23/02/2012 - 14:21

Clough delivers lower profit, flags changes

23/02/2012 - 14:21

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Clough chief executive Kevin Gallagher has outlined plans to restructure and refocus the engineering contractor, to ensure it is more focused on commercial outcomes that reward shareholders.

This followed the announcement of an $11.7 million statutory net profit for the half-year to December, down from $15.3 million previously.

The company said its underlying earnings from continuing operations was much higher at $22.7 million, but even this was down from the previous half-year’s $27.7 million.

A better indicator of the opportunities before Clough was the nine per cent increase in total revenue to $540 million, including from its many joint ventures.

Moreover, the group has work in hand of $2.4 billion, after recent contract wins with Inpex, CSBP and Fluor, and a strong pipeline of tender activity.

Mr Gallagher, who joined Clough last year from Woodside, acknowledged the company has previously built up a very large order book, only to experience contractual setbacks and other problems that damaged its earnings.

The same thing happened during the half-year under review. Earnings were dented by previously announced losses on a fixed price contract and margin dilution on two EPC contracts, plus a $6.8 million write-down on a Queensland property the group is aiming to sell.

Looking ahead, Mr Gallagher said he wanted a sharper commercial focus, to complement the group’s strong customer focus.

“It’s not just about revenue, it’s about margins, the bottom line,” he told WA Business News.

To achieve that outcome, he said Clough needs skills, processes, systems and governance to ensure that it can properly executive its contracts.

He is also planning to segment the business into four streams, covering: delivery of major EPC capital projects, its engineering business, jetties and near-shore marine structures, and commissioning and asset support.

Mr Gallagher singled out the marine construction business, conducted through the long-running BAM Clough joint venture, as an area that has delivered for both customers and shareholders.

He is aiming to lift the size and performance of all these areas, by giving executives clear accountability.

 

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