It only took 14 years: JSF parts maker Quickstep has finally produced a profit

Defence parts maker Quickstep (ASX:QHL) has posted its first profit, after 14 years on the ASX, and promised another one in the full year accounts.

The company made a $1.2m profit in the last six months of 2018, and lifted gross margins to 22.8 per cent. It broke even in the prior half.

Stockmarket investors are not yet convinced.

The share price rose 3 per cent to 7c, which is only slightly higher than the recently-achieved five-year low of 6.7c.

Quickstep makes carbon fibre parts mainly for aerospace industries.

Quickstep certainly thinks the turnaround has started

The company said revenue grew by 9 per cent compared to the first six months of calendar 2018 to $33.8m.

But 70 per cent of that revenue is from the infamous Joint Strike Fighter program and it still had negative cash flows for the half.

Negotiations with workers and two unions that resulted in industrial action late last year were resolved yesterday.

The company is predicting positive cash flow, earnings and a profit for the full year, and potential new contracts.

New beginnings

It hasn’t been an easy ride for shareholders, watching the company regularly report annual losses of more than $10m for at least the last decade.

A spokesman for the company said the turnaround came with the rise of Mark Burgess to the CEO chair in April 2017.

He froze executive and director pay, cut the R&D program, and refocused sales to the the things they did well, rather than whatever companies requested such as the Thales Hawkei project, which started in 2015 as a carbon fibre parts deal and ended — according to Mr Burgess in 2017 — as a glassfibre project.

Mr Burgess’ assessment of the company by the end of 2017 was cutting: the technology wasn’t aligned with the commercial opportunities available; the cost base was misaligned and productivity was low; margins were too tight; and the scale and volume of operations were taking a chunk out of profitability.

A year later he was reporting that numbers such as cash flow and EBIT (earnings before interest and tax) were in positive, and revenue growth should hit 20 per cent in fiscal 2019.