Engineering and property company Clough Limited has announced a net loss of $16.7 million for the half-year to December 2005, and is cautiously positive about its future prospects.
Engineering and property company Clough Limited has announced a net loss of $16.7 million for the half-year to December 2005, and is cautiously positive about its future prospects.
The result was in line with guidance provided at Clough's annual meeting last November, and included provisions of $26 million taken against two Indian contracts.
Managing director David Singleton said the company was seeking to negotiate extra costs for scope changes on the two Indian contracts, and its aim was to fully recover the provisions.
The problematic Indian projects followed the need to make large provisions against the Bass Gas project in Victoria, which Mr Singleton said was continuing through the mediation process.
However he said the underlying business was performing better and emphasised that new projects were helping to reduce the risk profile of the business.
"It is pleasing that across the rest of our activities we are improving profitability and see positive margins being generated from the balance of the order book," he said.
He said the profit (before the Indian provisions) in the first half "was a good indicator of how we see the second half traveling".
The order book was $840 million at the end of December and the company has since signed letters of intent for a further $350 million of work.
This includes a recent agreement with US company Apache Corporation to perform subsea repair work on oil and gas platforms in the Gulf of Mexico.
Mr Singleton said the agreement, worth $40 million in revenue per year, was "a major win for us".
"We haven't had a project like this for a few years now."
The project was rates-based with payment in advance and would be "very low risk".
Looking ahead, Mr Singleton said the company also had high expectations for the Boddington gold project, likely to cost about $1.6 billion.
The project is subject to a final investment decision but has awarded a front-end engineering contract to a consortium of Kvaerner (61 per cent) and the Clough-Murray & Roberts strategic alliance (39 per cent).
Mr Singleton said the group's risk profile had substantially improved, with lump sum contracts accounting for only about 40 per cent of expected earnings, down from about 90 per cent previously.
Looking across Clough's four divisions, its projects division posted a loss (before interest and tax) of $25.5 million reflecting the Indian provisions.
It's 83 per cent owned Indonesian subsidiary Petrosea, which is active in mining and oil & gas, reported an EBIT profit of $7.3 million.
Clough's property division achieved a profit of $2.8 million, which Mr Singleton said was down slightly but would improve in the second half.
Clough Services contributed $2.6 million helped by a long term services contract in Saudi Arabia.
