The results of this year's Top 40 survey reveal a strong upward trend in Defence business. For the first time in the survey's twenty-one year history, the total turnover has exceeded $10 billion. ADM Publisher Judy Hinz analyses the numbers.
The total revenue of Australia's Top 40 Defence contractors reached an impressive $10.384 billion in 2016, up 11 per cent on the 2015 total of $9.241 billion. Congratulations go to BAE Systems Australia, topping the survey once again with a turnover of $1.2 billion.
Following close on their heels is Raytheon Australia with its turnover of $964 million, a company record.
Thales Australia retains third position with a turnover of $924 million, up $85 million on the previous year.
Among the standouts in the survey is Boeing Australia, now at no.4 in the Top 40, reporting $850 million in turnover (up 88 per cent).
Ken Shaw, Boeing Defence Australia’s managing director, told ADM that the company’s recent strong growth can be attributed to focused efforts in three key areas: innovating throughout the program lifecycle; consistent delivery in a more-forless defence environment; and partnering beyond the contract.
“That commitment has been most obvious with the on-schedule, on-budget deliveries to the Australian Defence Force of platforms including C-17s, Super Hornets, CH-47Fs and most recently the country’s first P-8, and has continued throughout the design and execution phases of our Australian development and sustainment services contracts,” he said.
The leader of the infrastructure and base support contractors this year is Broadspectrum Ltd, at no.7, with improved turnover of $506 million in Defence business, up $106 million.
Lockheed Martin, at no.8, was keen to demonstrate, in their response to the Top 40 survey, the company’s success in bringing local suppliers into the F-35 program.
Currently, there are seventeen Australian suppliers under contract on the F-35 program with approximately US$443 million already contracted (a 10 per cent increase within the last six months) and additional opportunities for work over the next 30 years.
Via Lockheed Martin’s Global Supply Chain Program commitment to the Department of Defence, sixteen Australian companies and universities are exporting their products and services into Lockheed Martin programs, with total contracts awarded valued at over US$26 million. The program has recently been extended to 2017, providing further opportunities for Australian industry to participate in the global supply chain of Lockheed Martin.
In 2017, Lockheed Martin is establishing a world-class multi-disciplinary research facility in Melbourne. The Science Technology, Engineering Leadership and Research Laboratory – STELaRLab – will constitute Lockheed Martin’s national Research & Development Operations Centre for the company’s current research portfolio in Australia, and undertake R&D programs.
This demonstrates that the story behind the involvement of overseas primes in the local defence industry is often more complex than their local revenue figure reveals.
BAE Systems Australia for example operates in twenty-five locations across Australia and supports one of Australia’s largest Defence supply chains, purchasing $360 million worth of goods and services from around 1,600 Australian suppliers annually.
Three companies from the infrastructure and base support sector are included in the Top 10: Broadspectrum Limited, Lendlease and Spotless Group, which once again demonstrates the importance of this aspect of Defence business.
In surveying the information received from Australia’s Defence suppliers, there is a clear trend of growth in employment numbers. More than fifteen companies have reported an increase in employment numbers, adding more than 1,300 jobs to the Australian economy.
The total turnover of the Top 40 has topped the $10 billion mark ($10.384 billion) for the first time in 2016. Of last year’s participants who submitted entries for this year, an encouraging 28 in total had increases in revenue; only seven reported a decline in revenue.
Nine SMEs made the Top 40 this year (compared with five in 2015): of those nine, five are Australian-owned SMEs (compared with one in 2015).
General Dynamics Land Systems (GDLS) declined to participate this year, citing a change in corporate policy that has prohibited local disclosure of revenue, but at $39 million turnover in 2015, they might not have appeared in any case. Similarly, ABB Australia, citing a downturn in business, declined to participate. Laing O’Rourke too cited a downturn in revenue this year compared with 2015 but noted that they actually had a greater project value in hand for 2016 than the previous year. Under Managing Contractor arrangements, only their fees are classed as revenue.
Two years ago John Holland Group Pty Ltd was riding high in ADM’s Top 40 at no.6 with a turnover of $570.446 million. Today, the company has no defence contracts. Why? As I wrote last year, the company was taken over by CCCC International Holding Limited (CCCI), a wholly owned subsidiary of China Communications Construction Company Limited (CCCC). We will leave ADM readers to draw their own conclusions as to why the company’s defence contracts were withdrawn.
John Holland had been owned by Leighton Holdings (now known as CIMIC Group, which trades on the ASX). We are now seeing CPB Contractors, the rebranded Leighton Contractors, appearing in recent Defence tenders in Managing Contractor roles. CIMIC were contacted but declined to participate saying they were unable to separate revenue by market segment.
There are four companies appearing in the Top 40 rankings for the first time:
- 13 Leidos Australia: $256.7 million
- 21 UGL Defence: $110 million
- 34 Supacat: $48.9 million
- 38 St Hilliers Property P/L: $42.5 million
Leidos Australia, with Christine Zeitz at the helm, has been created through the sale of Lockheed Martin’s Information Systems & Global Solutions (IS&GS) business. As reported previously by ADM, it is understood that Leidos has taken the $942 million Change Program contract from Defence’s Chief Information Officer Group with them as part of the split, along with a range of other IT programs. The global Leidos workforce is estimated to be around 33,000 people across 30 countries, with turnover of around US$10 billion.
This is the first time we have seen UGL Defence participate in the Top 40. The company has a joint venture with longtime Top 40 participant Babcock in Naval Ship Management. On the corporate front, UGL Limited’s directors are contemplating a takeover offer from Cimic Group Limited, following UGL’s difficulties with some commercial projects.
Supacat Pty Ltd (Supacat) is a member of the SC Group. The company opened its first international office in 2012 by announcing its presence in Australia to provide Supacat’s diverse product range and engineering skills to the Asia Pacific market. The company now has offices in Victoria and NSW employing some 50 people. Supacat has also developed a considerable Australian supply chain under the banner of Supacat Team Australia generating significant opportunities for other Australian SMEs. The company specialises in vehicles, vessels and complementary machinery.
Defence estate and base support activities are an important component of Defence business in Australia. St Hilliers is an Australian owned property development and construction services provider, that, for the past 5 years, has been providing construction services to Defence, initially on projects in South East Queensland. Over the past two years the business has taken a national focus and is currently providing services across five states and nine different Defence bases. St Hilliers deliver a varied and extensive range of projects across the Defence infrastructure portfolio, specialising in capability driven projects such as training facilities and projects with a particular technical or security aspect, along with the delivery of maintenance and upgrade works across the Estate Works Program.
Past projects of note include the ELF2C Wide Bay Training Area Package 2 works ($64 million), ELF2C Greenbank Training Area ($110 million) and currently, the Redfin Phase 1B Infrastructure – SOV and FCS projects ($27 million) and the LIFCAP Full Mission Simulator Facilities ($9.1 million).
DISCLAIMER and COPYRIGHT NOTICE While every effort has been made to ensure the accuracy of the information published in ADM’s Top 40 Defence Contractors/Top 20 Defence SMEs surveys, the publishers accept no responsibility for any errors or omissions that may have occurred. Companies wishing to participate in future surveys should contact the publisher Judy Hinz. The survey is published for the interest of ADM readers and defence industry analysts. Participation is free.The information contained in ADM’s Top 40 Defence Contractors/Top 20 Defence SMEs surveys is copyright and may not be republished without the permission of the copyright holder, Yaffa Media Pty Ltd. All enquiries: Judy Hinz, Publisher, e. email@example.com t. 07 3348 6966. Any person or organisation quoting information from these surveys must acknowledge Australian Defence Magazine, December 2016/ January 2017 Top 40 Defence Contractors/Top 20 Defence SMEs survey