Annual Integrated Report

2019

Gathering
Momentum

Menu

Underground Mining + Oil & Gas + Power & Water

Managing
Our Material
Issues

Strategic maturity

4

Corporate Reputation

Maintain reputation as an ethical and responsible multinational organisation

Respond effectively to local requirements

Sustainable profitibility

1

BUSINESS MODEL RESILIENCE

CONTEXT:

Variable cyclical dynamics will continue to characterise core and complementary market sectors.

 

Underground Mining is expected to maintain profits at current high levels in the medium term.

 

Foundations are in place for Oil & Gas profit recovery from a low base: in metals & minerals and infrastructure markets in the short term; and gas & petrochemical markets in the medium term.

 

The sustainability of the Power & Water business model is dependent on opportunities emerging in target segments of core and complementary markets.

 

The Group’s financial position is robust and sufficient to fund our organic and acquisitive growth plans.


MATERIAL ISSUE
LEVERAGE MARKET POSITIONS TO DRIVE SHORT-TERM GROWTH

GROUP

  • Maximise growth potential in buoyant markets in Underground Mining.
  • Harness competitive advantages in Oil & Gas to secure work in metals & minerals and infrastructure.
  • Secure projects in target market segments in Power & Water.
  • Integrate and grow new acquisitions by utilising Group relationships and scale.
  • Anticipate and respond to market shifts to tactically position businesses for growth.
 

OIL & GAS

  • Increase presence in Australian infrastructure and Australasian mining market sectors.
  • Enhance skills and contracting expertise and leverage reputation for complex project delivery in metals & minerals and infrastructure markets.
  • Maximise new EPC capability in the USA to secure opportunities in this high-growth market:
    • Complete the integration of Clough USA.

UNDERGROUND MINING

  • Improve project delivery efficiency and innovate to optimise margins and grow market share.
  • Cementation Canada & USA:
    • Integrate TNT and develop new material handling service offering.
  • Murray & Roberts Cementation:
    • Integrate Boipelo JV and develop new contract mining service offering in the coal sector.
 

POWER & WATER

  • Accelerate revenue replacement by targeting complementary market segments.
  • Optimise OptiPower’s track record to win work from Eskom in transmission, distribution and substation sectors.
  • Secure opportunities in power plant repair and maintenance.
  • Secure opportunities in renewable energy, including solar and gas-to-power.
  • Secure opportunities in resources and industrial, and paper and pulp industries.
  • Grow Aquamarine market share in chemicals and components market.

MATERIAL ISSUE
DIVERSIFY EARNINGS POTENTIAL THROUGH ORGANIC AND ACQUISITIVE MEANS

GROUP

  • Pursue targeted geographic diversification and growth opportunities.
  • Optimise margins and balance of risk by exposure to project life cycle phases, in particular operations and maintenance.
  • Enhance competitiveness through selective crossplatform collaboration.
  • Maintain strategic flexibility by leveraging positions in complementary markets to ensure long-term resilience.
  • Drive organic growth through local partnerships.
  • Access new sources of annuity-type income through investment as project developer and operator.
 

OIL & GAS

  • Expand Clough USA’s service offering and market presence by leveraging synergies across the platform’s geographic footprint.
  • Capitalise on track record to secure opportunities in PNG’s LNG expansion.
  • Target opportunities in the international oil and gas market with global clients:
    • Kazakhstan, Canada and Mozambique.

UNDERGROUND MINING

  • Increase commodities footprint where market outlook is positive.
  • Cementation Canada & USA:
    • Increase North American market share.
    • Access opportunities in South America and with existing clients in Europe.
  • Murray & Roberts Cementation:
    • Develop local partnerships in Central and West Africa, with a focus on raise boring project opportunities.
    • Grow annuity-type income by securing contract mining projects.
  • RUC Cementation Mining:
    • Develop opportunities in Asia and other markets with the Oil & Gas platform.
  • Explore opportunities in opencast mining to increase contract mining income and mitigate impact of project investment cycles.
 

POWER & WATER

  • Expand project development, EPC, and operations and maintenance service offering.
  • Target transmission, distribution and substation projects in sub-Saharan Africa.
  • Target opportunities in the refined fuel storage sector in South Africa and the LNG sector in Mozambique.
  • Establish scale in water business:
    • Pursue municipal wastewater opportunities based on Organica demonstration plant results.
    • Offer bespoke solutions for industrial water treatment in mining and power sectors.
    • Secure annuity income through chemical supply contracts and operation of wastewater treatment plants.
  • Develop relationships with equity and funding partners.

MATERIAL ISSUE
MANAGE CAPITAL AND LIQUIDITY EFFECTIVELY

GROUP

  • Ensure disciplined cost management to achieve overhead costs of about 5% of revenue through the cycle.
  • Manage free cashflow in operations.
  • Manage short-term liquidity facilities per platform.
  • Target net debt to equity ratio of not more than 35%.
  • Preserve liquidity by managing cyclical impacts on working capital due to:
    • Project delays and deferrals in soft markets.
    • Rapid upswings in activity as markets recover.
  • Manage financial impact of close-outs and claims:
    • Recover at least uncertified revenue recorded for Dubai Airport, power programme and other claims.
    • Manage costs associated with the closure of the business in the Middle East.
    • Conclude the Grayston temporary works collapse matter.
 

OIL & GAS

  • Monitor and manage costs incurred for business development and tenders to secure new work.
  • Negotiate advance payments on new projects to improve working capital.

UNDERGROUND MINING

  • Implement platform-wide procurement initiatives to drive savings through economies of scale.
  • Minimise idle assets by selling non-strategic assets or deploying them on other projects.
  • Negotiate advance payments on new projects to improve working capital.
  • Manage project margins and cash flow to optimise working capital.
 

POWER & WATER

  • Reduce working capital by recovering uncertified revenues through settlement of claims.
  • Develop external funding solutions to drive project development opportunities.
  • Expedite claims resolution:
    • Manage CTFE project dispute.
    • Manage the complicated claims process associated with the power programme.


2

CONTRACTOR OF CHOICE

CONTEXT:

Excellence in all areas of project delivery underpins our aspiration to be a contractor of choice.

 

Our ability to attract and retain the best management and technical expertise is critical to this aspiration.

 

Local contracting and technology partners are a requirement when securing work, making it necessary to ensure alignment of principles and standards.



MATERIAL ISSUE
DEEPEN ENGINEERED EXCELLENCE PHILOSOPHY

GROUP

  • Strive for Zero Harm:
    • Maintain fatality-free operations across the Group.
    • Focus on lag and lead indicators.
    • Continue to develop, enhance and share effective interventions to maintain world-class safety performance.
    • Assess effectiveness in managing critical controls using the MAP/CRM programme.
    • Continue to innovate towards Zero Harm.
    • Align with client safety systems, where appropriate.
  • Minimise project losses:
    • Competitive and correct pricing of projects, considering project risk and minimum standards.
    • Conclude contracts on reasonable commercial terms, considering Group lessons learnt and contracting standards.
    • Effective resourcing and start-up of projects.
    • Achieve predictable outcomes in line with tender expectations through effective project and risk management.
    • Align contracting standards with changes in commercial risk profile.
 

OIL & GAS

  • Maintain world-class safety performance through real-time reporting and innovative approaches to HSE leadership training.
  • Continue to deepen client relationships and business partnerships.
  • Ensure commercial and operational discipline to manage financial risk of fixed-price contracts.

UNDERGROUND MINING

  • Maintain world-class safety performance through steady reduction in LTIFR and sustained improvement in TRCR.
  • Streamline safety and project management systems.
  • Share best practices to support safety and efficiency improvements.
  • Provide ongoing commercial and project management training.
  • Apply technology to enhance project performance and maintain leading market position:
    • Update IT platforms to cloud-based infrastructure.
    • Improve productivity and drive efficiency by investing in automation and innovation.
 

POWER & WATER

  • Maintain world-class safety performance:
    • Maintain LTIFR at record-low.
    • Implement Neuroleadership programme to deepen safety culture maturity.
  • Ensure compliance with new contracting standards, especially for cost-reimbursable commercial arrangements on projects taken over from other contractors.
  • Maintain operational and commercial discipline throughout tendering process.



MATERIAL ISSUE
ACCELERATE THE APPLICATION OF RELEVANT TECHNOLOGY

GROUP

  • Understand the potential of technology to enhance competitiveness:
    • Perform Group technology maturity assessment.
    • Understand which technologies can enhance productivity in specific sectors and service offerings.
    • Develop leadership mindset and capacity to adapt to technological advances.
  • Accelerate technologically enabled operations to achieve efficiency gains:
    • Invest in and commercialise innovative technology.
    • Establish appropriate technology partnerships.
 

OIL & GAS

  • Invest selectively in innovation and technology to support transformation of supply chains.
  • Develop a digital platform that focuses on scalable technology that meets the demands of a global EPC business.

UNDERGROUND MINING

  • Operationalise technology-enabled processes including training applications, remote controlled and automated production processes, and asset maintenance systems.
  • Drive current innovations to commercial maturity and monitor technological innovation.
  • Cementation Canada & USA:
    • Improve asset management, cost accounting and project management systems to improve project delivery.
  • Murray & Roberts Cementation:
    • Enhance systems, skills and processes to be a leading mechanised mining contractor in Africa.
  • RUC Cementation Mining:
    • Leverage investment in Insig Technologies to drive application of automation technology, to enhance competitiveness.
 

POWER & WATER

  • Commercialise environmentally friendly class-leading Organica wastewater treatment technology.
  • Enable digitalisation in core and project support systems, and increase productivity, flexibility, adaptability as well as efficient asset management.



3

EMPLOYER OF CHOICE

CONTEXT:

Our aspiration to be an employer of choice in all our markets supports the recruitment, development and retention of competent, high-performing and ethical employees.

 

It underpins our ability to resource effectively according to the realities of market and project cycles.

 

A key driver of success is the Group’s culture, which is centred on our Values of Integrity, Respect, Care, Accountability and Commitment.


MATERIAL ISSUE
ENSURE LEADERSHIP QUALITY AND SUCCESSION DEPTH THROUGH PROACTIVE DEVELOPMENT

GROUP

  • Continue to align leadership succession to diversity objectives in all platforms.
  • Emergency successors identified for all executive roles across all platforms.
  • Accelerate and support career progression of high-performing talent identified for future leadership roles.
  • Align performance contracts with Group strategic objectives across platforms for middle management and above. Where formal performance contracts are not in place, team-based targets clarify performance requirements.
  • Deliver leadership development programmes.
 

OIL & GAS

  • Coach and mentor high-potential employees to develop into future leadership roles.
  • Develop future leaders through Clough’s Construction Management Academy, Project Management Academy and Young Professionals Group for talented employees.

UNDERGROUND MINING

  • Deliver leadership training from supervisors to future leaders, and maintain succession plans through training interventions:
    • A new Management Training programme in Cementation Canada & USA.
    • Murray & Roberts Training Academy’s programmes for first-time supervisors.
    • RUC Cementation’s Leadership Development programme.
    • Drive a learning culture in Cementation North America.
 

POWER & WATER

  • Develop and mentor a high-performing core group of leaders and supervisors, with a focus on black talent.

MATERIAL ISSUE
MAINTAIN BEST PEOPLE PRACTICES TO ATTRACT AND RETAIN HIGH-CALIBRE TALENT

GROUP

  • Embrace international standards of social justice, decent work and human rights, while also aligning policies and procedures to the legislation and basic conditions of employment of the counties we operate in.
  • Maintain ISO 9001 accreditation in all platforms and the associated audits.
  • Safety first philosophy to achieve Zero Harm across all platforms.
  • Maintain effective employee wellness programmes.
  • Offer career advancement through job experience on high-profile projects and extensive skills development and training, and coaching opportunities.
  • Offer structured performance management and development linked to market-related remuneration and incentive schemes.
  • Conduct new employee induction sessions with all employees to communicate the Group’s Values, culture and performance expectations.
  • Ongoing communication and engagement initiatives between Group leadership and employees.
    • Address areas of improvement identified in the employee engagement surveys undertaken in all businesses.
  • Ensure responsible resourcing despite market and project cycles:
    • Retain core skills through continuous engagement.
    • Attract required skills timeously through effective people planning to mobilise projects on time and within budget.
    • Responsible approach to retrenchments to right-size operations during downturn and when demobilising projects.
 

OIL & GAS

  • Strengthen capabilities to deliver excellent project outcomes.
  • Provide depth and variety of work experiences to attract and retain the right talent.
  • Implement process and workflow improvements identified in employee engagement survey.
  • Provide flexible employment options.

UNDERGROUND MINING

  • Regional training centres offer best practice technical and supervisory training.
  • Murray & Roberts Cementation:
    • Offer innovative training solutions, including virtual and augmented reality applications.
  • Resource growth at the top of the cycle by attracting scarce specialised skills and investing in training.
 

POWER & WATER

  • Provide training and development interventions to build a high-performing core group of artisans and supervisors to meet strategic objectives.


4

CORPORATE REPUTATION

CONTEXT:

Stakeholder trust and support is critical to the Group’s success and sustainability.

 

Governance frameworks and reporting structures ensure visibility of and compliance across all platforms.

 

Businesses are expected to align to the Group’s frameworks, standards and Values as minimum best practice, despite local operating differences.

 

Managing the impact of local dynamics on project delivery to limit contagion risk is imperative for the Group’s credibility with multinational clients.

 

Recognition as a responsible corporate citizen that responds to national objectives and complies with local laws, codes and standards is critical to the Group’s licence to operate.


MATERIAL ISSUE
MAINTAIN REPUTATION AS AN ETHICAL AND RESPONSIBLE MULTINATIONAL ORGANISATION

GROUP

  • Embed and align Group frameworks, standards and Values in acquired businesses.
  • Ensure adherence to the Group diversity policy across the platforms.
  • Uphold reputation for responsible and ethical conduct:
    • Comply with laws, standards and codes in all operations.
    • Senior management declaration on ethical behaviour every six months.
    • Conduct ongoing compliance and ethics training.
 

OIL & GAS

  • Embed Group frameworks, standards and Values in Clough USA acquisition.

UNDERGROUND MINING

  • Embed Group frameworks, standards and Values in TNT acquisition.
 

POWER & WATER

  • Embed Group framework, standards and Values in OptiPower Projects acquisition.

MATERIAL ISSUE
RESPOND EFFECTIVELY TO LOCAL REQUIREMENTS

GROUP

  • Accelerate diversity and localisation to remain competitive.
  • Respond to local requirements and norms within the context of Group expectations.
  • Effectively manage local factors pertinent to safety, work culture, labour and community relations, local procurement and community development.
  • Develop and implement industrial relations strategy prior to starting any project.
  • Invest in corporate social responsibility programmes.
 

OIL & GAS

  • Improve workforce participation by indigenous communities and women.
  • Drive workplace equality through memberships in the Diversity Council of Australia and the Gender Equity Group.
  • Develop community engagement management plans for new projects to support project delivery and benefit communities.
  • Support organisations, communities and causes that improve the lives of people living near projects through the Clough Foundation.

UNDERGROUND MINING

  • Cementation Canada & USA:
    • Respond to requirement for First Nation business partnerships.
    • Continue to partner with local companies in South America and in Mexico.
    • Address the results of diversity and inclusion survey through the diversity and inclusion working group.
    • Leverage the New Miner programme to train indigenous employees.
  • Murray & Roberts Cementation:
    • Continue to meet BBBEE targets, including those contractually required by clients under the revised Mining Charter.
    • Employ and train local workers on projects.
    • Procure from preferential suppliers.
    • Invest in local community development.
    • Apply employee relations framework, especially in maintaining constructive union relationships.
    • Establish local partnerships on mining projects in sub-Saharan Africa.
  • RUC Cementation Mining:
    • Implement diversity policy.
    • Recruit locally on international projects.
 

POWER & WATER

  • Maintain strong BBBEE credentials to access opportunities in South Africa:
    • Build on improvement in black representation in senior, middle and junior management levels.
    • Initiatives in place to achieve BBBEE Level 2 in FY2020.
  • Establish BBBEE partnerships in power maintenance, transmission and distribution and water.
  • Continue to work closely with clients, local community forums and leaders to manage expectations around economic and employment investment.
  • Develop local partnerships in East and West Africa to access new markets and sectors to deliver growth.