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Advanced
Composites
Manufacturing
Solutions
Annual Report 2015
Highlights
FY15 sales
$39.5 m
up 229% from
$12.0 million
Firm order book
increase to
$74.9 m
at 30 June 2015
Strengthened
management team
Quickstep’s vision is to be an innovative composite solutions provider
and we are at the forefront of advanced composites manufacturing and
technology development.
Contents
2 Chairman’s Report
4 CEO and Managing Director’s review
6 Global Opportunity
8 Directors
12 Directors’ report
16 Remuneration Report
25 Financial statements
26 Consolidated statement of profit or loss and other comprehensive income
27 Consolidated statement of financial position
28 Consolidated statement of changes in equity
29 Consolidated statement of cash flows
30 Notes to the consolidated financial statements
59 Directors’ declaration
60 Lead Auditor’s independence declaration
61
62 Shareholder information
64 Corporate directory
Independent auditor’s report to the members
Substantial growth
achieved in FY2015
132%
Total FY15 revenue
at $41.3 million from
$17.8 million
$2.2m
of second half
FY15 profit
181%
Aerospace
manufacturing sales
at $33.7 million
Quickstep is today the largest independent carbon
fibre composites manufacturer in Australia
Quickstep Holdings Limited I Annual Report 2015
1
Chairman’s Report
We are at the forefront
of advanced composites
manufacturing and
technology development.
2
Quickstep Holdings Limited I Annual Report 2015
Advanced Manufacturing, Smart Technology in
one Quickstep
FY2015 was a year of significant expansion for Quickstep, as we accelerated
our transition from being purely a research and development business into
an advanced manufacturer of carbon fibre components and assemblies.
We secured additional purchase orders from our key aerospace customers in
Lockheed Martin, Northrop Grumman and BAE Systems, which has led to an
expansion of our manufacturing facilities and capabilities at our Bankstown
operations. We further extended the scope of our composite solutions
capabilities with the establishment of a dedicated Automotive Division in the
Geelong region of Victoria. We also demonstrated the commercial potential of
our patented Qure (composite curing) technology, with the successful execution
of our first external sale of the Qure process equipment to ORPE Technologiya.
Quickstep’s vision is to be an innovative
composite solutions provider and
we are at the forefront of advanced
composites manufacturing and
technology development. We are today,
the largest independent aerospace-grade
advanced composite manufacturer
in Australia and we have developed
significant capabilities and expertise in
the production of aerospace components
and assemblies, using both conventional
autoclave-based manufacturing and
leading Out-of-Autoclave production
technologies (developed in-house by
Quickstep and patented). We are now
taking these skills and capabilities into the
global automotive sector.
The Aerospace/Defense and
Automotive industries are the two key
industry sectors for carbon fibre growth
globally. Carbon fibre composites are
growing in demand from the aerospace
and automotive sectors because of
increasingly stringent U.S. European and
Asian regulations and penalties to ensure
reductions in carbon emissions and fuel
consumption. Aerospace and automotive
companies are increasingly in need of
lighter-weight solutions; reducing aircraft
and vehicle weight saves fuel and lowers
emissions.
Your company, therefore, has excellent
prospects for further growth globally,
as we ramp-up our expansion and
commercialisation strategies. In order to
fund our growth, we secured A$7.5 million
in loan facilities, including a A$4.5 million
Multi-Option Facility Agreement with Efic
and ANZ and a A$3 million short-term
loan facility through Newmarket Financing
Management (a strategic investor in the
carbon fibre sector in Australia). We were
also successful in securing a A$1.76
million grant through the Geelong Region
Innovation & Investment Fund (GRIIF)
to assist in the establishment of our
Automotive Division in the Geelong region.
Our financial results for FY2015 reflect
our focus on growth and expansion with
sales revenue rising from A$12.0 million
in FY2014 to A$39.5 million in FY2015.
This substantial increase was the result of
increased aerospace orders on both our
C130 and JSF programs and the success
of our first external sale of a Qure machine
to ORPE Technologiya.
As Chairman, I would like to recognise
the ongoing support of our shareholders,
our customers and my colleagues on the
Board. I would also like to thank David
Marino, our newly appointed (February
2015) CEO and Managing Director, the
executive management team and all of
the Quickstep staff, for their hard work and
dedication. I would also like to express my
appreciation to Philippe Odouard for his
leadership of the company during its early
development phase.
Your company has a number of
secured projects that will see sales
revenue continue to increase in the
year ahead. At 30 June 2015, we have
a firm order book valued at A$74.9
million. We have innovative advanced
manufacturing technologies, highly
skilled staff, and a strong track record
of product delivery. Today, we are
Australia’s largest independent high
grade carbon-fibre composites company
and have demonstrated our capacity
to win competitive long-term defence
sector contracts. We are emerging as
an innovative automotive technology
provider and are continuing to develop
‘next generation’ technologies to further
our global growth and expansion. I am
confident that the strength and capabilities
of the Quickstep team will enable us to
successfully pursue further growth in
FY2016.
Tony Quick
Chairman
Quickstep Holdings Limited I Annual Report 2015
3
CEO & Managing Director’s review
Our vision is to be
a world leader in
advanced composites
manufacturing.
4
Quickstep Holdings Limited I Annual Report 2015
Global Provider of Choice; Delivering Advanced
Composite Manufacturing Solutions
I am pleased to report that in FY2015, Quickstep has continued to grow and make
substantial progress towards becoming a leading global provider of advanced composite
components and manufacturing processes for the Aerospace and Automotive sectors.
We achieved a three-fold increase
in sales revenue to A$39.5 million in
FY2015, compared to A$12.0 million in
the previous year. We delivered 31 ship‐
sets to Lockheed Martin for the C-130J
program in FY2015. We increased the
production rate of parts for the Joint Strike
Fighter (JSF) program, with 464 JSF
parts delivered to Northrop Grumman
in the year and the qualification of our
parts for the JSF vertical tails project with
BAE Systems have progressed to plan.
Our very first external Qure equipment
contract achieved customer acceptance
and approval for client installation and we
received €4 million (A$5.8 million) payment
from ORPE Technologiya for this project.
From an Automotive perspective we
established our Automotive Division at
Deakin University’s Waurn Ponds campus
in the Geelong region, with the assistance
of a A$1.76 million grant from the Geelong
Region Innovation & Investment Fund
(GRIIF) and we have secured a niche
volume production agreement with a
global vehicle manufacturer, that will go
into production in early FY2016. Design
and development activities continued
throughout FY2015 with Thales Australia
for a series of composite components for
their Hawkei military vehicles. This would
be the first project to use Quickstep’s
automotive resin spray transfer (RST)
process, with production representative
parts required by Thales in FY2016.
Our vision is to be a world leader in
advanced composites manufacturing and
we are doing this through well-thought
out growth and expansion strategies
and implementation plans, in our four key
Business Areas:
» Aerospace Manufacturing: Proven
manufacturer of advanced carbon
fibre composite components and
complex assemblies for the Defence
Aerospace sector
» Quickstep Systems: Innovation in
product and process development;
management of all R&D, Patents and
Commercialisation projects across the
Quickstep business
» Quickstep Aerospace: Application of
Quickstep’s ‘disruptive’ technology that
lowers the overall cost of manufacturing
aerospace composite components
» Quickstep Automotive: Application
of Quickstep’s ‘disruptive’ technology
which enables the manufacture of both
Class A surface and Structural parts at
a substantially lower cost, compared to
traditional composite manufacture, for
the automotive sector
Our sales momentum is accelerating and
based on contracts secured before the
end of June 2015, our firm order book now
stands in excess of A$74.9 million, this
reflects increased orders for Quickstep’s
JSF and C‐130J aerospace contracts, and
it is anticipated that the majority of this work
will be completed during the next two years.
Commercialising Quickstep’s
Technologies
Throughout FY2015 we continued to
advance the commercialisation of both our
Qure and Resin Spray Transfer (RST)
technologies for use in both the aerospace
and automotive industries. We branded our
patented curing and moulding machine
to manufacture carbon‐fibre parts, ‘Qure’,
recognising its unique capability and
the potential for its technology to lower
the cost of manufactured components.
Qure represents an industry‐disruptive
technology which provides the aerospace
industry greater flexibility and more control
over the curing cycle than traditional
autoclave manufactured carbon fibre
composite parts.
Development programs with Airbus
and negotiations with a number of light
commercial and long‐range commercial
customers continued in FY2015.
Development activities were focused on
the use of Quickstep’s technologies in
aerospace such as cored structures, large
integrated structures, spars, beams and
parts with complex cure cycles.
Our automotive commercialisation
activities revolved around the further
development and application of both
our RST and Qure technologies to
manufacture components for automotive
vehicle producers and we advanced our
sales discussions with a number of OEMs
and tier‐1 automotive manufacturers.
This culminated in an agreement with
a global OEM to manufacture a series
of up to 1,000 lightweight carbon fibre
interior parts. Whilst small this agreement
demonstrates Quickstep’s serial
production capabilities and represents
early success for the first phase of our
automotive strategy. Over the course of
the next two years, we will target a number
of niche volume automotive projects, while
developing our RapidQure automotive
technology and increasing volume
capability to secure larger projects.
Outlook for FY2016
We look forward to another solid year
of growth in FY2016 and the company’s
near-term goals are:
Aerospace Manufacturing: Maintaining
production of C‐130J wing flaps at three
ship‐sets per month; completing the JSF
Vertical Tail qualification program and
increasing our manufacturing capacity
for JSF future growth and; pursuing
additional manufacturing contracts for the
Bankstown operation
Technology commercialisation –
Aerospace: Completing the installation of
the first commercial Qure plant in FY2016
and; securing additional Qure equipment
sales and component manufacturing
opportunities.
Technology commercialisation
– Automotive: Progressing the
commercialisation of the Qure and
RST technology for niche volume
manufacturing; developing the next
generation RapidQure technology for
higher volume manufacturing; preparing
for the production of our first automotive
contract; preparing for first parts supply for
Thales and; pursuing additional contracts
with other vehicle manufacturers
In closing, I would like to thank all of our
existing shareholders for their confidence
in Quickstep and the future of this
company. I would also like to acknowledge
the hard work and dedication of our Board
of Directors, our executive management
team and all our dedicated staff that are
not only managing Quickstep’s rapid
expansion, but also identifying and
delivering new product and customer
opportunities, utilising our advanced
composites technologies and capabilities.
David Marino
CEO and Managing Director
Quickstep Holdings Limited I Annual Report 2015
5
Quickstep’s global opportunity
Aiming to be a
world leader in
advanced composites
manufacturing
1
31 sets
of wing flaps for
“Super Hercules” C-130J
production in FY15
1.
Aerospace manufacturing
Quickstep’s manufacturing growth is assured, driven by
continued increase in demand from the JSF program. Orders
for fuselage components are scheduled to rise in FY2016
and, with qualification for vertical tails manufacturing in place,
substantially increase in FY2017.
As the C130J wing flap supply program continues in
production, we are confident of our ongoing role in this
program, beyond the current MoA with Lockheed Martin.
In the next six to 18 months we plan to expand the Bankstown
facility, increase production capacity and optimising
manufacturing processes and supply chain efficiency to
support contracted work. While existing contracts use
autoclave technology, we expect that as additional projects
are secured, they will also use Qure processes.
Our medium-term targets include niche-volume
manufacturing contracts for light aircraft, sports aircraft, and
defence prime contractors. Longer-term, as our capability
grows, we will be able to target larger projects for defence and
commercial aircraft.
2.
Technology commercialisation
for automotive
The overall market opportunity is significant, as global vehicle
production is forecast to grow to 106 million vehicles by 2021.
We are focused on the US, UK and China markets and have
targeted small-volume projects with global original equipment
manufacturers, with several quotes underway. We believe that
our most significant opportunities include:
» Alternative energy vehicles, particularly electric vehicles
» Small-volume premium level vehicles
» Lightweight vehicles
» Specialty vehicles
» Sports cars
Quickstep’s technology is highly flexible for production of
lightweight sandwich and core structures, structural interior
parts, and structural body parts. We currently target small-
volume projects of 500-2,000 units per year which, over the
next three years, is expected to increase to projects of 5,000-
10,000 units per year, including larger parts and assemblies.
6
1st
contract
with leading
global automotive
manufacturer secured
2
Quickstep Holdings Limited I Annual Report 2015 3
152%
increase in
Joint Strike Fighter
fuselage parts
4
3.
Technology development
We are investing to boost the efficiency of our Qure and
resin spray transfer (RST) technologies. Our roadmap
for improvement expects Qure’s throughput to reach
2,000-5,000 units per year in the next three years. Our
competitiveness will improve with the production capacity of
our technology.
Together with RST, the Qure process manufactures
components with a very high-quality surface finish. Quickstep
believes this technology provides the automotive industry a
superior alternative to compression moulding. A faster, fully
industrialised process of Qure, named RapidQure, is being
developed to increase mass production capacity and process
reliability, facilitating lower costs for customers. We expect to
commercialise this technology over the next 18 to 36 months
and, longer term, aim to increase capacity beyond 50,000
units per year.
4.
Technology commercialisation
for aerospace
The first commercial sale of Quickstep’s Qure has passed
customer approval and is expected to reduce our customer’s
running costs to one third of current costs using an autoclave
in addition to the lower capital costs. Over time, it will provide a
strong endorsement of Quickstep’s technology.
Our target markets include:
» Space and exploration aircraft: Quickstep will focus on
customers that need relatively flat, large surface area parts
in low-to-medium volumes for unmanned aircraft.
» Light and sports aircraft: Qure provides a flexible
manufacturing solution for low volume component
production, and potential customers are located in both
developing and mature geographic markets.
» Defence and commercial aircraft: Qualification of Qure is
needed to manufacture parts for prime contractors and
Tier 1 defence and commercial aerospace companies. Our
business model envisages manufacturing in Australia in
conjunction and international ‘asset-light’ models (where
Quickstep’s operations are located near to its customer).
7
Quickstep Holdings Limited I Annual Report 2015Quickstep’s long-term goal is to become a world leader in advanced composites manufacturing. We are focused on the aerospace, defence, automotive and transport sectors where the opportunity is most significant. Aerospace sector demand for carbon fibre is expected to grow at a cumulative annual growth rate of 14.7% from 2010 to 2020 and demand from the fastest-growing sector, automotive, is forecast to increase at about 50% per year in the same timeframe. Here we present a forward-looking roadmap for the next three years. Directors
1
2
3
4
5
1 Mr Tony Quick, MA (Cantab)
Independent Non Executive Chairman
– appointed 14 February 2013
(interim appointment as Executive Chair 29 May
2014 to 15 February 2015)
Mr Tony Quick, aged 59, 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.
2 Mr David James Marino,
B Eng (Mech) (Hons)
Managing Director and CEO
– appointed 16 February 2015
Mr David Marino, aged 44, was appointed
Chief Executive Officer and Managing Director
in February 2015. David has over 20 years of
manufacturing experience. This includes leading
Australian and International businesses through
Asia and the U.S., directing as many as 1600
people, and being responsible for revenues in
excess of $400 million per annum. Since being
recruited by Ford Australia through its graduate
program, David has held a number of diverse
roles in engineering, operations, program and
general management with Lear Corporation,
8
Air International and most recently with Futuris
Group as part of the Executive leadership
team from 2004 to 2015. He was a key driver
in its business globalisation, and held a number
of senior roles including General Manager
Seating, Executive General Manager Australia,
Executive General Manager Strategy and
Advanced Operations and most recently, Chief
Operating Officer.
David has significant experience in Mergers
and Acquisitions, led post integration teams
and has also executed partnerships and joint
ventures in Australia, South Africa, Thailand
and India. His experience includes serving on
local and international joint venture company
boards managed by the Futuris Group, and he
was the Chairman of the Feltex-Futuris board in
South Africa.
David has an honours degree in Mechanical
Engineering from Swinburne University in
Melbourne (1994) and has completed a number
of post graduate business studies including The
General Manager Program (TGMP) at Harvard
Business School (2005).
3 Mr Philippe Marie Odouard,
M.Sc (Bus)
Executive Director – Appointed CEO & MD 13
October 2008 to 29 May 2014,and Executive
Director 29 May 2014
Mr Philippe Odouard, aged 60, was appointed
Chief Executive Officer and Managing Director in
October 2008. In May 2014 Mr Odouard left his
role as CEO and Managing Director to focus on
Business Development activities as an executive
director. He has significant management
experience within the global aerospace and
defence sectors, both of which are primary target
markets for Quickstep’s technology.
Prior to joining Quickstep, Mr Odouard held a
dual role with Thiess Pty Ltd – one of Australia’s
largest infrastructure and services contractors
– as Senior Manager of Strategy and Business
Development: Defence, and Project Director for
the $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.
4 Mr Nigel Ian Ampherlaw, B.Com,
FCA, MAICD
Independent Non Executive Director
– appointed 8 July 2013
Mr Nigel Ampherlaw, aged 60, 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 the Chair of the Audit
Committee, member of the Risk Committee and
Remuneration Committee, Elanor Investor Group
where he is Chair of the Audit Committee and a
member of the Remunertion Committee Chair;
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.
5 Mr Peter Chapman Cook, Mpharm.,
PhC, Cchem, Fmonash, FRMIT, MPS,
MRACI, MAICD.
Independent Non Executive Director
– appointed 14 July 2005
Mr Peter Cook, aged 68, is the Chairman of
the Remuneration, Nomination and Diversity
Committee and has extensive business
experience, both within Australia and overseas.
Current appointments include Chair,
Pharmaceutical Science Advisory Group
(Monash University), Chair, Monash Institute
of Pharmaceutical Science’s Foundation and
Director Myostin Therapeutics.
Quickstep Holdings Limited I Annual Report 2015 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 2015 and the auditor’s report thereon.
6
7
8
9
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.
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.
6 Mr Bruce Griffiths, OAM
Independent Non Executive Director
– appointed 14 February 2013
Mr Bruce Griffiths OAM, aged 65, 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,
Director – Carbon Revolution Pty Limited.
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, Chairman
– Sail Melbourne ISAF Sailing World Cup.
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.
7 Air Marshal Errol John McCormack
(Ret’d), AO
Independent Non Executive Director
– appointed 11 August 2010
Air Marshal Errol McCormack, aged 74, 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.
8 Mr David Patrick Alexander Singleton,
BSc (Hons)
Independent Non Executive Director
– appointed 11 October 2010
Mr David Singleton, aged 55, 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.
9 Mr. Jaime Pinto, B.Com, CA, AIGA
Company secretary
– appointed 20 November 2012
Mr Pinto, aged 44, 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, is a member of The
Institute of Chartered Accountants Australia, and
an Associate Member of Governance Institute.
9
Quickstep Holdings Limited I Annual Report 2015 FY2015 was a year of significant expansion
for Quickstep, as we accelerated our
transition from being purely a research and
development business into an advanced
manufacturer of carbon fibre components
and assemblies.
Tony Quick
Chairman
10
Quickstep Holdings Limited I Annual Report 2015 11
Quickstep Holdings Limited I Annual Report 2015 Board Structure & Director
Independence
The Company continually monitors the
structure and performance of the Board
to ensure it is of an appropriate size,
composition and skill to lead the Company
and meet its current governance and
strategic needs.
The Chairman manages the Board
to achieve responsive and effective
business outcomes with highly committed
directors. Quickstep has a Remuneration,
Nomination and Diversity Committee
(RND Committee), whose responsibilities
include the development and on-going
review of Board competencies, structure,
performance and renewal. Both the RND
Committee Charter and “Policy and
Procedure for Selection and Appointment
of Directors” are accessible from the
Company’s website as follows.
• http://www.quickstep.com.au/359_
QHL_RND_Committee_Charter_-_
September_2014
• http://www.quickstep.com.au/366_
QHL_Selection_and_Appointment_
of_Directors_Policy_V1_-_02102014
The Policy and Procedure for Selection
and Appointment of Directors includes
an extensive matrix of skills that are
considered necessary within the
non-executive director group to facilitate
an effective and efficient Board. The RND
Committee periodically reviews both
this matrix and the directors’ actual skills
mix to ensure they satisfy the current
and immediately foreseeable needs
of the Company.
The Board maintains a varied level of
tenure amongst its directors, which is seen
as essential for its effective functioning
given the significant growth and change
experienced by Quickstep in recent
years. This has resulted in both an influx of
fresh ideas and the retention of sufficient
Quickstep specific understanding to
optimise strategic and operational
changes. As Quickstep transitions from
a Development to a Manufacturing and
Commercial organization the Board is
committed to managing the change of
both Directors and the Executive team
in order to ensure the appropriate blend
of skills, capability and experience.
The Board is committed to a majority of its
directors being independent to ensure the
Board acts in the best interest of the entity
itself, its security holders and stakeholders
generally. Director independence is
12
assessed on a regular basis, and all
directors are required to advise the
Board of any actual or potential conflicts
of interest as they arise, with any such
conflicts tabled at Board meetings.
In assessing independence the Board
considers a number of factors which
include, but are not limited to, the “Factors
relevant to assessing the independence
of a director” listed in Recommendation
2.3 of the Corporate Governance
Principles and Recommendations 3rd
Edition established by the ASX Corporate
Governance Council (‘the ASX Principles
and Recommendations”).
In 2015 the Board specifically assessed
the independence of Mr Tony Quick,
following his period as Executive
Chairman, Mr Peter Cook, based on his
duration of tenure, and Mr David Singleton,
due to the fact he is eligible for re-election
at the 2015 Annual General Meeting.
Mr Tony Quick was appointed on an
interim basis as Executive Chairman in
May 2014 to assist in the management
of the business during a period of
significant growth and the appointment
of a new CEO. Mr Quick relinquished his
executive duties in February 2015 upon
the appointment of a new CEO/Managing
Director, and resumed his role as
Non-Executive Chairman from this date.
During his tenure as Executive Chairman
Mr Quick fulfilled his role as Chairman in
a manner independent of his Executive
role, brought independent judgement to
bear upon issues before the Board, and
was remunerated separately and distinctly
in each capacity. The ASX Principles
and Recommendations suggest that
a director’s independence should be
reviewed if they have been employed in
an executive capacity by the Company
and it has not been three years since
ceasing this role. However, the Board
does not see the interim assumption
of executive duties as atypical, or as
constituting any compromise to the
independence of a director per se, when
as part of their non-executive director’s
responsibilities a director may need to
assume a short term executive capacity
should conditions warrant. Indeed such a
step asserts the Board’s and the director’s
actual independence. The Board also
considered Mr Quick’s activities and
interactions with senior management
during the period as Executive Chairman,
and the consequent operational structural
changes implemented. Since Mr Quick
resumed his role as Non-Executive
Chairman, the Board (independently of
the Chairman) considered the above
factors and unanimously resolved that
Mr Quick should be considered to have
remained independent.
Mr Peter Cook’s initial appointment as a
director was in July 2005. At the end of
July 2015 Mr Cook had been a director for
just over ten years. The ASX Principles and
Recommendations suggest that the Board
should regularly assess the independence
of a director who has served for more than
10 years. Also, and in accordance with
the Company’s rotation policy, Mr Cook
is eligible to stand for re-election at this
year’s Annual General Meeting, his fourth
term of office, subject to the Company’s
“Policy and Procedure for Selection and
Appointment of Directors” that special
requirements apply for the nomination
of directors that have served 9 years
and/or three terms of office.
After appropriate consideration, the
Board’s members (excluding Mr Cook)
unanimously resolved that Mr Cook’s
independence has not been impaired by
his tenure, due in part to the significant
change within senior management
since his initial appointment. The Board
further resolved that Mr Cook’s distinct
set of skills, including in innovation and
R&D, coupled with his experience is
of obvious and on-going benefit to
the Board. Accordingly, Mr Cook’s
nomination for re-election to the Board
was unanimously supported.
Mr David Singleton’s initial appointment
as a director was in October 2010. At the
end of July 2015 Mr Singleton had been
a director for just under five years. In
accordance with the Company’s rotation
policy, Mr Singleton is eligible to stand for
re-election at this year’s Annual General
Meeting, his third term of office.
After appropriate consideration, the
Board’s members (excluding Mr Singleton)
unanimously resolved that Mr Singleton
independence has not been impaired
during his tenure, and that Mr Singleton’s
distinct set of skills and experience,
including in aerospace and defence
industries, is of obvious and on-going
benefit to the Board. Accordingly,
Mr Singleton’s nomination for re-election
to the Board was unanimously supported.
Directors’ reportQuickstep Holdings Limited I Annual Report 2015 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 2015,
and the numbers of meetings attended by each Director were:
Board Meetings
Audit, Risk and Compliance
Committee Meetings
Remuneration,
Nomination and Diversity
Committee Meetings
Director
Mr T Quick
Mr D J Marino
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
A
20
8
20
20
20
20
7
20
20
B
20
7
16
20
20
20
5
20
17
A
–
–
–
6
–
–
4
6
6
B
–
–
–
6
–
–
4
6
5
A
–
–
–
–
6
6
–
–
6
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)
increasing production supply of parts to Northrop Grumman for the Joint Strike Fighter Project from the Bankstown
manufacturing facility;
b)
increasing production supply to 3 ship sets per month of C-130J wing flaps for Lockheed Martin;
c) producing first preproduction parts for qualification testing of Joint Strike Fighter vertical tails for BAE;
d) driving growth in firm order book to A$74.9M;
e) delivery of first Qure equipment contract with ORPE Technologiya;
f) commencement of facility planning for Hawkei preproduction parts;
g) continued development of RST and Qure technologies for scaled volume production (RapidQure).
Results
The loss from ordinary activities after income tax amounted to $3,937,888 (2014 loss: $11,181,401).
Review of Operations
A review of operations and activities for the financial year is set out in the Managing Director’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 (2014: $nil).
Events Since the end of the Financial Year
Since the end of the financial year the following events occurred:
a) First global Automotive OEM carbon fibre production contract secured
b) Presche development project completed with Audi confirming Quickstep superior Automotive manufacturing Technology
for volumes below 10,000 units
c) Secured an extension to repayments of the Efic Multi-Option facility, now expiring 30 March 2016
d)
e) Waurn Ponds Lease and Research and Development agreements with Deakin finalised for Automotive and R&D activities
Invest Victoria Grant received for R&D activities at Waurn Ponds
B
–
–
–
–
6
6
–
–
5
13
Quickstep Holdings Limited I Annual Report 2015
Likely developments and expected results of operations
Strategies, prospects and risks by division
Aerospace Manufacturing
Strategic objective
Prospects
Risks
Continue production ramp of JSF parts
in line with Northrop Grumman demand
Program schedules indicate a continued
increase in sales for the FY16
Capital availability to meet demand curve
which is mitigated by capacity planning
program over the period
Commencement of supply of JSF
Vertical Tail composite parts and
assemblies to BAE
Current schedule has production
commencing in Q4 of FY16
Final testing compliance of preproduction
parts supplied
New contract award to optimize assets
and improve overhead utilisation
A number of quotations are under
current negotiation with OEMs
Requirements of additional skilled
employment to be able to deliver
increased volume. Skills planning in place
Quickstep Systems
Strategic objective
Prospects
Risks
Award of additional Automotive and
Aerospace contracts using RST and Qure
A number of opportunities are currently
under negotiation with customers
Adoption of alternative technologies for
the same opportunities
Technology development of RapidQure
to take advantage of larger volume
manufacturing opportunities in the
global market
Set up of manufacturing facility in
Waurn Ponds for the delivery of
first OEM contract part and Hawkei
preproduction components
Program has commenced
Timing of development exceeds program
plan and investment expectations
Letters of Intent with Thales and
Global OEM orders signed
Capital timing to support and final decision
on Hawkei program
Directors’ Interests
The relevant interest of each Director in the shares, rights and options at the date of this report unless otherwise indicated is as follows:
Mr T Quick
Mr D J Marino
Mr P M Odouard
Mr N Ampherlaw 1
Mr P C Cook 2
Mr B Griffiths 3
Mr M B Jenkins 4
Mr D P A Singleton 5
Mr E J McCormack 6
Shares
Options
Rights
100,000
–
–
–
2,140,685
3,256,593
–
2,491,694
1,909,420
275,000
220,758
224,000
100,000
100,000
369,315
–
–
–
–
–
–
–
–
–
–
–
–
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 Bond Street Custodians Limited as custodian for the B A Griffiths Superannuation Fund, of which Mr Griffiths is a trustee.
4) Mr Jenkins retired as a Director on 20 November 2014. The interest disclosed is at the date of cessation as Director.
5) The registered holder of the shares is Belvoir Fund of which Mr Singleton is a Trustee.
6) The registered holder of the shares is Aviops Pty Ltd, of which Mr McCormack is a Director.
14
Directors’ reportQuickstep Holdings Limited I Annual Report 2015
Share Options and Rights
During the financial year 4,945,825 rights were granted under the Incentive Rights Plan (IRP) to executives as part of their remuneration
with vesting based on future conditions. 298,512 rights were forfeited with continued service conditions not met.
No options were granted during the year, nor were options granted in prior years exercised during the year ending 30 June 2015.
No other rights or options 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
Options
Mr P M Odouard
Mr P M Odouard
Mr P M Odouard
Mr P M Odouard
Mr P M Odouard
Rights
Mr P M Odouard
Mr P M Odouard
Mr D J Marino
Mr D J Marino
Mr D J Marino
Mr D J Marino
Mr D J Marino
Ms T Swinley
Mr T Olding
Mr M Schramko
Mr J Johnson
Total
Earliest possible
vesting date
Expiry
date
Exercise
Number
of shares/
price options/rights
30/06/2011
30/03/2017
30/06/2012
30/03/2017
30/06/2013
26/11/2017
31/08/2014
23/11/2018
31/08/2015
23/11/2019
31/08/2016
22/11/2018
31/08/2017
31/08/2019
31/08/2015
31/08/2015
31/08/2015
31/08/2015
31/08/2016
31/08/2016
31/08/2016
31/08/2016
31/08/2017
31/08/2017
31/08/2017
31/08/2019
31/08/2017
31/08/2019
31/08/2017
31/08/2019
31/08/2017
31/08/2019
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
619,446
471,698
471,337
706,373
987,739
802,000
1,107,420
207,641
207,641
415,283
415,282
1,245,847
233,999
304,540
244,660
265,000
8,705,906
No option or right holder has any right under the options to participate in any other share issue of the Company or any other entity.
Indemnification and Insurance of Officers
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 as a Director, Secretary or
executive officer to the extent permitted by the Corporations Act 2001. The Directors have not included details of the nature of the
liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance
contracts; as such disclosure is prohibited under the terms of the contract.
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 60.
Corporate Governance Statement
Quickstep’s Corporate Governance Statement can be found on the Company’s website at the following address:
http://www.quickstep.com.au/Investors-Media/Corporate-Governance
15
Quickstep Holdings Limited I Annual Report 2015
The report contains the following sections:
1 Principles of compensation
2 Details of remuneration
3 Share based compensation
4 Analysis of bonuses included in remuneration
5 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 T Quick
Mr N I Ampherlaw
Mr P Cook
Mr B Griffiths
Mr D Singleton
Executive directors
Mr D Marino
Mr P Odouard
Executive and officers
Mr J Pinto
Ms N Sharman
Mr J Johnson
Mr M Schramko
Ms T Swinley
Mr D Brosius
Dr J Schlimbach
Mr T Olding
Chairman, Interim Executive Chairman from 29 May 2014 until 15 February, 2015
Chair of Audit Risk and Compliance Committee
Chair of Remuneration, Nomination and Diversity Committee
Senior Independent Director from 29 May 2014 until 15 February 2015
Air Marshal (R’td) E McCormack
CEO and Managing Director (appointed 16 February, 2015)
Executive Director, Joint CEO Quickstep GmbH
Company Secretary
Chief Financial Officer
Vice President of Commercial and Administration
Vice President of Manufacturing and Operations
Vice President of Human Resources
President Quickstep Composite LLC (resigned 31 December 2014)
Joint CEO, Quickstep GmbH
Vice President Systems
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.
Quickstep has also developed an
Executive Remuneration Policy and a
Director Remuneration Policy that are
available on the Company’s website at
http://www.quickstep.com.au/Investors-
Media/Corporate-Governance.
16
Compensation levels for key management
personnel of the Group are competitively
set to attract and retain appropriately
qualified and experienced directors and
executives. The remuneration structures
are designed to attract suitably qualified
candidates, reward the achievement
of strategic objectives, and achieve the
broader outcome of creation of value for
shareholders. Compensation packages
include a mix of fixed compensation,
short-term incentives and equity-based
compensation as well as employer
contributions to superannuation funds.
Shares, 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. The Company also 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.
During FY 2015 the Company appointed a
new Managing Director & Chief Executive
Officer (MD). In determining an appropriate
remuneration package for the new MD,
the company obtained Managing Director
remuneration benchmarking data from
Godfrey Remuneration Group. The
methodology used in the benchmarking
process is summarised below:
• 2013/2014 survey data (the latest
actually available) from the comparator
companies was forecasted to
increase by 2%, 4% and 6% at the P25
(bottom quartile), P50 (median) and
P75 (top quartile) points respectively;
• 20 comparator companies were
included in the benchmark data group
to ensure an adequate sample size
that was both specific and robust;
Remuneration report – auditedQuickstep Holdings Limited I Annual Report 2015 1
Principles of Compensation
(continued)
•
• of the comparator companies,
10 had a market capitalisation
larger than Quickstep and 10 smaller
than Quickstep;
the comparator companies were
limited to between half and double
the Company’s size;
the comparator companies included
all direct competitors for customers
and talent from within that range; and
the comparator companies included
those with a similar global industry
classification standard (GICS) and
of the most similar size.
•
•
A market median (P50) total fixed
remuneration was generated from this
benchmarking data. The actual fixed
remuneration package awarded to the
CEO was $450,000, which is close
to but below the market median. The
comparator group companies generated
a Total Remuneration Package (total
fixed remuneration plus short and long
term incentives). The MD’s short term
incentive (STI) and long term incentive
(LTI) are each capped at 50% of total
fixed remuneration creating in a maximum
remuneration package of $900,000; a
figure consistent with both the market
comparator companies and Quickstep’s
own remuneration policy.
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 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
contributions to superannuation.
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.
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 KPIs and associated
targets to align individual rewards with
the Group’s desired performance. These
targets may include measures related
to the annual performance of the Group
and/or specified parts of the Group.
Certain KPI are classified as Corporate
KPIs, and are applicable to all executives
in varying proportions. Each executive
may also have personal KPIs that apply
only to them, which are tailored to ensure
greater alignment on an individual basis.
The Corporate KPIs are, however, the
major component of the targets for Key
Management Personnel (KMP).
In FY2015 12 Corporate KPIs were used,
including five financial KPIs, two business
development KPIs, two operational KPIs
and three strategic KPIs. The weighting of
corporate KPIs used in the determination
of an executive’s STI ranged from 50% for
certain functional specialists to 100% for
the Managing Director.
The RN&D Committee is responsible for
assessing whether the KPIs have been
achieved and meet the criteria set out
at the beginning of the year. Each year
a limited number of corporate KPIs are
designated as threshold metrics, with no
STI payable to any executive if these are
not achieved. In FY2015 there were two (2)
threshold metrics in use, with the hurdles
having been achieved.
Actual performance is then assessed
against both a target outcome and
a stretch outcome. Generally, where
performance falls below the target
outcome no payment is made against
that KPI and where performance
exceeds the stretch outcome the
stretch cap is payable. Generally, where
performance falls between target
and stretch outcomes an appropriate
proportion of the KPI is payable.
After determining the overall achievement
of KPIs based on the above review
process, the RN&D Committee
recommends the total incentive to be
paid to each executive and the aggregate
amount of any additional STI incentive
to be paid to any other beneficiary,
for approval by the Board.
Where a proportion of STI is payable in
shares, 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
were/are granted.
Introduction
b) Long-term incentives
i)
The Company currently has two long
term incentive plans in use: an Employee
Incentive Plan (EIP) and an Incentive
Rights Plan (IRP). The former has been
progressively replaced with the latter.
In November 2009 the Company
established the Quickstep Employee
Incentive Plan (EIP). The EIP enabled
the Board to grant (zero exercise price)
options to selected Quickstep employees,
with each option being a conditional right
to one Quickstep ordinary share, subject
to the satisfaction of the applicable
performance conditions and continued
service. Participation in the EIP was
open to all employees of the Group, but
in practice, options have only ever been
issued to one executive.
In November 2013 the Company
established the Quickstep Incentive
Rights Plan (IRP). The IRP was designed
to facilitate the Company moving towards
best practice remuneration structures for
executives, and offers under the IRP have
been made to a number of executives
since its introduction.
Further details of both plans are set
out below;
ii)
Quickstep Employee Incentive Plan
(EIP)
Under the EIP, the Board may grant
options to selected Quickstep employees
on such terms as it determines
appropriate. Participatioon 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.
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.
17
Quickstep Holdings Limited I Annual Report 2015 1 Principles of Compensation (continued)
b) Long-term incentives (continued)
ii) Quickstep Employee Incentive Plan (EIP) (continued)
In general, options granted under the EIP 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 under 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 following table.
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
2010 Year
2011 Year
2012 Year
30/06/11
30/06/12
30/06/13
31/08/2014
31/08/15
30 June 2011 30 June 2012 30 June 2013 31 Aug 2014 31 Aug 2015
% 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.
iii) Quickstep Incentive Rights Plan (IRP)
The IRP authorises the granting of Rights to executives of the Company, in the form of Performance Rights (PRs) and/ or Deferred
Rights (DRs) and/or Restricted Rights (RRs) (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 the
relevant service conditions are satisfied. DRs were granted to only Mr DJ Marino in FY2015. The DRs require Mr DJ Marino to remain
in continual employment until the relevant testing date set out in Note 16 (b) at which time they will vest. RRs are fully vested rights that
are subject to dealing restrictions, and may be granted or may arise from vesting of PRs and DR. There were no RRs granted in FY2015
and none arose from PRs or DRs.
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.
The PRs are subject to a performance condition based on achieving a relative Total Shareholder Return (TSR) equivalent to or in excess
of the ASX All Ordinaries Accumulation Index (AOAI) over the performance period. The AOAI is an index of total shareholder return
achieved by ASX listed companies which combines both share price movement and dividends paid during the performance period
(assuming that they are reinvested into Shares). As a general rule, Quickstep uses a performance period of three (3) years with an
anniversary date of 1 September each year.
18
Remuneration report – auditedQuickstep Holdings Limited I Annual Report 2015
1 Principles of Compensation (continued)
b) Long-term incentives (continued)
iii) Quickstep Incentive Rights Plan (IRP) (continued)
For vesting to occur the Company’s TSR (share price movement plus dividends) 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). 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
Below threshold
Threshold
Target
Stretch and above
Company’s TSR relative to AOAI movement
over the performance period
Vesting %
< 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
120% of AOAI increase
0%
25%
Pro-rata
60%
Pro-rata
100%
For PRs issued to executives other than Mr DJ Marino, testing of the TSR hurdle will occur on the third anniversary of the
commencement of the performance period and then semi-annually until the rights lapse or the fifth anniversary of the commencement
of the performance period. PRs issued to MR DJ Marino are vested at various dates. Refer to Note 16(b) for further detail. 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.
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 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 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 foot”, subject to the original performance conditions.
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, a fee for Chairmanship of a committee of $10,000 p.a. and $2,500 for
membership of each committee. 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
P Cook
B Griffiths
M Jenkins
E McCormack
D Singleton
1) Mr T Quick was appointed on an interim basis from 29/5/2014 as Executive Chairman at a rate of $2,000 a day. This role ceased on 15 February 2015.
Committee
Fees chairmanship
126,000
60,000
60,000
60,000
60,000
84,000
60,000
N/A
10,000
10,000
2,500
2,500
2,500
5,000
19
Quickstep Holdings Limited I Annual Report 2015
1 Principles of Compensation (continued)
d) Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for shareholder wealth, the RN&D committee gives regard to the following indices
in respect of the current financial year and the previous four financial years.
2015
2014
2013
2012
2011
Loss attributable to owners of the company
$(3,937,888)
$(11,181,401) $(16,985,894)
$(11,801,601)
$(13,734,713)
Dividends paid
Operating income
Change in share price
Return on capital employed
$nil
$nil
$nil
$nil
$nil
$39,511,931
$12,001,752
$2,562,621
$503,168
$471,524
(12.4%)
(6.1%)
35.7%
(66.4%)
(17.6%)
(95.9%)
(34.6%)
(60.9%)
13%
(52.5%)
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 Profit before
Interest and Tax (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 previous four years
the Group’s loss from ordinary activity after income tax has remained relatively consistent. FY2015 has shown a marked improvement as
the business works towards reporting profits through achieving commercialisation.
e) Service agreements
Name
Initial
agreement
date
Duration
Notice
period
Termination benefits
(to the extent permitted by law)
Mr D J Marino
16 Feb 2015
Open
6 months
Mr P M Odouard
13 Oct 2008
Open
6 months
Ms N Sharman
17 Feb 2014
Open
3 months
Mr J Johnson
1 Apr 2011
Open
3 months
12 months annual Total Fixed Remuneration (TFR) and
Pro-rated annual bonus (at Board’s discretion) If due to
change of control, 100% of annual TFR is paid immediately
plus pro-rated annual bonus
12 months annual salary and Pro-rated annual bonus
(at Board’s discretion)
3 months of annual salary package and Pro-rated annual
bonus (at Board’s discretion).
6 months of annual salary package and Pro-rated annual
bonus (at Board’s discretion).
Dr J Schlimbach
30 Mar 2009
3 months
n/a
Fixed term/
external
contractor
Ms Tracy Swinley
26 Nov 2012
Open
3 months
Mr M Schramko
25 Jul 2011
Open
3 months
Mr Timothy Olding
19 Feb 2015
Open
3 months
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)
STI cap
as a %
of TFR 1
LTI cap
as a %
of TFR 2
50
50
30
20
20
20
20
20
20
50
20
20
20
20
20
20
1)
STI (Short Term Incentive) is based upon 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 centre expenditure and functional outcomes aligned to the annual strategic plan.
2)
LTI (Long Term Incentive) is determined on the Group’s performance against relative Total Shareholder Return and is tested at multiple dates. This is the measure
currently used in the IRP applicable to the 2015 financial year.
20
Remuneration report – auditedQuickstep Holdings Limited I Annual Report 2015
Executive Directors
Mr T Quick
(29/5/14 until 15/2/15) 4
Mr D J Marino
(appointed 16/3/15)
Mr P M Odouard
Non-executive Directors
Mr T Quick
Mr N Ampherlaw
Mr P C Cook
Mr B Griffiths
Mr M B Jenkins
(retired 20/11/14)
Air Marshal
E J McCormack AO
Mr D Singleton
Executives
Mr D E Brosius
(terminated 31/12/14)
Mr J Pinto
Ms N Sharman
Mr J F Johnson
Dr J Schlimbach
Mr M Schramko
Ms T Swinley
Mr T Olding
(appointed 19/2/15)
– 126,000
– 70,000
– 70,000
– 61,500
–
25,625
– 86,500
– 65,000
– 221,837
– 40,000
– 293,255
50%
38%
40%
29%
–
–
–
–
–
–
–
7%
–
–
16%
12%
14%
19%
–
–
–
–
–
–
–
3%
–
–
4%
(1%)
3%
3%
2 Details of remuneration
The following tables show details of the remuneration received by the Directors and the key management personnel of the Group for the
current and previous financial year.
2015
Short-term Employee Benefits
Post-Employment Benefits
Share Based Payments
Non-
Salary / STI cash monetary
bonus 3 benefits
$
fees
$
$
Super-
Equity
based
annuation Termination short term Options &
rights 2
$
incentive 1
$
benefits
$
levy
$
Total
$
Proportion of
remuneration
Value of
SBP as
Total performance proportion of
related remuneration
$
227,000
–
– 227,000
–
156,772
31,207
785 188,764
7,224
–
–
31,207
101,197 328,392
–
– 227,000
–
–
361,478 56,236
20,748 438,462
14,252
– 45,000
140,291 638,005
126,000
63,927
63,927
61,500
25,625
78,995
59,361
–
–
–
–
–
–
–
– 126,000
– 63,927
– 63,927
– 61,500
–
25,625
–
6,073
6,073
–
–
–
–
78,995
59,361
7,505
5,639
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,955
8,113
– 60,068
– 40,000
–
–
– 154,203
7,566
40,000
224,351
– 43,462 267,813
25,442
234,992
37,942
9,000 281,934 25,560
194,395 28,663
– 223,058
–
227,658 32,248
– 259,906
22,735
213,623 49,843
– 263,466 23,384
89,171
14,918
1,490 105,579
6,837
–
–
–
–
–
–
–
–
–
1,588
10,623 319,705
(1,124)
– 221,934
(891)
9,808 291,558
(1,852)
9,380 294,378
–
6,692
119,108
18%
6%
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.
3)
The Short Term Incentive (STI) is comprised of an accrued current year cash bonus plus adjustment for differences between the amount accrued during the prior
financial year and the amount paid in the current 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 FY2014.
4)
Mr Quick was appointed on an interim basis as Executive Chairman to manage the day to day growth of the organisation in addition to his role as Chairman of the Board.
This arrangement commenced on 29 May 2014 and ceased on 15 February 2015.
21
Quickstep Holdings Limited I Annual Report 2015
2 Details of remuneration (continued)
2014
Short-term Employee Benefits
Post-Employment Benefits
Share Based Payments
Non-
Salary / STI cash monetary
bonus 3 benefits
$
fees
$
$
Super-
Equity
based
annuation Termination short term Options &
rights 2
$
incentive 1
$
benefits
$
levy
$
Total
$
Proportion of
remuneration
Value of
SBP as
Total performance proportion of
related remuneration
$
Executive Directors
Mr T Quick
(29/5/14 until 30/6/14) 4
Mr P M Odouard
Non-executive Directors
Mr T Quick
Mr N Ampherlaw
(appointed 8/7/13)
Mr P C Cook
Mr B Griffiths
Mr M B Jenkins
Air Marshal
E J McCormack AO
Mr D Singleton
Mr DE Wills (retired 5/7/13)
Executives
Mr D E Brosius
Mr S Godbille
(resigned 31/3/14)
Mr J Pinto
Ms N Sharman
(appointed 11/3/14)
Mr J F Johnson
Dr J Schlimbach
Mr M Schramko
Ms T Swinley
Mr P Robertson
(resigned 25/11/13)
Mr A Vihersaari
(resigned 12/6/14)
26,000
–
382,225
60,890
–
–
26,000
–
443,115
27,061
126,000
61,785
63,227
61,875
61,875
78,604
58,352
1,147
–
–
–
–
–
–
–
–
–
126,000
–
–
–
–
–
–
–
–
61,785
63,227
61,875
61,875
78,604
58,352
1,147
5,715
5,849
–
–
7,271
5,398
106
210,957
(13,268)
–
197,689
–
174,397
48,000
68,139
1,010
–
–
–
–
–
175,407
15,897
48,000
–
68,139
6,303
237,590
21,298
– 258,888
23,947
199,663
19,192
–
218,855
–
210,845
19,756
– 230,601
21,272
170,910
18,670
–
189,580
16,634
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
26,000
113,603 583,779
–
30%
–
19%
–
126,000
–
–
–
–
–
–
–
67,500
69,076
61,875
61,875
85,875
63,750
1,253
–
–
–
–
–
–
–
–
–
197,689
(7%)
–
–
–
–
–
–
–
–
–
1,010
27,481
219,795
13%
13%
–
–
–
–
48,000
74,442
21,298
24,352 328,485
18,603
19,835
18,670
– 237,458
–
271,708
– 224,884
–
–
20%
16%
15%
17%
–
–
14%
8%
7%
8%
98,243
(9,375)
–
88,868
5,870
28,846
(9,375)
–
114,209
(16%)
(8%)
177,786
3,100
–
180,886
–
–
2,562
41
183,489
3%
1%
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.
3)
The Short Term Incentive (STI) is comprised of an accrued cash current year bonus plus adjustment for differences between the amount accrued during the prior
financial year and the amount paid in the current 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 FY2014.
4)
Mr Quick was 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.
This arrangement commenced on 29 May 2014 ceased on 15 February 2015.
22
Remuneration report – auditedQuickstep Holdings Limited I Annual Report 2015
3 Share Based Compensation
a) Short Term Incentives
Equity settled short term incentive
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:
Name
Ms T Swinley
Mr J Johnson
Dr J Schlimback
Mr M Schramko
Mr D Brosius
Mr B McDonald
Mr P Salvati
Total
No. of shares granted
and vested during
FY15 in respect of
FY14 performance
Fair value
$
Total
fair value
$
65,257
128,175
56,034
60,768
39,428
39,713
26,592
415,967
$0.192
$0.192
$0.192
$0.192
$0.192
$0.220
$0.192
12,523
24,597
10,753
11,661
7,566
8,737
5,103
80,940
Equity settled short term incentives accrued in the current year for FY2015 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)
At 30 June 2015, Mr P Odouard is the only employee to be granted options pursuant to the EIP. No options were granted during the 2015
financial year under the EIP. Movement in EIP options during the year are set out below:
Name
Mr P Odouard
Mr P Odouard
Mr P Odouard
Mr P Odouard
Mr P Odouard
Balance at
Tranche Grant date grant date a 30 June 2014
FV per
option at
Exercised/
vested
during
the year b
Lapsed/
cancelled
during
Cumulative
Balance at vesting level
the year 30 June 2015 at end of year
Tranche 3 30/03/2010
Tranche 4 30/03/2010
FY2010
26/11/2010
FY2011
23/11/2011
FY2012
22/11/2012
$0.315
$0.270
$0.362
$0.173
$0.125
619,446
471,698
471,337
706,373
987,739
–
–
–
–
–
–
–
–
–
–
619,446
471,698
471,337
706,373
987,739
0%
0%
0%
0%
0%
a) The fair value of options granted was calculated using a Monte Carlo simulation analysis.
b)
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 $nil (2014: $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.
At 30 June 2015 executives accrued rights pursuant to the IRP. Movements in IRP rights during the year are set out below:
Performance and
deferred rights
Tranche
Grant date
FV per
right at
Balance at
grant date a 30 June 2014
Granted
during
the year b
Lapsed/
cancelled
during
Cumulative
Balance at vesting level at
the year 30 June 2015
end of year
Name
Mr P Odouard
Mr P Odouard
Mr D Marino
Mr D Marino
Mr D Marino
Mr D Marino
Mr D Marino
Ms N Sharman
Ms T Swinley
Mr T Olding
Mr M Schramko
Mr J Johnson
Performance
FY2013 22/11/2013
Performance
FY2015 20/11/2014
Performance
FY2015 16/02/2015
$0.152
$0.145
$0.100
Deferred
FY2015 16/02/2015
$0.200
Performance
FY2015 16/02/2015
$0.110
Deferred
FY2015 16/02/2015
$0.200
Performance
FY2015 16/02/2015
Performance
FY2015 31/08/2014
Performance
FY2015 31/08/2014
Performance
FY2015 19/02/2015
Performance
FY2015 31/08/2014
Performance
FY2015 31/08/2014
$0.155
$0.145
$0.145
$0.155
$0.145
$0.145
802,000
–
1,107,420
207,641
207,641
415,283
415,283
1,245,847
–
–
–
–
–
–
–
802,000
1,107,420
207,641
207,641
415,283
415,283
1,245,847
298,512
(298,512)
–
233,999
304,540
244,660
265,000
–
–
–
–
233,999
304,540
244,660
265,000
–
–
–
–
–
–
–
–
–
–
–
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 $743,031 (2014: $121,904). The total value of the rights is allocated to remuneration over the vesting period.
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
23
Quickstep Holdings Limited I Annual Report 2015
3 Share Based Compensation (continued)
b) Long Term Incentives (continued)
See note 16(b) for first testing date of all above grants.
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 2015
Included in
remuneration $ 1
% vested % forfeited
in year 2
in year 2
Directors
Mr P Odouard
Mr D Marino
Executives
Mr D Brosius
Mr J Johnson
Dr J Schlimbach
Mr M Schramko
Ms T Swinley
Mr T Olding
56,236
31,207
8,113
37,942
28,663
11,661
32,523
14,918
75%
75%
87%
75%
75%
75%
75%
75%
25%
25%
13%
25%
25%
25%
25%
25%
1)
2)
Amounts included in remuneration for the financial year represent the amount that vested in the financial year based on estimated achievement of Group and/or personal
goals and satisfaction criteria and accrued adjustments in relation to FY2014.
The amounts forfeited are due to the Group performance, personal performance or service criteria not being met in relation to the current financial year. Vesting and
forfeiture levels are based on estimates which will be finalized by 31 October 2015.
5 Services from remuneration consultant
During FY15 Quickstep engaged Godfrey Remuneration Group Pty Limited (GRG) to provide advice in relation to the CEO’s
remuneration and the Quickstep Incentive Rights Plan. Total fees paid for these services were $10,000 + 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.
In addition to the above services, the Company purchased a general remuneration survey published by Godfrey Remuneration Group.
This survey, which is generally available to the market, was not tailored in any way to the Company and the Company paid market rate
for it.
This report is made in accordance with a resolution of Directors.
Mr D J Marino
CEO and Managing Director
Sydney, New South Wales
24 September 2015
24
Remuneration report – auditedQuickstep Holdings Limited I Annual Report 2015
Financial statements
Segment information
Revenue and income
Expenses
Finance income and expense
Loss per share
Income tax expense
Financial assets and financial liabilities
Non-financial assets and liabilities
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
2
3
4
5
6
7
8
9
10 Cash flow information
11
12 Group entities
13 Capital and other commitments
14 Events occurring after the reporting period
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
Financial instruments – fair values and risk management
26
27
28
29
30
31
32
33
33
34
34
36
38
41
43
43
47
47
48
48
48
52
52
53
58
59
60
61
25
Quickstep Holdings Limited I Annual Report 2015 Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2015
Revenue
Cost of sales of goods
Gross profit (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
Loss for the period
Other comprehensive (loss) income net of income tax
Item that may be reclassified to profit or loss
Foreign currency translation difference for foreign operations
Other comprehensive (loss) income for the period, net of tax
Total comprehensive loss for the period
Earnings per share
Basic loss per share (cents)
Diluted loss per share (cents)
Notes
2015
$
2014
$
2
39,511,931
12,001,752
(27,853,298)
(13,781,109)
11,658,633
(1,779,357)
2
2
1,817,225
–
5,329,751
457,107
(4,076,533)
(2,435,981)
(181,381)
(595,083)
(7,158,284)
(6,764,245)
(2,678,222)
(3,019,459)
3(a)
(105,112)
(224,871)
(723,674)
(9,032,138)
1,024,535
142,642
(4,238,749)
(2,291,905)
(3,214,214)
(2,149,263)
(3,937,888)
(11,181,401)
–
–
(3,937,888)
(11,181,401)
(641,849)
221,602
(641,849)
221,602
(4,579,737)
(10,959,799)
(0.99)
(0.99)
(2.93)
(2.93)
4
4
6
5
5
26
Quickstep Holdings Limited I Annual Report 2015
Consolidated statement of financial position
As at 30 June 2015
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
Deferred income
Loans and borrowings
Employee benefits
Total non-current liabilities
Total liabilities
Net (liabilities) assets
EQUITY
Share capital
Reserves
Accumulated Losses
Total equity
Notes
2015
$
2014
$
7(a)
7(b)
8(a)
7(c)
7(d)
8(b)
1,169,944
5,134,466
5,981,585
709,400
528,046
–
565,583
6,180,827
8,260,333
3,848,833
394,718
445,385
13,523,441
19,695,679
8(c)
8(d)
12,024,843
13,454,853
20,081
36,557
12,044,924
13,491,410
25,568,365
33,187,089
7(e)
7(f)
7(g)
8(e)
4,565,718
5,290,832
3,203,926
13,809,490
5,244,195
748,615
7,394
473,720
13,762,454
19,581,436
7(f)
7(g)
8(e)
2,425,606
–
10,500,256
10,456,325
113,163
61,337
13,039,025
10,517,662
26,801,479
30,099,098
(1,233,114)
3,087,991
9(a)
9(b)
9(c)
88,228,474
88,228,474
3,106,319
3,489,536
(92,567,907)
(88,630,019)
(1,233,114)
3,087,991
27
Quickstep Holdings Limited I Annual Report 2015
Consolidated statement of changes in equity
For the year ended 30 June 2015
Consolidated
Notes
Share
capital
$
Foreign
currency
translation Share based Accumulated
payments
$
reserve
$
$
losses Total equity
$
Balance at 1 July 2013
74,754,828
(129,155)
3,088,499
(77,448,618)
265,554
Total comprehensive loss for the period
Loss for the period
Other comprehensive income
Foreign currency translation difference
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share based transaction payments
Issue of ordinary shares net of transaction costs
Balance at 30 June 2014
Balance at 1 July 2014
Total comprehensive loss for the period
Loss for the period
Other comprehensive loss
Foreign currency translation difference
Total comprehensive loss for the period
Transactions with owners in their capacity as owners:
Share based transaction payments
Balance at 30 June 2015
9(c)
9(b)
9(b)
9(a)
9(c)
9(b)
9(b)
–
–
–
–
13,473,646
13,473,646
–
221,602
221,602
–
–
–
(11,181,401)
(11,181,401)
–
221,602
(11,181,401)
(10,959,799)
–
–
–
308,590
–
308,590
–
–
–
308,590
13,473,646
13,782,236
88,228,474
92,447
3,397,089
(88,630,019)
3,087,991
88,228,474
92,447
3,397,089
(88,630,019)
3,087,991
–
–
–
–
–
(641,849)
(641,849)
–
–
–
(3,937,888)
(3,937,888)
–
(641,849)
(3,937,888)
(4,579,737)
–
258,632
–
258,632
88,228,474
(549,402)
3,655,721
(92,567,907)
(1,233,114)
28
Quickstep Holdings Limited I Annual Report 2015
Consolidated statement of cash flows
For the year ended 30 June 2015
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 (used in) operating activities
Cash flows from investing activities
Acquisition costs for plant and equipment
Proceeds from sale of property, plant and equipment
Receipts from (Investment in) restricted cash and term deposit
Net cash from (used in) 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
Net cash from financing activities
Net increase (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 period
Cash and cash equivalents at end of period
Notes
2015
$
2014
$
27,967,034
15,601,190
33,922
(492,351)
97,430
(96,579)
6,053,337
5,226,829
(39,941,831)
(27,502,511)
10(a)
(6,379,889)
(6,673,641)
(952,130)
(1,263,810)
8(c)(d)
257,000
189,501
3,150,885
(3,458,433)
2,455,755
(4,532,742)
–
12,625,293
5,500,000
–
(500,000)
(1,750,405)
(403,720)
(43,627)
(421,724)
(16,693)
4,552,653
10,436,471
628,519
(24,158)
(769,912)
(57,825)
565,583
1,393,320
7(a)
1,169,944
565,583
29
Quickstep Holdings Limited I Annual Report 2015
Segment information
Revenue and income
Expenses
Finance income and expense
Loss per share
Income tax expense
Financial assets and financial liabilities
Non-financial assets and liabilities
Equity
Contents of the notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10 Cash flow information
11
12 Group entities
13 Capital and other commitments
14 Events occurring after the reporting period
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
Financial instruments – fair values and risk management
Page
31
32
33
33
34
34
36
38
41
43
43
47
47
48
48
48
52
52
53
58
30
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015 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:
Aerospace Manufacturing – Targeting manufacturing contracts for Aerospace utilising a range of manufacturing solutions including
traditional manufacturing technologies such as autoclaves and ‘next generation’ technologies.
Quickstep Systems – Licensing our Qure and RST technologies to Original Equipment Manufacturers (OEM’s) and their suppliers,
and providing them with Quickstep machines and support services and manufacturing parts using the Qure and RST processes.
b) Segment results
2015
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
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
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
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
Aerospace
Manufacturing
$
Quickstep
Systems
$
Total
$
33,756,679
5,755,252
39,511,931
–
1,817,225
1,817,225
2,332,494
1,844,477
119,519
2,452,013
–
1,844,477
(2,862,920)
(348,515)
(3,211,435)
23,052,622
2,515,743
25,568,365
25,181,907
1,619,572
26,801,479
952,130
–
952,130
11,955,593
3,292,333
2,236,083
987,468
46,159
12,001,752
2,393,514
195,842
130,662
5,685,847
2,431,925
1,118,130
(4,933,805)
(2,104,508)
(7,038,313)
23,671,724
6,376,586
30,048,310
23,810,203
4,260,905
28,071,108
1,217,643
21,493
1,239,136
2015
$
2014
$
(3,211,435)
(726,453)
(7,038,313)
(4,143,088)
(3,937,888)
(11,181,401)
25,568,365
30,048,310
–
3,138,779
25,568,365
33,187,089
26,801,479
28,071,108
–
2,027,990
26,801,479
30,099,098
31
Quickstep Holdings Limited I Annual Report 2015
1 Segment information (continued)
d) Major customers
The revenue earned by the manufacturing segment includes amounts from the following customers:
Northrop Grumman ISS Int, Inc
Lockheed Martin Aeronautics
e) Geographical information
The Manufacturing and Quickstep Systems segments are managed at Quickstep’s head office in Australia.
$11,129,026
$22,108,565
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.
Segment non-current assets are based on the geographical location of the assets.
Revenue
$
Non-current
assets
$
4,056
11,703,773
33,238,550
–
6,269,325
341,541
39,511,931
12,044,924
46,600
8,980
11,946,172
12,995,613
426,603
69,194
12,001,752
13,491,410
2015
$
2014
$
39,511,931
12,001,752
1,817,225
4,463,253
–
–
–
157,326
481,453
227,719
1,817,225
5,329,751
–
457,107
2015
Australia
United States of America
Europe
Total
2014
Australia
Europe
United States of America
Total
2 Revenue and income
Sales revenue
Sale of goods
Government grant income
R&D tax incentive
SADI program grant
Other government grant income
NACC
Other Income
Other income
32
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
3 Expenses
a) Other expenses
Amortisation of intangible assets
Loss on disposal of plant and equipment
Loss on disposal 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
4 Finance income and expense
Recognised in profit or loss
Interest income
Change in fair value of deferred income through profit or loss
Foreign currency gains
Gain on settlement of debt by equity instruments
Change in fair value of share option liability
Finance income
Finance lease interest paid
Interest expense on liabilities measured at amortised cost
Foreign currency losses
Other expenses
Finance expense
Net finance costs
Recognised in other comprehensive income
Foreign currency translation difference for foreign operations
Total recognised in other comprehensive income, net of tax
Notes
8(d)
2015
$
31,545
70,386
3,181
105,112
2014
$
53,795
171,076
224,871
13,114,334
1,131,204
1,283,180
326,721
258,632
9,379,829
857,769
1,422,536
247,100
308,590
16,114,071
12,215,824
16(d)
Note
2015
$
2014
$
24,535
–
–
–
7(g)(iv)
1,000,000
1,024,535
(1,033)
(1,844,477)
103,918
(201,460)
66,687
173,497
–
142,642
(1,606)
(1,118,130)
(2,134,029)
(1,038,675)
(259,210)
(133,494)
(4,238,749)
(2,291,905)
(3,214,214)
(2,149,263)
(641,849)
(641,849)
221,602
221,602
33
Quickstep Holdings Limited I Annual Report 2015
5 Loss per share
The calculation of basic loss per share at 30 June 2015 was based on the loss attributable to ordinary shareholders of $3,937,888
(2014: $11,181,401) and a weighted average number (W.A.N.) of ordinary shares outstanding during the financial year ended 30 June 2015
of 397,663,615 (2014: 381,291,850) calculated as follows:
Note
Actual No.
W.A.N.
Actual No.
2015
2014
W.A.N.
Issued ordinary shares 1 July
397,457,534 397,457,534
323,845,045
323,845,045
Effect of shares issued on exercise of rights and to Executives as remuneration
415,967
206,081
2,982,117
1,128,030
Effect of shares issued
Effect of shares exchanged for debt settlement
Issued ordinary shares at 30 June
–
–
–
–
66,640,000
53,891,754
3,990,372
2,427,021
9(a)
397,873,501
397,663,615
397,457,534
381,291,850
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)
Basic and diluted loss per share (cents)
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% (2014 – 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
c) Tax losses not brought to account
The gross amount of unused tax losses for which no deferred tax asset has been recognised.
d) Temporary differences not brought to account
Deferred tax assets/(liabilities):
Prepayments
Other provisions
Borrowing costs
Deductible capital raising costs
Property, plant and equipment
Intangibles
Deferred tax assets relating to temporary differences not recognised
2015
2014
397,663,615
381,291,850
(0.99)
(2.93)
2015
$
2014
$
–
–
–
–
–
–
–
–
(3,937,888)
(11,181,401)
(1,181,366)
(3,354,420)
759,267
(85,152)
2,496,813
108,711
(995,300)
(1,295,611)
1,502,551
2,044,507
–
–
59,894,506
57,429,276
(250)
1,237,960
14,812
169,206
1,654,840
207,754
–
844,765
29,174
273,315
1,166,332
207,754
(3,284,322)
(2,521,340)
–
–
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.
34
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
Income tax expense
6
e) Tax consolidation legislation
Quickstep Holdings Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group effective from
1 July 2010.
f) R&D tax offset incentive
No R&D tax offset incentive (2014: $3,500,000) has been recorded as receivable as at 30 June 2015 due to current year turnover
exceeding the threshold for eligibility for any further cash refund entitlements. 2014 was the final year of eligibility recording a $3,500,000
entitlement. An additional $1,817,225 above the amount recorded as a receivable in 2014 was received on finalisation of the 2014 R&D
claim during 2015. This amount has been recognised in profit or loss during the year (refer to Note 2).
7 Financial assets and financial liabilities
a) Cash and cash equivalents
Current assets
Cash at bank and in hand
2015
$
2014
$
1,169,944
1,169,944
565,583
565,583
Cash and cash equivalents of $733,798 (2014: $397,929) have been pledged as collateral against a secured bank loan (refer to Note 7(g)).
b) Trade and other receivables
Current assets
Trade receivables
Other receivables
R&D tax incentive and government grants receivables
GST and VAT receivables
Accrued interest
Payroll tax refund receivable
Other receivables
4,456,740
2,326,468
–
3,500,000
411,891
–
241,000
24,835
58,622
8,462
278,530
8,745
5,134,466
6,180,827
Trade and other receivables of $4,493,764 (2014: $913,640) have been pledged as collateral against a secured bank loan (refer Note 7(g)).
c) Other financial assets
Current assets
Held to maturity term deposits
Restricted cash deposits
d) Other current assets
Current assets
Prepayments
Other
e) Trade and other payables
Current liabilities
Trade payables
Sundry payables and accrued expenses
709,400
779,400
–
3,069,433
709,400
3,848,833
495,237
32,809
528,046
340,454
54,264
394,718
2,252,675
2,313,043
4,374,324
916,508
4,565,718
5,290,832
35
Quickstep Holdings Limited I Annual Report 2015
7 Financial assets and financial liabilities (continued)
f) Deferred income
Consolidated
2015
2014
Current Non-current
$
$
Total
$
Current Non-current
$
$
Total
$
Deferred income
3,203,926
2,425,606
5,629,532
13,809,490
3,203,926
2,425,606
5,629,532
13,809,490
–
–
13,809,490
13,809,490
The amounts reported as current deferred income includes amounts received as a 30% prepayment of ship-sets 40 through 58 of
C-130J wing flaps to be sold to Lockheed Martin, scheduled to be completed and therefore income expected to be recognised by
January 2016.
g) Loans and borrowings
2015
2014
Current Non-current
$
$
Total
$
Current Non-current
$
$
Total
$
Secured bank loan ii
Capitalised interest facility ii
Prepaid borrowing cost ii
629,756
9,370,244
10,000,000
–
–
1,524,189
1,524,189
(394,875)
(394,875)
Secured bank loan carrying amount
629,756
10,499,558
11,129,314
–
–
–
–
10,000,000
10,000,000
1,062,801
1,062,801
(615,188)
(615,188)
10,447,613
10,447,613
Finance lease liability v
Short term facility-Efic iii
Short term facilty – Newmarket loan iv
2,000,000
3,000,000
Short term facility-Newmarket loan deferred costs iv
(2,018,576)
Newmarket loan carrying amount
Newmarket share options at fair value iv
981,424
1,625,000
8,015
698
8,713
7,394
8,712
16,106
–
–
–
–
–
2,000,000
3,000,000
(2,018,576)
981,424
1,625,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
i) Term and debt repayment schedule
Secured bank loan
Capitalised Interest
Short term facility – Efic
Short term facility – Newmarket
Finance lease liabilities
5,244,195
10,500,256
15,744,451
7,394
10,456,325
10,463,719
Effective
interest rate
%
Year of
maturity
Maximum
facility value
$
Drawn
amount
$
Maximum
facility value
$
2015
2014
Drawn
amount
$
8.562
8.562
2.246
12.000
8.397
2021
2021
2016
2016
2016
10,000,000
10,000,000
10,000,000
10,000,000
3,333,333
1,524,189
3,333,333
1,062,801
2,000,000
2,000,000
3,000,000
3,000,000
n/a
8,713
n/a
n/a
n/a
n/a
n/a
16,106
36
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
7 Financial assets and financial liabilities (continued)
g) Loans and borrowings (continued)
ii) Secured bank loan
On 1 November 2011 Quickstep Technologies Pty Ltd, a subsidiary Company of the Group, executed an Export Finance Facility Agreement
with Australian and New Zealand Banking Group Limited (ANZ) (Financier) and Export Finance and Insurance Corporation (Efic)
(Guarantor) to fund certain capital expenditure. The Agreement provides for a loan facility of up to $10,000,000 plus capitalised interest
of up to $3,333,333. At 30 June 2015 the facility had been fully drawn to $10,000,000 together with capitalised interest of $1,524,189.
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 2016 which is the fifth year of the facility, with the final repayment due in year 10.
The interest rate on the facility comprises a variable base rate, a fixed margin payable to the Financier and a fixed guarantee fee payable
to the Guarantor. Unused limit fees are payable to both the Financier and the Guarantor on the undrawn principle balance.
The facility includes an interest rate cap which limits the maximum rate applicable to the base rate for the duration of the capitalisation
period to 5.03%. This cap ensures that the interest accruing on the facility remains within the capitalised interest limit. The cost of the cap
has been recorded as prepaid borrowing cost and is recognised in the profit and loss through the effective interest rate method, with a
carrying value of $394,875 at 30 June 2015 ($615,188 at 30 June 2014).
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 2015 is $23,172,938 which
represents the cash and cash equivalents, plant and equipment, inventory and other assets owned by Quickstep Technologies Pty Ltd.
Under this agreement, Quickstep Technologies Pty Ltd (Chargor) has agreed to the following restrictions on title on any of the assets
under which Efic (Chargee) has a fixed charge over. Without the consent of the Chargee, the Chargor may not:
• dispose of the Secured Property; 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
lease or license the Secured Property or any interest in it, or deal with any existing lease or licence; 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 2015 is $88,017,349 and its carrying value net of impairment is $35,978,911.
iii) Short term facility – Efic
Quickstep Holdings Limited is party to a short term debt facility provided by the Export Finance and Insurance Corporation which is
classified as current in accordance with repayment date of 31 October 2015 ($2,000,000). The repayment terms of this facility has
been amended subsequent to the balance sheet date with repayment now due at 31 December 2015 ($1,500,000) and 30 March 2016
($500,000).
iv) Short term facility – Newmarket loan
In February 2015 a $3,000,000 debt facility was secured from Newmarket Financing Management Pty Ltd and Associates (Newmarket).
This facility provides short-term working capital support to assist Quickstep’s long term growth as its deliveries for the F-35 Lightning
II Joint Strike Fighter (JSF) and Lockheed Martin C-130J Super Hercules programs accelerate. The term of the facility is 18 months
(expiring on 31 August 2016). The debt is secured against Quickstep Group assets but subordinated to senior debt.
As partial consideration for providing the loan, Quickstep has issued 25 million options to Newmarket to acquire ordinary shares in
Quickstep which expire on 31 December 2018. The exercise price will be the lesser of $0.25 or 25% above the issuance price of any
equity capital raising up to $10 million undertaken prior to the exercise of that tranche of options.
The options were granted on 9 January 2015 and initially measured at fair value of $2,625,000 using a Monte Carlo valuation technique.
This initial fair value has been deferred against the $3,000,000 face value of the loan and is being amortised through profit or loss using
the effective interest rate method over the 18 month term of the loan. The option liability was also remeasured through profit or loss at 30
June 2015 to a fair value of $1,625,000 resulting in a gain of $1,000,000 during the year.
The Newmarket loan and associated Options are treated and disclosed in this manner because, under the relevant accounting standard,
the Options are treated as a financial instrument. Consequently, even though the carrying value of the Newmarket loan is disclosed at
$981,424, the Company has an obligation to repay $3,000,000 (plus interest) to Newmarket at the expiration of the term of the facility.
37
Quickstep Holdings Limited I Annual Report 2015 7 Financial assets and financial liabilities (continued)
g) Loans and borrowings (continued)
v) 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
8 Non-financial assets and liabilities
a) Inventories
Current assets
Raw materials and consumables
Work in progress
2015
$
2014
$
8,427
702
9,129
412
5
417
8,015
698
8,713
8,427
9,129
17,556
1,033
417
1,450
7,394
8,712
16,106
2015
$
2014
$
3,622,305
2,359,280
5,162,989
3,097,344
5,981,585
8,260,333
Inventories of $5,981,585 (2014:$6,905,757) have been pledged as collateral against a secured bank loan (refer to Note 7(g)).
b) Assets classified as held for sale
During the 2013 financial year, following the decommissioning of the Company’s North Coogee facility, the company identified certain
plant and equipment which were deemed surplus to the needs of the Company. The assets were classified as held for sale and an
impairment to the carrying value of the assets was recognised.
A reassessment of the benefits of the surplus assets was made in the last financial year and it was determined the majority of the surplus
assets should be utilized for the JSF Project. The assets were reclassified as plant and equipment and the remaining fair value less cost
to sell the remaining assets held for sale at 30 June 2014 was $445,385.
During the year ended 30 June 2015 the assets classified as held for sale have been disposed of through sales to third parties or utilised
within the business leaving a $nil residual balance classified as held for sale at 30 June 2015. The loss on disposal of the assets sold
was $3,181.
38
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
8 Non-financial assets and liabilities (continued)
c) Property, plant and equipment
At 1 July 2013
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Transfers
Assets held for sale
Effect of movements in exchange rates
Depreciation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Disposals
Transfers
Assets held for sale
Effect of movements in exchange rates
Depreciation charge
Closing net book amount
At 30 June 2015
Cost i
Accumulated depreciation
Net book amount
i) Refer to Note 7(g) for details of fixed and floating charges over certain of the above assets.
Plant and Assets under
equipment construction
$
$
Office
furniture &
equipment
$
Total
$
17,432,426
1,452,269
1,309,995
20,194,690
(5,674,392)
–
(721,069)
(6,395,461)
11,758,034
1,452,269
588,926
13,799,229
11,758,034
1,452,269
588,926
13,799,229
264,403
(163,565)
866,146
–
2,086,492
(2,225,892)
1,432,615
(7,680)
(2,453,055)
–
797
–
108,587
(197,012)
139,400
1,239,136
(360,577)
–
–
1,432,615
5,967
(916)
(201,579)
(2,654,634)
12,917,244
93,320
444,289
13,454,853
22,103,601
(9,186,357)
93,320
1,071,002
23,267,923
–
(626,713)
(9,813,070)
12,917,244
93,320
444,289
13,454,853
12,917,244
907,744
(77,282)
93,320
149,265
(2,682)
(2,288,696)
93,320
29,500
–
(93,320)
–
–
–
444,289
13,454,853
–
(14,110)
–
–
(1,977)
937,244
(91,392)
–
149,265
(4,659)
(131,772)
(2,420,468)
11,698,913
29,500
296,430
12,024,843
25,510,395
(13,811,482)
29,500
755,580
26,295,475
–
(459,150)
(14,270,632)
11,698,913
29,500
296,430
12,024,843
39
Quickstep Holdings Limited I Annual Report 2015
8 Non-financial assets and liabilities (continued)
d) Intangible assets
At 30 June 2013
Cost
Accumulation amortisation and impairment
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Effect of movement in exchange rates
Amortisation for the year
Closing net book amount
At 30 June 2014
Cost
Accumulation amortisation and impairment
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Effect of movement in exchange rates
Amortisation for the year
Closing net book amount
At 30 June 2015
Cost
Accumulated amortisation
Net book amount
e) Employee benefits
Computer
software
$
Total
$
689,003
(623,581)
65,422
689,003
(623,581)
65,422
65,422
24,674
256
(53,795)
36,557
65,422
24,674
256
(53,795)
36,557
714,422
(677,865)
36,557
714,422
(677,865)
36,557
36,557
14,886
183
(31,545)
20,081
36,557
14,886
183
(31,545)
20,081
729,491
(709,410)
20,081
729,491
(709,410)
20,081
2015
2014
Current Non-current
$
$
Total
$
Current Non-current
$
$
Total
$
Liability for annual leave
Liability for long service leave
Total
748,615
–
748,615
–
113,163
113,163
748,615
113,163
861,778
473,720
–
473,720
–
61,337
61,337
473,720
61,337
535,057
40
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
9 Equity
a) Share capital
i) Share capital
Ordinary shares – fully paid
9(a)(ii)
397,873,501 397,457,534
88,228,474
88,228,474
Notes
2015
Shares
2014
Shares
2015
$
2014
$
ii) Movements in ordinary share capital
Details
Year ended 30 June 2014
Opening balance 1 July 2013
Shares issued on exercise of rights
Shares issued to Executives as remuneration
Shares issued on exercise of options
Shares issued for debt settlement
Issue of ordinary shares, net of costs
Balance 30 June 2014
Year ended 30 June 2015
Opening balance 1 July 2014
Shares issued on exercise of rights
Balance 30 June 2015
Number of shares
$
323,845,045
74,754,828
2,204,589
471,048
306,480
–
–
–
3,990,372
848,353
66,640,000
12,625,293
397,457,534
88,228,474
397,457,534
88,228,474
415,967
–
397,873,501
88,228,474
a) During the year, the Company issued 415,967 (2014: 2,982,117) shares pursuant to share-based payment arrangements with certain key management personnel.
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.
iii) Options
Options granted during the year
At 30 June 2015, Mr P Odouard is the only employee to be granted options pursuant to the Quickstep Employee Incentive Plan (EIP).
No options were granted during FY15 under the EIP, which has been replaced by the Quickstep Incentive Rights Plan (IRP) as set out at
Note 16 (b) below.
Unissued shares under option
At 30 June 2015, unissued ordinary shares of the Company under option are:
Expiry date
30 March 2017
26 November 2017
23 November 2018
22 November 2019
Number of options
Exercise price
2015
2014
$0.00
$0.00
$0.00
$0.00
1,091,144
471,337
706,373
987,739
1,091,144
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 no options (2014: 306,480) were exercised.
Lapse of options
During the current and prior financial years, no options lapsed.
41
Quickstep Holdings Limited I Annual Report 2015
9 Equity (continued)
a) Share capital (continued)
iv) Rights
At 30 June 2015, unissued ordinary shares of the Company under rights totalled 5,449,314 (2014: 802,000). The rights are issued
pursuant to:
• Executive services agreements and vesting at various future dates on completion of relevant service periods, and
• Offers under the IRP which vest at various future dates upon satisfaction of performance conditions and service criteria.
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, no shares (2014: 2,204,589 shares) were issued as a result of the exercise of rights.
298,512 rights (2014: 220,720) were forfeited in the current year.
b) Reserves
Share-based
payments
$
Notes
Foreign
currency
translation
reserve
$
Total
$
3,088,499
(129,155)
2,959,344
89,469
87,035
132,086
–
–
–
–
221,602
89,469
87,035
132,086
221,602
3,397,089
92,447
3,489,536
3,397,089
92,447
3,489,536
16(d)
16(d)
16(d)
125,674
52,018
80,940
–
–
–
125,674
52,018
80,940
–
(641,849)
(641,849)
3,655,721
(549,402)
3,106,319
2015
$
2014
$
(88,630,019)
(77,448,618)
(3,937,888)
(11,181,401)
(92,567,907)
(88,630,019)
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
Balance at 1 July 2014
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 2015
c) Accumulated losses
Balance 1 July
Net (loss) for the year
Balance 30 June
42
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
10 Cash flow information
a) Reconciliation of cash flows from operating activities to loss after income tax:
Loss for the year
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
Change in fair value of share option liability
Present value on deferred income
Operating profit /(loss) before changes in working capital
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase/(decrease) in inventories
Decrease/(increase) in other current assets
(Decrease)/ increase in trade and other payables
Increase in employee benefits
(Decrease)/increase in deferred income
Decrease in prepaid interest
Net cash used in operating activities
2015
$
2014
$
(3,937,888)
(11,181,401)
31,545
53,795
2,420,468
2,654,634
(24,535)
258,632
73,567
1,844,477
–
–
(103,918)
308,590
171,076
1,118,130
(27,898)
(173,497)
3,204,055
1,038,675
(1,070,026)
1,000,000
–
(66,687)
133,494
(201,460)
3,800,295
(6,276,467)
1,046,361
(1,615,524)
(2,278,748)
(6,609,659)
(133,328)
(7,288)
(1,181,545)
2,308,947
326,721
247,100
(8,179,958)
4,928,085
220,313
351,165
(6,379,889)
(6,673,641)
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;
•
• market risk.
liquidity risk; and
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.
43
Quickstep Holdings Limited I Annual Report 2015
11 Financial instruments – fair values and risk management (continued)
b) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivables from customers and cash balances and deposits.
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. 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
2015
$
2014
$
1,169,944
709,400
5,134,466
–
565,583
779,400
6,180,827
3,069,433
7,013,810
10,595,243
As at 30 June 2015, no financial asset was considered past due (2014: nil).
As at 30 June 2015, no financial asset was considered impaired (2014: nil).
The Group’s maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region of the customer was:
Australia
Europe
USA
2015
$
2014
$
437,768
318,612
4,378,086
5,134,466
3,882,803
1,286,625
1,011,399
6,180,827
c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are
settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that
it will always have sufficient liquid assets to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Group’s reputation.
Typically, the Group ensures that it has sufficient cash 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).
44
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
11 Financial instruments – fair values and risk management (continued)
c) Liquidity risk (continued)
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
At 30 June 2015
Trade and other payables
Finance lease liabilities
Secured bank loan
Carrying Contractual
cash flows
$
amount
$
Less than
6 months
$
6 – 12
Between 1 Between 2
months and 2 years and 5 years
$
$
$
Over 5
years
$
4,565,718
(4,565,718)
(4,565,718)
–
8,713
(9,129)
(4,213)
(4,213)
–
(703)
–
–
–
–
11,129,314
(14,947,412)
(150,000)
(814,342)
(2,180,239)
(9,058,570)
(2,744,261)
Short term facility agreement – Newmarket
981,424
(3,360,000)
(180,000)
(3,180,000)
Newmarket options
1,625,000
–
–
Short term facility agreement – Efic
2,000,000
(2,040,534)
(2,040,534)
–
–
–
–
–
–
–
–
–
–
–
20,310,169
(24,922,793)
(6,940,465)
(3,998,555)
(2,180,942)
(9,058,570)
(2,744,261)
At 30 June 2014
Trade and other payables
5,290,832
(5,290,832)
(5,290,832)
–
–
16,106
(17,555)
(4,213)
(4,213)
(8,427)
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)
–
(702)
–
–
Finance lease liabilities
Secured bank loan
d) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income
or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return.
Interest rate risk
i)
The Group is exposed to interest rate risk predominantly on cash balances and deposits. Given the relatively short investment horizon
for these, management has not found it necessary to establish a policy on managing the exposure of interest rate risk.
The Group has entered into a variable rate secured loan agreement for a period of 10 years. The facility includes an allowance to defer
interest payments up to $3,333,333 over the first 5 years of the loan and interest will 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 i
Finance lease liabilities ii
Short term facility agreement – Newmarket iii
Variable rate instruments
Cash and cash equivalents iv
Secured bank loan v
Short term facility agreement – Efic vi
2015
$
2014
$
709,400
(8,713)
(3,000,000)
779,400
(16,106)
–
(2,299,313)
763,294
1,169,944
565,583
(11,524,189)
(11,062,801)
(2,000,000)
–
(12,354,245)
(10,497,218)
45
Quickstep Holdings Limited I Annual Report 2015
11 Financial instruments – fair values and risk management (continued)
d) Market risk (continued)
i)
As at the end of the reporting period, the Group had the following variable rate borrowings outstanding:
i) Held-to-maturity term deposits include three security deposits as follows;
Interest rate risk (continued)
$45,000 with an interest rate of 2.14%, maturing on 7 July 2015
$274,000 with an interest rate of 2.13%, maturing on 29 October 2015
$390,400 with an interest rate of 2.6%, maturing on 10 May 2016
ii) The average interest rate applicable to the Group’s finance leases is 8.40% (2014: 8.40%).
iii) The short term facility provided by Newmarket is subject to a 12% interest rate with interest payable monthly in arrears.
iv) Cash includes funds held in short term deposits during the year, which earned a weighted average interest rate of 2.39% (2014: 1.6%).
v) 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 3.64% at 30 June 2015.
vi) The short term facility provided by Efic in July 2014 incurs a variable rate of interest inclusive of a base rate representing Efic cost
of funding plus a 2% margin.
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change
in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts
shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is
performed on the same basis for 2014.
Effect in AUD
Variable rate instruments – increase by 100 basis points
Variable rate instruments – decrease by 100 basis points
Cash flow sensitivity (net)
2015
$
(133,357)
133,357
–
2014
$
(104,972)
104,972
–
ii) Currency risk
The Group is exposed to currency risk on sales, purchases and cash holdings that are denominated in a currency other than the
respective functional currencies of Group entities, primarily the Australian dollar (AUD), Euro (EUR) and US Dollar (USD). The currencies
in which these transactions primarily are denominated are AUD, EUR and USD.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept
to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
The Group’s investment in its German subsidiary is 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 dollars, was as follows:
Receivables
Cash
Trade payables
The following significant exchange rates applied during the year:
AUD v USD
AUD v EUR
46
30 June 2015
30 June 2014
USD
$
EUR
$
USD
$
EUR
$
3,640,404
333,879
222,965
291,646
3,251,010
132,646
1,429,419
46,261
(779,054)
(52,097)
(279,849)
(120,460)
3,195,229
462,514
3,103,807
1,355,220
Average rate
Reporting date spot rate
2015
2014
2015
2014
0.8382
0.6963
0.9184
0.6770
0.7680
0.6866
0.9420
0.6906
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
11 Financial instruments – fair values and risk management (continued)
d) Market risk (continued)
Sensitivity analysis
A 10 percent movement of the Australian dollar against the following currencies at 30 June would have increased (decreased) profit
or loss and equity on balances denominated in foreign currencies by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2014.
Increase/(decrease)
in loss
Increase/(decrease)
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%)
2015
$
2014
$
2015
$
378,223
(462,273)
61,239
(74,848)
299,537
(366,101)
178,398
(218,042)
(97,659)
(106,208)
(591,734)
723,231
(199,089)
243,331
175,739
in equity
2014
$
(391,873)
478,956
(329,611)
402,858
160,330
e) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a
strong capital base sufficient to maintain future development in accordance with the business strategy. In order to maintain or adjust the
capital structure, the Group may return capital to shareholders or issue new shares. The Group’s focus has been to raise sufficient funds
through equity and borrowings so as to fund its working capital and commercialisation of technology requirements.
There were no changes in the Group’s approach to capital management during the year.
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
except for Newmarket options which are considered level 2 in the fair value hierarchy. Quickstep Holdings Limited’s financial instruments
are primarily made up of cash and cash equivalents and trade receivables, 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 Systems Pty Ltd (formerly Quickstep Operations Pty Ltd)
Quickstep GmbH
Quickstep Composites LLC (deregistered FY2015)
Quickstep Automotive Pty Ltd (formerly Commercial Aerospace Composites Pty Ltd)
Quickstep Aerospace Pty Ltd (formerly Quickstep Australia Pty Ltd)
13 Capital and other commitments
a) Non-cancellable operating leases
Country of incorporation
Ownership interest
2015
%
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
Non-cancellable operating lease contracted for but not capitalised in the financial statements payable as follows:
Less than one year
Between one and five years
More than five years
2015
$
2014
$
1,805,330
6,412,775
9,117,960
1,234,730
8,096,621
7,253,238
17,336,065
16,584,589
The Company’s operating lease expense recognized in the year was $2,001,062 (2014: $1,508,610).
The Company’s operating lease commitments comprise of three property leases, and five capital finance agreements for IT equipment.
47
Quickstep Holdings Limited I Annual Report 2015
13 Capital and other commitments (continued)
a) Non-cancellable operating leases (continued)
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 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 third 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 a provision for rent reviews on an annual basis.
14 Events occurring after the reporting period
Since the end of the financial year the Group:
Secured an extension to payment terms of the Efic Multi Option facility. The remaining $2,000,000 balance was originally due in
October 2015. New payment terms are $500,000 due in December 2015 with the remaining $1,500,000 due in March 2016.
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
2015
$
2014
$
2,835,385
2,638,893
150,724
359,485
154,203
141,323
238,080
28,846
3,499,797
3,047,142
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 2010 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.
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 2015, Mr P Odouard is the only employee to be granted options pursuant to the EIP. No options were granted during FY15
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
Exercised during the year
As as at 30 June
Exercisable as at 30 June
2015
No. of options
WAEP No. of options
3,256,593
$0.00
3,563,073
–
–
(306,480)
3,256,593
$0.00
3,256,593
–
–
–
2014
WAEP
$0.00
$0.00
$0.00
–
No share options were exercised in FY15. The weighted average share price at the date of exercise for share options exercised in FY14
was $0.21.
48
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
16 Share-based payments (continued)
a) Quickstep Employee Incentive Plan (continued)
Details of the fair value of unvested options granted are set out below
Grant
Tranche 3
Tranche 4
FY2010
FY2011
FY2012
Total
Fair value per
option at the
grant date
No. of options
619,446
471,698
471,337
706,373
987,739
3,256,593
$0.3150
$0.2700
$0.3620
$0.1730
$0.1250
Total
fair value
$
195,125
127,358
170,624
122,203
123,467
738,777
During 2015, an expense of $52,018 (2014:$87,035) has been included in the financial statements as the portion attributable to the
current financial year as required by accounting standards.
A Monte-Carlo simulation has been used to value all grants that had a future vesting condition at the grant date of the options.
Assumptions used in the relevant valuations included:
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Volatility
Risk free interest rate
Dividend yield
3
4
2010 year
2011 year
2012 year
30/03/2010
30/03/2010
26/11/2010
23/11/2011
22/11/2012
30/06/2011
30/06/2012
30/06/2013
31/08/2014
31/08/2015
30/03/2017
30/03/2017
26/11/2017
23/11/2018
23/11/2019
$0.35
$0.35
Nil
1.3
80%
4.66%
0%
Nil
2.3
80%
5.01%
0%
$0.41
Nil
2.9
75%
5.07%
0%
$0.21
Nil
3.1
75%
3.08%
0%
$0.17
Nil
3.0
55%
2.68%
0%
b) Quickstep Inventive Rights Plan (IRP)
During the 2014 financial year the Company established the Quickstep Incentive Rights Plan (IRP).
The IRP was 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.
Further details regarding the IRP are set out in the Remuneration Report.
At 30 June 2015 executives accrued rights pursuant to the IRP. Details of the fair value of unvested rights are set out below.
Executive
Mr P Odouard
Mr P Odouard
Mr D J Marino
Mr D J Marino
Mr D J Marino
Mr D J Marino
Mr D J Marino
Mr T Swinley
Mr T Olding
Mr M Schramko
Mr J Johnson
Total
Grant No. of rights
Performance or
Deferred Right
First Testing date
Fair value per Total fair value
right at the at grant date
grant date
$
FY2013
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
FY2015
802,000
1,107,420
207,641
207,641
415,283
415,282
1,245,847
233,999
304,540
244,660
265,000
5,449,313
Performance
Performance
Performance
Deferred
Performance
Deferred
Performance
Performance
Performance
Performance
Performance
31 August 2016
31 August 2017
31 August 2015
31 August 2015
31 August 2016
31 August 2016
31 August 2017
31 August 2017
31 August 2017
31 August 2017
31 August 2017
$0.152
$0.145
$0.100
$0.200
$0.110
$0.200
$0.155
$0.145
$0.155
$0.145
$0.145
121,904
160,576
20,764
41,528
45,681
83,056
193,106
33,930
47,204
35,476
38,425
821,650
49
Quickstep Holdings Limited I Annual Report 2015
16 Share-based payments (continued)
b) Quickstep Inventive Rights Plan (continued)
During FY15 an expense of $125,674 (2014: $26,569) has been recognised 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.
A Monte-Carlo model was used to value the rights issued. Key assumptions in the relevant valuation models included:
FY2015
Tranche 1
FY2015
Tranche 2
16/02/2015
16/02/2015
31/08/2015
31/08/2016
$0.200
$0.200
Nil
Nil
0.5 years
1.5 years
2.00%
55%
0%
1.87%
55%
0%
FY2013
31/08/2013
31/08/2016
31/08/2019
$0.195
Nil
3.3 years
55%
15%
0%
FY2015
Tranche 1
FY2015
Tranche 2
FY2015
Tranche 3
16/02/2015
16/02/2015
16/02/2015
31/08/2015
31/08/2016
31/08/2017
31/08/2015
31/08/2016
31/08/2019
$0.200
$0.200
$0.200
Nil
Nil
Nil
0.5 years
1.5 years
2.9 years
2.00%
55%
12%
0%
1.87%
55%
12%
0%
1.86%
55%
12%
0%
Deferred Rights
Mr D J Marino
Tranche
Grant date
First testing date
Share price at grant date
Exercise price
Expected life (years)
Risk free rate
Volatility of QHL
Dividend yield
Performance Rights
Mr P Odouard
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
Mr D J Marino
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Risk free rate
Volatility of QHL
Volatility of AOAI
Dividend yield
50
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015 16 Share-based payments (continued)
b) Quickstep Inventive Rights Plan (continued)
Mr T Olding
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Risk free rate
Volatility of QHL
Volatility of AOAI
Dividend yield
Executive:
Ms T Swinley, Mr M Schramko, Mr J Johnson, and Mr P Odouard
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Exercise price
Expected life (years)
Risk free rate
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
Forfeited during the year
As at 30 June
FY2015
19/02/2015
31/08/2017
31/08/2019
$0.200
Nil
2.9 years
1.83%
55%
12%
0%
FY2015
31/08/2014
31/08/2017
31/08/2019
$0.185
Nil
3.3 years
2.69%
55%
12%
0%
2014
No. of rights No. of rights
2015
802,000
–
4,945,825
802,000
(298,512)
5,449,313
802,000
c) 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.
415,967 shares (2014: 471,048) were issued to employees as consideration for $80,940 (2014: $102,217) of short term incentives paid
in respect of short term incentive achievement in the previous financial year.
This plan has ceased and so no further incentives will accrue.
51
Quickstep Holdings Limited I Annual Report 2015
16 Share-based payments (continued)
d) Share-based payment expense
The expense recorded in the financial report for the portion attributable to the current financial year as required by accounting standards is:
2014
$
2015
$
Equity settled short term incentive
IRP, performance rights
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/(over) accrual from prior year
80,940
125,674
52,018
132,086
89,469
87,035
258,632
308,590
2015
$
2014
$
226,700
58,000
284,700
179,600
30,000
209,600
18 Parent entity financial information
a) Summary financial information
As at, and throughout, the financial year ending 30 June 2015 the parent company of the Group was Quickstep Holdings Limited.
2015
$
2014
$
(5,130,760)
(43,516,385)
–
–
(5,130,760)
(43,516,385)
1,020,356
1,020,356
(2,253,470)
(2,253,470)
4,217,115
4,217,115
(640,207)
(640,207)
(1,233,114)
3,576,908
88,228,474
88,228,474
3,655,721
3,334,983
(93,117,309)
(87,986,549)
(1,233,114)
3,576,908
Results of the parent entity
Profit or loss for the year
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
Reserves
Share-based payments reserve
Accumulated losses
Total Equity
52
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015
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 2015
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 the
Quickstep machines and support services.
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 2015.
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.
Use of estimates and judgements
The preparation of financial statements in conformity with AASBs
requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimates are revised and in any future
periods affected.
Information about significant areas of estimation uncertainty and
critical judgements in applying accounting policies that have the
most significant effect on the amount recognised in the financial
statements are described in the following notes:
• Note 16 – Share-based payments
• Note 19 (d) – Going Concern
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.
d) Going concern
The Group has incurred a loss after tax for the year ended
30 June 2015 of $3,937,888 (2014: loss after tax of $11,181,401).
At 30 June 2015 the Group has net liabilities of $1,233,114
(2014: net assets of $3,087,991)
The loss reflects the ongoing commercialisation of the Group
which was largely completed in the 2015 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) and loan facilities. The level of
production of JSF components and C-130J wing flaps increased
in the 2015 financial year, and Management and the Directors
expect this to continue as the Group’s aerospace order book at
30 June 2015 is $74.9 million with more than 61% of these orders
to be fulfilled in 2016.
The existing net liability position of the Group and the need to
support current operating cash flow requirements and associated
growth in both Aerospace and Automotive activities in relation to
new technology developments, has resulted in the cash flow of
the Group being materially dependant on a combination of the
following funding solutions:
• Continuing firm orders for the JSF Project and C-130J
wing flaps and their associated payment terms;
• Continued cost control;
Increased debt; or
•
Increased equity
•
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 a combination
of the above funding solutions, as deemed appropriate by the
Directors, will be achieved and that the realisation of assets and
settlement of liabilities will occur in the normal course of business.
Notwithstanding the confidence of the Directors, should the
funding solutions discussed above not be successful there is a
material uncertainty as to whether the Group would continue
as a going concern.
e) Basis of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Quickstep Holdings Limited
(“Company” or “parent entity”) as at 30 June 2015 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.
53
Quickstep Holdings Limited I Annual Report 2015 19 Significant accounting policies (continued)
e) Basis of consolidation (continued)
Associates and jointly controlled entities
(equity accounted investees)
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Significant influence is presumed to exist when the
Group holds between 20 and 50 percent of the voting power
of another entity. Jointly controlled entities are those entities
over whose activities the Group has joint control, established
by contractual agreement and requiring unanimous consent for
strategic financial and operating decisions. Associates and jointly
controlled entities are accounted for using the equity method
(equity accounted investees) and are initially recognised at cost.
The Group’s investment includes goodwill identified on acquisition,
net of any accumulated impairment losses.
The consolidated financial statements include the Group’s share
of the income and expenses and equity movements of equity
accounted investees, after adjustments to align the accounting
policies with those of the Group, from the date that significant
influence or joint control commences until the date that significant
influence or joint control ceases. When the Group’s share of
losses exceeds its interest in an equity accounted investee,
the carrying amount of that interest (including any long-term
investments) is reduced to zero and the recognition of further
losses is discontinued except to the extent that the Group has
an obligation or has made payments on behalf of the investee.
f) Foreign currency 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 derecognises a financial liability
when its contractual obligations are discharged or cancelled or
expire. Financial assets and liabilities are offset and the net amount
presented in the statement of financial position when, and only
when, the Group has a legal right to offset the amounts and
intends either to settle on a net basis or to realise the asset
and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities
recorded at amortised cost:
• Loans and borrowings, including a secured loan facility
from the ANZ Bank of $10 million plus capitalised interest
of $3.3 million.
iii) Share Capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects.
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.
54
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015 19 Significant accounting policies (continued)
g) Financial instruments (continued)
v) Derivative financial instruments
The group holds a derivative financial instrument in the form
of options issued in relation to borrowed funds.
Derivatives are recognsied initially at fair value; any directly
attributable transaction costs are recognized in profit or loss as
they are incurred. Subsequent to initial recognition, derivatives
are measured at fair value and changes therein are generally
recognized in profit or loss.
h) Property, plant and equipment
Items of property, plant and equipment are measured at cost
less accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable to
the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs
directly attributable to 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
Office equipment
6.67% to 37.50%
6.67% to 50.00%
Intangible assets
i)
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:
Licences, patents and rights to technology
10 years
Royalty buy-back
Capitalised development costs
Software
10 years
5 – 10 years
2 ½ years
j) Leased assets
Leases in terms of which the Group assumes substantially all the
risks and rewards of ownership are classified as finance leases.
Upon initial recognition the leased asset is measured at an amount
equal to the lower of its fair value and the present value of the
minimum lease payments. Subsequent to initial recognition, the
asset is accounted for in accordance with the accounting policy
applicable to that asset.
Other leases are operating leases and the leased assets are not
recognised on the Group’s statement of financial position.
k) Inventories
Inventories are measured at the lower of cost and net realisable
value. 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.
55
Quickstep Holdings Limited I Annual Report 2015 Impairment
19 Significant accounting policies (continued)
l)
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.
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
Sale of goods
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.
56
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015 19 Significant accounting policies (continued)
n) Revenue (continued)
Sale of goods (continued)
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.
Construction contracts
Construction contract revenue recognised results from the
construction of a number of Quickstep process machines.
These machines have been constructed based on specifically
negotiated contracts with customers.
Contract revenue includes the initial amount agreed in the
contract plus any variations in contract work, claims and incentive
payments, to the extent that it is probable that they will result in
revenue and can be measured reliably.
If the outcome of a construction contract can be estimated
reliably, then contract revenue is recognised in profit or loss in
proportion to the stage of completion of the contract. The stage
of completion is assessed with reference to manufacturing
schedules. Otherwise, contract revenue is recognised to the
extent of contract costs incurred that are likely to be recoverable.
Contract expenses are recognised as incurred. Any expected loss
on a contract is recognised immediately in the statement of profit
or loss.
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.
Income tax
r)
Income tax expense comprises current and deferred tax. Current
tax and deferred tax is recognised in profit and loss except to
the extent that it related to a business combination, or items
recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantially enacted at reporting date, and any adjustment to
tax payable in respect of previous years. Current tax payable also
included any tax liability arising from the declaration of dividends.
Deferred 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.
Quickstep Holdings Limited and its subsidiaries have unused tax
losses. However, no deferred tax balances have been recognised,
as it is considered that asset recognition criteria have not been
met at this time.
s) Goods and Services Tax (GST)
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.
57
Quickstep Holdings Limited I Annual Report 2015 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.
19 Significant accounting policies (continued)
t) Earnings per share
Removed as not applicable to Quickstep Holdings Limited.
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
Removed as not applicable to Quickstep Holdings Limited.
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.
Adoption of these standards and interpretations has not resulted
in any material changes to the Group’s financial statements.
w) Changing Comparatives
Where necessary, comparative disclosures have been reclassified
to conform with current year presentation.
58
Notes to the consolidated financial statements30 June 2015Quickstep Holdings Limited I Annual Report 2015 Directors’ declaration
30 June 2015
In the Directors’ opinion:
a)
the consolidated financial statements and notes that are set out on pages 25 to 58 and the Remuneration Report within the
Directors’ Report are in accordance with the Corporations Act 2001, including:
i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
ii) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its performance for the year ended on that
date, and
b) subject top the Going Concern note in 19(d) 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
c) 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.
Note 19(b) confirms that the consolidated 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 for the year ended 30 June 2015.
This declaration is made in accordance with a resolution of Directors.
Mr D J Marino
CEO and Managing Director
Sydney, New South Wales
24 September 2015
59
Quickstep Holdings Limited I Annual Report 2015 Lead auditor’s independence declaration
30 June 2015
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the
Corporations Act 2001
To: the directors of Quickstep Holdings Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended
30 June 2015 there have been:
i) no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
ii) no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Cameron Slapp
Partner
Sydney
24 September 2015
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity. Professional Standards Legislation
60
Quickstep Holdings Limited I Annual Report 2015
Independent auditor’s report to the members
30 June 2015
ABCD
Independent auditor’s report to the members of Quickstep Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Quickstep Holdings Limited (the company),
which comprises the consolidated statement of financial position as at 30 June 2015, and consolidated
statement of profit or loss and other and comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year ended on that date, notes 1 to 20
comprising a summary of significant accounting policies and other explanatory information and the
directors’ declaration of the Group comprising the company and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement whether due to fraud or error. In note 19(b), the
directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial statements of the Group comply with International Financial
Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We performed the procedures to assess whether in all material respects the financial report presents
fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true
and fair view which is consistent with our understanding of the Group’s financial position and of its
performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion:
a) the financial report of the Group is in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the Group’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
b) the financial report also complies with International Financial Reporting Standards as disclosed in
note 19(b).
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative Liability limited by a scheme approved under
(“KPMG International”), a Swiss entity. Professional Standards Legislation
61
Quickstep Holdings Limited I Annual Report 2015
ABCD
Material uncertainty regarding continuation as a going concern
Without modifying our opinion, we draw attention to note 19(d), which provides disclosure regarding
the Group’s ability to continue as a going concern. As set out in note 19(d), the directors have indicated
the need for a combination of continuing sales orders and associated cash flows from certain
customers, continued cost control, increased debt or equity as deemed appropriate by the directors,
to support current operating cash flow requirements and growth. This indicates the existence of a
material uncertainty as to whether the Group will be able to continue as a going concern and realise
its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the
financial report.
Report on the remuneration report
We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2015. The directors of the company are responsible for the preparation and presentation of the
remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Quickstep Holdings Limited for the year ended 30 June
2015, complies with Section 300A of the Corporations Act 2001.
KPMG
Cameron Slapp
Partner
Sydney
24 September 2015
62
Quickstep Holdings Limited I Annual Report 2015 Shareholder information
30 June 2015
The shareholder information set out below was applicable as at 31 August 2015.
A. Voting rights
The voting rights attaching to each class of equity securities are set out below:
a) On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote.
b) Options do not carry any voting rights.
B. Substantial holders
Substantial holders in the Company are set out below:
C. On-Market buy back
There is no current on-market buy back.
D. Distribution schedules
Distribution of each class of security as at 31 August 2015:
Ordinary fully paid shares
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
Holders
Units
437
1,241
1,003
2,991
126,823
4,190,259
8,457,353
110,406,526
564
274,692,540
%
0.03
1.05
2.13
27.75
69.04
6,236
397,873,501
100.00
Options exercisable at the lesser of $0.25 or 25% above the issue price of any
equity capital raising up to $10M undertaken prior to 31 December 2018 (unlisted)
Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
–
–
–
–
1
1
25,000,000
25,000,000
100.00
100.00
Options exercisable at $0.00 on or before 30 March 2017 (unlisted)
Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
Options exercisable at $0.00 on or before 26 November 2017 (unlisted)
–
–
–
–
1
1
%
–
–
–
–
%
–
–
–
–
%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,091,144
1,091,144
100.00
100.00
Holders
Units
–
–
–
–
1
1
471,337
471,337
100.00
100.00
63
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
Quickstep Holdings Limited I Annual Report 2015 D. Distribution schedules (continued)
Options exercisable at $0.00 on or before 23 November 2018 (unlisted)
Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
–
–
–
–
1
1
706,373
706,373
100.00
100.00
Options exercisable at $0.00 on or before 23 November 2019 (unlisted)
Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – Over
Total
–
–
–
–
1
1
E. Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 2,777 shares at $0.18 per share):
Holders
915
F. Top holders
The 20 largest registered holders of each class of quoted security as at 31 August 2015 were:
Rank Holder Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Washington H Soul Pattinson And Company Limited
WSF Pty Ltd
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