Hi Fellow QHL shareholders. I sent Mark an email the other day and he was cool enough to respond with some feedback that fills in some of the gaps in the 4C and AGM. I do like a CEO who is conscious enough to respond sensibly to a shareholder. I noticed a few people complaining about Mark and the directors not buying on market. He responded to that very nicely below. Read for yourselves but sometimes I think people jump to conclusions without getting all the facts. Up to you all how you view the responses but I do feel that Mark is proving himself the real deal and IMO has really looked at the revenue / cost equation with a detailed focus and having positive impact on both
Cheers David
DYOR and GLTAH
Hi Mark
Hope you are doing well and have settled in to the sh1tty Australian weather.
The recent 4C quarterly was pretty decent and I can see you making a difference already. Its good to see a Boeing contract being added to the mix. Also good to see revenue / Sales ramping up.
I noted that you are predicting this 3rd quarter to be cash flow positive. As part of your longer term forecasting, can you comment or whether you expect this trend of profitable quarters to continue. if so great, if not - I'd be curious as to when consistency in positive cash flow can be achieved. Costs and R&D have always been an issue for a business like QHL - but when do they come under some sense of control.
As we communicated at the AGM and since, I want us to be measured against specific performance outcomes - >10% sales growth in FY18, EBIT positive H2 FY18 and full year FY19 EBIT positive. We stand by those forecasts and are working hard to achieve them. I am very confident we will shortly move to a sustainably profitable position.
We have halved investment in R&D year on year and taken a range of other cost actions achieving a year on year cost take-out of $3.5M. Aggressive cost management will continue. Our R&D spend will be more focussed and much more closely aligned to commercial outcomes, revenue and profit generation. I have also ensured we invest more in business development, and we now have a healthy pipeline to fuel future growth – and this will expand further as the team matures. Note that our industry does have long lead times from securing contracts to revenue generation, but I feel confident about new growth opportunities.
Regarding the Boeing contract - for F15 Eagles, and F18 hornets, are you allowed to tell the market what the parts might be and how big the contract is for the initial test run. If under confidentiality clauses, that's ok. I'm a big fan of both aircraft and recently read about possible improvements to the super eagle to keep it flying. I'm wondering if QHL has a part of that modernisation and future. If so, that would be fantastic as lots of F15's and F18's our there. That would be a great win for QHL. How big could that contract be for QHL - have you got any aspirational numbers.
The Boeing contracts are a significant win for us. Though relatively low in value initially (and therefore low risk) it will allow us to secure Boeing supplier accreditation and a new customer to provide larger future opportunities. I can't disclose any specific details of the contract but joining the Boeing supply chain is clearly a very significant step for us and will open up a range of opportunity.
Regarding the same contract F15 and F18 parts, do you foresee a high chance of turning this contract into something longer term. Would it involve more parts? Is this Boeing's way of testing QHL's capability first, and then working towards a larger expanded scope?
Do you think this could / will lead into Boeing's commercial division - ie the 737, 787, 797 (future). Does QHL have capability to offer an improved carbon panel for these airframes and wing flap assemblies. Can QHL compete and can they win business against the existing established way of doing things. What are your thoughts? Where do we compete? Where don't we compete?
The application of Qure to commercial aircraft secondary structures is a key component of our growth strategy. As you will know, aerospace is a conservative industry where safety is paramount. Adoption of new process technology takes time and program development timescales are long. But I am confident we are well placed to play in this space and we have several ongoing marketing activities addressing this segment.
I noticed a distinct lack of commentary around the automotive sector. Are you abandoning or withdrawing from this sector. Is the KIST investigation still progressing? Have they provided any feedback? What are your thoughts and feelings about this. For myself, i feel like i've been dragged through a field of hope on a journey to the land of despair. Its been years and I'm wondering what if anything will become of it. I was under the impression QHL had the only carbon fibre panel that came out of a mould with A-class finish so that no buffing was required and was also structural grade - a win win. Surely this should have transpired into something by now? If not, why not? What is the hold up?
The equipment supplied to KIST has been installed and commissioned. We have been providing technical support but I do not have specific feedback to share. We have certainly not given up on automotive. Carbon composites are one of a range of material choices and most current production is highly commoditised or extremely niche, they are not our target markets. I expect to be able to communicate more on our plans for the auto sector in the coming months.
Anyway, keep up the good work. I know the share price doesn't reflect your efforts or the quarter. You really need to be cash flow positive to attract new investors. A hard road but will make it more enjoyable when you succeed where others haven't.
I firmly believe the actions we have taken over the last 6-8 months are starting to have a meaningful impact on our financial and operating performance. This will accelerate as volumes grow and, whilst there may be a time lag, this will ultimately be reflected in our share price. Once we have exited the current blackout period (an unusually long period at this time of year) I will resume my planned share purchases.
Cheers
David
Thanks, Mark
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