After a disappointing revenue performance for its aftermarket business unit over the past 12 months a decision has been made to keep it as a core part of Quickstep Holdings but with several new growth initiatives.
Australia’s largest independent aerospace composite manufacturer Quickstep Holdings (ASX:QHL) has announced after a detailed and comprehensive strategic review process, the company’s aftermarket business will be enhanced to capitalise on the growth of the domestic and regional aviation market.
QHL said there had been disappointing revenue performance for the aftermarket business unit over the past 12 months, with a corresponding loss position as outlined in their February interim results. The strategic review included extensive negotiations with all key stakeholders, but particularly focused on domestic airline customers.
The after-market business was acquired from Boeing in the midst of the pandemic and has been further negatively impacted by the longer aviation recovery in the Australasia and Asia Pacific markets, as compared to the rest of the world. However, the airline and charter markets in Australia are now seeing very substantial recovery, increases in flight hours and a return of capacity – all of which fuels the revenue outlook for the Aftermarket business, which provides composite parts and repairs large components on commercial aircraft like 737s, A-320s and 787s.
Four key steps to turn around aftermarket business
There were four key steps the review outlined to improve profitability of the aftermarket business.
- Renewed partnership arrangement with QHL’s major Australian domestic airline customer.
The new partnership has improved commercial terms and workload commitments, which will in turn enhance QHL’s ability to generate annual revenues from the arrangement, following a first year which did not meet expectations. It is anticipated that this may represent an attractive business model for several other domestic and regional airlines to follow in the next 12-18 months.
- Aggregate customer commitments now underpin a much improved forward financial forecast
Across new commercial agreements, and a continued increase in ad-hoc work, the financial forecast is forecast to result in a complete reversal of the prior loss position.
- Pursuing potential new customer and partner opportunities
An aggressive approach to market, with additional business development resources, will likely result in new customer and partner opportunities during FY24.
4. Leadership team restructure and additional investment
Changes and additional people resources will be applied to the leadership team, new management systems and specialist tools andequipment will form the initial phase of an investment-for-growth strategic plan.
QHL’s three distinct businesses
With three distinct lines of business including aerostructures, aftermarket and applied composites, three Australian locations and one in the US, QHL employs 300 people and delivers almost $100 million in revenue.
Aerostructures is all about defence and aerospace components and assemblies for military aircraft including F-35s, C-130s and a range of Boeing fighter jets.
The Applied Composites business has historically done a lot of work with automotive, medical devices and other transportation sectors.
However, QHL is now focusing that area of the business on sophisticated, commercial drones from the smaller weight classes of 25 to 50kg up to much larger, heavier classes.
The company recently signed its second major drone contract with Carbonix, inking a new $2.3 million contract that will see the leading Australian drone manufacturer triple its production over the next year.
Aftermarket business strongly positioned to pursue growth
Managing director Mark Burgess said following the review and implementation of the initiatives it is considered that the aftermarket business will be strongly positioned to pursue further opportunities for revenue growth in the medium term.
“We are grateful to our Australian customer base for their acknowledgement of our unique capability and their desire to support its future development and growth,” he said.“The aviation industry in Australia is rebounding from the pandemic and the outlook for the maintenance, repair, overhaul, and upgrade market is very positive.
Burgess said onshore capability is vital to the health of a competitive and sustainable aviation industry in Australia.
“It is also our view that Quickstep’s capability offers defence customers a genuinely unique sovereign capability for the Indo-Pacific,” he said.
This article was developed in collaboration with Quickstep Holdings, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
