Quickstep delivered strong sales growth in Q1 with sales revenue of $17.6 million, up 42 per cent compared with $12.4 million in Q1 FY18.
This represented 6 per cent growth on $16.6 million in Q4 FY18 and all components were supplied on time and in line with program demand during the quarter. Quickstep remains on track to deliver higher Joint Strike Fighter volumes over the next two years, with JSF revenue expected to increase more than 40 per cent in FY19.
Operating cash flow of $2 million reflected delayed customer payments received in October 2018. Working capital temporarily rose by $5.6 million as a consequence of the delayed receipts, as well as increased sales. The increase in working capital was partially offset by an increase in net deferred income of $1.9 million.
Improvement in gross margin is expected during FY19 as JSF volumes continue to increase and from the ongoing lean manufacturing program. Q1 gross margin was impacted by supply chain stress as the JSF program ramps towards full rate production.
A comprehensive supply chain management strategy is in place to address supply chain risks arising from the ramping up in F-35 production.
Quickstep enjoyed a number of key operational highlights, including:
- Lean operating and continuous improvement: Lean operating initiatives continue to be rolled out across all functions at both of the company's Bankstown and Geelong sites to improve efficiency, improve margins and reduce operating costs.
- Secured new partner: Quickstep manufactured and delivered the first F-15 part for Boeing.
- Employee share ownership: Quickstep recently announced an Employee Share Plan to help recognise the contribution that its employees make to the growing success of the business.
The company's revenue growth was driven by project highlights, including:
- Boeing Defense: Quickstep continued development work for two Boeing contracts for both F-15 and F-18 combat aircraft. These contracts add a new 'prime' customer, as well as new aircraft platforms and part families for Quickstep's portfolio. Quickstep has 'approved supplier' status with Boeing, which opens up significant future business opportunities across the scope of Boeing's operations.
- Chemring: In July 2018, Quickstep was awarded a new defence project to establish production for F-35 countermeasure flare housings. The contract, funded via Chemring from the F-35 Joint Program Office, and an additional NACC-ISP grant of $1 million to complement the investment made by Quickstep.
- General Atomics: The company's partnership with General Atomics' 'Team Reaper' tender may lead to additional project opportunities with General Atomics.
- Lockheed Martin: In August 2018, Quickstep signed an MoU with Lockheed Martin associated with the supply of wing flaps for C-130J amd LM-100J for an additional five years. This extended the existing contract, due to end 2019, strengthening the supply chain relationship. Additionally, Quickstep has been buoyed by the increasing production run of the F-35 numbers, as part of larger block buys announced by the Pentagon.
"This was a strong quarter with Quickstep reporting record revenue. Our program of lean and continuous improvement is producing results, including a profit for the quarter. Focus on the aerospace sector has helped business development. We delivered our first part to Boeing Defense and were very pleased to welcome Chemring Australia as a new client during the quarter," Quickstep CEO and managing director, Mark Burgess said.
Quickstep anticipates that the business will continue to improve in FY19, buoyed by F-35 deliveries and production ramps up to peak production volumes in the next two years.
Quickstep has significant growth potential through winning composite manufacturing contracts, primarily in the aerospace sector, using traditional techniques and its proprietary advanced manufacturing Qure and QPS technologies. Quickstep continues to focus on winning new customers and contracts, and supporting growth through partnerships to build scale.
The company plans to accelerate its business development activities to win additional business through its tiered growth strategy, focusing on key areas, including:
- Core defence aerospace: Increasing revenue and diversifying the company’s customer base within the defence/aerospace sector utilising existing Bankstown facilities, while expanding core capabilities.
- Aerospace Qure/advanced manufacturing deployment: Strategic growth within the aerospace and other sectors, using Qure 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 is an independent aerospace‐grade advanced composite manufacturer in Australia, operating from state‐of‐the‐art aerospace manufacturing facilities at Bankstown Airport in Sydney and a manufacturing and R&D/process development centre in Geelong. The group employs more than 200 people in Australia and internationally.