“For Babcock... part of our business model is investing, on a long-term basis, with our customers [and] with governments to grow capabilities, to grow workforces [and] to grow skills,” he explains.
In this episode of the Defence Connect Podcast, Ruff reveals how the engineering support services business is growing its Australian arm “indigenously” and how its investment in local untapped talent, equipment and practices is developing Australian capabilities above and beyond the defence force.
You’ll also hear his thoughts on the ways in which the government is reforming the defence industry at large, collaboration and competition as a means of driving growth, and why he believes future projects on Babcock's horizon will enable the team to lead the way in the defence space.
Enjoy the podcast,
The Defence Connect team.
Listen to previous episodes of the Defence Connect podcast:
Episode 62: PODCAST: The industrial dating service, Peter Webster, Industry Capability Network NSW
Episode 61: PODCAST: Expanding UK business interests in Australian defence industry, Stephen Phipson CBE, DIT DSO
Episode 60: PODCAST: Defending the defence industry, Daniel Mendoza-Jones, Mendoza Legal and Consulting founder
Episode 59: PODCAST: Making industry a fundamental input to capability, Andrew Garth, general manager, CDIC
Episode 58: PODCAST: The shifting sands of AIC, Lee Stanley, Daronmont Technologies
Episode 57: PODCAST: Fostering the future of defence industry, Margot Forster, Defence Teaming Centre CEO
Episode 56: PODCAST: Propelling Defence through advanced automation – Andrew Seal, Siemens head of defence and marine solutions
Episode 55: PODCAST: Exports key to the future of Australia’s defence industry, Richard Marles, opposition spokesman for defence
Episode 54: PODCAST: Mining boom to defence boom – Minister Paul Papalia, WA’s Defence Issues Minister
Episode 53: PODCAST: Gearing Victoria for growth, Greg Combet, Victoria’s defence industry advocate
Phil Tarrant: G'day everyone. It's Phil Tarrant here. Thanks for joining us on the Defence Connect Podcast. It's always good to have you on board and along this journey as we explore what's happening in defence industry at the moment. To help me out today I have someone who I've been wanting to catch up for a little while to get a better understanding and appreciation of this multinational business' operations in Australia. I have David Ruff who is the CEO of Babcock Australasia. David, how you going?
David Ruff: Very well, thank you. Nice to be here.
Phil Tarrant: Thanks for coming in. Yeah, it's good to have you.
David Ruff: Thank you.
Phil Tarrant: We were chatting very quickly off air just about the breadth of programmes and work that you're undertaking here in Australia, 700 plus people, you're one of the big guys in town and, obviously, looking to grow. Some interesting work on the horizon with the government's investment in defence spending for the next decade with the white paper, which we're all familiar with. You're not an Aussie local but you're now calling Australia home.
David Ruff: Absolutely.
Phil Tarrant: How long you been in country now?
David Ruff: I've actually been here a year, came down from the Middle East where I was running Babcock's operation across the Middle East for the preceding five years. Prior to that I was in the UK running their defence business. I've got a defence slant within Babcock but the Middle East operation and particularly here in Australasia, it's not just defence. We operate in a couple of other sectors as well. Obviously, for the purposes of this discussion, we'll focus on defence.
Phil Tarrant: We'll have a chat a little bit later in the podcast around some of the programmes and work that you're undertaking right now.
David Ruff: Sure.
Phil Tarrant: What sold you with Australia? How'd they persuade you to come down here? I know it's the middle of winter right now and it's 20 something degrees and sunny skies. Are you city based?
David Ruff: No. Our regional head office is actually in Adelaide, which is a function of our focus on our naval marine business, both in terms of the submarine business that we do with ASC and also over in Western Australia with the WAMA, the Warship Management Alliance. But it is interesting that we've stayed in Adelaide. We've grown our business so we operate in the aviation sector, we operate in the land sector non-defence, emergency services, transport energy. We operate all of that out of a single regional support centre in Adelaide.
That said, all of our operating businesses are co-located with our customers, so we're co-located around 75 sites across Australia, length and breadth of it. That's where we do our business, with our customer.
Phil Tarrant: You're on a plane quite a lot then travelling around?
David Ruff: More than I would like to be, yeah. I spend a lot of time on a plane, particularly between here and New Zealand, but also dealing with head office back in UK and Europe, in fact.
Phil Tarrant: What was it in particular about the CEO role for Babcock Australasia that dragged you out of the Middle East to these fair shores? Was it the investment undertaking? Is it the type of work that Babcock's doing here?
David Ruff: A number of things. I think the first thing is Babcock has grown quite significantly in Australia. We started out purely in defence and only four years ago we were turning over 15 million a year; now we're on the $300 million mark and we're growing at 25 per cent a year. That growth profile and the challenge of maintaining that and actually adding to that was a significant draw.
I think the other thing is leveraging off my Middle East experience. There are a lot of similarities, believe it or not, between the Middle East defence market and the Australian defence market. Some of those similarities, I think, were best summarised by the need for defence industrialization. Both areas have got a similar macro environment in politically, economically and in terms of security. That's not to say that the security situation in Australia is anything like the Middle East, the Middle East is a challenge beyond anybody's imagination but that whole desire to industrialise the defence market to create an indigenous defence industrial base is as big in the Middle East, bearing in mind that the Middle East is not a country it's a series of countries, but it is a common theme across the Middle East where there is this overriding need to create an industrial base, a manufacturing base, to train locals, to upscale the workforce, to create domestic industries and to invest in those industries.
I see that same parallel here in Australia. For Babcock, that's absolutely part of our business model is investing on a long-term basis with our customers, with governments, to grow capabilities, to grow workforces, to grow skills.
Phil Tarrant: If you keep on the parallel of Middle East with Australia, Middle East is a collection of disparate countries, which all have their own challenges in terms of political stability. We've, obviously, gone through a period over the last five or six years with the Arab Spring and how that evolution of these nation states within the Middle East. It's challenging in that regards compared to Australia, an individual sovereign nation with strong economic stability but people is a very different case. I would argue that the Middle East probably has greater access to talent particularly where you were in the UAE. You can find people to undertake manufacturing jobs, whereas, in Australia, manufacturing is in a very different climate and different situation where the warfare talent to get quality people to help you become a good manufacturer is probably a little bit more challenging.
What are you guys doing in terms of Babcock to find those best workers to put in the sites you have across Australia and upscaling them to do what they do really well?
David Ruff: I think the first point to make is that I think Australia has got a huge wealth of talent. If you look at the education system in Australia, and I'm going right up to tertiary now and Adelaide is as good an example of any as high quality secondary and tertiary education. The quality of the people that are coming out of those educational establishments is enormous. There's untapped potential there. When the Australian government puts billions and billions into a defence white paper and is set about creating a defence industry, which I happen to think is absolutely the right thing to do, if you're going to put that sort of investment into your national economy, the very best return you can get on that is a sustainable industry.
The bedrock of any industry is the people and skilled people. Those skills range from the very high level, white collar down to the skilled vocational technicians and so on and so forth. The defence industry like every other, needs that broad range. I think that broad range is available in Australia today and it is sustainable because it is being replaced out of the educational system and will continue so to be.
From a Babcock point of view, we have very little problem recruiting the right quality of people in terms of skills and in terms of experience. Now, that's today. As the defence industry grows and we launch on a national ship building enterprise, submarines, whatever it is, there's, obviously, going to need to be an upscaling. There's no doubt about that. You're already seeing the big defence majors, Babcock included, investing in people, in institutions, in training and technology. All of that is going on, it's all part of the defence industrial policy statement, which the government has laid out there.
I, along with the rest of industry, see that as a bit of a challenge and something for us to respond to. The framework's been laid, our response is to invest in it and commit to it, whether that is people, whether it's supply chain. If you look at, just in our submarine business alone, where we very proudly support ASC, a relatively small part of the overall sustainment of Collins. That enterprise, the Babcock part of that enterprise, is something like 50 local suppliers, 50 international suppliers, and a total of 450 that contribute to the overall outcome that we put into that programme.
That's just a tiny, tiny piece of Collins, but those numbers alone, I think, indicate the benefit you can get when you invest in the national defence industry and the downstream effect you can have in terms of people and growing the national skills base, and in terms of investing in the national supply chain.
Phil Tarrant: What's the corporate global perspective of Australia from the Babcock view? You have many markets across the world who have some increasing defence spend, some are decreasing defence spend, but if I was to be a fly on the wall at corporate board meeting, and they spoke about the Australia market, what would the board be saying about Australia?
David Ruff: Number one, investment priority, very simple. We, Babcock, at a group level have undergone what we call a realignment, which is really just focusing our business on our sectors and our customers. I mentioned earlier that we're co-located with our customers around 75 sites in Australia, that has been a conscious activity to get alongside our customers to really, really work with them, to understand them and to go with them on a long-term partnering basis.
At the macro level, Australia is, obviously, seen as a very stable economy, a growth economy, a democracy. I'm not going to talk about Brexit and all that, but whether it's UK, and we are a UK registered company but from a global perspective, Babcock looks at Australia as literally a number one investment priority.
Phil Tarrant: It's a good place to do business.
David Ruff: Very good place to do business, the right policy frameworks are in place, the right legislative frameworks are in place. For example, in the defence sector it's very straightforward. You've got the ASDEFCON terms and conditions, it's structured, it's clear, it's objective. The Middle East is sometimes a little bit different to that and in the Middle East you really have to be quite choosy about what you go for, what you don't go for. Here it is completely different. Here it is almost the same as contracting in the U.S., the UK or any other first world defence nation.
Phil Tarrant: From a risk perspective, how does the board see, or yourself included, government change here in Australia, whether it's a labour government, liberal government? Do you have the same optimism that the marketplace irrespective of who is in the seat deciding what happens in Canberra?
David Ruff: Absolutely. We take an apolitical view globally. What we look for is much more on the policy frameworks and the sustainability of those and the resilience of those. In Australia, we see that in bucket loads. We have no questions around that at all. Whatever the colour of the government, there is a very strong public service, which, like the UK and like other developed nations, provides for that continuity and consistency. That's what gives us the certainty to invest.
Phil Tarrant: I think they're being very clear that the current government in setting defence policy, defence agenda for the period ahead and it's underpinned by some strong policy documentation now, which I think, everyone is on side of to try and deliver. There's a lot of new companies coming into defence industry right now and a lot of them lament about the challenges about cracking defence industry in Australia. Many of these are, obviously, very competitive at the prime end for some of these marquee programmes and projects.
If I was to ask your global CEO what he told you when he appointed you to this job in a sentence, what do you need to deliver for the corporate from the Australian perspective?
David Ruff: Well, of course, we need to deliver growth. Any company is in the business of growing. You can't stand still in this modern world but I think it goes a lot deeper than that. You mentioned defence industrial policy and so on. Absolutely.
If you look at the decisions that the commonwealth has made in the last 12 months, I think in many senses, Australia is setting the pace for the rest of the world. They have a very clear defence policy, white paper, the procurement that comes out of that is very clearly articulated, the industrial policy that underpins that now and some of the things like the next generation fund, the defence technology centre, all of those sorts of institutions and activities that are coming out of it are, I think, really setting the pace and setting the model for others to follow.
I think, for me, the challenge is for industry now to respond to that and we're starting to see that, we're starting to see investments, as I said earlier, in people and in programmes and so on. I think as we go on we'll see industry, because industry's very good at forming consortia and alliances and really getting together to provide and respond to that framework.
I think we've got quite some way to go. Only 12 months ago when I arrived here, what I saw in the defence industry landscape was very much a traditional landscape. You had the OEMs who were responding to the commonwealth's requirement for platforms. It was very much a platform-centric focus on procurement, relatively light-touch focus on sustainment and sustainability.
What I've seen in the last 12 months is a fundamental shift. I think the commonwealth's defence industrial policy alongside CASG's reform programme and other underpinning activities like that have really driven a focus towards asset management, availability, performance. If you talk to service commanders and they talk about providing lethal effect, what they also now talk about in the same sentence is guaranteeing that lethal effect at maximum availability at minimum cost.
The equation is changing now and I think the whole pendulum is swinging towards a focus on sustainable asset management. That is a big, big shift and industry has to respond to that. We are seeing some of the traditional manufacturers starting to respond to that. But equally, companies like Babcock, it is absolutely what we do. It is what we've been doing in other parts of the world for a long time.
In the last 12 months, you asked me earlier about what it is that attracted me down here. It was, actually, the prospect of a maturing defence market, which is moving much more towards an output-based focus on the high-level availability of assets at optimal performance and at the least effective cost. Now that's quite a difficult equation.
Phil Tarrant: Do you think that's a space that Babcock can play comfortably in?
David Ruff: I think it's a space we will lead in. We're only now just starting to see, I'm talking specifically in defence now, in other sectors, emergency services we're starting to see some of the movements but let's stick to defence. In defence, we're starting to see the commonwealth now outsourcing whole parts of capability. Let me give you an example, JP2060 Deployable Medical Health. There for the first time the commonwealth is taking an operational capability, Deployable Medical Health, and it is outsourcing the procurement and the provision, including inter-operational theatres, and then the subsequent regeneration, repatriation of the whole capability to industry. That, I think, says a lot.
It shows that the commonwealth is reforming, it is investing in industry, it has belief that industry will step up to the plate, it has a conviction that industry will provide in times of combat, in operational theatres and so on and it's putting its money where its mouth is. If you look at what Babcock does for other militaries around the world, that is exactly what we do. The market for us is getting to a position where I think we are positioned to become the leader in this particular space.
Phil Tarrant: What is it do you think about the Babcock DNA or it might be your English pedigree, or the way you go about doing business that's going to position you more favourably against maybe some of your American competitors or colleagues, whatever you want to call them. What makes you unique?
David Ruff: We're not a manufacturer, we're not an OEM. We are an engineering support services company and nobody understands what that means. The best way to describe it is engineering is in our DNA. It's at the heart of what we do and we do three things, really.
The first thing we do is we manage critical assets. We deliver complex programmes and I'll come back to those words complex and critical frequently. The third thing we do, which underpins it all, is we teach people vital skills. Those are just not our own people those are our customer's people and so on. If you put a wrap around all of that, what that enables us to do is to manage people's assets; I'm not talking about low-value, low-impact assets. I'm talking about complex critical assets like warships, submarines, combat aircraft, military tanks. Whatever it is, we, today, somewhere on this planet manage those critical assets for demanding customers at exceptionally high levels of availability.
If I give you an example, in the UK, some of the military aircraft that we maintain, we provide those at guaranteed 95 per cent availability. That's exceptionally high and it is guaranteed. We've managed to do that at, in one particular case, around 20 per cent operating cost reduction. That's what we do and that's what we bring to the party, and we will bring to the party here in Australia.
Some of the programmes that we're just starting to see, coming out of defence and developing in defence, is where we will bring that benefit. Again, it's just very much about absolute maximum availability at the lowest possible cost. That doesn't mean cheap, necessarily. It just means at a lower cost than is currently.
Phil Tarrant: It's about creating value.
David Ruff: Yep, absolutely.
Phil Tarrant: But it's ensuring that you keep the clients cost considerations in mind and keep it as low as possible.
David Ruff: Everybody, whether you're a federal government, a state government or a blue chip operator, you have cost concerns. Nobody is immune to those. What we do is understand the business. We have some very clever methodologies, we have some very clever processes and, most of all, we have extremely clever people. Babcock is 35,000 people and the vast majority of those are highly skilled engineers and technicians who do this stuff for a living.
Underpinning it all, we have some very innovative financing and commercial solutions, which allow us to say to our customer, "Well, okay, if you give a contract of say 10-years length, what we can do over that period of time is guarantee you an availability at this level and we can also, at that same time, commit to taking out X per cent operating cost." We have commercial examples around the world where we have done that and where, if we would fail to do it, we would be getting our chequebook out. Now as a company, we're not going to be getting our chequebook out so we deliver.
Phil Tarrant: So you’re happy to share in risk in the delivery of projects as your learning effects increase, and you can look to drive the price down.
David Ruff: Absolutely. It is all about investment; it's investment in people, it's investment in equipment, it's in processes, it's in knowhow. Critically, it's about transferring that; over time, we expect to transfer that stuff. Our business here in Australia has grown very much indigenously. We have brought in relatively few people from around the world into our business here. As we do that, and I'm going to be one of the last of them, by the way, we grow the capability here in Australia and that's in terms of people, that's in terms of processes, in terms of systems, infrastructure and so on.
Phil Tarrant: We spoke earlier about the parallels between Middle East and Australia. When it comes to doing business here, how do you find the Aussies? Are you enjoying the straight away of doing stuff? I imagine it's very different to the Middle East -
David Ruff: It's refreshing. It's refreshingly different. In the defence spaces I've said it's very structured, it's very open, it's very clear, it's very objective and we have absolutely no problem with that. We're very comfortable in that space.
The style of doing business is fine. It's as you would expect right across the fence and whether it's with the CASG element of defence, whether it's with the commonwealth, whether it's with the services themselves, whether it's with some of the big industrial players. Let's not forget, defence is a relatively small sector and so as I'm sure my colleagues in the defence space will tell you, we compete with each other as much as we collaborate with each other. It just depends what the customer needs and what solutions are out there.
You can take big flagship programmes like the UK aircraft carrier. We're very proud to have built that alongside BAE Systems. In another competition we might be aggressively competing with BAE Systems; that's how the world works.
Phil Tarrant: Well, the system works.
David Ruff: It works very well, yeah.
Phil Tarrant: It's interesting. I enjoy the dynamics how today's collaborator is tomorrow's competitor and vice versa. When you compete aggressively and competition's good, it's what fuels people to deliver results but I don't see a lot in defence as I do see in other industries. Others see the demonization of these businesses in order to corral and motivate. You don't see that in defence. But to change the mindset of competing with someone against a major programme, which can be worth billions of dollars, to, "Hey, let's join forces and drive ahead." Does that just happen organically do you think with people that work within defence or do you think people need to work on that deliberate mind shift between competitor or collaborator?
David Ruff: I think there's a whole set of causes, and I think what drives it in defence is at the end of the day you have a government. You're talking at state level here, you're talking about the national level, you're talking about the certainty of the budget, you're talking about the certainty of policy, the people that control the budget control the policy, you're talking about the need for domestic security. Everybody understands that, everybody buys into that, everybody's keen to be a part of that. If the customer requires industry to collaborate, industry will collaborate. Industry is extraordinarily agile at putting together consortia, at putting together alliances. It's equally as good at competing.
But, generally, I find in the defence space, people are driven by the customer need. I don't think there's any defence business out there that would not claim to be customer facing. We're all customer facing. We all interpret the customer's needs in different ways, maybe. But at the end of the day, we respond with our particular tool set, whatever we've got in our golf bag, we respond to the customer's needs. If those needs are greater than any one particular tool set, industry is very quick to see who else has got the other complementary bits and get together with them. It's very much driven by customer at the end of the day.
Phil Tarrant: When you think back a year when you were considering this role, looking into this role, looking at the Australian marketplace and arriving here 12 months down the track to today, is there anything you completely misread or got wrong do you think?
David Ruff: No, not at all. I think everything is as I expected it to be. Again, I go back to that high-level policy framework, the budgets, the funding, the commitments, the structures that are in place, the processes that are in place. There have been no surprises at all. It's absolutely as Babcock read it. I think certainly in the defence space now, that there is this focus and this shift towards the focus on sustainable defence industry, towards the sustainability of the defence capabilities, the various defence capabilities and the approach that is being taken to that, that very much plays to the Babcock business model.
Phil Tarrant: For you, when you think about the requirements of your role to deliver growth at a global corporate level but also to grow the footprint of Babcock in Australia, what is it when you concern yourself in bed at night, where I generally worry about stuff, what is it that really concerns you, which might inhibit or restrict you to deliver that? Anything in particular?
David Ruff: In the defence space, frankly, no. It's, as I've said, everything is in place and the direction, and I'm not talking about in the next 12 or 18 months, I'm talking about the next 20 years, 30 years. This is a long-haul game, defence is a long-haul game. There is plenty for us to be a part of now and we are. I think we've got seven live bids at the moment in the company and there is plenty downstream, whether it's the SEA1000 programme or things like JP2060 that I've talked about, there is plenty for us in defence. I actually don't have any particular worries about defence.
We operate in a number of other sectors in this part of the world as we do globally. Oil and gas is one of them and anybody who's in the oil and gas sector today is rightly concerned about the flatline oil price, and the effect that is having on the industry and some of the services that are delivered into the industry. If I worry about anything, I worry about the oil price but that's not something I can change. I can respond to it and we have responded to it.
We're still actually, quite interestingly, against the global trend. The business that we operate here in Australia, which is an offshore helicopter business, is actually growing against the trend, the global trend. I'm comfortable with that. But if I worry about anything, I worry about the oil and gas price and not defence.
Phil Tarrant: It sounds as though you've got the defence component of the business is driving forward and it's on the way. You said you've got seven live bids and we'll chat about those in just a sec, but how much of your time and attention would you place towards defence versus other parts of your steering Babcock here in Australasia?
David Ruff: That's a really good question. If I look at it in terms of the size of the business, it's between here and Australia and New Zealand, not forgetting that in New Zealand we are the New Zealand Defence Force's maritime strategic partner so we basically do what we do. In New Zealand we do what we do for the UK so we operate the dock yard, we sustain the entire navy, that's a completely different ballgame down in New Zealand. But that is part of our defence focus, as far as I'm concerned.
Overall, defence is roughly 50 per cent of my business. Do I spend 50 per cent of my time on it? Probably about that, it just depends. All of these businesses are slightly cyclical. Some of them have their peaks and troughs. Right now we've got, as I said, seven bids on the go. Of those, five of those are defence so defence is a big part of my attention right now. In three months' time, it might be our energy business or our transport business or whatever. It doesn't stay constant, let's put it that way.
Phil Tarrant: How do you prioritise to get into your role and to deliver this growth? Are you more aligned towards getting the infrastructure, the people, the capabilities in place to win work or are you more concentrating on, we've won the work, let's make sure we deliver it as efficiently and profitably as possible? Where would you say sit on that spectrum?
David Ruff: Absolutely both. No question. Babcock has a strapline. Our strapline is, "Trusted to deliver." We are very clear that if we drop a ball, ever, on our ongoing operations contracts, that's the short route to failure. You have to keep on performing. In a business where we operate, manage, provide people's complex assets, their critical assets, their critical programmes, we cannot afford to drop the ball. We sign up to very high levels of performance, as I've said earlier, 90 to 95 per cent is not unusual. When you put the complexity in the defence context of deploying those assets globally, of operating them globally in sometimes stress situations, of regenerating those and repatriating those all to the customer's readiness or qualms and so on and so forth, it is a highly complex, highly demanding environment. It's a bit like the game of soccer in the UK. You're only as good as your last game, if you drop the ball you're out. We absolutely cannot drop our focus on current business and operations and performing to the customer's satisfaction but, equally, we have to grow.
Like all businesses, we have growth targets and so on and growth aspirations. The Babcock way of doing these things is not just to go out and bid, bid, bid. We're not a bidding machine. We're a long-term business, we take a long-term approach, we take long-term partnerships, we invest.
If you look at some of the businesses and, again, outside the defence sector as well as inside the defence sector, we are very happy to invest in infrastructure, in people, in IP. We will do what it takes to get that solution right for the customer.
Phil Tarrant: How do you celebrate your wins? I like the idea of growth and growth businesses. You go out there and proactively chase and you, obviously, have a big filter on the type of work you want to win but when you do win these programmes, how do you celebrate a good win and all that? It's when the work starts by and large, but-
David Ruff: Celebration is always something that we have to do. If you want to keep your people motivated and incentivized and so on, of course, you've got to celebrate their successes. Actually, our celebrations are relatively short because as soon as we win something, the focus is on implementation.
If I give you an example, a non-defence example as our most recent one. Nine months ago we won a contract to support Qantas' ground support equipment, nationally. For us that was a big flagship contract. Qantas is a very big brand, its operations are complex and they're highly critical to Qantas, of course they are. That implementation was crucial and critical and we could not put a footstep wrong. The day that we went live, we absolutely had to be 100 per cent on top of the game. In terms of celebrating the success, yes, there's a bit flag waving around, "Wow, we've won the Qantas contract, guys," but actually it soon turns to the serious notion of implementation and delivery.
Phil Tarrant: How are you finding this growth curve in terms of people, those very talented engineers in Australia. You mentioned that you like to cultivate home-grown talent rather than importing it from other sort of jurisdictions around Australia. Are you looking at the pool of current servicemen and women who potentially are looking for career outside of, life after Australian Defence Force? Is that an attractive talent pool for you guys?
David Ruff: Yeah, absolutely. I think in any defence business in any part of the world, you'll find a relatively high proportion of ex-defence people in that business. That's absolutely sensible. These are the people who understand the ethos of the customer, the operational needs and demands of the customer, the imperatives that they have to work to; those people are always of high interest to us.
But it is a balance. You've got to bring young blood in. Babcock has a very heavily subscribed graduate scheme. We invest a lot in graduates, and we invest a lot in apprentices. We train something like 600 apprentices a year just to feed our own business. That investment in people is absolutely critical to us. New people, new skills, new blood and actually a new way of seeing things. The number of times I've seen graduates come off our programme and spend six months, a year in a job and then start to question the way things are done and to make suggestions about doing it better and so on, so forth, that value is incredible. If you blend that with the experience that ex-defence people get, you get a very, very powerful combination, which enables you to go to your customer and say, "Look I understand your needs because this guy, this defence person, was part of your show for 20, 30 years or whatever it is." But equally, we've got this bright person who's come up with this idea and what we'd like to do is blend it.
I'm not trying to individualise it, but that blend of experience and youth and education and aspiration and innovation is critical to what we do. If we try and manage complex and critical assets as we do today, in five years’ time in the same way, we're dead. We have to constantly innovate, constantly move forward, new processes, new methodologies, new systems and that's part of what we do.
Phil Tarrant: When you look at life after service, there's a lot of primes in the marketplace who are all trying to draw on this talent coming out of army, navy and air force, men and women. What do you think their perception would be of the Babcock brand if I was to pop down, and we were over at the harbour from Garden of Ireland and asked one of the seamen there or women, "Who's Babcock?" What do you think they would say?
David Ruff: They'd probably say, "Who's Babcock?" And that's not necessarily a criticism. I think one of Babcock's great strengths is we're very often the brand behind the brand. I'll go back to the Qantas example again as a very good example of that.
When you get on a Qantas plane and you look out the window, that piece of ground support equipment pushing the plane back or servicing the plane or whatever it is, doesn't have a Babcock logo on it, it has a Qantas logo on it. But we're actually the guys behind that. I can give you legion examples in the defence base where exactly the same thing applies. You just don't see the Babcock brand. We run military flying training, you don't see the Babcock logo anywhere, what you see is the air force's logo and so on.
I wouldn't expect the local defence person to necessarily know too much about Babcock. That might be a challenge for us in the future as the Australia defence industry grows and so on. I think it's probably important that we start to put our brand out there a bit more, but it isn't necessarily a concern to me that individuals don't understand the brand because at the end of the day, our brand is understood where it really matters. If you talk in the submarine community globally, there's very few people who haven't heard of Babcock for example.
I think we've got it just about right, but that's not to say that you can't always do a bit more brand development and so on.
Phil Tarrant: I'm sure there's a lot of assurance and all the confidence you have in programme, the products, all the service that you're delivering to people that you don't need to be flying the programme, what you're doing is delivering something to someone that needs it and irrespective of the name associated with it. If it's done the right way and it serves the purpose, I think that's a big ticket as far as I'm concerned.
David Ruff: I agree and I think if you look at some of the big things we do, there's very few companies that can claim to be the power behind the national nuclear deterrent. In the UK, that's what we are. Those submarines that carry that national nuclear deterrent do not go to sea without Babcock's maintenance, refits, upgrades, whatever. That's what we do. And if we don't turn up to work or we get it wrong, then that whole system is at risk. Of course, that probably would be the ultimate price. We would just never do that.
Whether it's Qantas' ground support equipment, it's the national UK deterrent, it's Collins class submarines here in Australia or ANZAC frigates over in WA, we treat them the same. They are critical assets, they are complex assets and they have to be available.
Phil Tarrant: You mentioned you have seven bids in the pipeline, five you mentioned are in the defence space. Where are you seeing this growth? Talk to me about the next 10 years? Where we going to see the Babcock name? Which projects are you going to be associated with?
David Ruff: We're going to be associated with anything to do with asset management. I've mentioned JP2060, I could put Australian defence force ground support equipment in the same thing; we just bid on that, that bid closed yesterday, in fact, and we've submitted our bid for that. Anything to do with defence asset management, we will take a very long, hard look at.
We don't always have to be the prime and, again, I think this goes back to your question around brand. Babcock is very comfortable partnering with people, sometimes being the subcontractor, so if you look at submarines in this country, we are very proud to support ASC. We would not think of doing it any other way. We have the capability to do much more but that's not how it works in Australia. We work to how it works in Australia.
ANZAC alliance with frigates. If you look at our expertise with frigates globally, we could quite easily do what the whole WAMA does, that's not our place so we don't even try to do that, we'll take our place within that. If you look at current defence initiatives, the major services provider, we're priming that and we've got some very big names supporting us in that. That's still a competitive process so I won't say too much more on that.
In that instance, we are the prime, in other instances we'll be the sub or the partner or whatever it is. We're very flexible, we're very adaptable to whatever the requirement is, but in terms of our long-term growth in the defence space in this country, it's very much around asset management. It's very much about making sure that the defence customer, air, land or sea, has the operation availability that they require to fulfil their charter with government and commonwealth and so on. That is assured and guaranteed at the most effective cost.
Phil Tarrant: David, I've really enjoyed the chat. I came into this conversation with, I've done quite a lot of research and I'm quite familiar with the level of work that your business is undertaking right now. We write a lot about it on defenceconnect.com.au but what's become clear to me and probably reinforce it in many ways is the business' ability to crystallise exactly where it has value and that clarity of thinking to say this is where we're going to play in Australasia marketplace. That's come through loud and clear so thanks for giving me that greater knowledge and insight into the -
David Ruff: Sure, my pleasure.
Phil Tarrant: It's good and stay in touch. Lot's happening at the moment so any sort of project winds and we like to publicise it, let us know. It's always good.
David Ruff: Yeah, celebrate the success.
Phil Tarrant: You need to and if anyone's got any questions for David, you can contact me and the team editor at defenceconnect.com.au and we'll pass them on. Likewise, any other questions or any of the other podcasts for our guest, please do get in touch, always happy to hear from you. Remember to check out defenceconnect.com.au. If you're not subscribing to the daily news alert, market intelligence like the majority of defence industry are, please go the website, defenceconnect.com.au/subscribe. Remember, on all the social channels, Facebook, Twitter and LinkedIn just search Defence Connect and you'll find us and that's it for me this week.
Again, David, I appreciate you coming in, really good chat.
David Ruff: My pleasure, enjoyed it, thank you.
Phil Tarrant: And we'll be back again next week. Until then, bye, bye.