During the past three years, the Group broadened its market focus to mitigate market cyclicality and subsequently renamed its business platforms to better reflect the market sectors in which they operate as specialist contractors. This decision contributed to significant order book growth for the Energy, Resources & Infrastructure ("ERI") platform, which reported an all-time high order book. The Group expects the ERI platform to make a significant contribution to earnings in FY2022.

In FY2021 H1, the Mining platform, especially in the Northern Hemisphere and South Africa, was negatively affected by prolonged COVID-19 lockdown restrictions. The fair value adjustment of the Company's investment in the Bombela Concession Company was also less than that of the prior period, which benefitted from the settlement of claims. The Power, Industrial & Water platform continued to experience a dire lack of project opportunity, as there has been no meaningful fixed investment in the South African economy for the past few years.

As announced in the Business Update published in November 2020, results for FY2021 H2 are expected to be better than for H1, especially as adaptation to declining COVID-19 restrictions increases and work commences on recently awarded contracts.

The growth in the Group’s order book to R60,5 billion is due to the significant growth in the ERI platform’s order book. Since December 2018, when the ERI platform focused mainly on the liquified natural gas (“LNG”) sector in Australia, its order book has grown from R4,4 billion to R42,2 billion at the end of December 2020. This growth follows the award of several multi-billion Rand projects in the energy, resources and infrastructure sectors.

The ERI platform trades under the Clough brand, a brand associated with providing project service excellence for more than 100 years on large and technically and logistically challenging projects in the energy, resources and infrastructure industries. Clough's journey has always been dynamic, as market developments necessitated changes to market sectors or geographies in which the Clough group of companies operates.

In anticipation of this platform’s order book growth, the necessary capacity was established to effectively manage a structurally larger business. Strategically, the platform has been organised into three regional businesses, APAC (Asia-Pacific), North America and EMEA (Europe/Middle East/Africa), each with a strong and dedicated leadership team, while maintaining access to the platform’s global resources and expertise. In addition, as the market transitioned from cost reimbursable models for engineering, construction and procurement (“EPC”) projects to mainly lump sum turnkey (“LSTK”) models, the platform redefined its systems and project leadership capability to align with the new requirements.

For the APAC region, which represents the largest percentage of the platform's order book, John Galvin, with over 30 years experience in the consulting, manufacturing and construction industries, was appointed as Executive Vice President. He is supported by John Guyer, an industry veteran with over 25 years domestic and international experience in heavy engineering and construction, with specific responsibility for operational oversight of Clough's various APAC projects. Additionally, Martin Siddle, with 30 years domestic and international experience in the energy, oil & gas, petrochemical, LNG and gas-to-liquids EPC contracting service sector, was appointed to lead the North American business. The APAC and North American regions represent more than 95% of the platform's order book.

PROLONGED COVID-19 IMPACT

The business impact of the COVID-19 pandemic and related restrictions that commenced in the second half of the previous financial year has continued into FY2021, although not at the same level as was experienced in FY2020 H2. However, the FY2021 H1 impact was more severe than what was anticipated.

The Group has largely recovered from the initial and major FY2020 H2 COVID-19 restrictions impact and is well positioned to operate successfully through this short to medium term uncertainty. The relevance of and the Group's exposure to the natural resources, commodities, utilities, energy and infrastructure markets, and its significant order book, support the view of expected growth in Group earnings, especially after FY2021.

Financial Results

Revenue from continuing operations was maintained at R10,8 billion (FY2020 H1: R10,8 billion). The Group reported earnings before interest and tax for continuing operations of R117 million (FY2020 H1: R419 million) and an attributable loss of R167 million (FY2020 H1: R163 million profit). The loss is ascribed to a prolonged COVID-19 restrictions impact, especially in the Mining platform, a disappointing result by the Power, Industrial & Water platform, as well as a lower fair value adjustment profit from the investment in the Bombela Concession Company. A diluted continuing headline loss per share of 8 cents was recorded
(FY2020 H1: 49 cents profit).

Cash, net of debt, improved to R0,3 billion cash (FY2020 H1: R0,1 billion debt).

The Group is pleased to report a record, quality order book of R60,5 billion (FY2020 H1: R50,8 billion). Although FY2021 is proving to be a challenging year for the Group, the current order book and near orders hold promising potential for a significant turnaround in FY2022.

The effective tax rate remains high, mainly due to withholding tax in foreign jurisdictions, as well as losses incurred in entities where future taxable earnings are uncertain. Consequently, no deferred tax assets could be recognised on these losses.

Dividend

On an annual basis, the board of directors of the Company (“Board”) considers a dividend post-year end. As a result of the significant growth in the Group’s order book and ongoing uncertainty brought about by COVID-19, the Board will prioritise retaining sufficient capacity to deliver the order book.

ORDER BOOK, NEAR ORDERS AND PROJECT PIPELINE

The Group reported a record, quality order book of R60,5 billion, which includes several multi-year contracts. The project pipeline includes a significant value of near orders of R19,9 billion, and Category 1 project opportunities of R94,7 billion, of which circa R34 billion is being negotiated on a sole-source basis.

		Pipeline
R billions	Order book	Near orders	Category 1	Category 2	Category 3
Energy, Resources & Infrastructure	42,2	5,0	43,9	58,8	502,1
Mining	17,9	14,7	44,2	27,4	45,8
Power, Industrial & Water	0,4	0,2	6,6	30,5	14,8
31 December 2020	60,5	19,9	94,7	116,7	562,7
30 June 2020	54,2	11,4	121,3	123,5	469,8
31 December 2019	50,8	6,4	70,5	81,9	515,3

• Near orders: Tenders where the Group is the preferred bidder and final award is subject to financial/commercial close – there is more than a 95% chance that these orders will be secured.
• Category 1: Tenders submitted or tenders the Group is currently working on (excluding near orders) – projects developed by clients to the stage where firm bids are being invited – reasonable chance of being secured as projects are a function of (1) final client approval and (2) bid win probability.
• Category 2: Budgets, feasibilities and prequalification the Group is currently working on – project planning underway, not at a stage yet where projects are ready for tender.
• Category 3: Leads and opportunities which are being tracked and are expected to come to market in the next 36 months – identified opportunities that are likely to be implemented, but still in pre-feasibility stage.

Energy, Resources & Infrastructure Platform

	Engineering & Construction		Global Marine		Commissioning & Maintenance		Corporate & Other		Total
R millions	2020	2019	2020	2019	2020	2019	2020	2019	2020	2019
Revenue	4 617	3 035	68	10	222	280	244	60	5 151	3 385
Operating profit/(loss)	138	47	(2)	(12)	22	155	(155)	(190)	3	–
Margin	3%	2%	(3%)	(120%)	10%	55%	–	–	–	–
Order book	41 214	29 419	382	381	600	695	–	–	42 196	30 495
LTIFR (fatalities)									0,34(0)	0,36(0)

Revenue increased to R5,2 billion (FY2020 H1: R3,4 billion) and the platform recorded a break-even in earnings before interest and tax (FY2020 H1: break-even). The platform was successful in securing an increased and quality order book of R42,2 billion (FY2020 H1: R30,6 billion). The Group expects the platform to make a significant contribution to Group earnings in FY2022.

The platform has done well by establishing a good market position in the specialist infrastructure and resources growth sectors in Australia, both sectors which are expected to remain buoyant over the next decade. Australia's post-COVID-19 economic recovery will rely extensively on state-funded investment in public infrastructure, complemented by a bullish outlook for capital project spend by mining majors.

In North America, all businesses have been consolidated under Clough USA. Several partnerships are under consideration that will make this business a strong contender for EPC projects in the region. As the energy market is somewhat under pressure presently, this business is targeting a broader market in line with the platform strategy. However, as a cleaner feedstock for power generation, LNG demand is expected to recover in the medium term as the global transition to a
carbon-neutral economy gathers momentum.

The platform's near orders increased to R5,0 billion (FY2020 H1: R0,1 billion). This value excludes the previously announced Perdaman Industries' multi-billion Australian dollar urea plant, where Clough is in a 50/50 joint venture with Saipem and this project is included in the platform's Category 1 pipeline projects. The Final Investment Decision is expected before the end of FY2021.

Mining Platform

	Africa		Australasia		The Americas		Total
R millions	2020	2019	2020	2019	2020	2019	2020	2019
Revenue	1 574	1 636	1 536	1 922	1 954	2 656	5 064	6 214
Operating profit	90	98	32	50	54	205	176	353
Margin	6%	6%	2%	3%	3%	8%	3%	6%
Order book	12 726	12 755	2 163	2 727	3 058	4 135	17 947	19 617
LTIFR (fatalities)	1,91(0)	1,91(0)	1,12(0)	0,68(0)	0,00(0)	2,68(0)	1,28(0)	1,67(0)

Revenue and operating profit decreased to R5,1 billion (FY2020 H1: R6,2 billion) and R176 million (FY2020 H1: R353 million), respectively. The order book decreased marginally to R17,9 billion (FY2020 H1: R19,6 billion), but is supported by a strong project pipeline.

The platform continues to perform well, although the mining businesses in the Americas are experiencing a prolonged COVID-19 restrictions impact, manifesting as disruption to project operations and a delay of new project awards, which is creating short-term order book pressure.

There is an increased demand for vertical shaft work in Australia and several projects are expected to be awarded during FY2021 H2. The platform is well positioned for these opportunities considering its service offering and the competitive landscape. In sub-Saharan Africa, the awards and commencement of new projects have been delayed, but are expected to materialise within the 2021 calendar year.

Capital investment in the mining sector continues mainly in brownfield expansions although it is expected that, considering commentary from mining clients, investment in new mines will return from mid-2021 onwards. Goldman Sachs recently released a report commenting that a recovery in commodity prices will be the beginning of a much longer structural bull market for commodities and according to JPMorgan Chase & Co, oil and other commodities have probably entered a new super cycle, as a post-pandemic economic rebound and swelling inflation spark expectations of rising demand. This platform has established a very good position in the global market for underground mining projects and is well positioned to benefit from the expected improvement in market conditions.

The platform's near orders increased to R14,7 billion (FY2020 H1: R6,1 billion).

Power, Industrial & Water Platform

	Power1		Water		Transmission & Distribution		Other2		Corporate		Total
R millions	2020	2019	2020	2019	2020	2019	2020	2019	2020	2019	2020	2019
Revenue	262	615	2	7	103	136	188	414	–	–	555	1 172
Operating profit/(loss)	134	61	(13)	(1)	(25)	22	(114)	(4)	(49)	(59)	(67)	19
Margin	51%	10%	(650%)	(14%)	(24%)	16%	(61%)	(1%)	–	–	(12%)	2%
Order book	85	153	114	–	189	266	12	225	–	–	400	644
LTIFR (fatalities)											1,20(1)	0,00(0)

1	All power sector projects, including Power Programme (Medupi & Kusile).
2	Includes Resources & Industrial and Electrical & Instrumentation projects.

Revenue and order book decreased to R0,6 billion (FY2020 H1: R1,2 billion) and R0,4 billion (FY2020 H1: R0,6 billion), respectively. Given the platform’s low revenue base and losses on a near-completed project, the platform recorded an operating loss of R67 million (FY2020 H1: R19 million profit).

The platform operates in sub-Saharan Africa, a region which currently presents limited large-scale project opportunity, with available opportunities being delayed. No projects of any significant value were secured during the period and opportunity for new project awards within the next six-month period is limited.

The recently announced infrastructure plan by the South African Government to stimulate the economy should present opportunity in the medium term, and several transmission tenders invited by Eskom are currently under adjudication.

Investment in the South African water sector continues to be limited. The LNG investments in Mozambique are also unlikely to present opportunity in the short to medium term, as there are significant regional security risks to the project.

The platform has near orders of R0,2 billion (FY2020 H1: R0,2 billion).

Investments

	Bombela Investments
R millions	2020	2019
Revenue	–	–
Operating profit	107	197

The Gautrain is operating with capacity restrictions and current ridership levels are significantly down. Demand is expected to remain subdued until all COVID-19 lockdown restrictions have been lifted. Current ridership is circa 11 000 passengers per day, compared to about 55 000 passengers per day prior to COVID-19 restrictions.

The estimated impact of the COVID-19 restrictions on the Group's 50% investment in the Bombela Concession Company was accounted for in FY2020 H2. A business interruption claim for losses caused by an infectious disease and the related restrictions has been submitted to the insurers, which currently is under consideration. The impact, if any, of prolonged COVID-19 restrictions on this investment will be re-assessed during FY2021 H2.

A fair value adjustment profit of R107 million was reported for the period (FY2020 H1: R197 million). The FY2020 H1 result included proceeds from the settlement of various claims.

Discontinued Operations

	Middle East		Other		Total
R millions	2020	2019	2020	2019	2020	2019
Revenue	–	126	25	35	25	161
Operating loss	(68)	(31)	(51)	(17)	(119)	(48)

The Group recorded an operating loss from discontinued operations of R119 million (FY2020 H1: R48 million loss). The increased loss is due to a R39 million impairment following the decision to sell an investment in a joint venture holding, the Mooikloof residential development (a retained asset after the sale of the Infrastructure & Building businesses in 2017), which has not made any progress for several years, as well as a negative R39 million exchange rate movement on an intercompany loan to the Middle East.

The Group continues to actively manage several claims and counterclaims on completed projects in the Middle East. To achieve a final exit from this region is a complex matter, as evidenced by the successful (although without cause) call made on the Al Mafraq project bonds. Stakeholders are referred to the SENS announcement published on 18 January 2021 regarding the Al Mafraq project in Abu Dhabi. The payout under these bonds is not expected to have any income statement impact, nor any direct cash flow implications for the Group. The Group will continue to provide further updates to stakeholders as appropriate.

Considering the progress made with the legal processes required to close-out all commercial matters, the Group expects to exit this region within the 2021 calendar year and without any further material impact on its adopted accounting position.

UPDATE ON THE GROUP'S CLAIMS PROCESSES

Since the end of the previous financial year, the Group's uncertified revenue remained unchanged at R1,1 billion. It has become more difficult to settle claims expediently with clients considering the uncertainty brought about by COVID-19 pandemic. The Group, however, remains confident that revenue recognised as uncertified will be certified and paid once attendant commercial matters have been resolved.

HEALTH AND SAFETY

The Board deeply regrets the passing of Mr Wilfred Moleofi, who was employed by OptiPower Projects in South Africa. Wilfred sustained injuries in July 2020, while performing his duties. The Board again offers its deepest sympathies to his family and friends.

The Group's lost-time injury frequency rate ("LTIFR") improved to 1,00 (FY2020 H1: 1,12). Even though the LTIFR remains industry leading, fatalities and injuries at work are avoidable and therefore unacceptable. The Group continues to focus on understanding and managing the complex interplay of factors required to ensure Zero Harm to our employees, service providers and communities.

The health and well-being of all employees is important, especially amid the COVID-19 pandemic. To date, the Group has reported 651 infected employees and 610 recoveries. Regrettably, seven colleagues have lost their lives due to COVID-19 related complications and the Group shares its deepest condolences with their families and friends. Where required, support is being provided to employees to assist them in dealing with the mental and emotional impacts of COVID-19 and the related restrictions. We are also maintaining regular communication with employees on how best to protect themselves and their families from infection.

SHIFT IN GROUP'S CLASSIFICATION ON THE JSE

As from 22 March 2021, the Group's classification on the JSE will move from Diversified Industrials to the Engineering and Contracting Services subsector, a new subsector to be introduced by FTSE Russell and the enhanced Industry Classification Benchmark. This new subsector will be more descriptive of the Group's strategic positioning.

PROSPECTS STATEMENT

Considering the Group's order book of R60,5 billion and near orders of R19,9 billion, it is well positioned for a return to profitability in FY2022 and to achieve meaningful earnings growth in the short to medium term.

The Group is confident that its growth plans are achievable and it has the necessary leadership, financial and resource capacity to support these plans.

Any forward-looking information contained in this announcement has not been reviewed and reported on by the Group's external auditors.

On behalf of the directors: