106
286,127,006
397,457,534
Options exerciseable at $0.00 on or before 30 March 2017
Options exerciseable at $0.00 on or before 26 November 2017
Options exerciseable at $0.00 on or before 23 November 2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
%
0.03
0.87
1.92
25.19
71.99
100.00
%
-
-
-
-
100.00
100.00
%
-
-
-
-
100.00
100.00
%
-
-
-
-
100.00
100.00
%
-
-
-
-
100.00
100.00
83
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 2,942 shares at $0.17 per share).
Holders
886
Units
1,065,720
84
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
Shareholder information
Corporate Directory
Quickstep Holdings Limited
Shareholder information
30 June 2014
Top Holders
The 20 largest registered holder of each class of quoted security as at 26 September 2014 were:
Rank Holder Name
Securities
%
Washington H Soul Pattinson And Company Limited
68,172,570
17.15
Decta Holdings Pty Ltd
WSF Pty Ltd
Romadak Pty Ltd
National Nominees Ltd
State One Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited
Mirrabooka Investments Ltd
Vcamm Ltd
State One Stockbroking Pty Ltd
Best Holding Pty Ltd
Philippe Odouard
Sandhurst Trustees Ltd
Yarraandoo Pty Ltd
Sols Super Pty Ltd
Prunelle Holding Pty Ltd
Equilibrium Pensions Limited
Gellatly DC + EMR
Citicorp nominees Pty Ltd
Code Nominees Pty Ltd
Total Top 20
12,611,891
10,333,235
8,597,976
5,697,422
3,930,977
3,783,134
3,500,000
3,114,757
3,090,641
2,928,846
2,440,685
2,347,543
2,271,576
2,109,567
2,077,692
2,003,450
1,900,000
1,810,597
1,778,000
3.17
2.60
2.16
1.43
0.99
0.95
0.88
0.78
0.78
0.74
0.61
0.59
0.57
0.53
0.52
0.50
0.48
0.46
0.45
144,500,559
36.34
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
96
Directors
Mr T Quick
Executive Chairman
Mr P M Odouard
Executive Director
Mr N Ampherlaw
Independent Non-Executive Director
Mr P Cook
Independent Non-Executive Director
Mr B Griffiths
Independent Non-Executive Director
Mr M B Jenkins
Independent Non-Executive Director
Mr E J McCormack
Independent Non-Executive Director
Mr D Singleton
Independent Non-Executive Director
Secretary
Mr J Pinto
Principal Office
361 Milperra Road Bankstown Airport
New South Wales 2200 Australia
Telephone: +61 2 9774 0300
Facsimile: +61 2 9771 0256
Email: info@quickstep.com.au
www.quickstep.com.au
Registered Office
Level 2, 160 Pitt Street
Sydney New South Wales 2000
Auditor
KPMG
Chartered Accountants
10 Shelley Street
Sydney Australia 2000
Solicitors
Clifford Chance
Level 7, 190 St Georges Terrace
Perth Western Australia 6000
Patent Attorney
Watermark
Building 1, Binary Centre
Level 3, 3 Richardson Place
North Ryde New South Wales 2113
Share Registry
Security Transfer Registrars Pty Ltd
110 Stirling Highway
Applecross Western Australia 6153
Stock Exchange
Australian Securities Exchange Limited
Exchange Centre, 20 Bridge Street
Sydney New South Wales 2000
ASX Code
QHL
85
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Quickstep Holdings Limited I Annual Report 2014Quickstep Holdings Limited I Annual Report 2014
www.quickstep.com.au