Quickstep Holdings Limited

3Q FY18 quarter: turning acorner

Positive operating cash flow

In August 2017, QHL’s CEO and MD Mark Burgess, announced a business reorganizationand cost cutting initiative – the One Quickstep change program – with a“line in the sand” objective of posting positive operating cash flows from theMarch 2018 quarter.

We are pleased to note that QHL delivered on this objective, postingpositive operating cash flows for the first time since the September 2016quarter. Operating cash flow of A$2.7m was derived from A$0.6m in EBITDA, aworking capital reduction of A$1.2m, and a net deferred income benefit ofA$0.9m. Note: this is the first time that QHL has posted a positive EBITDA – alandmark event in itself.

After paying off A$2m in short-term loans and investing ~A$0.2m inPPE, QHL achieved positive net cash inflow of A$0.5m. As a result, the group’scash balance increased - albeit modestly - to A$2.85m (as at 31 March 2018)from A$2.35m (as at 31 Dec 2017).

Productionramp-up on track

Lockheed Martin C-130J shipset production was at the normalized rateof two per month (six for the quarter). JSF F-35 deliveries increased 9% QoQ to436 parts (312 fuselage / 124 VTFs); this represents a 41% increase YoY. WithYTD F-35 deliveries at 1,128 parts, we believe QHL is well on track to meet itstargeted F-35 deliveries target of 1,500 parts for the full year (+22% onFY17).