Tara Hamid spoke to Mark Burgess, CEO and managing director of Quickstep, about how his business realignment allowed the company to grow its revenue and ramp up production.
When Mark Burgess joined Quickstep, a composite components manufacturing company, as CEO in May last year, he had to make some difficult decisions, which at the time appeared brutal, but eventually paid off – even sooner than he had anticipated.
Having over 20 years’ experience in the global aerospace and defence industries, including a 16-year career in BAE Systems, Burgess announced a complete business realignment in August last year to help the company accelerate its profitability growth.
The realignment strategy – called the OneQuickstep program – involved some radical measures, including halving the number of key management personnel and the size of the board as well as closing down the group’s research and development facility in Germany.
The company also significantly reduced its research and development expenditure at its process development centre in Geelong and implemented Lean programs across its operations for cost-control measures.
“None of these were attractive decisions to be made, but they were absolutely essential for the business to remain sustainable,” Burgess told Manufacturers’ Monthly.
“It was hard to maintain morale during this period and keep people focused. All of us had to work together to get through the period. Being a publicly listed company also came with its own challenges. We needed to convince the stakeholders – be it creditors, investors, or customers and suppliers – that we had a sustainable business and that we were going to generate positive cash-flow,” he said.
But, the turn around came sooner than expected and in the second half of the 2018 fiscal year, Quickstep reported a positive net profit after tax, enabling the company to re-invest in the business’ growth.
“The performance of the two halves of the year were worlds apart, so much so that we made a net profit in the second half of the year, against a significant loss in the first half of the year,” Burgess added.
Quickstep announced nearly 14 per cent growth in its overall sales for fiscal year 2018, compared to the previous year, with the second half gross margin five per cent higher than the first half.
Being the largest independent aerospace-grade advanced composite manufacturer in Australia, Quickstep has been working with some of the world’s largest aerospace/defence organisations, including Lockheed Martin, Northrop Grumman, BAE Systems, and Victorian-based Marand Precision Engineering.
Quickstep is an approved supplier for the international F-35 Lightning II Joint Strike Fighter (JSF) program – the largest military aerospace program in the world, valued in excess of US$300 billion ($420 billion) worldwide. Quickstep has also been selected by Lockheed Martin as the sole supplier of composite wing flaps for the military C-130J “Super Hercules” and the commercial LM- 100J transport aircraft.
In 2018, Quickstep’s production for SF program increased 45 per cent and Burgess is expecting the growth to exceed 40 per cent this year, and at slower pace next year.
In August, Quickstep also extended its existing contract with Lockheed Martin for an additional five-years to continue supplying wing flaps for Lockheed Martin’s commercial and military aircrafts through to 2024.
Burgess said he expects the Lean program implementation to continue to drive excess cost out of the business in the 2019 fiscal year. This, he expects, will allow the company to experience positive cash flow through all four quarters, while also making a net profit for the full year – the first time in the company’s 17-year history.
Changing the mindsets
So how did the company get through the difficult period and improve its profitability?
The main challenge, Burgess said, was to change the mindset in his business to focus on profitability, in addition to the company’s existing commitment to quality and on-time delivery.
“One of the main things that struck me when I first joined the company was that I thought a business that has been running for nearly 16 years and never made a profit is not a sustainable business,” Burgess said.
Burgess said the shift in mindset meant that the company had to go from spending extensively on R&D without any take-to-market plans to “invest only on programs that have a clear pathway to commercialisation.”
“It’s symbiotic. You can’t invest in R&D if you are not making money and you can’t make money if you aren’t driving Lean manufacturing operations.
“We are well on that pathway now. And the most exciting thing from my point of view is that while delivering shareholder value is absolutely paramount to everything we do, we are creating headroom within our budget to re-invest in the business to position ourselves for the next layer of growth,” Burgess said.
Growing the business
Quickstep is already re-investing its earnings back in the business. In August, the company announced that it had secured a new project to produce carbon fibre composite housings for an F-35 counter-measure flare for Chemring Australia.
This project is supported by funding from the F-35 Lightning II Joint Program Office through Chemring Australia and a New Air Combat Capability – Industry Support Program grant of $1 million. This is in addition to about $2 million investment by Quickstep to establish a new advanced manufacturing centre within its existing facility in Bankstown.
Burgess said the new plant has been designed by engineers who specialise in the automotive manufacturing industry to look like automotive manufacturing cells, with high levels of automation and involving highly optimised operations.
“Unlike the automotive sector, the defence industry is usually not accustomed to large volumes of manufacturing. But, with the growing demand – both from the Commonwealth defence expenditure as well as an unprecedented demand in the narrow body manufacturing in the commercial sector – our production volumes are increasing. “If you look at the F-35 project, we are currently producing about 2,500 parts a year. Whereas the volumes we will be producing in the new manufacturing facility will be between 15,000 to 30,000 units per year. So, it’s a huge leap in volume,” he said.
That’s why, Burgess said, a large number of Quickstep’s current team of 246 employees come from a background in the automotive sector. “It’s a unique aspect to our business that the demise of the auto sector in Australia has actually had a beneficial effect for us, as most of our team at our R&D facility in Waurn Ponds, have a background in automotive manufacturing,” he said.
While the current contract with Chemring Australia is focused on designing and preparing the facilities for the project, Quickstep is expecting to start its new production line in Bankstown within the next 12 months.
Investing in people
Quickstep has also been increasingly investing in its people, creating career development programs for employees and setting targets for diversity and inclusiveness within the team.
The measures, according to Burgess, are aimed towards placing the company as an employer of choice in the advance manufacturing industry in Western Sydney.
“It’s a war for talent out there,” Burgess said. “So, a part of how we are driving our business forward is a real bias towards investment in people. That’s not something that we’ve done very well in the past. Of course, we’ve always been a responsible employer, but we somehow left the career development of employees as an afterthought.”
An employer of choice, according to Burgess, is a company that embraces diversity, offers flexible working conditions, and provides people with competitive remuneration – with the opportunity to increase their earnings based on their performance.
“But that’s only what gets people through the door. What motivates them when they are here, is investing in employee welfare programs, like a decent dining area, giving them training and development, investing in them as individuals and collectively as a team, and most importantly, giving them sight of what career progression lies ahead for them.”
Quickstep is currently partnering with TAFE NSW-Padstow on the development and implementation of a comprehensive composite manufacturing training program for all of the new employees starting at the company’s manufacturing facility in Bankstown.
Burgess said the TAFE training program was designed to significantly reduce the time it takes to train the employees in composite and additive manufacturing.
“It removes the burden from our people and places that responsibility on TAFE. We are very fortunate that Padstow TAFE, because of its proximity and engagement with Bankstown airport, have lots of aerospace and aviation experience. They even have their own small autoclave, which means they can, not just lay up, but also cure composite parts,” he said.
Quickstep’s educational programs are not exclusive to TAFE. “The model we are moving towards is a career-long learning model, wherein the employees, at all levels, have access to internal and external training and development programs provided either by TAFE or other external organisations,” Burgess said.
Since last year, Quickstep has also implemented a diversity and inclusion strategy, detailing the company’s commitment to gender, ethnicity and age diversity within the workplace, as well as its commitments for workplace culture. To deliver on those commitments, Burgess said it was important to keep the communication channels with employees open and to allow them to understand their role in the business.
“Everybody wants to feel valued, but they also want to feel that what they do is meaningful and to know why it is meaningful. So we are investing more in conveying that to the people, using a performance review process, as well as a cascade of management systems from the board through the various tiers of leadership,” Burgess concluded.