From the Source: Mr Greg Hayes, CEO, Tenix Group | ADM May 07

1 May 2007

By Julian Kerr

Greg Hayes is Managing Director and CEO of the Tenix Group. He joined Tenix last November as Executive Director Finance and Corporate Development and was appointed to his current post in February.

He was previously Chief Financial Officer of AGL and has held senior management positions at Westfield and Southcorp. He spoke to ADM's Senior Correspondent, Julian Kerr, in April.

Profile - Greg Hayes
2007 CEO & Group Managing Director, Tenix group
2006 Executive Director Finance & Corporate Development, Tenix Group
2003-2006 AGL
2001-2003 Westfield Group
1991-1998 Southcorp

ADM: You've now been at Tenix for six months, the last three of them as Managing Director. What has the learning curve involved, particularly on the defence side?

Hayes: Obviously I'm still on a learning curve and developing my knowledge. Clearly, Defence is a highly important sector for Australia, with multiple stakeholders and a wide range of equipment and services. It's also a highly visible sector. It's highly competitive, and I expect it will become increasingly so.

Internally, I've observed that Tenix is an experienced participant, with many exceptional staff and professionals including the Salteri family.

I think that all the basics are still the same; customer requirements must be understood and met, competition must be met head-on, partnership relationships must be fostered, and company assets, including people, must be protected and grown.

ADM: What are the differences in doing business compared to your last employer (AGL)?

Hayes: There are some obvious differences and I think the DMO acknowledge that dealing with them is different to dealing with normal industry.

As Dr Gumley has put out in the public domain, there's almost no flexibility in terms of the statutory side, down to the more commercial aspects where they have some flexibility in contracting. Clearly, knowing the customer is knowing how they contract and ensuring you have the capability and willingness to meet their requirements.

This means there may be some things out there that are difficult for us if we assess that the contractual requirements or the overall requirements of the Commonwealth are not something that we're able effectively to meet.

ADM: Will Tenix Defence be risk-averse?

Hayes: The DMO has said that risk should be borne by the party best able to do so. However, risk management is not about being risk-averse, it's about assessing the capability of being able to deal with that risk and, accordingly, being able to price it into contractual negotiations.

I see us as wanting to understand the risk environment and being able to deliver in that environment and get appropriately rewarded.

ADM: What's your management style?

Hayes: I've had the opportunity in my business life to observe and work with some of the best leaders and managers in Australia, and that provided me with a great foundation. One of the things I've learned is to develop a vision and be able to articulate it.

Something we're working very hard on at the moment is reviewing all our business strategies to ensure their currency, their relevance, and our ability to execute them.

What we'll do is articulate that within the business and we'll make that transparent, particularly to the customer as well, as we go through that process. Communication is obviously important and I believe in a participative approach.

One example of that is that I've attended every budget presentation in the location that the business resides and given our staff an opportunity to meet me and hear from me, and by the same token, given me an opportunity to hear directly from them.

Another thing I have learnt, and I will be very keen about, is discipline in the organisation. Discipline is going to be one of the foundations. Something else I believe in strongly is the fact base, to explore and to understand down to the level of established fact. That requires a disciplined approach, and that's one of the things I'll be expecting within the organisation.

The best decisions are made when you have the best information. My job will be to ensure that everybody, as a matter of course, goes through a very deliberate process to get to the best information base that we possibly can for the making of every decision.

ADM: The defence business was restructured in March into Tenix Marine and Tenix Aerospace and Defence. Why?

Hayes: It was timely to review the structure, particularly with Robert (Salteri) becoming a Non-executive Director. Also, it was appropriate that Dave Miller, as head of the big Marine division, report directly to me. The whole structure has been flattened considerably to shorten the decision-making process.

ADM: Is a flotation on the cards?

Hayes: The background is important. Tenix and its antecedents have been privately-owned for 50 years. There are a number of advantages to this. To this point, there is no significant limitation that has been identified. My focus is on driving the business to improve the quality of outcomes for the existing shareholders.

ADM: The restructure announcement referred to emerging challenges and opportunities. What are they?

Hayes: Tenix has a very solid footprint and there are great opportunities to build up the business from that. There is a continued growing revenue base in the defence sector; Tenix has established partnerships and the ability to develop and grow new ones, the company is bidding for multiple projects across the spectrum, and we have a workforce in excess of 4,000 which is a valuable asset for us to develop.

Challenges? Competition is fierce and we must ensure that we're prepared to meet it head-on. With skills shortages across the country we must retain our status as a preferred employer, and we must continually adapt our business model to meet the needs of the customer.

ADM: Following the restructure what's the breakdown of revenue percentages within the Tenix Defence business units?

Hayes: Obviously it varies year to year, but within Tenix Defence, Marine is going to be greater than 50 per cent and the others will make up the balance. Overall, Tenix Defence represents about 60 per cent of Group revenue.

ADM: Looking at the individual units, how is Land travelling?

Hayes: Tenix has the largest footprint of any defence contractor in the Land area. We've got an excellent contract at Albury-Wodonga, and with our joint venture partner Toll Holdings across the country in Tenix Toll.

In addition we have large long-term contracts in vehicle upgrades. As far as the M113 upgrade is concerned, we're still projecting a completion date by the end of 2010 in line with the contract timetable, and we plan to deliver the first vehicles in the fourth quarter of this year.

There are still a couple of remaining engineering issues that we're working on as we speak, including the braking system, and that's delayed some of the internal approval processes.

ADM: How's Aerospace doing?

Hayes: We've got a good business model with our success with the AP-3C through-life support contract. Our focus is on through-life support with upgrades. To be able to do that competitively we need a number of contracts.

We've got one at the moment and we're bidding for a couple of others and we need internal capability as well to effectively be able to deliver. On the C-130Hs - Project Echidna - it's progressing extremely well and the through-life tender is expected out later this year. We've upgraded three, and the contract is to complete all 12.

So far as the Seahawks are concerned, we're continuing with the upgrades on all 16 and the through-life RFT is expected out in the next few months.

ADM: You're bidding with Saab and Northrop Grumman to be the Industry Capability Partner for Project Air 7000 Phase1B. If the General Atomics' Mariner is selected as the platform rather than Northrop Grumman's Global Hawk, will this affect your bid?

Hayes: Our bid shouldn't be affected by whatever platform is chosen.

ADM: Looking at Maritime, why is Project Protector running late?

Hayes: We've been given some additional tasks to perform, which has extended the original schedule. There have been some changes in specifications, as well as some engineering issues both in Australia and New Zealand. All the ships, the multirole vessel, the offshore patrol vessels and the inshore patrol vessels, are running about four months behind schedule.

ADM: What about JP 2048?

Hayes: We believe we've got the most capable solution and both companies (Navantia and Tenix) are very capable in construction, integration and delivery.

For our baseline option we'd balance the work between Australia and Spain. We've allocated much of the steel fabrication work to Spain to avoid pulling similar resources away from the air warfare destroyer project.

The hull would be built in Spain and the superstructure in Australia. We've allocated much of the high-end technology effort to Australia, particularly combat systems, communications systems, missions system engineering. In addition we've included a range of options for the government to consider in providing additional work for Australian industry.

ADM: What's the future for Williamstown if Tenix doesn't win JP 2048?

Hayes: Tenix Marine is a strong business with a great heritage and significant physical and people resources, including Williamstown. We intend to compete vigorously in Marine into the future and Williamstown is a proven shipyard for low-risk production. It forms part of our plans.

The first fabrication for the amphibs won't occur until 2009 so we have the existing issue that we need to utilise Williamstown effectively, whether for military or commercial. We've been using Williamstown for Anzac support - HMAS Stuart has been in dock there recently - and it's a viable part of that activity, though we do a lot of that work out in Henderson (in Western Australia).

At this stage we're bidding for the amphibs and we hope we'll be successful there. Obviously Williamstown is included in the strategic review - everything will be part of that. The cost of operating on that site is not prohibitive and part of what Williamstown offers is the skill base in Victoria.

Part of the skills shortage issue is that people still want to live in capital cities. The opportunity for us to be able to use the skills available in Williamstown is not something that we want to discard.

ADM: Do you envisage Tenix Defence growing organically, or by acquisition?

Hayes: Part of the strategic assessment that we're going through is to identify what the elements of success are. We have a strong base for businesses to grow organically; I learnt a great deal at Westfield about the organic growth pipeline. Organic growth must be a cornerstone for Tenix as it's more controllable.

However, we will continue to develop partnerships and look for acquisitions, but we'll be judging them against our organic opportunities. I wouldn't rule out an offshore acquisition, but it's not something on the current horizon.

ADM: What export opportunities exist for Tenix Aerospace and Defence products and services?

Hayes: Over the past 10 years more than $1.9 billion of export dollars have been generated by Tenix, and a further $1.5 billion in naval, air and land opportunities offshore are currently being targeted. We also have our R&D capability in Electronic Services and some commercialisation success, notably through secure IT products.

ADM: What's your vision for the Tenix Defence of the future - let's say up to the expiry of the current Defence Capability Plan in 2016?

Hayes: I don't like to benchmark against world's best practice because I don't know what that is. I read about it, I hear about it, but I can't touch it. So what I like to say is that we will be the best that we can be, Tenix will be the best that it can be.

It certainly means being a better business in 2016 than it is today in helping to meet the sustainable capability needs of the ADF. That's got to be our objective - to be a better business in being able to help meet those needs, to meet and to exceed the Commonwealth's expectations.

Competing effectively and efficiently, which requires scale, being a partner of choice, being an employer of choice. Importantly, continuing to develop, articulate and deliver on a robust set of values.

Tenix is a business that has strong values, and that was one of the key things that I evaluated when I was making a decision about coming to the company, and it's not something we're prepared to let fall by the wayside.