Forge lifts profit, forms Clough JV

Engineering and construction groups Forge and Clough have added to their close ties by establishing a joint venture to bid for contracts on major resource and infrastructure projects.

Announcing its fourth consecutive increase in revenue and profits, Forge said today the 50:50 joint venture had commenced bidding for both engineering, procurement and construction (EPC) contracts and construct-only projects.

This comes one year after Clough closed a proportional takeover offer that delivered it a 31 per cent shareholding in Forge.

Forge reported today a 32 per cent increase in net profit to $38.8 million for the year to June 2011, with the result affected by a retrospective tax settlement in Ghana.

Revenue surged 72 per cent to $425 million as the company continued working on projects in Australia and Africa.

Managing director Peter Hutchinson said Forge had gone through a “step change” to compete against ‘tier 1’ contractors on large-scale resource projects.

Mr Hutchinson noted that his Clough counterpart, John Smith, had supported the drive for an “integrated Forge Clough relationship”.

Both companies are going through a management transition, with Forge seeking a new managing director and Clough announcing recently that Woodside executive Kevin Gallagher will be its new chief executive.

Mr Hutchinson said several candidates have been interviewed for the Forge role.

Forge finished the financial year with a strong balance sheet, including $78 million cash and minimal debt, but anticipates it will need more working capital to support its growth.

In light of this, the board decided that a 50 per cent increase in the final dividend, to 7.5 cents per share, was appropriate.

As well as bidding for work in Australia, Forge is pursuing growth opportunities in Africa, and is evaluating the establishment of a Johannesburg office to support its operations.

Meanwhile, Forge announced today that its 100 per cent-owned subsidiary, Abesque Engineering, had won a $30 million contract with Shark Bay Resources.

Under the deal, Abesque will design and construct a salt washplant at Shark Bay's salt operations in Shark Bay.