PROMISSES
PROMISES
delivered
ANNUAL
REPORT
2018
CONTENTS
QUICKSTEP ANNUAL REPORT 2018
01. Promises to Shareholders
02. Chair’s Report
04. CEO and Managing Director’s Review
08. Review of operations
10. Our People
12. Our Leadership Team
14. Board of Directors
16. Directors report
24. remuneration Report
32. Financial Report
71. Shareholder Information
73. Corporate Directory
$59.0m
Sales revenue
up 13.7%
45%
JSF contract
revenue up by
$0.9m $4.7m
EBIT for
H2 FY2018
EBITDA
improvement
5%
GROSS MARGIN
PERCENTAGE UP
in H2 v’s H1
5 yr
contract
extension
C-130J
Approved
supplier
status with
Boeing and
Airbus
$3.5m New
OneQuickstep
annual cost
savings
business with
Boeing and
Chemring
1st
industrial
use of Qure
with Micro-X
LEAN
programs
having
an impact
single R&D
CENTRE OF
EXCELLENCE
Collaborations
with General
Atomics and
Triumph Group
Successful
front fender
demonstration
project
Sales
and
Manufacturing
Agreement
with The
ATR Group
QUICKSTEP.COM.AU
PROMISES TO SHAREHOLDERS
01
our Promises to Shareholders –
delivered.
Simplify management and Board structure
Realign R&D and reduced costs in FY2018
Close Germany/Consolidate at Geelong
Cease non-core programs
Cost savings of $3.5m versus FY2017
Improve Gross Margin
Increased investment in business development
Lean programs at Bankstown and Geelong
Further develop Qure and QPS solutions
Grow sales by >10% in FY2018
Secure new customers and contracts
Establish partnership opportunities
Positive in H2 FY2018
02
QUICKSTEP ANNUAL REPORT 2018
CHAIR’S REPORT
chair’s
report
FY2018 was a signifi cant year for Quickstep
with the achievement of net profi t in the
second half of the year for the fi rst time
in the history of the company and the
securing of additional future work to drive
continued revenue growth. In FY2018, we
have delivered as we promised at last year’s
Annual General Meeting, on the following:
14%
increase in annual sales revenue
EBIT
Positive EBIT for the second
half of FY18
COSTS
Cost savings and
efficiency improvements
Securing
new business
for the future
QUICKSTEP.COM.AU
03
Profitability and Growth –
As Promised.
FINANCIAL PERFORMANCE
Our financial results for FY2018 reflect the
success of the OneQuickstep change
program, combined with JSF program volume
growth, which has resulted in sales revenue
increasing 14% from $51.9 million in FY2017 to
$59.0 million in FY2018.
OneQuickstep continues to realign our
company for growth and profitability,
evidenced through $0.9 million EBIT and
positive net profit after tax in the second half
of FY2018. Costs were reduced by $3.5 million
in FY2018 through initiatives including closure
of our German operations, consolidation of
our R&D operations at Geelong and ceasing
non-core programs. Lean enterprise programs
have commenced at both our Bankstown
and Geelong sites, increasing eff iciency
and productivity, and our second half gross
margin was 5% higher than the first half.
Earnings before interest, tax and research
and development costs (EBIT before R&D)
were $2.4 million for FY2018, compared to
an operating loss before R&D of $0.2 million
in FY2017.
Our operating cash flow for the second half
was $3.6 million, compared to a cash outflow
of $4.3 million in the first half, reflecting the
$3.2 million improvement in EBITDA in the
second half compared to the first half and
our improved working capital management.
Our full year net loss improved to a loss of
$2.9 million for FY2018, from a net loss of $6.7
million in FY2017, despite a non-cash $0.5
million decrease in gains from the revaluation
of share options included in net finance
costs. We expect that these improvements
in EBIT and cashflow will continue in FY2019
and beyond.
BUSINESS IMPROVEMENT AND GROWTH
FY2018 saw a substantial change in the senior
management team at Quickstep, under the
leadership of Mark Burgess, our CEO and
Managing Director. Mark has implemented a
much leaner, but highly capable and focused
leadership team, with extensive aerospace,
defence and broader manufacturing and
automotive experience. This team has the
skills, experience and capabilities to further
accelerate our growth and profitability in an
eff ective and sustainable manner.
In FY2018, Quickstep secured two new export
programs with Boeing Defense, became
an approved supplier for Boeing opening
opportunities across the Boeing Company,
and for Airbus Australia Pacific. We are
also a member of the General Atomics-led
Team Reaper Australia partnership which
is tendering for Australian Remotely Piloted
Aircraft systems business.
In July 2018 we announced that we had
secured a new project to produce carbon fibre
composite housings for an F-35 counter-
measure flare for Chemring Australia, further
expanding our advanced manufacturing
capability. We also announced we have signed
a letter of intent to work jointly on future
projects with Triumph Aerospace Structures, a
major Tier One aerostructures supplier in the
US market.
We have also recently signed a Memorandum
of Understanding (MoU) with Lockheed
Martin for a Long Term Flexible Contract
(LTFC) associated with the ongoing supply of
C-130J/LM-100J wing flaps for an additional
five-years, covering the period 2020 to 2024.
We have an existing contract with Lockheed
Martin to provide wing flaps for the C-130J/
2019, and
LM-100J aircraft through to end-2019, and
ue our
this contract extension will continue our
hip with
successful supply chain relationship with
Lockheed Martin.
In FY2018 we also completed a successful
manufacturing trial using our patented
Qure technology to produce demonstration
automotive front fenders for a European luxury
car manufacturer and we entered into a sales
and manufacturing agreement with The ATR
Group, a leading Italian supplier of advanced
manufacturing composite components for the
aerospace and automotive sectors.
CLOSING REMARKS
In closing, I would like to recognise the
ongoing support of our shareholders,
customers and suppliers and my fellow Board
members. I would also like to acknowledge the
departure of three Directors, Air Marshal Errol
McCormack (Ret’d) AO, Peter Cook and Nigel
Ampherlaw, in November 2017. I sincerely
thank Errol, Peter and Nigel for the support
and the hard work they provided during their
tenure on the Quickstep Board. Finally, I would
also like to thank Mark Burgess, the executive
management team and all of our staff at
Quickstep, for their hard work and dedication
throughout FY2018.
We have had an extremely encouraging year
in FY2018 and have a positive outlook for the
year ahead. Quickstep remains focused on
delivering our secured aerospace and defence
programs, on target R&D to accelerate
growth, and on further improvement
and change through our OneQuickstep
initiative. Our strong order book, patented
technologies and operational competitiveness
will provide us with the opportunity to
accelerate our international growth and
provide all our stakeholders with a long-term
sustainable business.
TONY QUICK
Chair
04
QUICKSTEP ANNUAL REPORT 2018
CEO
and MANAGING
DIRECTOR’S
REPORT
I am extremely pleased to deliver
this report to you, following my fi rst
full year in the role as the CEO and
Managing Director of Quickstep. In
FY2018 we implemented a range of
signifi cant improvement initiatives
under the OneQuickstep banner
to shift the business towards
long-term profi tability and
accelerated growth, with the aim
of delivering real and sustainable
value to all our stakeholders.
Initiatives undertaken include:
> Focused R&D
> Lean Manufacturing
> New contracts and
customer diversifi cation
> Tiered Growth Plan
QUICKSTEP.COM.AU
05
CEO & MANAGING DIRECTOR’S REPORT
OneQuickstep –
Improvement, Growth and
Margin Expansion
LEAN MANUFACTURING
Continually improving our advanced
manufacturing capability is a central
element of Quickstep’s overall strategy. We
have placed ourselves at the forefront of
available technology by pursuing and winning
highly complex, close-tolerance work and
commissioning ‘state-of-the-art’ advanced
manufacturing equipment in Bankstown and
Geelong. During FY2018 we commenced
the implementation of lean manufacturing
systems and practices internally at each
of our manufacturing facilities and across
all business processes and customer
programs. We are focusing on production rate
improvement, process eff iciency, automation,
one piece material flow, continuous
improvement and cost competitiveness.
We have invested over $35 million since 2012
on installed capital base and we can now
undertake a complete range of advanced
manufacturing operations internally including:
> CNC (Computer numerical control)
ply cutting & laser-guided material lay-up
> Autoclave and Out-of-Autoclave curing of
composites
> Range of sophisticated NDT (non-
destructive testing) processes
> PMM (Precision Milling Machine) cells and
robotic trimming
> Robotic/Automated drilling and riveting
> Complex assembly and painting
> Laboratory testing of materials/components
We are focused on further enhancing our
advanced manufacturing facilities through the
adoption of digital manufacturing and Industry
4.0 techniques and practices to deliver a
fully integrated and world-class advanced
manufacturing capability to our customers.
BUSINESS GROWTH
During FY2018 we continued to work with
existing and new customers on development
proposals for new business opportunities,
resulting in:
BOEING DEFENSE
We secured two new contracts from Boeing
Defense for F-15 and F-18 components.
These contracts add a new tier 1 customer,
new aircraft platforms and part families to
our customer portfolio. We also achieved
Approved Supplier status with Boeing
in FY2018, which will open significant
future business opportunities across the
Boeing Company.
GENERAL ATOMICS
We are partnering with General Atomics in the
‘Team Reaper’ tender for Remotely Piloted
Aircraft (RPA) systems. This partnership is
progressing well and may lead to additional
project opportunities with General Atomics in
the near-term.
LOCKHEED MARTIN
We recently announced that we have signed
a Memorandum of Understanding (MoU)
for a Long Term Flexible Contract (LTFC)
associated with the ongoing supply of
C-130J/LM-100J wing flaps for an additional
five-years, covering the period 2020 to 2024.
We have an existing contract with Lockheed
Martin to provide these wing flaps through
to end-2019, and this contract extension
will continue this successful supply chain
relationship.
AIRBUS
We secured Approved Supplier status with
Airbus Australia Pacific allowing us to formally
quote for new business.
I am immensely proud of what has been
achieved in FY2018 and genuinely excited
about the outlook for the business over the
next five years. Over the past twelve months
we have put in place a number of the key
building-blocks that will provide us with the
op
opportunity to accelerate our global growth
an
and provide all of our shareholders with
lon
long-term sustainable returns.
ONEQUICKSTEP
ONON
Th
Throughout FY2018 we have progressively
introduced and ramped-up the OneQuickstep
int
pr
program, which focuses on having a unified
an
and progressive culture across the entire
Quickstep business. OneQuickstep is our
Qu
va
value system and it drives our business
cu
culture through:
>
> Aligned Company Strategy
>
> Shared Vision and Mission
>
> High Performance Culture
>
> Operational Excellence
>
> Standardised Systems/Processes
>
> Leadership and Teamwork
FY
FY2018 has seen substantial changes to
the business through our OneQuickstep
th
ini
initiatives and we have made significant
im
improvements and gains. We achieved cost
sa
savings of $3.5 million in FY2018, with our
gr
gross margin improving by five percentage
po
points in the second half compared to the first
ha
half. We achieved positive EBIT in the second
ha
half, as we promised.
FO
FOCUSED R&D
We closed our German operations in FY2017
We
an
and have relocated all of our R&D and
pr
process development activities into our
Ge
Geelong operation at Deakin University’s
Wa
Waurn Ponds campus. This global centre of
ex
excellence in Geelong also supports a range
of
of activities for our Bankstown facility. We
fu
further commercialised the Qure process and
its
its capability has been increased to higher
sp
specifications (equivalent to Autoclave for
aeaeaeaeaeaeaeaeaeeaa
aerospace applications). We now have an
up
upgraded Qure cell that is fully operational at
ou
our Geelong site. We did all of this by being
foc
focused, while reducing our R&D spend
ye
year-on-year by $1.8 million.
06
QUICKSTEP ANNUAL REPORT 2018
has achieved a cost saving of
OneQuickstep
$3.5m
Over the next three years we expect to benefit
from increasing JSF production and higher
margins. Our enhanced business development
activities and healthy project pipeline have us
well positioned for future profitable growth.
Throughout FY2019, Quickstep will continue
to be focused on high value, expanding global
markets while strengthening our position as
Australia’s leading independent carbon fibre
composites manufacturer.
CLOSING REMARKS
In closing, I would like to sincerely thank all
of our shareholders, customers and partners
for their ongoing support and confidence in
Quickstep. We have a great company, with a
unique value proposition, and this is now being
seen and recognised by all our stakeholders
and potential customers. I would like to take
this opportunity to welcome Alan Tilley, our
new Chief Financial Off icer (CFO) to the
Quickstep leadership team and thank our
outgoing CFO, Andrew Crane, for his eff ort
and support over his two and a half years
with us. I would also like to welcome Gary
Robinson as our Executive General Manager,
Operations. Gary is a qualified aeronautical
engineer with extensive operations experience
to the leadership team. Gary joined us on a
permanent basis in September 2018.
Finally, I would like to acknowledge the
support and dedication of our Board of
Directors, our leadership team and, in
particular, all our dedicated employees –
without you we would not be the great
company we are today, your eff orts are
greatly appreciated.
MARK BURGESS
CEO and Managing Director
CEO and Managing Director
U.S. MARKET
We appointed a senior Business Development
leader in FY2018, based in Texas. This
will allow for more regular and deeper
engagement with existing and potential new
U.S. customers.
CHEMRING
We have secured U.S. and Australian
government funding to produce composite
housings for an F-35 Lightning II
countermeasure flare for a new customer,
Chemring Australia. We will be commissioning
an advanced new manufacturing cell at
Bankstown during FY2019, extending our
capability to support the F-35 Program and
other defence and aerospace projects.
TRIUMPH
We signed a Letter of Intent for future
collaboration with Triumph Group (US),
a global leader in manufacturing and
overhauling aerospace structures, systems,
and components. Quickstep and Triumph
have already identified future collaboration
opportunities in Australia and the U.S.
ATR GROUP
We signed a Manufacturing Partnership
Agreement with ATR Group, a leading
Italian company that designs, prototypes
and manufactures structural parts and
components in advanced composite materials
for the automotive and aerospace sectors.
FRONT FENDER PROJECT
We completed a successful manufacturing
trial using our patented Qure technology to
produce advanced prototype automotive
front fenders for a European luxury car
manufacturer. This activity will be progressed
further in FY2019.
GROWING CORE BUSINESS
Our strong delivery and quality performance
in FY2018 to Lockheed Martin, Northrop
Grumman and BAE Systems/Marand, has also
resulted in discussions and current proposals
on a number of new supply opportunities with
these customers.
OUTLOOK FOR FY2019
FY2019 will be another significant year
for Quickstep: a year of continued volume
expansion, product development and the
further acceleration of our growth plans.
We will be targeting our research and
development (R&D) expenditure in FY2019
on commercialisation of our patented Qure
process and exploitation of the Quickstep
Production System (QPS) in the aerospace,
defence and other advanced manufacturing
sectors, such as automotive and
medical devices.
We anticipate that the business will continue
to improve in FY2019 as our JSF deliveries
ramp up towards peak production volumes.
We expect that our revenue will grow by more
than 20% in FY2019 and our gross margins
will continue to improve as we benefit from
economies of scale and increasing eff iciencies
from our lean manufacturing activities. We
therefore expect to deliver positive EBIT and
positive operating cash flow for FY2019.
Quickstep has significant growth potential
through securing composite manufacturing
contracts, primarily in the aerospace
sector, using our advanced manufacturing
technologies to provide customers with
product and process solutions. We will
continue to focus on winning new customers
and contracts in FY2019, and supporting
growth through partnerships to build scale.
We plan to further accelerate our business
development activities in FY2019 to win
additional business, through our tiered
growth strategy:
> Core Defence Aerospace: Increasing
revenue and diversifying our customer
base within the Defence/Aerospace sector
utilising our existing Bankstown facilities,
while expanding our core capabilities
> Aerospace Qure/Advanced
Manufacturing Deployment: Strategic
growth within the Aerospace and other
sectors, using our Qure process and
innovative technology solutions to attract
new business opportunities
> Step-change Growth: Step change
to Commercial Aerospace supply.
Securing of large global programs and/
or inorganic growth across the wider
defence, commercial aerospace and
automotive industries
QUICKSTEP.COM.AU
07
CEO & MANAGING DIRECTOR’S REPORT
$35m
Invested on installed capital base since 2012
08
QUICKSTEP ANNUAL REPORT 2018
REVIEW OF OPERATIONS
review of
operations
Aerospace Production
Ramps Up and Will Continue
to Grow
Quickstep currently has two advanced manufacturing facilities in Australia:
Bankstown, NSW:
Hosts our corporate
headquarters and a 16,000 sqm
state of the art aerospace
composite manufacturing
plant at Bankstown Airport
in south-west Sydney. This
advanced manufacturing
facility positions Quickstep as
Australia’s largest independent
advanced composite
manufacturer, capable of
almost all facets of aerospace
and defence composite
manufacturing contract work.
Geelong, Victoria: In Geelong we have a dedicated R&D team and
fully-equipped low volume production facilities, located at Deakin University’s
Waurn Ponds campus, focused on developing and delivering composite
manufacturing solutions. R&D capabilities on site include: Design Engineering,
Materials Development and Testing; Process Engineering and Automation; Tooling
Design and; Program Management and implementation. Deakin University and the
Carbon Cluster both provide enviable depth to a broad R&D capability.
TEXAS, USA: In FY2018, Quickstep established a representative offi ce in Texas,
in the USA, to support future growth in the North American market. This will
allow more regular and deeper engagement with existing and potential USA
customers and, progressively, enable the localisation of supply chain and quality
management, as well as potential manufacturing partnerships.
EUROPE: During FY2018 we also established a European Sales and Manufacturing
Agreement with The ATR Group in Italy. The collaboration will focus on
developing sales and parts manufacturing opportunities with customers in
both the automotive and aerospace sectors, aligned with Quickstep’s growth
strategy. Emphasis will be on the commercialisation of our out-of-autoclave
process technology Qure and QPS for the manufacturing of advanced
composite components and assemblies in the European market.
QUICKSTEP.COM.AU
09
Geelong Operations
Bankstown Operations
The Geelong facility underwent a number of significant
changes in FY2018, as a result of focusing our overall R&D
spend, ceasing some non-core activities that no longer fit
our long-term growth plans and centralising all of our R&D
and technology development activities for the Quickstep
group at the Geelong site. A lean enterprise program was also
commenced at the Geelong site in FY2018.
A number of advanced manufacturing projects were
undertaken in FY2018 at our Geelong facility, involving the
application of our advanced composites solutions and the
industrialisation of our patented ‘Qure’ process technology.
These advanced manufacturing projects included:
> Micro-X: Production is continuing for the manufacturing
of a carbon fibre chassis for a portable x-ray device. This
program uses the Qure process and the device is being
sold in export markets. Volumes at present are low, but
are anticipated to increase in the future
> Front Fender: Development and demonstration of an
advanced production solution, using Qure, for a complex
engineered part for a European luxury vehicle manufacturer.
This process will improve production rates and has
multi-segment applicability. It is anticipated that further
work will occur on this project in FY2019
> QPS: Further development of the Quickstep Production
so
System (QPS), a complete material-to-finished part solution
adva
vanced comp
s
for the manufacturing of advanced composite parts
> Chemring: Development of an advanced manufacturing
facturin
ment of an advan
evelo
uce carbon fibre
u
S, to produ
housing
cell, using QPS, to produce carbon fibre composite housings
asure flare for Chem
asure flare for Ch m
mring Australia.
m
35 counter-mea
for an F-35 counter-measure flare for Chemring Australia.
be industrialise
ed by Geelong in FY2
2019 for
d by Geelong in FY2
This will be industrialised by Geelong in FY2019 for
B
Bankstown site.
ementation at the B
implementation at the Bankstown site.
In FY2018, Quickstep accelerated the implementation of an
advanced lean production system at Bankstown, focused
on rate improvement, process eff iciency, automation and
one piece material flow. Manufacturing practices and
operational eff iciency were improved significantly during
FY2018 at the Bankstown facility through a number of
important initiatives including:
> Robotic drilling and fastening fully commissioned
on the C-130J line, replacing manual operations
> Upgrading of autoclave control systems, resulting in
more eff icient cure cycles and improved quality
> Re-layout of the JSF and C-130J productions lines
to improve material and workflow
> Scrap reduction through pareto analysis and
continuous improvement processes
> Lean manufacturing training and the expansion of
our internal Continuous Improvement Program (CIP),
including the appointment of a full-time CIP Manager
> Training and development programs to improve workforce
skills and capabilities , including leadership training and
composites training for new operators by TAFE NSW
Revenue from Quickstep’s Joint Strike Fighter (JSF) F-35
aircraft contracts for FY2018 was up 45% from FY2017 as
deliveries accelerated. JSF revenues are expected to increase
by more than 40% in FY2019, in line with the growing F-35
production schedule which has delivered 310 JSF aircraft
to date.
C-130J wing flaps production continued at the long-term rate
of two ship-sets per month and, during August, Quickstep
secured a contract extension for production of these parts
for a further five-year period from 2020 to 2024.
QLD
NSW
VIC
$59.0m
Total Revenue
up 14%
10
QUICKSTEP ANNUAL REPORT 2018
Jean England | C130 Composite Team Leader
“I’ve put forward four
successful candidates
for our Employee Referral
Program because
Quickstep is a great
company to work for. My
candidates are in all their
20s. They have a future
here if they want, all the
way to Management plus
it’s great to pass on our
knowledge for when the
older employees retire.”
our
people
We continue to focus on building Quickstep as an ‘Employer of Choice’, providing our
employees with career opportunities across a wide and varied range of disciplines,
our Employee Referral Program is testament to this. OneQuickstep has established and
reinforced that we are a values based organisation and we are continuing to build a work
culture and workplace environment that attracts and retains talented individuals that
can work together collaboratively to achieve great outcomes. We focus on supporting
well-being and fl exibility through our policies and practices such as purchasing additional
annual leave, transition to retirement, fl exibility, domestic violence support and paid
parental leave. We challenge and develop our people through professional development
programs and our partnership with TAFE NSW allows us to continue to grow the capability
of our workforce, to be ready and able to expand and meet the needs of existing and
new programs and customers. It is truly an exciting time to be part of Quickstep.
Andy Miller | Product Engineer
“ The R&D team has applied our patented Qure
technology to process the complex 3D geometry
of a composite automotive fender, demonstrating
improved part quality, while reducing curing times
and capital infrastructure costs compared to
equivalent autoclave production parts.”
Michael Baker | Industrial & Manufacturing Engineer
“ As Process Engineering Lead, my role is to effectively
manage our team of Manufacturing and Industrial
Engineers across all existing and incoming programs
on the Bankstown site to ensure we meet safety,
quality and cost requirements and achieve the best
possible outcomes for the business.”
QUICKSTEP.COM.AU
11
OUR PEOPLE
Chris Little | Purchasing Specialist
“I’m excited to be working
for an Australian business
leading the way in carbon
composite manufacture
and solutions as part of
great team of people full
of energy and knowledge
with different skill sets to
grow and learn from.”
Serena Liu | Technical Planner
“ As a graduate engineer, I never
thought I would be able to work
at the forefront of advanced
composites technology, this
early on in my career. Being
able to contribute to one of the
world’s most innovative and
technological advancements
while working alongside experts
in the industry, is providing me
with invaluable experience.”
Steve Osborne
Business Development
Director USA
“This year saw the establishment
of Quickstep USA Inc. in Houston,
Texas. This is an important step
in strengthening our key US
industry relationships and this
investment should be instrumental in
securing Quickstep signifi cant
opportunities in the near future.”
Kamini Patel | Quality Engineer
“ As a Quality Engineer, with
OneQuickstep vision, I am
proud to be an integral part of
the Continuous Improvement
activity in the business.”
12
QUICKSTEP ANNUAL REPORT 2018
our
leadership
Team
Gary Robinson
Executive General
Manager Operations
Jacque Courtney-Pitman
Chief Human Resources Officer
“ It’s an exciting time to be joining
the team at Quickstep as we move
from the establishment phase into
streamlined, lean production and
further develop our capabilities
in new product introduction”
“ The dedication and focus to achieve
OneQuickstep is very rewarding. Our
leaders are taking charge of driving,
supporting and delivering great
results through our people in safety,
productivity and building Quickstep
as an employer of choice.”
QUICKSTEP.COM.AU
13
OUR LEADERSHIP TEAM
Alan Tilley
Chief Financial Officer
Mark Burgess
Chief Executive Officer
“ Quickstep has started to deliver profi t
and operating cash fl ow and the
outlook for the coming year is for this
to continue. This is a great platform
for growth and provides confi dence
that the company can win profi table
new business opportunities.”
“ FY18 was a year of successful
transition for the business and
one which we are all proud of.
During FY19 we will build a solid
platform for growth and sustained
profi tability over the coming
years. Quickstep is a truly exciting
advanced manufacturing business
with an incredible outlook.”
Ross Mahon
Chief Business Development
& Technology Officer
“ Over the past 12 months we have
built a solid foundation through
One Quickstep, QPS, technology
development and day to day business
performance that is receiving
positive customer recognition and
feedback. Quickstep is continuing
to implement new technology and
systems that provide a strong point
of competitive differentiation and will
enable us to rapidly accelerate our
future growth and position Quickstep
as a leading global provider of
advanced composite solutions”
14
QUICKSTEP ANNUAL REPORT 2018
BOARD OF DIRECTORS
QUICKSTEP.COM.AU
15
Board of
Directors
The Quickstep Board
underwent some change in
FY2018 and now consists
of four Directors, led by Tony
Quick, as Chair. Our strong
and experienced Board has
extensive aerospace and
automotive manufacturing
experience and is well
credentialled to lead and
guide the business towards
accelerated growth and
improved profi tability.
TONY QUICK, CHAIRMAN
MARK BURGESS, CEO & MANAGING DIRECTOR
JAMES DOUGLAS, NON-EXECUTIVE DIRECTOR
BRUCE GRIFFITHS OAM, NON-EXECUTIVE DIRECTOR
JAIME PINTO, COMPANY SECRETARY
16
QUICKSTEP ANNUAL REPORT 2018
Directors’ Report
Directors’ Report
The Directors present their report on the consolidated entity consisting of Quickstep Holdings Limited and
the entities it controlled at the end of, or during, the year ended 30 June 2018. Throughout the report, the
consolidated entity is referred to as the “Group” or “Quickstep”.
Directors
The following persons were Directors of Quickstep Holdings Limited during the whole of the financial year
and up to the date of this report:
Mr. T H J Quick
Mr. M H Burgess
Mr. J C Douglas
Mr. B A Griffiths
The following persons were Directors of Quickstep Holdings Limited, from 1 July 2017 to 28 November 2017
when they retired at the 2017 Annual General Meeting:
Mr. N I Ampherlaw
Mr. P C Cook
Air Marshal E J McCormack (Ret’d)
Principal Activities
During the year the principal continuing activities of the Group consisted of:
(cid:120)
(cid:120)
(cid:120)
production of parts for Northrop Grumman for the Joint Strike Fighter Project
production of C-130J wing flaps for Lockheed Martin
production of parts for Joint Strike Fighter vertical tails for BAE Systems and Marand Precision
Engineering
(cid:120) manufacturing and development of parts using Qure technology
(cid:120)
continued development of technologies for scaled volume production
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 (2017 $Nil).
Review of Operations
Total sales for the year ended 30 June 2018 were $59.0 million (FY17 $51.9 million) representing a 13.7%
increase year on year. The increase is attributable to volume growth in the Joint Strike Fighter (JSF) program
marginally above plan and consistent with the continuing ramp up of the program towards full production.
Total JSF revenue was $38.6 million (FY17 $26.7 million) being a 45% lift on prior year. Revenue from the C
– 130 contract of $18.8 million was slightly ahead of plan and marginally down on previous year reflecting
the mature nature of this revenue stream. The ongoing ramp up in JSF volumes is the principal driver behind
FY18 H2 revenue of $31.2 million being 12% or $3.4 million more than FY18 H1. Quickstep remains on track
to deliver higher JSF volumes over the next two years with JSF revenue expected to increase further in FY19.
The operating loss for FY18 of $1.3 million is an improvement of $4.4 million on the prior year including a
gross profit improvement of $1.6 million, reduction in spend on research and development of $1.8 million
and $1.0 million less spend on corporate and other costs. This improvement reflects actions taken in H1 as
part of the OneQuickstep initiative including Lean programs, more focussed R&D and a drive to reduce
corporate costs and improve operational efficiency. The actions taken as part of OneQuickstep early in FY18
have helped deliver an operating profit of $0.9 million in H2 compared to a $2.2 million loss in the first half.
QUICKSTEP.COM.AU
17
Directors’ Report
Directors’ Report
Review of Operations
The FY18 net loss of $2.9 million is an improvement of $3.8 million on the prior year comprising the
$4.4 million operating loss reduction noted above partially offset by a $0.6 million decrease in gains from
share option revaluation, a non cash item.
Cash from operating activities for FY18 was $(0.7million), compared to $0.1 million in FY17 with the working
capital balances as at 30 June 2018 representing a more sustainable position and funding JSF volume
growth. EBITDA has materially improved between FY17 and FY18 from $(3.5 million) to $1.2 million as a
consequence of the lift in revenues, lean initiatives and drive to reduce costs. Positive operating cash flow
for H2 of $3.6 million is a material improvement on the H1 operating cash outflow $(4.3 million).
Total loans outstanding as at 30 June 2018 are $13.6 million, a decrease of $2.0 million from December
2017 reflecting improved profitability and cash flows from operations. To fund the working capital
requirements of the further lift in JSF volumes in FY19, an increase of $4 million in the short term working
capital facility has been secured.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Group during the financial year.
Events Since the end of the Financial Year
No matter or circumstance has arisen since 30 June 2018 that has significantly affected the Group’s
operations, results or state of affairs, or may do so in future years.
Shares under Options
Unissued ordinary shares of Quickstep Holdings Limited under option at the date of this report are as follows
Date Options granted
9 January 2015
Expiry Date
31 December 2018
Issue Price of Shares
$0.1625
Number Under Option
25,000,000
No option holder has any right under the options to participate in any other share issue of the Company or
any controlled entities.
No options were granted during the year, and no options granted in prior years were exercised during the
year ending 30 June 2018. No other options have been granted since the end of the financial year.
18
QUICKSTEP ANNUAL REPORT 2018
Directors’ Report
Directors’ Report
Information on Directors
The following information is current as at the date of this report
Mr. Tony H J Quick, MA (Cantab) Chair
Independent Non-Executive Director - appointed 14 February 2013
Mr. Quick joined Quickstep following a highly successful career in the aerospace and defence
industries. 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, was one of the world’s largest independent first-tier suppliers to the
integrated metal and composite assemblies for
global aviation
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
a 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.
industry providing
Chair of the board
Chair of the Defence Materials Technology Centre.
Ordinary shares in Quickstep Holdings Limited
746,162
Mr. Mark H Burgess
CEO and Managing Director - appointed 18 May 2017
Mr Burgess joined Quickstep in May 2017 bringing with him over 20 years’ experience in the
global aerospace and defence industry, where his successful delivery of profitable growth and
complex projects in advanced technology businesses has led to significant employer, customer
and industry recognition. Mr Burgess has held leadership roles of increasing responsibility
across Europe, USA, the Middle East and Asia Pacific. After a long career with BAE Systems
covering sales, contracts, project and general management he joined Honeywell in 2013 as Vice
President Honeywell Aerospace, Asia Pacific. During his four years at Honeywell, he was
responsible for driving sustained profitable growth across a defence, space and commercial
helicopter portfolio. Mr Burgess has extensive experience of governance and stakeholder
management, working with public, private and not-for-profit sectors. He has managed several
successful post acquisition integration projects and has held numerous board positions on
subsidiaries and international joint ventures. He holds a degree in Politics and Economics from
the University of Hull and has completed several post graduate studies in business and
operations management.
Chief Executive Officer
Ordinary shares in Quickstep Holdings Limited
289,500
Experience and
expertise
Special
responsibilities
Other current
Directorships
Interests in shares
and options
Experience and
expertise
Special
responsibilities
Interests in shares
and options
QUICKSTEP.COM.AU
19
Directors’ Report
Directors’ Report
Information on Directors
Mr. James C Douglas, LLB, BSc
Independent Non-Executive Director - appointed 19 December 2016
Mr. Douglas is Chair of Australian automotive wheels manufacturer Carbon Revolution and a
founder of investment firm Newmarket Capital, a strategic investor in the carbon fibre
manufacturing sector. He is also an Investment Director at Acorn Capital. James has over 20
years of global investment banking and financial industry experience and has held former roles
as Global Head of Consumer Products at Merrill Lynch, Head of Consumer Products – Americas
at UBS and Head of Global Banking Australia & New Zealand at Citi. He holds a LLB and BSc from
the University of Melbourne.
Chair of the Audit, Risk and Compliance Committee from 29 November 2017.
Chair of Carbon Revolution. Director of Newmarket Capital.
Ordinary shares in Quickstep Holdings Limited
Rights to shares in Quickstep Holdings Limited (one third share of
Newmarket)
980,401
8,333,333
Mr. Bruce A Griffiths, OAM
Independent Non-Executive Director - appointed 14 February 2013
Mr. Griffiths 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 awarded the Order of Australia
Medal for services to the automotive manufacturing industry and to the community. Previous
appointments include: Rail Supplier Advocate from 2009 to 2014, Chair - Futuris Automotive
Group (2007-2012), Managing Director - Futuris Automotive Group (1992 -2007), Chair - 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, Chair - Sail Melbourne ISAF Sailing World Cup.
Mr. Griffiths’ honors 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.
Chair of the Remuneration, Nomination and Diversity Committee from 29 November 2017.
Current appointments include: Board Member - Industry Capability Network Limited (ICNL),
Director - Carbon Revolution Pty Limited
Ordinary shares in Quickstep Holdings Limited
1,833,167
Mr. Nigel I Ampherlaw B Com, FCA, MAICD
Independent Non-Executive Director – retired 28 November 2017
Mr. Ampherlaw 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. He has
extensive experience in Risk Management, technology, consulting and auditing in Australia and
the Asia-Pacific region.
Chair of the Audit, Risk and Compliance Committee until 28 November 2017.
Directorships included a Non-Executive Director of Credit Union Australia where he is Chairman
elect, and member of the Strategy Committee; Elanor Investor Group where he is Chair of the
Audit and Risk Committee and a member of the Remuneration and Nominations Committee;
and a Non-Executive Director of the Australia Red Cross Blood Service, where he is a member
of the Finance and Audit Committee and of the Risk Committee. He has also been a member of
the Grameen Foundation Australia Charity Board since 2012.
Ordinary shares in Quickstep Holdings Limited
as at 28 November 2017
500,000
Experience and
expertise
Special
responsibilities
Other current
Directorships
Interests in shares
and options
Experience and
expertise
Special
responsibilities
Other current
Directorships
Interests in shares
and options
Experience and
expertise
Special
responsibilities
Other
Directorships as
at 28 November
2017
Interests in shares
and options
20
QUICKSTEP ANNUAL REPORT 2018
Directors’ Report
Directors’ Report
Information on Directors
Mr. Peter C Cook, MPharm, CChem, FMonash, FRMIT, MPS, MRACI, MAICD
Independent non-executive Director- retired 28 November 2017
Mr. Cook’s most recent Executive appointment was as Managing Director and CEO 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.
Chair of the Remuneration, Nomination and Diversity Committee until 28 November 2017
Chair, Pharmaceutical Science Advisory Group (Monash University), Chair, Monash Institute of
Pharmaceutical Science’s Foundation and Director Myostin Therapeutics.
Ordinary shares in Quickstep Holdings Limited
as at 28 November 2017
1,590,685
Air Marshal Errol J McCormack (Ret’d) AO
Independent Non-Executive Director – retired 28 November 2017
Mr. McCormack has extensive experience as a Senior Commander in the Royal Australian Air
Force. Mr. 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. His pro-bono work includes Deputy Chair of the Board of the Sir Richard
Williams Foundation, an independent think-tank supporting development of Australian military
aviation policy.
Member of the Audit, Risk and Compliance Committee and the Remuneration, Nomination and
Diversity Committee until 28 November 2017.
Non-Executive Chairman of Chemring Australia Pty Ltd.
Ordinary shares in Quickstep Holdings Limited
as at 28 November 2017
590,319
Mr. Jaime Pinto, B.Com, CA, AIGA
Company Secretary - appointed 20 November 2012
Mr. Pinto 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.
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.
He is currently the Company Secretary of a number of ASX-listed and unlisted companies in the
manufacturing, investing, real estate and advisory industries
Ordinary shares in Quickstep Holdings Limited
90,000
Experience and
expertise
Special
responsibilities
Other
Directorships as
at 28 Nov 17
Interests in shares
and options
Experience and
expertise
Special
responsibilities
Other
Directorships as
at 28 Nov 2017
Interests in shares
and options
Experience and
expertise
Other current
roles
Interests in shares
and options
QUICKSTEP.COM.AU
21
Directors’ Report
Directors’ Report
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 Chair 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/files/files/359_QHL_RND_Committee_Charter_-_September_2014.pdf
http://www.quickstep.com.au/files/files/366_QHL_Selection_and_Appointment_of_Directors_Policy_V1_
-_02102014.pdf
The Policy and Procedure for Selection and Appointment of Directors includes a 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 the business evolves this is continually reviewed.
The Board is committed to a majority of its Directors being independent to ensure the Board acts in the best
interests of the entity itself, its security holders and stakeholders generally. Director independence is
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”).
Directors’ Meetings
The numbers of meetings of the Company's board of Directors and of each board committee held during
the financial year ended 30 June 2018, and the numbers of meetings attended by each Director were:
Director
Board Meetings
Audit, Risk and
Compliance Committee
Meetings
Remuneration,
Nomination and Diversity
Committee Meetings
Mr. T H J Quick
Mr. M H Burgess
Mr. J C Douglas
Mr. B A Griffiths
Mr. N I Ampherlaw
Mr. P C Cook
Air Marshal E J McCormack (Ret’d)
Held
23
22
23
23
8
8
8
Attended
23
22
23
20
7
8
8
Held
2
-
5
2
3
-
3
Attended
2
-
5
2
3
-
2
Held
1
-
1
4
-
3
3
Attended
1
-
1
4
-
3
3
22
QUICKSTEP ANNUAL REPORT 2018
Directors’ Report
Directors’ Report
Insurance of Officers and Indemnities
Except as indicated below, the Group has not otherwise, during or since the end of the financial year,
indemnified or agreed to indemnify an officer of the Group or of any related body corporate against a liability
incurred as an officer.
Insurance
During the financial year, Quickstep Holdings Limited 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 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.
Indemnities
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.
Non-Audit Services
During the financial year, KPMG, the Group’s auditor, has performed certain other services in addition to
the audit and review of the financial statements.
The Board of Directors has considered the position and, in accordance with advice received from the Audit
Risk and Compliance Committee, are satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are
satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the
auditor independence requirements of the Corporations Act 2001 for the following reasons- all non-audit
services have been reviewed by the audit and risk committee to ensure they do not impact the impartiality
and objectivity of the auditor, and none of the services undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants.
Details of the amounts paid to the auditor of the Group, KPMG, for non-audit services provided during the
year are set out below:
Other Services
Grant – Assurances
Accounting and tax services
Total Non-Audit Fee
2018
$
5,000
24,040
29,040
2017
$
23,200
-
23,200
QUICKSTEP.COM.AU
23
Directors’ Report
Directors’ Report
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 (cid:23)(cid:22).
Rounding of Amounts
The Company is a kind referred to in ASIC Legislative Instrument 2016/191, relating to the “rounding off” of
amounts in the Directors’ report and financial statements. Amounts in the Directors’ report and financial
statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
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
This report is made in accordance with a resolution of Directors on 28 August 2018.
M H Burgess
Director
Sydney, New South Wales
24
QUICKSTEP ANNUAL REPORT 2018
remuneration Report – Audited
Remuneration Report – Audited
The Directors present the Quickstep Holdings Limited 2018 remuneration report, outlining key aspects of
the Group’s remuneration policy and framework, and remuneration awarded this year.
The report is structured as follows:
1.
2.
3.
4.
5.
Principles of Compensation
Details of Remuneration
Share Based Compensation
Analysis of Bonuses included in Remuneration
Key Management Personnel Related Transactions
1. Principles of Compensation
Key Management Personnel (KMP) comprise the Directors of the company and the senior leadership team.
KMP have authority and responsibility for planning, directing and controlling the activities of the Group.
The report includes details relating to:
Executive Director
Mr. M H Burgess
Non-Executive Directors
Mr. T H J Quick
Mr. J C Douglas
Mr. B A Griffiths
Mr. N I Ampherlaw
Mr. P C Cook
Chief Executive Officer and Managing Director
Chair
Chair of Audit, Risk and Compliance Committee from 29 November 2017
Chair of Remuneration, Nomination and Diversity Committee from
29 November 2017
Chair of Audit, Risk and Compliance Committee retired 28 November 2017
Chair of Remuneration, Nomination and Diversity Committee retired
28 November 2017
Air Marshal E J McCormack (Ret’d) Retired 28 November 2017
Other Key Management Personnel
Mr. J Pinto
Ms. J E Courtney-Pitman
Mr. R L Mahon
Mr. A J Tilley
Mr. A R Crane
Mr. K J Boyle
Company Secretary
Chief Human Resources Officer
Chief Business Development and Technical Officer
Chief Financial Officer from 25 June 2018
Chief Financial Officer until 24 June 2018
Chief Operating Officer until 20 April 2018
The Board has established a Remuneration, Nomination and Diversity (RN&D) Committee which assists the
Board in formulating policies on and in determining:
(cid:120)
(cid:120)
The remuneration packages of executive directors, non-executive directors and other key
management personnel, 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.
Further
http://www.quickstep.com.au/Investors-Media/Corporate-Governance.
information on the role of the committee
in the charter available at
is contained
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.
Compensation levels for KMP of the Group are competitively set to attract and retain appropriately qualified
and experienced directors and executives. The remuneration structures are designed to reward the
achievement of strategic objectives and achieve the broader outcome of value creation for shareholders.
Compensation packages include a mix of fixed compensation, short-term cash incentives and equity-based
incentives.
Shares, options or rights may only be issued to Directors subject to approval by shareholders in a general
meeting.
QUICKSTEP.COM.AU
25
remuneration Report – Audited
Remuneration Report – Audited
1. Principles of Compensation
The Group does not have any scheme relating to retirement benefits for its KMP other than contributions
defined under its statutory obligations.
The Company’s policy is to provide executives with a competitive fixed compensation comparable to the
median paid by like sized companies undertaking similar work and offers additional short and long term
incentives to allow the executive to achieve top quartile compensation, if all performance hurdles are met.
All incentives are capped.
The Company’s policy is to provide non-executive Directors with a fixed fee comparable to the median of
that paid by similar sized ASX listed companies operating in similar fields. Non-executive Directors are not
eligible for participation in any of the Company’s incentive schemes.
Fixed compensation
Fixed compensation consists of base compensation, as well as statutory 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.
Short Term Incentive - Cash and equity settled short term incentive
Certain KMP receive short-term incentives (STI) in cash and/or shares on achievement of key performance
indicators (KPIs). Each year, the RN&D Committee considers the appropriate KPIs and associated targets to
align individual rewards to the Group’s performance. These targets include measures related to the annual
performance of the Group and specific measures related to the activities of individual KMPs.
In FY18, nine Corporate KPIs were used, including four financial KPIs (weighting 35%), two KPIs relating to
people and safety (weighting 15%), two growth and technology focused KPIs (weighting 20%) and one
project and operational KPI (weighting 30%). The weighting of corporate KPIs used in the determination of
an executive’s STI ranged from 70% for functional specialists to 100% for the Chief Executive Officer and
Chief Financial Officer.
The RN&D Committee is responsible for assessing whether the Corporate 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 FY18 there was one
financial threshold metric.
Actual performance is then assessed against both a target outcome and a stretch outcome. Where
performance falls below the target outcome no payment is made against that KPI and where performance
exceeds the stretch outcome the maximum stretch is payable. Where performance falls between target and
stretch outcomes an appropriate proportion of the KPI is payable. When the target is achieved 50% of the
weighting for the KPIs is payable. When both the target and stretch outcomes are achieved 100% of the
weighting for the KPIs are payable.
After determining the overall achievement of KPIs based on the above review process and hurdle, the RN&D
Committee has recommended that a STI is payable in respect of FY18.
26
QUICKSTEP ANNUAL REPORT 2018
remuneration Report – Audited
Remuneration Report – Audited
1. Principles of Compensation
Long Term Incentive - Quickstep Incentive Rights Plan (IRP)
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. The terms of the IRP were
most recently approved by shareholders at the 2015 AGM.
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 service conditions are satisfied. There were no RRs granted in FY18 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.
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 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 scales will apply to all
tranches:
Performance Level
Below Threshold
Threshold
Target
Stretch and Above
Company’s TSR Relative to AOAI Movement of the
Performance Period
< 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
Vesting %
0%
25% Pro-rata
50% Pro-rata
100%
For PRs issued to executives, 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. 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.
QUICKSTEP.COM.AU
27
remuneration Report – Audited
Remuneration Report – Audited
1. Principles of Compensation
Long Term Incentive - Quickstep Incentive Rights Plan (IRP)
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 will lapse.
Unless the Board determines otherwise, if a participant ceases employment under special circumstances,
rights that were granted to the participant during the financial year in which the termination occurred will
be lapsed 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.
Non-Executive Directors’ Fees
Remuneration for all non-executive directors was approved at a board meeting on 19 October 2017 –
pending the retirement and non-replacement of three members. It was resolved that, despite an additional
workload for the continuing non-executive Directors, and considering Company profitability, there would
be no increase in any fees and the committee membership fee was removed. 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
Director Fees
Committee Fees
Mr. T H J Quick
Mr. J C Douglas
Mr. B A Griffiths
$126,000
$60,000
$60,000
n/a
$10,000
$10,000
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.
2018
2017
2016
2015
2014
Loss aattributable to owners of the
company ($000)
Dividends paid
Operating income ($000)
Change in share price
Return oon capital employed
(2,891)
$nil
59,036
(22.7%)
(9.4%)
(6,662)
$nil
51,915
(25.4%)
(33.3%)
(5,785)
$nil
50,128
(18.2%)
(8.6%)
(3,937)
$nil
39,511
(12.4%)
(6.1%)
(11,181)
$nil
12,001
35.7%
(66.4%)
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.
28
QUICKSTEP ANNUAL REPORT 2018
remuneration Report – Audited
Remuneration Report – Audited
1. Principles of Compensation
Service Agreements
Name
Initial
agreement
date
Duration
Notice
period (3)
Termination benefits
Mr. M H Burgess
8 May 17
Open
NES
Ms. J E Courtney-Pitman
30 Mar 16
Open
NES
Mr. R L Mahon
11 Jan 17
Open
NES
Mr. A J Tilley
25 June 18
Open
NES
Mr. A R Crane
24 Sept 15 24 June 18
NES
Mr. K J Boyle
23 Mar 16 20 April 18
NES
12 months annual 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
3 months of TFR and pro-
rated annual bonus (at
Board's discretion)
3 months of TFR and pro-
rated annual bonus (at
Board's discretion)
3 months of TFR and pro-
rated annual bonus (at
Board's discretion)
3 months of TFR and pro-
rated annual bonus (at
Board's discretion)
3 months of TFR 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
20
20
40
30
20
20
20
40
30
20
(1) Short Term Incentive (STI) is determined on performance against 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
other than Mr. M H Burgess, whose STI is payable in a combination of cash and shares), as a percentage
of Total Fixed Remuneration (TFR). The KPIs include company financial objectives, such as sales, profit
and cashflow, and other growth, operational and people objectives including new contracts,
technology development, project delivery and functional outcomes aligned to the annual business
plan.
(2) Long Term Incentive (LTI) is determined on the Group's performance against relative Total Shareholder
Return and is tested at multiple dates. The LTI cap refers to the maximum amount payable in shares as
a percentage of TFR. This is the measure currently used in the IRP applicable to FY18.
(3) NES refers to the National Employment Standard in the Fair Work Act (2009). Under section (3) (ss117-
118) an employee is entitled to a minimum notice period depending on length of service and age.
(4) In FY19, for all KMP, the LTI cap has increased to 40% of the TFR and the STI cap has increased to 40%
of the TFR. The STI cap will be payable in a combination of cash and shares weighted 50/50 on the
outcome.
QUICKSTEP.COM.AU
29
remuneration Report – Audited
Remuneration Report – Audited
2. Details of Remuneration
The following tables detail the remuneration received by KMP of the Group for the current and previous financial
year.
Name
Salary /
Fees
$
STI (2)
$
Discretionary
Payment (6)
$
2018
SGC
$
Termination
$
LTI
Rights
(1)
$
Total
$
Executive Directors
Mr. M H Burgess
Non-Executive Directors
Mr. T H J Quick
Mr. J C Douglas
Mr. B A Griffiths
Mr. N I Ampherlaw
Mr. P C Cook
Air Marshal E J
McCormack (Ret’d)
Other KMPs
Mr. J Pinto
Ms. J E Courtney-Pitman
Mr. R L Mahon
Mr. A J Tilley (3)
Mr. A R Crane (4)
Mr. K J Boyle (4)
479,951
148,500
126,000
61,163
66,250
29,167
26,637
32,915
60,000
228,182
299,951
-
329,951
216,682
-
-
-
-
-
-
-
6,779
27,440
-
20,718
(1,926)
-
-
-
-
-
-
-
-
-
-
-
-
-
Executive Directors
Mr. M H Burgess (5)
Mr. D J Marino
Non-Executive Directors
Mr. T H J Quick
Mr. N I Ampherlaw
Mr. P C Cook
Mr. B A Griffiths
Air Marshal E J McCormack
(Ret’d)
Mr. J C Douglas
Other KMPs
Mr. J Pinto
Mr. A R Crane
Ms. J E Courtney-Pitman
Mr. K J Boyle
Mr. R L Mahon (5)
2017
73,289
488,426
-
99,171
-
125,000
126,000
69,463
63,825
61,500
78,870
57,249
60,000
335,045
238,136
249,397
142,990
-
-
-
-
-
-
-
-
-
-
-
-
-
41,652
26,198
25,594
11,971
-
75,000
20,000
20,000
-
20,049
-
5,811
-
-
2,530
3,127
-
20,049
20,049
-
20,049
20,049
4,904
19,616
-
537
6,175
-
7,630
5,251
-
19,616
16,933
19,616
9,808
-
-
-
-
-
-
-
99,503
748,003
-
-
-
-
-
-
126,000
66,974
66,250
29,167
29,167
36,042
60,000
279,291
364,582
-
518,835
300,913
-
-
24,281
-
17,142
-
-
-
- 148,117
(9,723)
75,831
-
-
-
-
-
-
-
-
-
-
-
-
-
-
335,110
78,193
1,067,323
-
-
-
-
-
-
-
16,960
8,494
8,072
2,637
126,000
70,000
70,000
61,500
86,500
62,500
60,000
488,273
309,761
322,679
167,406
(cid:9)(cid:18)(cid:10)
(cid:9)(cid:19)(cid:10)
(cid:9)(cid:20)(cid:10)
(cid:9)(cid:21)(cid:10)
(cid:9)(cid:22)(cid:10)
(cid:9)(cid:23)(cid:10)
LTI rights include the accounting expense attributable to the current year under the IRP.
STI is comprised of an accrued current year cash bonus plus adjustment for amounts accrued in FY17 which(cid:1)
were not paid. This adjustment results in a negative expense in the above table in relation to KMPs’ for whom(cid:1)
the prior year accrual exceeded the current year accrual, except for Mr. M H Burgess whose STI is payable 50%
cash and 50% shares and who was not entitled to a bonus in FY17.
Mr. A J Tilley commenced employment on 25 June 2018 and remuneration for the period of employment in(cid:1)
FY18 was considered Immaterial.
Mr. K J Boyle ceased as a KMP on 20 April 2018 and Mr. A C Crane ceased as a KMP on 24 June 2018.
For personnel that commenced employment during FY17 these figures represent the period from start date to(cid:1)
the end of FY17 – refer Services Agreement on page (cid:19)(cid:25).
The RN&D Committee recommended and the Board approved a discretionary payment to select KMP in FY17.(cid:1)
This reflected a level of activity beyond standard requirements to deliver key projects in line with or ahead of(cid:1)
agreed timelines.
30
QUICKSTEP ANNUAL REPORT 2018
remuneration Report – Audited
Remuneration Report – Audited
3. Share Based Compensation
Long term Incentive - Quickstep Incentive Rights Plan (IRP)
At 30 June 2018 executives have accrued performance rights pursuant to the IRP. Movements in IRP rights
during the year are set out below:
KMP
Tranche
refer
Note
Grant
date
FV per
right at
grant
date (a)
First
testing
date
Balance
at
30 June
2017
Number
Granted
during
the year
(b)
Number
Lapsed
during the
year
Number
Balance
at
30 June
2018
Number
Fair
Value at
grant
date
$
Cum
vesting
level
Mr. M H Burgess
CEO 1
01/12/17
$0.047
31/08/18
Mr. M H Burgess
CEO 2
01/12/17
$0.089
31/08/19
Mr. M H Burgess
CEO 1
01/12/17
$0.051
31/08/18
Mr. M H Burgess
CEO 2
01/12/17
$0.089
31/08/19
Mr. M H Burgess
FY18
01/12/17
$0.069
31/08/20
-
-
-
-
-
412,376
412,376
825,248
825,248
-
-
-
-
412,376
$19,382
412,376
$36,701
825,248
$42,087
825,248
$73,447
1,237,624
- 1,237,624
$85,396
Mr. A R Crane
Mr. A R Crane
Mr. A R Crane
FY16
01/06/16
$0.085
31/08/18
446,970
FY17
01/03/17
$0.072
31/08/19
906,610
-
-
-
-
446,970
$37,992
906,610
$65,276
FY18
01/12/17
$0.069
31/08/20
-
1,039,604
- 1,039,604
$71,732
Ms. J E Courtney-Pitman
FY16
01/06/16
$0.085
31/08/18
123,737
Ms. J E Courtney-Pitman
FY17
01/03/17
$0.072
31/08/19
431,719
-
-
Ms. J E Courtney-Pitman
FY18
01/12/17
$0.069
31/08/20
-
495,050
-
-
-
123,737
$10,518
431,719
$31,084
495,050
$34,158
Mr. K J Boyle
Mr. K J Boyle
Mr. K J Boyle
FY16
01/06/16
$0.085
31/08/18
131,313
FY17
01/03/17
$0.072
31/08/19
457,622
-
-
(131,313)
(457,622)
FY18
01/12/17
$0.069
31/0820
-
554,455
(554,455)
-
-
-
$11,162
$32,949
$38,257
Mr. R L Mahon
FY17
01/03/17
$0.072
31/08/19
276,300
-
Mr. R L Mahon
FY18
01/12/17
$0.069
31/08/20
-
633,663
-
-
276,300
$19,894
633,663
$43,723
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
(a)
The fair value of rights granted was calculated using a Monte Carlo simulation analysis. Refer to
Note E.4, for the model’s key assumptions.
(b) The fair value of rights granted in the year is $512,792 (2017 $304,622). The total value of the rights
is allocated to remuneration over the vesting period.
Modification of terms of equity-settled share-based payment transactions
No terms of equity-settled share-based payment transactions (including 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.
QUICKSTEP.COM.AU
31
remuneration Report – Audited
Remuneration Report – Audited
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 other key management personnel of the Group are detailed
below:
KMP
Executive DDirector
Mr. M H Burgess
Other KKMP
Ms. J E Courtney-Pitman
Mr. R L Mahon
Mr. A R Crane
Mr. K J Boyle
Included in
remuneration(1)
% vested in
year (2)
% lapsed in
year (2)
$148,500
59%
$(8,675)
$27,440
$36,172
$(1,926)
66%
62%
59%
42%
41%
34%
38%
41%
68%
(1)
Bonuses included in remuneration comprise of an accrued current year cash bonus plus
adjustment for amounts accrued in FY17 which were not paid. This adjustment results in a
negative expense in the above table for whom the prior year accrual exceeded the current year
accrual, except for Mr. M H Burgess whose bonus is payable 50% cash and 50% shares and who
was not entitled to a bonus in FY17.
(2)
The amounts lapsed are due to the Group performance, personal performance or service criteria
not being met in relation to the current financial year.
5. Key Management Personnel Related Transactions
Mr. J C Douglas is a non-executive Director of the Group and is also a Director of Newmarket Management
Pty Ltd and Associates (Newmarket). Therefore at 30 June 2018 the Newmarket options are considered to
be held by a related party.
32
QUICKSTEP ANNUAL REPORT 2018
financial statments
Financial Statements
Financial statements
Consolidated Statement of Profit or Loss and other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Page
(cid:20)(cid:20)
(cid:20)(cid:21)
(cid:20)(cid:22)
(cid:20)(cid:23)
Notes to the Consolidated Financial Statements
A. About this Report
B. Business Performance
B.1 Key Performance Measures
B.2 Segment Reporting
B.3 Loss per Share
B.4 Notes to Statement of Cash Flows
B.5 Income Tax Expense
C. Capital and Financial Risk Management
C.1 Loans and Borrowings
C.2 Finance Income and Finance Costs
C.3 Financial Instruments
C.4 Financial Risk Management
C.5 Share Capital
C.6 Capital and other Commitments
D. Operating Assets and Liabilities
D.1 Trade and other Receivables
D.2 Inventories
D.3 Deferred Revenue
D.4 Property, Plant and Equipment
E. Employee Benefits
Employee Benefit Obligation
E.1
E.2 Employee Benefit Expense
E.3 Related Party Transactions
E.4 Quickstep Incentive Rights Plan (IRP)
E.5 Equity Settled Short Term Incentive
F. Other Disclosures
F.1 Group Entities
F.2 Parent Entity Financial Information
F.3 Deed of Cross Guarantee
F.4 Auditors’ Remuneration
F.5 Subsequent Events
F.6 New Accounting Standards
Directors’ Declaration
Lead Auditor’s Independence Declaration
Independent Auditor’s Report to the Members
(cid:20)(cid:24)
(cid:21)(cid:17)
(cid:21)(cid:18)
(cid:21)(cid:18)
(cid:21)(cid:19)
(cid:21)(cid:19)
(cid:21)(cid:21)
(cid:21)(cid:23)
(cid:21)(cid:23)
(cid:21)(cid:24)
(cid:22)(cid:18)
(cid:22)(cid:19)
(cid:22)(cid:20)
(cid:22)(cid:20)
(cid:22)(cid:21)
(cid:22)(cid:21)
(cid:22)(cid:23)
(cid:22)(cid:23)
(cid:22)(cid:24)
(cid:22)(cid:25)
(cid:22)(cid:26)
(cid:23)(cid:17)
(cid:23)(cid:17)
(cid:23)(cid:18)
(cid:23)(cid:19)
(cid:23)(cid:19)
(cid:23)(cid:19)
(cid:23)(cid:21)
(cid:23)(cid:22)
(cid:23)(cid:23)
QUICKSTEP.COM.AU
33
Consolidated Statement of Profit or Loss and
other Comprehensive Income
for the year ended 30 June 2018
Consolidated Statement of Profit or Loss and other
Comprehensive Income
for the year ended 30 June 2018
Revenue
Cost of sales of goods
Gross profit
Grants received
Research and development expenses
Corporate and administrative expenses
Other expenses
Loss from operating activities
Finance income
Finance expenses
Net finance costs
Loss before income tax
Income tax benefit
Loss for the year
Other comprehensive income/ (loss) net of income tax
Item that may be reclassified to profit or loss
Cash flow hedges
Exchange difference on translation of a foreign operation
Other comprehensive income for the period, net of income tax
Notes
2018
$000
2017
$000
59,036
(49,707)
9,329
51,915
(44,175)
7,740
498
532
(3,716)
(7,430)
-
(1,319)
150
(1,722)
(1,572)
(5,492)
(7,919)
(561)
(5,700)
606
(1,568)
(962)
C.2
C.2
(2,891)
(6,662)
B.5
-
-
(2,891)
(6,662)
239
(36)
203
-
68
68
Total comprehensive (loss) for the year
(2,688)
(6,594)
Loss per share:
Basic loss per share
Diluted loss per share
B.3
Cents
(0.51)
(0.51)
Cents
(1.18)
(1.18)
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
34
QUICKSTEP ANNUAL REPORT 2018
Consolidated Balance Sheet
as at 30 June 2018
Consolidated Balance Sheet
as at 30 June 2018
Consolidated balance sheet
ASSETS
Current assets
Cash and cash equivalents
Derivative financial instruments
Term deposits
Trade and other receivables
Prepayment and other assets
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Loans and borrowings
Deferred revenue
Employee benefit obligations
Total current liabilities
Non-current liabilities
Loans and borrowings
Deferred revenue
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Total equity
Notes
2018
$000
2017
$000
B.4
C.3
C.4
D.1
D.2
D.4
C.1
D.3
E.1
C.1
D.3
E.1
C 5
2,862
239
810
4,451
556
10,015
18,933
13,237
20
13,257
32,190
8,963
5,658
2,394
1,179
18,194
7,900
-
310
8,210
26,404
5,786
3,722
-
718
6,292
635
10,599
21,966
14,753
61
14,814
36,780
10,346
3,763
4,220
1,138
19,467
8,240
682
210
9,132
28,599
8,181
109,118
4,573
109,118
4,077
(107,905)
(105,014)
5,786
8,181
The consolidated balance sheet should be read in conjunction with the accompanying notes.
QUICKSTEP.COM.AU
35
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
2018
Balance at 1 July 2017
Loss for the period
Other comprehensive (loss)/ income
Foreign currency translation difference
for foreign operations
Effective portion of changes in fair
value of cash flow hedges, net of tax
Total comprehensive (loss)/ income
for the period
Transactions with owners of the
company:
Share based payments expenses
Share
capital
$000
109,118
-
-
-
-
-
Foreign
currency
translation
reserve
$000
Cash flow
hedges
reserve
$000
Share
based
payments
$000
Accumulated
losses
$000
Total
equity
$000
4,312
(105,014)
(2,891)
8,181
(2,891)
(235)
-
(36)
-
(36)
-
-
-
239
239
-
-
-
-
-
-
(36)
239
(2,891)
(2,688)
-
-
293
-
293
Balance at 30 June 2018
109,118
(271)
239
4,605
(107,905)
5,786
2017
Balance at 1 July 2016
Loss for the period
Other comprehensive income:
Foreign currency translation difference
for foreign operations
Total comprehensive (loss)/ income for
the period
Transactions with owners of the
company:
Share based payments expenses
109,118
(303)
-
-
-
-
-
68
68
-
Balance at 30 June 2017
109,118
(235)
-
-
-
-
-
-
3,769
-
-
-
(98,352)
(6,662)
14,232
(6,662)
-
68
(6,662)
(6,594)
543
-
543
4,312
(105,014)
8,181
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
36
QUICKSTEP ANNUAL REPORT 2018
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
for the year ended 30 June 2018
Cash flows from operating activities
Cash receipts in course of operations
Interest received
Interest paid
Government and industry grants
Cash payments in the course of operations
Net cash (used in) /from operating activities
Cash flows from investing activities
Acquisition costs of plant and equipment and intangible assets
Proceeds from government grant for capital
Receipts from /(investment in) restricted cash and term deposit
Net cash (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payment of borrowing costs
Finance lease payments
Net cash (used in) / from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of period
B. 4
Notes
2018
$000
2017
$000
58,448
50,515
24
(358)
498
31
(74)
532
(59,295)
(50,910)
B. 4
(683)
94
(1,165)
(4,437)
141
(92)
467
245
(1,116)
(3,725)
6,000
(4,715)
(310)
-
975
(824)
3,722
(36)
2,862
1,500
(1,250)
(542)
(1)
(293)
(3,924)
7,578
68
3,722
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
QUICKSTEP.COM.AU
37
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
A. About this Report
Introduction
This is the financial report of Quickstep Holdings Limited (the “Company”) and its controlled entities (the “Group”).
The Company is domiciled in Australia and the Group is a for-profit entity. The Group is at the forefront of advanced
composites manufacturing and technology development and is the largest independent aerospace-grade advanced
composite manufacturer in Australia, currently partnering with some of the world’s largest aerospace/defence
organisations.
What’s new this year?
This year we have reviewed the content and structure of the financial report looking for opportunities to make it
less complex and more relevant to our users. This included:
(cid:120)
(cid:120)
Eliminating immaterial disclosures that may undermine the usefulness of the financial report by obscuring
important information;
Reorganising the notes to the financial statements into sections to assist users in understanding the Group’s
performance;
(cid:120) Moving the significant accounting policies to where the related accounting balance of financial statement
matter is discussed, and
Improving the presentation of certain notes.
(cid:120)
The purpose of these changes is to provide users with a clearer understanding of what drives the financial
performance and position of the Group, whilst still complying with the provisions of the Corporations Act 2001.
Materiality
Information is only included in the financial report to the extent that it has been considered material and relevant
to the understanding of the financial statements. Factors that influence if a disclosure is material and relevant,
include whether:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the dollar amount is significant in size (quantitative factor)
the dollar amount is significant by nature (qualitative factor)
the Group’s results cannot be understood without the specific disclosure (qualitative factor)
it is critical to allow a user to understand the impact of significant changes in the Group’s business during the
period; and
it relates to an aspect of the Group’s operations that is important to its future performance.
Statement of Compliance
These general purpose financial statements have been prepared in accordance with the Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
The consolidated financial statements of the Group also comply with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board.
The consolidated financial statements were authorised for issue by the Board of Directors on 28 August 2018.
38
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
A. About this Report
Basis of Preparation
The financial statements have been prepared on the historical cost basis. These consolidated financial statements
are presented in Australian dollars, which is the Group’s functional currency.
Rounding of Amounts
The Company is of a kind referred to in Class Order 2016/191 issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the financial statements and Directors’ report. Amounts
in the financial statements and Directors’ report have therefore been rounded off to the nearest thousand dollars,
or in certain cases, to the nearest dollar.
Accounting Estimates and Judgements
The preparation of financial statements in conformity with AASBs requires management to make judgements,
estimates and assumptions about future events.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting
policies are described below:
Going concern
The Group has incurred a loss after tax for the year ended 30 June 2018 of $2,891,000 (2017 $6,662,000). The Group
has net assets of $5,786,000 (2017 $8,181,000) and net current assets of $739,000 (2017 $2,499,000). Current loans
and borrowings are $5,658,000 (2017 $3,763,000). Operating cash outflow for the year was $683,000 including R&D
investment of $3,716,000.
The full year loss after tax of $2,891,000 is $3,771,000 lower than the prior year and profitability has improved over
the course of the year ended 2018 resulting in a net profit after tax of $38,000 for the six month period ended 30
June 2018. This can be attributed to the impact of OneQuickstep savings, the lean manufacturing program and an
increase in volumes on the JSF program. Operating cash outflow for the year of $683,000 includes EBITDA of
$1,183,000 and a working capital increase of $537,000 with reductions in trade debtors and inventory offset by a
normalisation of the trade payables balance. Cash generation and profits are forecast to improve further into FY19.
Additional working capital funding was secured with Efic during the year to support further JSF volume growth in
FY19 resulting in an increase in the short term facility from A$3,000,000 to A$7,000,000.
The existing cash and current borrowing position of the Group and the need to further support growth
requirements, uncertainty associated with foreign exchange rate fluctuations on US$ denominated sales, partially
mitigated by the recent implementation of forward contracts, and commercialisation of new technology results in
future cash flow of the Group being partially dependent on a combination of the following solutions:
(cid:120)
(cid:120)
(cid:120)
ongoing cost control;
delivering further manufacturing efficiencies for existing programs; and
extension of the Efic short term working capital facility after 30 June 2019 or alternative sources of longer term
debt funding.
The going concern basis presumes that the above operational and 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, if the combined effect of the above solutions
should not be wholly successful there is a material uncertainty as to whether the Group would continue as a going
concern.
The Directors consider that there is a basis to expect the Group will be able to meet its commitments due to the
above measures, the improved financial performance during FY18 and additional working capital funding available
and accordingly, the financial report has been prepared on the basis of a going concern.
QUICKSTEP.COM.AU
39
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
A. About this Report
Significant Accounting Policies
The accounting policies have been applied consistently to all periods presented in these consolidated financial
statements, and have been applied consistently by all entities in the Group. Other significant accounting policies
are contained in the notes to the consolidated financial statements to which they relate.
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 2018 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 parent entity. 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.
Foreign currency translation
Transactions, assets and liabilities denominated in foreign currencies are translated into Australian dollars at
reporting date using the following exchange rates:
Foreign currency amount
Applicable exchange rate
Transactions
Date of transaction
Monetary assets and liabilities
Reporting date
Foreign exchange gains and losses resulting from translation are recognized in the Income Statement, except for
qualifying cash flow hedges which are deferred to equity.
On consolidation, the assets, liabilities, income and expenses of foreign operations are translated into Australian
dollars using the following applicable exchange rates:
Foreign currency amount
Applicable exchange rate
Income and expenses
Average monthly rate
Assets and liabilities
Equity and reserves
Reporting date
Historical date
Foreign currency differences resulting from translation are recognized in other comprehensive income, and
presented in the foreign currency translation reserve in equity. When a foreign operation is disposed of, in part or
in full, the relevant amount in the foreign currency translation reserve is transferred to the statement of
comprehensive income.
40
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
B. Business Performance
This section provides the information that is most relevant to understanding the financial performance of the Group
during the financial year and, where relevant, the accounting policies applied and the critical judgements and
estimates made.
B.1
B.2
B.3
B.4
B.5
Key Performance Measures
Segment Reporting
Loss per Share
Notes to Statement of Cash Flows
Income Tax Expense
B.1 Key Performance Measures
The key performance measures for the year were:
Revenue
EBITDA
EBIT before research and development costs
EBIT
Net loss
Recognition and Measurement
2018
$000
59,036
1,183
2,397
(1,319)
(2,891)
2017
$000
51,915
(3,477)
(208)
(5,700)
(6,662)
Revenue
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of returns, trade allowances and rebates.
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.
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.
Research and development expenses
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.
Government grants
Grants from the government that compensate the Group for expenses incurred are recognised in the profit and loss
when funds are received and the Group has complied with all grant conditions.
QUICKSTEP.COM.AU
41
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
B. Business Performance
B.2 Segment Reporting
The Company is managed as a whole and is considered to have a single operating segment. There is no further
division of the Company or internal segment reporting used by the Directors when making strategic decisions or
resource allocation decisions.
Geographical Information
In presenting information on the basis of geographical segments, segment revenue is based on the geographical
location of customers. Segment assets are based on the geographical location of the assets.
Revenue:
United States of America
Australia
Other
Total
Non-current assets:
United States of America
Australia
Other
Total
Major Customers
2018
$000
50,850
8,186
-
59,036
-
13,257
-
13,257
2017
$000
43,228
5,012
3,675
51,915
-
14,566
248
14,814
Approximately 86.1% (2017 83.3%) of revenue for the Group is attributable to the following customers
(cid:120) Northrop Grumman ISS Int. Inc
(cid:120)
Lockheed Martin Aeronautics Co
Loss per Share
B.3
The calculation of basic loss per share is based on the loss attributable to ordinary shareholders and a weighted-
average number (WAN) of ordinary shares outstanding.
Loss attributable to ordinary shareholders
Weighted average number of ordinary shares:
Shares at 1 July
Shares issued under share based payments arrangements
Shares at 30 June
Basic loss cents per share
2018
$
2017
$
2,891,000
6,662,000
2018
Number
2017
Number
562,880,792 562,474,143
-
64,618
562,880,792 562,538,761
(0.51)
(1.18)
Potential ordinary shares on issue are not considered to be dilutive as the Company is in a loss position and
therefore the diluted loss per share equals the basic loss per share.
42
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
B.4 Notes to Statement of Cash Flows
Cash and Cash Equivalents
Cash at bank and in hand
Reconciliation of Net Profit to Net Cash Provided by Operating Activities
Loss for the period
Adjustments for:
Amortisation of intangibles
Depreciation and grant amortisation
Bad debt write-off
Share based payment expense
Loss on disposal of non-current assets
Net foreign currency losses
Change in fair value of share option liability
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
Decrease in inventories
(Increase)/decrease in other current assets
Increase/(decrease) in trade and other payables
Increase in employee benefits
Increase/(decrease) in deferred revenue
Decrease in prepaid interest
Net cash (used in) /from operating activities
B.5
Income Tax Expenses
Reconciliation of Income Tax Expense
Numerical reconciliation of income tax expense to prima facie tax payable is as follows:
Loss from continuing operations
Tax benefit at the Australian tax rate of 30.0% (2017 - 30.0%)
Expenditure not allowable for income tax purposes
Effect of different tax rate for overseas subsidiaries
Income not assessable
Other
Deferred tax asset not brought to account
Prior year adjustment
Income tax expense
Current tax
Deferred tax
2018
$000
2,862
2017
$000
3,722
2018
$000
2017
$000
(2,891)
(6,662)
24
2,478
-
293
79
505
(125)
1,841
584
79
(1,888)
141
(2,508)
705
(683)
29
2,210
345
543
-
546
(575)
(1,402)
1,307
(152)
2,604
199
154
948
94
2018
$000
2017
$000
(2,891)
(6,662)
(867)
90
156
(38)
-
921
(262)
-
-
-
(1,999)
100
213
(173)
21
1,258
580
-
-
-
QUICKSTEP.COM.AU
43
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
B. Business Performance
Income Tax Expenses
B.5
Tax Losses not brought to Account
The gross amount of unused tax losses for which no deferred tax asset has been recognised
Temporary Differences not brought to Account
Deferred tax assets/(liabilities):
Other provisions
Borrowing costs
Deductible capital raising costs
Property, plant and equipment
Intangibles
Deferred tax assets relating to temporary differences not recognised
2018
$000
71,947
2017
$000
68,623
2018
$000
2017
$000
722
38
144
2,067
208
3,179
646
9
251
1,804
208
2,918
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 the Group considers it prudent to defer recognition
until the Group generates taxable income.
Tax Consolidation Legislation
Quickstep Holdings Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated
Group effective from 1 July 2010.
Recognition and Measurement
Income tax
Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit and
loss except to the extent that it related to a business combination, or items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantially enacted at reporting date, and any adjustment to tax payable in respect of previous years.
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 nor 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.
44
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
This section provides information relating to the Group’s capital structure and its exposure to financial risks, how
they affect the Group’s financial position and performance and how the risks are managed.
C.1
C.2
C.3
C.4
C.5
C.6
Loans and Borrowings
Finance Income and Finance Costs
Financial Instruments
Financial Risk Management
Share Capital
Capital and other Commitments
C.1
Loans and Borrowings
2018
Non-
current
$000
5,914
1,986
-
7,900
-
-
Current
$000
2,121
353
184
2,658
3,000
-
Total
$000
Current
$000
8,035
2,339
184
10,558
3,000
-
1,750
291
97
2,138
1,500
125
3,763
2017
Non-
current
$000
6,500
1,740
-
8,240
-
-
8,240
Total
$000
8,250
2,031
97
10,378
1,500
125
12,003
5,658
7,900
13,558
Effective
interest rate
Year of maturity
7.27
7.27
8.85
2021
2021
2019
2018
Maximum facility
value
$000
10,000
3,333
7,000
2017
Maximum facility
value
$000
10,000
3,333
3,000
Secured bank loan
Capitalised interest facility
Accrued borrowing cost
Secured bank loan carrying amount
Short term facility-Efic
Newmarket share options at fair value
Term and Debt Repayment Schedule
Secured bank loan
Capitalised Interest
Short term facility - Efic
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 $3,333,000. Loan repayments commenced
on 30 April 2016, with the final repayment due in October 2021. No further draw down of this facility can be made
as the availability period has passed.
Interest will be capitalised until the maximum facility value of $3,333,000 is reached. At 30 June 2018 the interest
facility has been drawn to $2,339,000 (2017 $2,031,000). The Company has paid in this financial year an amount of
$35,000 (2017 $208,000).
The interest rate on the facility comprises a variable base rate, a fixed margin payable to the Financier and a fixed
guarantee fee payable to the Guarantor. Unused limit fees are payable to both the Financier and the Guarantor on
the undrawn principal balance.
QUICKSTEP.COM.AU
45
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
Loans and Borrowings
C.1
Secured Bank Loan
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, refer Note C.6.
Under this agreement, Quickstep Technologies Pty Ltd (Chargor) has agreed to the following restrictions on title on
any of the assets over which Efic (Chargee) has a fixed charge. Without the consent of the Chargee, the Chargor
may not:
dispose of the Secured Property,
lease or license the Secured Property or any interest in it, or deal with any existing lease or licence,
part with possession of the Secured Property,
(cid:120)
(cid:120)
(cid:120)
(cid:120) waive any of the Chargor’s rights or release any person from its obligations in connection with the Secured
(cid:120)
Property, or
deal in any other way with the Secured Property or any interest in it, or allow any interest in it to arise or be
varied.
Quickstep Holdings Limited has entered into a subordination agreement which subordinates certain intercompany
debts due to it from Quickstep Technologies Pty Ltd to the amounts due under the Export Finance Facility.
Short term facility – Efic
Quickstep Holdings Limited executed an Export Contract Loan (ECL) agreement with Efic on 28 June, 2017 and a
variation deed dated 25 June 2018. This revolving loan facility is limited to $7,000,000 (2017 $3,000,000) and each
drawing under the facility will be due for repayment within 10 months of the drawdown date. The facility is in place
to support additional working capital requirements related to growth of JSF deliveries and is available to be drawn
up to 28 June 2019.
The interest rate on the facility is a variable rate calculated as the sum of the base rate plus a margin of 5.85%,
payable to Efic quarterly on funds drawn. Loan establishment fees of $40,000 were paid during FY18 and have been
recognised through the profit and loss as finance expense (Note C.2). A commitment fee of 1.5%pa accrues from
the date of the agreement and is payable to Efic quarterly.
Recognition and Measurement
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.
46
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.2
Finance Income and Finance Costs
Finance income
Interest income
Change in fair value of share option liability
Finance income
Finance costs
Interest expense on liabilities measured at amortised cost
Foreign currency losses
Other expenses
Finance costs
Net finance costs
Recognition and Measurement
Finance income and finance costs
2018
$000
2017
$000
25
125
150
(1,063)
(505)
(154)
(1,722)
(1,572)
31
575
606
(947)
(546)
(75)
(1,568)
(962)
Finance income comprises interest income on funds invested (including available-for-sale financial assets). 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, 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.
C.3
Financial Instruments
Current assets
2018
$000
2017
$000
Forward foreign exchange contracts – cash flow hedges
239
-
Recognition and Measurement
Fair Value Measurement
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value
of the derivative is recognised in Other Comprehensive Income and accumulated in the cash flow hedge reserve.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit and loss.
The Group uses forward foreign exchange contracts to hedge its currency exposure risk in relation to sales in US
dollars – all hedges have a maturity date less than 1 year from reporting date.
Valuation of Financial Measurement – cash flow hedges
Foreign currency forward contracts are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured to their fair value at the end of each reporting period. The Group documents
at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are
used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values
or cash flows of hedged items.
QUICKSTEP.COM.AU
47
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
Financial Risk Management
C.4
Overview
The Group has exposure to the following risks from its use of financial instruments:
(cid:120) Credit risk;
(cid:120)
(cid:120) Market risk.
Liquidity risk, and
This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and
processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are
included throughout these financial statements.
The Company’s 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.
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. The carrying amount of the Group’s financial assets represents the maximum credit
exposure.
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 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.
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, financial assets are neither past due or impaired.
48
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.4
Financial Risk Management
Exposure to credit risk
The Group’s maximum exposure to credit risk for trade and other receivables at the reporting date by
geographic region was:
Australia
Europe
United States of America
Liquidity Risk
2018
$000
1,608
-
2,843
4,451
2017
$000
1,286
940
4,066
6,292
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.
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 2018
Trade and other payables
Secured bank loan
Short term facility
At 30 June 2017
Trade and other payables
Secured bank loan
Short term facility
Carrying
amount
$000
Contractual
Cash flows
$000
Less than
6 months
$000
6 – 12
months
$000
Between 1
and 2 years
$000
Between 2
and 5 years
$000
8,963
10,558
3,000
22,521
10,346
10,378
1,500
22,349
(8,963)
(11,113)
(3,136)
(23,212)
(10,346)
(12,226)
(1,618)
(24,190)
(8,963)
(750)
(598)
(10,311)
(10,346)
(1,039)
(59)
(11,444)
-
(1,725)
(2,538)
(4,263)
-
(1,331)
(1,559)
(2,890)
-
-
(3,450)
(5,188)
-
-
(3,450)
(5,188)
-
-
(2,953)
(6,903)
-
-
(2,953)
(6,903)
QUICKSTEP.COM.AU
49
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.4
Financial Risk Management
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect
the Group’s income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Interest rate risk
The Group 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 $3,333,000 with interest to be accrued on any deferred amount. The
applicable interest rate is re-set on a monthly basis in accordance with the 30 days bank bill rate.
The Group is exposed to interest rate risk pre-dominantly on cash balances and deposits and loans and borrowings.
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.
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
Variable rate instruments
Cash and cash equivalents
Secured bank loan
Short term facility agreement – Efic
2018
$000
2017
$000
810
718
2,862
(10,374)
(3,000)
(10,512)
3,722
(10,281)
(1,500)
(8,059)
As at the end of the reporting period, the Group had the following instruments outstanding:
Held-to maturity term deposits
Amount
$274,000
$324,000
$120,000
$91,500
Interest rate
2.25%
2.25%
2.25%
2.20%
Maturity date
4 October 2018
4 October 2018
4 October 2018
4 October 2018
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 as FY17.
Variable rate instruments - increase by 100 basis points
Variable rate instruments - decrease by 100 basis points
2018
$000
(105)
105
2017
$000
(81)
81
50
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.4
Financial Risk
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),
Great Britain Pounds (GBP) 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.
The Group's exposure to foreign currency risk at the end of the reporting period was as follows:
Receivables
Cash
Trade payables
2018
USD 000
2018
EUR 000
2018
GBP000
2017
USD 000
2017
EUR 000
2,101
403
(2,870)
(366)
-
-
(85)
(85)
-
-
(30)
(30)
3,115
1,075
(3,321)
869
631
74
(59)
646
The following significant exchange rates applied have been applied:
AUD v USD
AUD v EUR
AUD v GBP
Average rate
2018
0.7732
0.6506
0.5765
2017
0.7530
0.6903
0.5788
Year-end spot rate
2017
2018
0.7391
0.6344
0.5634
0.7662
0.6718
0.5912
Sensitivity analysis
A 10 percent movement of the Australian dollar against the following currencies at 30 June would have affected the
movement of financial instruments denominated in a foreign currency and effected profit and loss by the amounts
shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores
any impact of forecast sales and purchases. The analysis is performed on the same basis as FY17.
Index
US/AUD exchange rate - increase (10%)
US/AUD exchange rate - decrease 10%
GBP/AUD exchange rate - increase (10%)
GBP/AUD exchange rate - decrease 10%
EUR/AUD exchange rate - increase (10%)
EUR/AUD exchange rate - decrease 10%
Fair Value Hierarchy
Profit or loss
2018
$000
45
(55)
5
(6)
12
(15)
(14)
2017
$000
103
(126)
11
(13)
11
(13)
(25)
Equity, net of tax
2017
$000
2018
$000
(67)
82
(5)
6
791
(967)
(165)
(103)
126
625
(768)
625
(768)
(120)
Financial assets and liabilities, including foreign currency hedges and the Newmarket options are considered level
2 in the fair value hierarchy. The carrying value of financial assets and liabilities carried at amortised costs,
approximate their fair value. During the year, there have been no transfers between levels in the fair value
hierarchy.
QUICKSTEP.COM.AU
51
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.5 Share Capital
Capital Management
The Group’s objectives are to safeguard the Group’s ability to continue as a going concern and 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,
aerospace growth and commercialisation of technology requirements. There were no changes in the Group’s
approach to capital management during the year.
Movements in Share Capital
2018
Shares
2017
Shares
2018
$000
2017
$000
Opening balance
562,880,792
562,474,143
109,118
109,118
Shares issued under share based payments arrangements
-
406,649
-
-
Closing balance
562,880,792
562,880,792
109,118
109,118
During the year, the Company issued Nil (2017 406,649) shares pursuant to share-based payment arrangements
with certain key management personnel.
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.
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully
paid.
Options
Movements in unissued shares under option:
Opening balance
Options lapsed
Closing balance
2018
No of options
2017
No of options
25,000,000
25,000,000
-
-
25,000,000
25,000,000
These options do not entitle the holders to participate in any share issue of the Company or any other body
corporate.
Mr. J C Douglas is a non-executive Director of the Group and is also a Director of Newmarket. Therefore at 30 June
2018, the Newmarket Options are considered to be held by a related party.
Newmarket Share Options at Fair Value
Newmarket Financing Management Pty Ltd and Associates (Newmarket) holds 25,000,000 (2017 25,000,000)
options to acquire ordinary shares in Quickstep. These options expire on 31 December 2018.
These options were revalued at 30 June 2018 to a fair value of 0 (zero) cents (2017 0.5 cents) per share or $NIL
(2017 $125,000). The gain of $125,000 (2017 $575,000) has been recognised through the income statement as
finance income, refer Note C.2
A Binomial Tree model was used to value these options per dollar issued. The model key assumptions were as
follows:
Expiry date
Share price at valuation date
Exercise price
Contractual life
Risk free interest rate
Volatility of QHL
Dividend Yield
31 December 2018
$0.075
$0.1625
0.5 Years
1.89%
40%
0%
52
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
C. Capital and Financial Risk Management
C.6 Capital and other commitments
Capital Commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is
as follows:
Property, plant and equipment
2018
$000
796
2017
$000
784
Other Commitments – Pledged as Collateral against 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 subsidiary has
provided Efic with a fixed and floating charge over the following:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, Plant and equipment
2018
$000
1,954
4,335
9,935
12,448
2017
$000
1,634
5,914
9,791
13,485
Under this agreement, Quickstep Technologies Pty Ltd (Chargor) has agreed to the following restrictions on title on
any of the assets over which Efic (Chargee) has a fixed charge. Without the consent of the Chargee, the Chargor
may not:
(cid:120)
(cid:120)
(cid:120)
(cid:120) waive any of the Chargor’s rights or release any person from its obligations in connection with the
dispose of the Secured Property,
lease or license the Secured Property or any interest in it, or deal with any existing lease or licence,
part with possession of the Secured Property,
(cid:120)
Secured Property, or
deal in any other way with the Secured Property or any interest in it, or allow any interest in it to
arise or be varied.
Non-Cancellable Operating Leases
The Group leases various premises and IT equipment under non-cancellable operating leases. The leases have
varying terms, escalation and renewal rights. On renewal, the terms of the leases are negotiated.
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Less than one year
Between one and five years
More than five years
2018
$000
2017
$000
2,424
6,192
-
8,616
2,253
7,847
-
10,100
The operating lease expense for the year ended 30 June 2018 was $2,424,000 (2017 $2,597,000).
Recognition and Measurement
Leases
Payments made under operating leases are recognised in the statement of profit and loss and other comprehensive
income on a straight-line basis over the term of the lease.
QUICKSTEP.COM.AU
53
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
D. Operating Assets and Liabilities
This section provides information relating to the operating assets and liabilities of the Group. Quickstep has a strong
focus on maintaining a strong balance sheet through continued focus on cash conversion. The Group’s strategy also
considers expenditure, growth and acquisition requirements.
D.1 Trade and Other Receivables
D.2
Inventories
D.3 Deferred Revenue
D.4 Property, Plant and Equipment
D.1 Trade and Other Receivables
Current assets
Trade receivables
Other receivables
All trade receivables are current.
Recognition and Measurement
2018
$000
3,971
480
4,451
2017
$000
4,756
1,536
6,292
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.
D.2
Inventories
Current assets
Raw materials and consumables
Work in progress
Finished goods
Recognition and Measurement
2018
$000
4,919
4,261
835
10,015
2017
$000
6,136
3,920
543
10,599
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.
54
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
D. Operating Assets and Liabilities
D.3 Deferred Revenue
Current
Non-current
2018
$000
2,394
-
2,394
2017
$000
4,220
682
4,902
The amounts reported as 2018 deferred revenue include:
(cid:120)
(cid:120)
Lockheed Martin Aeronautics Co - a 30% advance payment for long lead time materials for C-130J wing flaps,
income will be recognised by September 2018.
Lockheed Martin Aeronautics Co - amount received in advance to support the robotic drill project, income will
be recognised by November 2018.
D.4 Property, Plant and Equipment
Plant and
equipment
$000
Assets under
construction
$000
Office furniture
& equipment
$000
2018
Opening net book amount
Additions
Government grant received
Transfers from assets under construction
Disposals
Amortisation of grant
Depreciation charge
Closing net book amount
Cost
Accumulated depreciation
2017
Opening net book amount
Additions
Government grant received
Transfers from assets under construction
Effect of movements in exchange rates
Amortisation of grant
Depreciation charge
Closing net book amount
Cost
Accumulated depreciation
13,847
-
(141)
1,285
(37)
488
(2,922)
12,520
32,156
(19,636)
9,670
174
(467)
6,558
(1)
341
(2,428)
13,847
31,648
(17,801)
782
1,165
-
(1,373)
-
-
-
574
574
-
3,144
4,198
-
(6,560)
-
-
-
782
782
-
Total
$000
14,753
1,165
(141)
-
(62)
488
(2,966)
13,237
33,455
124
-
-
88
(25)
-
(44)
143
725
(582)
(20,218)
244
1
-
2
-
-
(123)
124
987
(863)
13,058
4,373
(467)
-
(1)
341
(2,551)
14,753
33,417
(18,664)
QUICKSTEP.COM.AU
55
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
D. Operating Assets and Liabilities
D.4 Property, Plant and Equipment
Recognition and Measurement
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 Asset
Plant and factory equipment
Office equipment
Depreciation Rate
6.67% to 37.50%
6.67% to 50.00%
Impairment
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. 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.
56
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
E. Employee Benefits
This section provides a breakdown of the various programs Quickstep uses to reward and recognise employees and
Key Management Personnel (KMP). Quickstep believes that these programs reinforce the value of ownership and
incentives and drive performance both individually and collectively to deliver better returns to shareholders.
E.1 Employee Benefit Obligations
E.2 Related Party Transactions
E.3 Employee Benefit Expense
E.4 Quickstep Incentive Rights Plan (IRP)
E.5 Equity Settled Short Term Incentive
E.1 Employee Benefit Obligations
Employee benefit obligation
- Annual leave (current)
- Long service leave (non-current)
Recognition and Measurement
2018
$000
1,179
310
1,489
2017
$000
1,138
210
1,348
Long service leave
The liabilities for long service 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 high
quality corporate 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.
E.2 Employee Benefit Expense
Wages and salaries
Defined contribution plan expense
Increase in leave liabilities
Share based payments expense
2018
$000
20,001
1,588
141
293
22,023
2017
$000
19,050
1,536
199
543
21,328
QUICKSTEP.COM.AU
57
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
E. Employee Benefits
E.2 Employee Benefit Expense
Recognition and Measurement
Wages and salaries
Liabilities for wages and salaries, including non-monetary benefits and annual 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 employees’ 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 is recognised in the provision for employee benefits.
All other short-term employee benefit obligations are presented as payables.
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.
E.3 Related Party Transactions
Key Management Personnel Compensation
The key management personnel compensation included in “Employee benefit expense” in note E.2 is as follows:
Short-term employee benefits
Share-based payments
Termination benefits
The total value of the rights is allocated to remuneration over the vesting period.
2018
$000
2,273
279
76
2,625
2017
$000
2,599
371
-
2,970
58
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
E. Employee Benefits
E.4 Quickstep Incentive 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. In 2015
the Board adopted Revised Rules for the IRP to ensure the IRP continued to reflect market practice and remained
appropriate for the Company. These Revised Rules were approved by shareholders at the Company’s 2015 Annual
General Meeting.
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.
During 2018 an expense of $293,000 (2017 $543,000), refer Note B.4 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. The model's key assumptions were as follows:
In Relation to CEO Performance Rights
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Expected life (years)
Risk free factor
Volatility of QHL
Volatility of AOAI
Dividend yield
CEO Transition 1
01/12/17
31/08/18
31/08/18
$0.089
0.7
1.66%
40%
12%
0%
CEO Transition 2
01/12/17
31/08/19
31/08/19
$0.089
1.7
1.76%
40%
12%
0%
In Relation to Performance Rights
Tranche
Grant date
First testing date
Expiry date
Share price at grant date
Expected life (years)
Risk free factor
Volatility of QHL
Volatility of AOAI
Dividend yield
3
16/02/15
31/08/17
31/08/19
$0.20
2.9
1.86%
55%
12%
0%
FY15
31/08/14
31/08/17
31/08/19
$0.185
3.3
2.69%
55%
12%
0%
FY15(a)
19/02/15
31/08/17
31/08/19
$0.20
2.9
1.83%
55%
12%
0%
FY16
01/06/16
31/08/18
31/08/20
$0.14
2.7
1.65%
45%
15%
0%
FY17
01/03/17
31/08/19
31/08/21
$0.105
2.9
1.97%
40%
13%
0%
FY18
01/12/17
31/08/20
31/08/22
$0.89
3.1
1.93%
40%
12%
0%
QUICKSTEP.COM.AU
59
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
E. Employee Benefits
E.4 Quickstep Incentive Rights Plan (IRP)
Rights
Movements in unissued shares under rights:
Opening balance
Granted during the year
Rights vested
Rights forfeited/lapsed
Closing balance
The rights are issued pursuant to:
2018
No of rights
2017
No of rights
11,059,693
5,773,667
7,419,773
6,116,592
-
(1,692,590)
(415,283)
(415,283)
16,786,876
11,059,693
(cid:120)
Executive services agreements, which rights vest at various times in the future according to years of service
completed.
(cid:120) Offers under the Incentive Rights Plan (IRP), which vests at various future dates upon satisfaction of
(cid:120)
performance conditions and service criteria.
The exercise price of the rights is Nil and the rights are lapsed if employment is terminated prior to the vesting
date.
E.5 Equity Settled Short Term Incentive
Certain executives are eligible to 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.
In FY18 Nil (2017 Nil) shares were issued to employees.
60
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
F. Other Disclosures
This section provides details on other required disclosures relating to the Group to comply with the
accounting standards and other pronouncements.
F.1 Group Entities
F.2
Parent Entity Financial Information
F.3
Deed Of Cross Guarantee
F.4
Auditors’ Remuneration
Subsequent Events
F.5
F.6 New Accounting Standards
F.1 Group Entities
Name of entity
Parent entity
Quickstep Holdings Limited
Controlled entities
Quickstep Technologies Pty Limited *
Quickstep Systems Pty Limited *
Quickstep GmbH
Quickstep Automotive Pty Limited *
Quickstep Aerospace Pty Limited *
Quickstep USA Inc.
Country of
Incorporation
Ownership Interest
2017
2018
%
%
Australia
Australia
Australia
Germany
Australia
Australia
USA
100
100
100
100
100
100
100
100
100
100
100
-
Quickstep USA Inc was incorporated 30 April 2018. There have been no transactions in FY18.
* Companies entered into deed of cross guarantee with Quickstep Holdings Limited.
F.2 Parent Entity Financial Information
As at, and throughout, the financial year ending 30 June 2018 the parent entity of the Group was Quickstep
Holdings Limited.
Results of the parent entity
(Loss) /profit for the year
Total Comprehensive income
Financial position of the parent entity at year end
Total assets
Total liabilities
Net assets / (liabilities)
Total equity of the parent entity comprises
Share capital
Reserves
Accumulated losses
Total equity
2018
$000
2017
$000
21
530
1,073
1,100
5,031
(4,259)
772
2,854
(2,612)
242
109,118
5,276
(113,622)
772
109,118
4,767
(113,643)
242
QUICKSTEP.COM.AU
61
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
F.
Other Disclosures
Deed of Cross Guarantee
F.3
Under the terms of ASIC Corporations (Wholly owned Companies) Instrument 2016/785, certain wholly
owned controlled entities have been granted relief from the requirement to prepare audited financial
reports. Quickstep Holdings Limited has entered into an approved deed of indemnity for the cross-
guarantee of liabilities with those controlled entities in Note F.1.
The following consolidated Statement of Comprehensive Income and Balance Sheet comprise Quickstep
Holdings Limited and its controlled entities which are party to the Deed of Cross Guarantee (refer Note F.1.),
after eliminating all transactions between parties to the Deed.
Statement of Profit and Loss and other Comprehensive Income
Revenue
Loss before income tax
Income tax benefit
Loss for the year
Other comprehensive income net of income tax
Items that might be reclassified to profit or loss
Cash flow hedges
Total comprehensive (loss) for the year
Balance Sheet
ASSETS
Current assets
Cash and cash equivalents
Derivative financial instruments
Term deposits
Trade and other receivables
Prepayment and other assets
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Loans and borrowings
Deferred revenue
Employee benefit obligations
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee benefit obligations
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Total equity
2018
$000
59,036
(8,318)
-
(8,318)
239
(8,079)
2,862
239
810
4,423
533
10,015
18,882
13,237
20
13,257
32,139
7,619
5,658
2,394
1,179
16,850
7,900
310
8,210
25,060
7,079
109,118
5,515
(107,554)
7,079
62
QUICKSTEP ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
F.
Other Disclosures
Auditor’s Remuneration
F.4
Amounts received or due and receivable by the auditor KPMG for:
Audit services
Other services
Grant assurance
Accounting and tax services
Total non-audit fee
2018
$
2017
$
209,500
205,000
5,000
24,040
29,040
238,540
23,200
-
23,200
228,200
Subsequent Events
F.5
There have been no matters or circumstances that have arisen since 30 June 2018 up to the date of this
report that would significantly affect:
(cid:120)
(cid:120)
(cid:120)
the operations of the Consolidated Entity;
the results of those operations; and
the state of affairs of the Consolidated Entity.
F.5
New Accounting Standards
AASB 15 Revenue Recognition
AASB 15, which becomes mandatory for the Group from 1 July 2018, will replace AASB 118 which covers
revenue arising from the sale of goods and the rendering of services and AASB 111 which covers
construction contracts.
AASB 15 is based on the principle that revenue is recognised when control of a good or service transfers to
a customer. This new standard permits either a full retrospective or a modified retrospective approach for
the adoption. The Group will apply the cumulative effect method as at the initial date of application being
1 July 2018.
The Group has completed an impact assessment of adopting this standard and identified the key difference
between the Group’s current accounting policy and treatment under AASB 15 is that from 1 July 2018
revenue will be recognized over the performance period (i.e. period of manufacture) instead of at a point
in time (i.e. dispatch of goods). Based on this assessment the estimate impact for the year ended 30 June
2018 would be an increase of revenue of $ 6.7 million and increase in costs of goods sold of $5.2 million
and have a net impact on the Income Statement of approximately $1.5 million. The Group expects to make
an adjustment to increase opening retained earnings by $1.5 million as at 1 July 2018.
QUICKSTEP.COM.AU
63
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
Notes to the Consolidated Financial Statements
for the year ended 30 June 2018
F.
Other Disclosures
F.5
New Accounting Standards
AASB 9 Financial Instruments
AASB 9 ‘Financial Instruments’ replaces the existing guidance in AASB 139 ‘Financial Instruments:
Recognition and Measurement’. It includes revised guidance on the classification and measurement of
financial instruments, a new expected credit loss model for calculating impairment on financial assets, and
new general hedge accounting requirements. It also carries forward the guidance on recognition and de-
recognition of financial instruments from AASB 139. AASB 9 is not mandatory until 1 July 2018 for the Group
Management has completed a review of the potential impact on its financial statements resulting from the
application of AASB 9 and determined there is no material impact. The Group will adopt AASB 9 for the year
ended 30 June 2019.
AASB 16 Leases
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance
sheet, as the distinction between operating and financial leases is removed. Under the new standard, an
asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only
exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change.
The standard will affect primarily the accounting for the Group’s operating leases. Refer to Note C.6. for
details of the Group non-cancellable lease commitments. However, the Group has not yet determined to
what extent these commitments will result in the recognition of an asset and a liability for future payments
and how this will affect the Group’s loss and classification of cash flows.
Some of the commitments may be covered by the exception for short-term and low-value leases and some
commitments may relate to arrangements that will not qualify as leases under AASB 16.
This standard permits either a full retrospective or a modified retrospective approach for the adoption. The
standard is effective for the first interim period within annual reporting periods beginning after 1 January
2019. The Group has decided to adopt AASB 16 in FY20.
64
QUICKSTEP ANNUAL REPORT 2018
Directors’ Declaration
for the year ended 30 June 2018
Directors’ Declaration
for the year ended 30 June 2018
In the Directors' opinion:
(cid:9)(cid:66)(cid:10)
the consolidated financial statements and notes set out on pages (cid:20)(cid:20) to (cid:23)(cid:20) and the Remuneration(cid:1)
report on pages (cid:19)(cid:21) to (cid:20)(cid:18) in the Directors’ report, are in accordance with the Corporations Act 2001,(cid:1)
including:
(cid:74)(cid:15)
(cid:74)(cid:74)(cid:15)
complying with Australian Accounting Standards and the Corporations Regulations 2001;(cid:1)
and
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its(cid:1)
performance for the year ended on that date; and
(cid:9)(cid:67)(cid:10)
there are reasonable grounds to believe that the Company will be able to pay its debts as and(cid:1)
when they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001 from
the chief executive officer and chief financial officer for the financial year ended 30 June 2018.
The directors confirm that the financial statements comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board.
There are reasonable grounds to believe that the Company and the group entities identified in Note F.1 will
be able to meet any obligations or liabilities to which they are, or may become, subject to by virtue of the
Deed of Cross Guarantee between the Company and those Group entities pursuant to ASIC Corporations
(Wholly owned Companies) Instrument 2016/785.
This declaration is made in accordance with a resolution of Directors.
Mr. M H Burgess
Director
28 August 2018
Sydney, New South Wales
QUICKSTEP.COM.AU
65
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 of Quickstep Holding Ltd
for the financial year ended 30 June 2018 there have been:
i.
ii.
No contraventions(cid:3)of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit(cid:17)
(cid:60)(cid:87)(cid:68)(cid:890)(cid:47)(cid:69)(cid:47)(cid:890)(cid:1004)(cid:1005)(cid:3)
(cid:94)(cid:47)(cid:39)(cid:890)(cid:1004)(cid:1005)(cid:3)
(cid:87)(cid:4)(cid:90)(cid:890)(cid:69)(cid:4)(cid:68)(cid:890)(cid:1004)(cid:1005)(cid:3)
(cid:87)(cid:4)(cid:90)(cid:890)(cid:87)(cid:75)(cid:94)(cid:890)(cid:1004)(cid:1005)(cid:3)
(cid:87)(cid:4)(cid:90)(cid:890)(cid:24)(cid:4)(cid:100)(cid:890)(cid:1004)(cid:1005)(cid:3)
(cid:87)(cid:4)(cid:90)(cid:890)(cid:18)(cid:47)(cid:100)(cid:890)(cid:1004)(cid:1005)(cid:3)
KPMG
Charmaine Hopkins
Partner
Sydney, 28 August 2018
(cid:46)(cid:51)(cid:48)(cid:42)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:11)(cid:179)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:3)(cid:54)(cid:90)(cid:76)(cid:86)(cid:86)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)
(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:86)(cid:70)(cid:75)(cid:72)(cid:80)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)
(cid:51)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:47)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)
66
QUICKSTEP ANNUAL REPORT 2018
Independent Auditor’s Report
To the shareholders of Quickstep Holdings Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Quickstep Holdings Limited (the
Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
(cid:120)
(cid:120)
giving a true and fair view of the
Group’s financial position as at 30
June 2018 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
(cid:120) Consolidated Balance Sheet as at 30 June 2018;
(cid:120) Consolidated Statement of Profit or Loss and other
Comprehensive Income, Consolidated Statement of
Changes in Equity, and Consolidated Statement of Cash
Flows for the year then ended;
(cid:120) Notes including a summary of significant accounting
policies; and
(cid:120) Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
(cid:46)(cid:51)(cid:48)(cid:42)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:11)(cid:179)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:3)(cid:54)(cid:90)(cid:76)(cid:86)(cid:86)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)
(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:86)(cid:70)(cid:75)(cid:72)(cid:80)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)
(cid:51)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:47)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)
QUICKSTEP.COM.AU
67
Material uncertainty related to going concern
We draw attention to Note A “Going Concern” in the financial report. The conditions disclosed in Note A,
indicate a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going
concern and, therefore, whether it will realise its assets and discharge its liabilities in the normal course of
business, and at the amounts stated in the financial report. Our opinion is not modified in respect of this
matter.
In concluding there is a material uncertainty related to going concern we evaluated the extent of uncertainty
regarding events or conditions casting significant doubt in the Group’s assessment of going concern. This
included:
(cid:120)
Evaluating the underlying data used by management to derive forecast cash flows. We specifically
considered the consistency of the underlying data with budgets and forecasts approved by the Directors
and tested by us. We also considered the consistency of the underlying data with our understanding of
the Group’s intentions, as outlined in Directors minutes.
(cid:120) Analysing the potential impact of reasonably possible changes in projected cash flows and their timing,
to the projected periodic cash positions. Assessing the resultant impact on the ability of the Group to
pay debts as and when they fall due and continue as a going concern. The specific areas we focused on
were informed from our test results of the accuracy of previous Group cash flow projections and
sensitivity analysis on key cash flow projection assumptions;
(cid:120) Assessing the planned levels of operating and capital expenditures for consistency of relationships and
trends to the Group’s historical results, results since year end, and our understanding of the business,
industry and economic conditions of the Group. We have also considered the ability of the Group to
defer or cancel forecast uncommitted capital and research and development expenditure;
(cid:120) Assessed significant non-routine forecast cash outflows by inspecting associated third party
correspondence to consider the impact of possible changes on the quantum and timing of amounts to
be paid on the cashflow projections;
(cid:120) Assessed the Group’s forecast of advance payments from customers. We checked assumptions of
quantum and timing to customer correspondence and signed customer contracts, to assess their
accuracy to the cashflow projections;
(cid:120) Reading correspondence and agreements with existing financiers to understand and assess the
variation to existing debt facilities.
(cid:120) We evaluated the Group’s going concern disclosures in the financial report by comparing them to our
understanding of the matter, the events or conditions incorporated into the cash flow projection
assessment, the Group’s plans to address those events or conditions, and accounting standard
requirements.
68
QUICKSTEP ANNUAL REPORT 2018
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgment, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the matter described in the Material uncertainty related to going concern section, we have
determined the matter described below to be the Key Audit Matter.
Revenue recognition ($59.0m)
Refer to Note B.1 to the Financial Report
The key audit matter
How the matter was addressed in our audit
The Group generates revenue through sale of
goods. The Group also receives payments in
advance of sale which results in deferred revenue
being recognised.
We focused on this as a key audit matter due to the
significance of the quantum of revenue recognised
combined with the large volume of transactions.
This necessitated additional audit effort across the
transactions.
Our procedures included:
(cid:120) We evaluated the Group’s process for revenue
recognition and deferral of advanced payments
in accordance with the accounting standards;
(cid:120) We tested a statistical sample of revenue
transactions recognised during the year and
checked recognition against underlying invoices
to customers, customer signed dispatch dockets
or evidence of delivery and the Group’s revenue
recognition policy;
(cid:120) We selected a sample of pre and post year end
revenue transactions and checked the timing of
revenue recognition against underlying invoices
to customers, customer signed dispatch dockets
or evidence of delivery and the Group’s revenue
recognition policy;
(cid:120) We selected a sample of post year end credit
notes to assess the recognition of revenue in
the appropriate period; and
(cid:120) We selected a sample of advanced payment
receipts from customers to check the deferral of
revenue in accordance with the Group’s revenue
recognition policy.
QUICKSTEP.COM.AU
69
Other Information
Other Information is financial and non-financial information in Quickstep Holdings Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible
for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinions.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information, and
based on the work we have performed on the Other Information that we obtained prior to the date of this
Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
(cid:120) preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
(cid:120)
(cid:120)
implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
(cid:120)
(cid:120)
to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of this
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our Auditor’s Report.
70
QUICKSTEP ANNUAL REPORT 2018
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Quickstep Holdings Limited for the year
ended 30 June 2018, complies with
Section 300A of the Corporations Act
2001.
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 responsibilities
We have audited the Remuneration Report included in page 24
to 31 of the Directors’ report for the year ended 30 June 2018.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG Charmaine Hopkins
Partner
Sydney
28 August 2018
QUICKSTEP.COM.AU
71
Shareholder Information
for the year ended 30 June 2018
Shareholder Information
for the year ended 30 June 2018
The shareholder information set out below was applicable as at 31 July 2018.
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 July 2018:
Ordinary fully paid shares
Range
Holders
Units
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - Over
Total
459
860
830
2,650
759
5,558
103,017
2,823,027
6,756,165
104,673,056
448,525,527
562,880,792
%
0.02
0.50
1.20
18.60
79.68
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
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - Over
Total
E. Unmarketable parcels
-
-
-
-
1
1
Units
-
-
-
-
25,000,000
25,000,000
%
-
-
-
-
100.00
100.00
Holdings less than a marketable parcel of ordinary shares (being $500 parcel at $0.0890 per share):
Holders
1,389
Units
3,296,659
72
QUICKSTEP ANNUAL REPORT 2018
Shareholder Information
for the year ended 30 June 2018
Shareholder Information
for the year ended 30 June 2018
D.
Top holders
The 20 largest registered holders of each class of quoted security as at 31 July 2018 were:
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Holder Name
Washington H Soul Pattinson And Company Limited
Deakin University
State One Stockbroking Pty Ltd
Farjoy P
Romsup PL
Code Nom PL
Decta Holdings Pty Ltd
WSF Pty Ltd
HSBC Custody Nominees (Australia) Limited
Hobson Cove PL
Best Holding Pty Ltd
Petia Super Pty Ltd
Yarraandoo Pty Ltd
Sols Super Pty Ltd
Exwere Investments Pty Ltd
Bond Street Custodians Limited
BNP Paribas Nominees Pty Ltd
Mr Richard Cornelis Peetera
Total
Securities
89,419,161
33,333,333
16,214,017
13,680,981
8,812,430
7,207,580
6,788,904
6,305,793
4,470,854
4,000,000
3,500,000
3,065,661
3,058,920
3,048,688
2,959,933
2,748,830
2,400,000
2,149,464
2,134,839
2,120,000
217,419,518
%
15.89
5.92
2.88
2.43
1.57
1.28
1.21
1.12
0.79
0.71
0.62
0.54
0.54
0.54
0.53
0.49
0.43
0.38
0.38
0.38
38.63
QUICKSTEP.COM.AU
73
Corporate Directory
DIRECTORS
Mr. T H J Quick
Mr. M H Burgess
Mr. J C Douglas
Mr. B A Griff iths
SECRETARY
Mr. J Pinto
Chair
CEO and Managing Director
Non-Executive Director
Non-Executive Director
PRINCIPAL OFFICE
361 Milperra Road
Bankstown Airport
New South Wales 2200 Australia
Telephone: +61 2 9774 0300
Internet: www.quickstep.com.au
Email: info@quickstep.com.au
REGISTERED OFFICE
Level 2
160 Pitt Street
Sydney New South Wales 2000
AUDITOR
KPMG
Chartered Accountants
Tower 3
300 Barangaroo Avenue
Sydney New South Wales 2000
SHARE REGISTRY
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford Victoria 3067
STOCK EXCHANGE
Australian Securities Exchange Limited
Exchange Centre
20 Bridge Street
Sydney New South Wales 2000
ASX CODE
QHL
WWW.
QUICKSTEP.
COM.AU