ADM Top 40 2011: Industry revenue grows despite budget pressures | ADM Dec 2011 / Jan 2012
Judy Hinz | Brisbane
Once again, a stronger increase was recorded by the Top 20 SMEs – 10.4 per cent year on year, $585.8 million in 2011 versus $530.9 million in 2010.
At this point, it is important to note that some SMEs appear in the Top 40 list so the total revenue figure across the Top 40 Defence Contractors and Top 20 SMEs survey is not purely a matter of adding the two total figures together. The aggregate revenue across the two groups is, in fact, $7.847 billion for 2011, covering 49 companies.
The turnover for the Top 10 Defence Contractors totals $5.867 billion for 2011, compared with $5.364 billion in 2010, an increase of 9.4 per cent year on year. This means that the Top 10 companies account for 76 per cent of the total turnover of the Top 40.
It’s interesting to look back a decade. The Top 10 of our Top 40 Defence Contractors survey for 2001, published in January 2002, reported revenue of $3.03 billion, which translates to growth of 154 per cent over the decade. A full list of all Top 40 lists over the past decade are also available on the ADM website, www.australiandefence.com.au for those who want to see the evolution for themselves.
Strong performance by the Top 10
BAE Systems Australia recorded a $300 million increase in turnover to again top ADM’s survey with $1.8 billion in revenue. A decade ago, BAE Systems Australia reported revenue of $400 million (in ADM’s Top 40 Defence Contractors Dec/Jan 2001-2002).
BAE Systems Australia’s performance comes in spite of the reduction in the number of employees on the company’s books, reducing from 6,500 in 2010 to 6,000 in 2011. Commenting on the reduction in the number of employees, a company spokesperson told ADM that the difference in numbers relates purely to the mix of projects that BAE Systems Australia is currently delivering, saying that “some projects have higher labor requirements than others.”
It is also interesting to note just how the company’s range of interests in defence business has increased exponentially.
Thales Australia has slipped from the no.2 spot to no.3, with the no.2 spot being taken by Raytheon Australia, with revenue figures for 2011 of $761 million.
Apart from BAE Systems Australia, ASC Pty Ltd is the big mover in revenue gain, up $182.3 million year on year, to record $695.8 million in 2011 revenue, an increase of 35 per cent. Employee numbers have grown commensurately by 300 to 2,000 in the wake of the Air Warfare Destroyer (AWD) project.
Serco Sodexo Defence Services continues to perform well in the sector. The company’s turnover rose $42 million or just over 15 per cent to $308 million in 2011 compared with the previous year’s turnover of $266 million.
Commenting on the good performance which has seen the company move up to no.6 in the Top 40, chief executive officer Wayne Smith told ADM that the improved performance was due to “organic growth in the contracts, particularly in the Environmental Services and some ancillary services provided through the Clothing Stores contract.”
Estate, facilities management and support services companies continue to feature strongly in the Top 40. Transfield Services has had another solid year with turnover up $35 million, from $175 million in 2010 to $210 million in 2011. The improved performance comes about through the company’s success in securing two new Comprehensive Maintenance Services contracts with Defence Support Group, plus work on the AWD.
Rounding out the Top 10 this year is Saab Technologies. The company has reported a strong year, an increase of $43 million in turnover from $157 million in 2010 to $200.4 million in 2011, a 27 per cent increase. Marketing Manager, Business Development for Saab Technologies, Mark Proctor, told ADM that it had been a “great year” for the company, marked by the on-time delivery of the ANZAC Anti-Ship Missile Defence program and completion of the Hornet Upgrade Program, which fitted the BOL Countermeasure Dispensing System. He said that revenue had also been boosted by the contract for C-RAM radars in Afghanistan, continuing ammunition sales and the acquisition of Sensis.
Beyond the Top 10 companies
Of those companies ranked outside the Top 10, Lockheed Martin has shown the greatest increase in turnover. With recent wins in JP 2030 and the MH60R program as well as the JORN support five-year contract extension, the company recorded a significant increase in revenue in 2011, up $37 million to $198 million compared with the 2010 figure of $161 million. The company’s Australian workforce numbers have also risen from 580 in 2010 to 725 in 2011.
Sikorsky Helitech had recorded a dip in turnover in 2010, but in 2011, the company’s turnover has bounced back to its pre-2010 figure of $70 million.
Quietly making big strides is South Australian-based locally-owned SME Nova Systems, reporting increased turnover in 2011 of $41.4 million, up $12.4 million. The workforce has increased too – from 129 employees to 195, close to the cusp for qualification as an SME. The company has advanced its ranking in the Top 40 by 11 places, year on year. This year Nova is ranked at no.24 in the overall survey.
Another good performer is CEA Technologies, reporting an increase of $10 million in turnover from $40.07 million in 2010 to $50.0 million in 2011, a 25 per cent increase.
Top 20 SMEs
For some SMEs, the business year has been difficult. Defence business is a tough sector, dominated by behemoths and subject to a cyclical demand cycle that is not always predictable, not to mention federal budget imperatives and the phasing out of decommissioned capability such as the F-111. It is one thing to know that the platform you’ve been supporting for many years is about to be phased out; it is quite another to restructure a small business successfully to replace a revenue stream that no longer exists. It can represent a major challenge for small business owners.
Yet some SMEs have managed to thrive in what is widely regarded as a tough business environment.
Communications Design and Management is a local SME with a good story to tell. The company has recorded a substantial increase in turnover in defence business from a reported $16.3 million in 2010 to $27.1 million in 2011. Employment numbers have risen from 140 to 164. Owner and managing director Ralph Nash was delighted with the result.
“CDM’s increased Defence Revenue in 2010 was a reflection of our overall performance as a company, with FY 2010/11 being our strongest and most profitable year to date,” he told ADM. “CDM has had a long and successful relationship with Defence which has held firm throughout our 20 years of operations and has strengthened in recent years. CDM is investing and positioning for further growth in the future.”
CDM’s performance sees them take a position in the Top 40 for the first time, ranked at no.36 overall and no.8 in local companies ranking in the Top 20 Defence SMEs list.
Overall, the Top 20 Defence SMEs reported a stronger increase in percentage terms than the Top 40 Defence Contractors – 10.4 per cent year on year ($585.8 million in 2011 versus $530.9 million in 2010). Of the top 10 SMEs in the defence sector, it is worth noting that only four are locally owned: Adagold Aviation, Nova Systems, Communications Design and Management and Daronmont Technologies.
The combined revenue for the Top 10 Defence SMEs is $418.5 million or 71 per cent of the total of the Top 20 Defence SMEs revenue of $585.8 million.
Participation in 2011 survey
In ADM’s Top 40 Defence Contractors survey for the 2011 year, there is one newcomer, KBR, with a turnover of $29.9 million in defence business, and a ranking of no.35 in the Top 40.
The are a few new faces in the SME list: Nioa, Cincom Systems, Birdon Pty Ltd and Eylex Pty Ltd – all locally-owned SMEs.
ADM’s Top 40 Defence Contractors and Top 20 SMEs survey relies on the voluntary participation from companies across the spectrum of defence business in Australia and New Zealand.
While we actively encourage participation, a number of companies decline to participate for a variety of reasons. Inevitably, companies showing a reduction in turnover are reluctant to highlight the fact. Some companies have a corporate policy not to publicly reveal such information.
It is, however, the only regular and reliable indicator of the economic activity undertaken in the defence industry in Australia. As such the annual survey plays an important role in boosting the profile of the sector in the community and wider economy.
Disclaimer
While every effort has been made to ensure the accuracy of the information published in ADM’s Top 40 Defence Contractors and Top 20 SMEs survey, the publishers accept no responsibility for any errors or omissions that may have occurred. Participation in the survey is voluntary, based on invitations extended to known industry participants. Companies wishing to participate in future surveys should contact Judy Hinz, Managing Editor, judyhinz@yaffa.com.au. The survey is published for the interest of ADM readers. Participation is free.
Copyright notice
The information contained in ADM’s Top 40 Defence Contractors and Top 20 Defence SMEs survey is copyright. The copyright owner is Yaffa Publishing Group Pty Ltd. No part of this survey may be republished or quoted in any article or report, without the express permission of the publisher. All permission requests are to be directed to Judy Hinz, Managing Editor, Tel 07 3348 6966 e. judyhinz@yaffa.com.au
Any person or organisation given permission to quote the information published here must acknowledge Australian Defence Magazine, December 2011/January 2012 Top 40 Defence Contractors and Top 20 SMEs Survey as the source.