By James Thomson
The SmartCompany Dun & Bradstreet Industry Growth List for the engineering sector highlights an industry enjoying explosive growth from the resources and infrastructure booms. But labour shortages remain the sector’s greatest challenge.
Australia’s engineering firms are experiencing that one problem every business would love to have – there’s just too much work to do. The SmartCompany Dun & Bradstreet Industry Growth List for the engineering sector reveals an industry enjoying explosive growth thanks to Australia’s resources and infrastructure booms. But a lack of skilled workers is weighing heavily on many of the firms, which find their resources stretched to the limit.
The engineering sector Industry Growth List is a good proxy for the wider engineering sector, with the revenue base of the firms ranging from the $1.5 million minnow Lennon Engineering & Construction through to the $3.5 billion listed engineering company WorleyParsons, which has a market capitalisation of $9.2 billion. The bulk of the companies are mid-sized firms, with the average revenue recorded by list members in 2007 sitting at about $358 million.
There can be no argument that members of the SmartCompany Dun & Bradstreet Industry Growth List have enjoyed spectacular growth in the last 12 months, with the total revenue earned soaring almost 46% from $12.3 billion to $17.9 billion.
At right is the Top 10, but see the end of this feature for the full list of 50.
Leading the charge is Perth-based firm STI-Global, which increased its revenue from $189,843 to $1.9 million. The company provides security and risk management services for the infrastructure sector, with a big focus on using wireless technology developed in Australia.
Its speciality is the rail industry, where its products help rail operators with track geometry, wheel impact detection and measurement, and real-time tracking. The products help warn rail operators of potential safety issues and prevent derailments and other accidents. STI-Global’s executive chairman, Kevin Reichelt, says: “We can be proactive and get to these problems before they happen.”
While STI-Global’s business started in Perth in 2006, it was not until the company headed to Europe and found a joint-venture partner in the Spanish capital of Madrid that the business really started to grow. And although STI-Global works throughout Europe and is also expanding into north and south America, the domestic resources and infrastructure boom means a renewed focus on Australia. “There is still an enormous amount of under-capacity, and there’s a lot of infrastructure that is planning to be developed,” Reichelt says.
The company is owned by around 60 investors, the largest of which are the directors and advertising industry leader Siimon Reynolds. Staff numbers have more than tripled in the last three years to 47. The team will need to get even bigger if the company‘s growth continues at the current rate.
Reichelt expects group sales to hit $10 million this year and the company has quotes out on more than $105 million of work. To fund that sort of growth, STI-Global is going to need more capital. The company is examining the possibility of a float or an equity injection. “We are in discussions with several major Australian companies and international companies in regards to taking strategic stakes in the company,” Reichelt says. “We’re pushing hard and we’re starting to raise the profile of the company dramatically.”
Robert Care, chief executive of engineering firm Arup Australasia (ranked 35th on the list) is also fighting hard to keep up with the amount of work in the engineering sector. “Frankly, given the balance between resources and jobs, we do find ourselves saying ‘no’,” Care says. “You have to be honest and say to clients ‘we cannot properly service that contract’.”
That can be difficult message to get through to engineers, who are naturally inclined to say yes first and come up with a solution later. But despite the resources and infrastructure booms, the employee-owned company took a conscious decision about three years ago not to chase growth for growth’s sake. It has allowed its core buildings and infrastructure business to grow at its own pace and pushed its specialist engineering services such as acoustics, fire, risk and security, and management consultancy. “We decided not to pursue growth as such, but rather see growth as a consequence of success,” Care says.
Arup’s revenue has climbed 39% in the last 12 months from $95 million to $132 million and head count has grown 30% a year for the last three years. Finding people remains a huge challenge. Arup’s employee-owned structure, whereby profits are shared equally across its global operations (the business started in London in 1946 and now has offices in 37 countries) has become a good attraction and retention tool. Care has also been able to use staff from overseas offices to fill some gaps, but it’s not enough. “We’re 1300 people now and I could employ another 250 people tomorrow,” Care says.
The chief executive of Engineers Australia, Peter Taylor, estimates Australia needs another 20,000 to 30,000 engineers, particularly in the electrical power, civil, resources and petroleum areas. While there is a lot of work being done to increase the number of skilled migrants coming into the engineering sector, the shortfall shows no sign of decreasing. “Over the past 15 years, the number of graduates per $10 million of constriction is on a very significant downhill slope. I suspect the amount of work is going to increase faster than the universities or the skilled migration program can cope with it.”
Dave Hackett, operations manager at third-ranked firm DGH Engineering, has concentrated hard on retention in a bid to avoid having to buy in workers. The company, which is based in the North Queensland coal town of Mackay, increased revenue from $3.6 million to $12.9 million last year. It tries to use its small size as an advantage by treating its 100 staff as a family. “There’s a lot of big companies around and a lot of public companies around, and they don’t treat their men as they should,” Hackett says. “At the end of the day, everyone wants to be appreciated. It costs nothing to say thanks.”
Hackett should know. He and fellow DGH director Mark Horn formerly worked for Reb Engineering, which was acquired by listed company Transfield Services in 2002. “We were a bit disappointed at the way Transfield were taking the business and treating the people,” Hackett says. They established DGH three years ago and spend six months setting up the business. The work soon flowed. “Being local we were known around the town,” Hackett says. “But you’ve got to put runs on the board and you cannot rely on your past.”
Hackett, like most in the engineering sector, is bullish about the future of the resources boom. While the number of new mines being developed will eventually drop away, Hackett says the sector will be kept very busy maintaining the mines already built.
Robert Arup and Kevin Reichelt are also optimistic about the infrastructure boom, particularly after the Rudd Government set aside $20 billion for the Building Australia Fund in this year’s federal budget.
Peter Taylor from Engineers Australia shares their sunny outlook and points out that engineers will also be at the forefront of meeting climate change challenges. It appears that it is not going to be any easier for the Australian engineering sector to keep up.
SmartCompany Dun & Bradstreet Industry Growth List for the engineering sector
|
Rank
|
Company
|
Revenue FY
|
Revenue FY
|
Growth
|
|
1
|
STI-Global
|
$1,922,747
|
$189,843
|
913%
|
|
2
|
RCR Laser
|
$15,195,000
|
$3,460,000
|
339%
|
|
3
|
DGH Engineering
|
$12,930,000
|
$3,600,000
|
259%
|
|
4
|
Fink Engineering
|
$6,346,418
|
$2,034,697
|
212%
|
|
5
|
Works Infrastructure
|
$883,244,000
|
$296,456,000
|
198%
|
|
6
|
VDM Group
|
$232,181,000
|
$81,024,000
|
187%
|
|
7
|
Sedgman
|
$156,008,000
|
$55,278,000
|
182%
|
|
8
|
Marine & Civil Construction
|
$40,042,133
|
$14,246,879
|
181%
|
|
9
|
Coote Industrial
|
$68,959,000
|
$27,171,086
|
154%
|
|
10
|
Ausenco
|
$356,929,000
|
$144,396,000
|
147%
|
|
11
|
McDonald Keen Group
|
$40,284,817
|
$17,112,645
|
135%
|
|
12
|
Monadelphous Engineering Associates
|
$58,819,000
|
$26,626,000
|
121%
|
|
13
|
Sun Engineering (Qld)
|
$60,009,892
|
$28,581,372
|
110%
|
|
14
|
Cut And Fill
|
$85,607,322
|
$47,254,774
|
81%
|
|
15
|
JJ McDonald & Sons Engineering
|
$152,242,621
|
$85,225,610
|
79%
|
|
16
|
HIS Engineering Services
|
$14,020,000
|
$8,208,000
|
71%
|
|
17
|
FRH Victoria
|
$532,890,361
|
$322,209,332
|
65%
|
|
18
|
Brierty
|
$155,173,950
|
$94,539,028
|
64%
|
|
19
|
Georgiou Group
|
$175,642,348
|
$109,148,639
|
61%
|
|
20
|
Lennon Engineering And Construction
|
$1,698,436
|
$1,079,689
|
57%
|
|
21
|
Downer EDI Rail
|
$544,962,000
|
$347,142,000
|
57%
|
|
22
|
JFTA
|
$54,121,370
|
$35,243,319
|
54%
|
|
23
|
Bellero Constructions (Qld)
|
$61,037,596
|
$40,509,737
|
51%
|
|
24
|
Sigma Energy Solutions
|
$14,970,565
|
$9,948,186
|
50%
|
|
25
|
Winslow Constructors
|
$228,360,940
|
$152,159,546
|
50%
|
|
26
|
CAE Australia
|
$32,846,813
|
$22,365,549
|
47%
|
|
27
|
Coffey International
|
$368,655,000
|
$251,886,000
|
46%
|
|
28
|
WorleyParsons
|
$3,492,802,000
|
$2,404,512,000
|
45%
|
|
29
|
Australian Mine Services
|
$18,700,000
|
$12,954,768
|
44%
|
|
30
|
O'Donnell Griffin
|
$401,145,000
|
$283,208,000
|
42%
|
|
31
|
JA Dodd
|
$139,175,866
|
$98,485,344
|
41%
|
|
32
|
Sinclair Knight Merz
|
$671,789,368
|
$478,684,418
|
40%
|
|
33
|
Arup
|
$132,007,584
|
$95,012,100
|
39%
|
|
34
|
Britton Marine (Australia)
|
$7,417,000
|
$5,395,000
|
37%
|
|
35
|
McCosker Contracting
|
$31,579,665
|
$23,109,383
|
37%
|
|
36
|
Rhodes Contracting
|
$21,000,000
|
$15,455,000
|
36%
|
|
37
|
Citywide Service Solutions
|
$128,003,000
|
$96,181,000
|
33%
|
|
38
|
Aztecsoft
|
$2,646,139,000
|
$1,996,775,000
|
33%
|
|
39
|
CEC Group
|
$143,403,810
|
$108,913,829
|
32%
|
|
40
|
Rock Engineering (Aust)
|
$24,600,000
|
$18,780,000
|
31%
|
|
41
|
GHD
|
$675,520,000
|
$516,520,000
|
31%
|
|
42
|
Bytecraft Systems
|
$2,404,058,000
|
$1,851,698,000
|
30%
|
|
43
|
Bovis Lend Lease
|
$1,803,623,000
|
$1,399,229,000
|
29%
|
|
44
|
Clean Teq
|
$7,024,768
|
$5,460,140
|
29%
|
|
45
|
Beca
|
$32,761,133
|
$25,545,853
|
28%
|
|
46
|
Longford Woods
|
$14,447,966
|
$11,314,123
|
28%
|
|
47
|
KBR Holdings
|
$356,421,697
|
$279,996,500
|
27%
|
|
48
|
RCR Energy Service
|
$58,663,000
|
$46,392,000
|
26%
|
|
49
|
Downer EDI Engineering Electrical
|
$275,771,000
|
$220,656,000
|
25%
|
|
50
|
EP Group
|
$67,427,393
|
$53,968,694
|
25%
|
Compiled by Dun & Bradstreet using information from its commercial database of more than 2.7 million companies.
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