The strategic repositioning of the business has begun to show in our financial performance for the year, and in our earnings expectations for the next few years.
Revenue grew 65% to R11,4 billion (FY2020: R6,9 billion), with operating earnings of R227 million (FY2020: R454 million operating loss); representing a R681 million turnaround on the prior year’s loss. This strong return to profitability was achieved as our large EPC projects entered main production and new work secured during the year was converted to revenue. The platform was successful in securing an increased order book of R37,0 billion (FY2020: R34,4 billion).
Our LTIFR of 0.16 (FY2020: 0.17) is significantly better than the Australian contracting industry average of 0.92. TRCR deteriorated to 3.07 (FY2020: 1.21) due to safety challenges experienced at the start of a major project. A turnaround plan was implemented and is yielding good outcomes. The platform won the award for the best safety performance at platform level in the annual Group CE Safety Recognition Awards.
Of four new projects we were awarded in Australia, two exemplify the significant opportunity for the platform as the country invests heavily in decarbonisation and infrastructure-led growth. We secured the EPC scope for the country’s first net-zero emissions hydrogen and gas capable power plant in New South Wales for an EPC portion of EnergyAustralia and Project EnergyConnect, in 50/50 joint venture with Elecnor from Spain.
In North America, the integration of Clough Enercore into Clough USA was successfully completed. Our circa R9 billion downstream petrochemical construction project in Texas is performing well, despite initial permit delays and COVID-19 restrictions.
The e2o brand, well known for providing workforce management solutions in APAC, is expanding its offering to brownfield EPC and operations & maintenance in the region. It is also being positioned to expand its services in North America.
COVID-19 continues to impact on the platform’s clients, employees, projects and regions. While restrictions are easing, the pandemic is still affecting work rosters, supply chain requirements and the general wellbeing of our employees. However, our projects are moving forward and we are navigating the challenges. These include the Oyu Tolgoi project in Mongolia, which is emerging from “caretaker” mode, and the Lombrum project in PNG, on which mobilisation has been delayed.
COVID-19, low oil prices and a strong societal push towards a sustainable future have accelerated the global transition to cleaner energy. At the same time, public and private institutions are coming to terms with the urgency, cost and benefits of this transition. Operators are making net-zero emissions and energy transition commitments to align with sustainability expectations from clients, shareholders, funders and society at large.
Socioeconomic recovery post COVID-19 in Australia and North America will rely heavily on investment in private and public infrastructure with multi-billion Rand programmes that include transport, water and energy projects. Reduced reliance on coal in Australia for baseload power is driving the development of flexible generation capacity (peaking power and hybrid), renewables, waste-to-energy and green and blue hydrogen. In the United Kingdom, waste-to-energy opportunities are available.
The resources market is expected to gain momentum over the near term alongside the uptake of new and low emissions technologies. Australia’s exports of commodities that are central to these technologies — lithium, nickel and copper — are set to surge. Revenue from these commodities is expected to exceed current thermal coal revenue.
The platform is well positioned to capitalise on these developments. We deliver critical projects in energy, resources and enabling infrastructure industries, which will support the transition from fossil fuels to renewable and cleaner sources of energy.
In this context, environmental and socioeconomic issues feature both in the design of facilities and in project delivery, and are an increasingly important requirement for our clients, funders and shareholders. Our focus is to develop lower-emission plant designs to support clients in their decarbonisation efforts and our project execution includes multiple initiatives to engage our stakeholders.
Our strategy remains to position the platform’s core strengths and deepen its capabilities in the energy, resources and specialised infrastructure markets in APAC and North America, through organic and acquisitive growth.
Organic growth will include increasing our exposure to specialised infrastructure and continued focus on the power market (generation, storage and transmission), as well as the development of a hydrogen market and capability in APAC and North America. With opportunities in the North American LNG sector expected to remain limited in the short term, we will diversify our business in the region to include specialised infrastructure, similar to our repositioning in APAC. Our broader market focus in North America will include civil infrastructure supporting terminals, disaster relief and near shore marine prospects.
We are considering a value accretive acquisition in the APAC region to support growth, as well as an acquisition in North America to position us for the specialist infrastructure opportunities in these regions.
We are acutely focused on our project execution and mitigating project delivery risk. Structuring the platform into three regional businesses (APAC, North America, and EMEA) has provided each regional business with a defined level of autonomy and accountability within the global Clough management system.
The corporate function supports the platform’s growing needs and ensures the regions have the right resources, governance and focus to deliver project excellence. The platform’s executive committee was restructured to reflect this approach. Recognising how critical technology, reputation management and stakeholder engagement is to our aspirations, our chief business integration and security officer and our head of corporate affairs and stakeholder engagement were appointed to the committee.
Furthermore, we are deepening our management capacity and focus on initiatives to support our strategy and to ameliorate execution risk, with Engineered Excellence, innovation and people being key themes.
The Group’s operating philosophy of Engineered Excellence means that we strive for excellence in everything that we do. We aim to set new safety, performance and environmental benchmarks through deliberate planning, measurement and control. This drive for continual improvement supports our aspiration of being widely respected as a contractor and employer of choice in our markets.
Our focus on Engineered Excellence encompasses all aspects of project delivery, including commercial and health, safety and environmental management, governance, alignment with joint-venture partners and successful localisation. As our digital strategy gains momentum, it will support our ambitions of consistently excellent and profitable project delivery.Our projects can be found here
As part of our client engagement practice, we have made sustainability in design a standard business process. Outcomes include improvements in operating efficiency, significantly reduced CO2 emissions for the life of the facility, and optimising power generation through hybrid technologies, such as battery energy storage solutions. This reduces both capital investment and operating expenditure. During the project execution phase this design approach also minimises critical safety risks. The platform is also engaging with clients to develop solutions to support the net-zero transition.
The evolution of our safety practices has improved outcomes across the platform.
However, we continue to work towards a workplace that is injury free through effective safety leadership, personal accountability and developing our employees. Since 2017, we have completed nine projects with zero injuries and zero environmental impacts. Several other projects are on track to achieve this status.
We have partnered with MATES in Construction, an Australian not-for-profit organisation that focuses on mental health education and suicide prevention in the construction industry. We became a signatory to their Blueprint for Better Mental Health in 2020, and implemented its recommendations across all our projects. This involved providing relevant education and training to our project supervisors and workforce.
COVID-19 remains a significant health risk. Procedures, risk assessments, audits, screening and testing protocols are in place.
Technology is a critical part of the platform’s service offering. Understanding disruption, navigating new technologies, and managing cybersecurity and data protection, is vital to our success. We developed and have been implementing a phased digital strategy since 2017. This strategy was designed to meet the demands of a global EPC business, with a focus on global technology standards, scalability and defining a data management framework.
The next phase of this digital strategy, planned for early 2022, will focus on business synergy. This will include implementing an integrated technology and data platform and employing predictive analytics and robotic process automation. It will be supported by a digital operations journey and streamlined identity and access management.
The platform aims to:
During the year, we began work on a global solution for workforce planning, recruitment and onboarding, performance management, and learning and development. These are critical to the successful delivery of our order book.
We made remote working and flexible working arrangements an option for employees in APAC and North America. Offering this flexibility has been careerchanging for many employees and is transforming the way we do business.
The platform’s graduate programme, a structured three-year programme offering local and international development opportunities, has been effective in providing new talent for the engineering team. In FY2022, the graduate programme will adopt an expanded approach, including other disciplines that are key to successful project execution.
We want to ensure that the engineering and construction industry provides workplaces where everyone feels valued and included, where their strengths and their differences are embraced, and which provides opportunities for everyone to achieve their full potential.
Although we conform to the equal-work-equal-pay principle, we acknowledge that further work is needed to fully address pay equality. Historically, we have seen a disproportionately higher loss of female talent from middle management levels across the industry due to workplace rigidity. Our remote and flexible working policy should help to address this issue.
Our commitment to making a difference in our industry in this regard was recognised by an Employer of Choice for Gender Equality citation by the Workplace for Gender Equality Agency in FY2019. We have maintained the citation to date.
We engaged with CEOs for Gender Equity to deliver a series of workshops that captured the unspoken stories, questions, opportunities and challenges people face in the workplace and at home. These stories were shared with managers and the executive committee and provided insights on how we could best lead on our commitment to gender equity beyond policy and procedure.
In North America, the platform launched HERSTORY MAKERS, a women’s network, open to all employees who wish to actively participate in and support gender equity.
We constantly review our procurement and supply chain practices to ensure diversity and local participation. We have simplified our pre-qualification process for contracts under AU$250 000 to make it easier for small and medium businesses to demonstrate their technical and financial capability and relevant experience.
In Australia, the platform completed the first year of its Innovate RAP. Innovate RAP is a framework to create meaningful opportunities with Aboriginal and Torres Strait Islander peoples, which include employment, and supply chain and community development initiatives.
The Innovate RAP has given employees a framework to better understand and reflect on what reconciliation means to them, and how the platform can work together to create even more positive impacts, enriching the lives of the communities in which we work and live.
Across our regions, our operations are backed by the skills and values of veterans from all walks of life, across the Army, Navy, Air Force, First Responders and Cadets. In July 2020, the platform became a signatory of the Veterans Employment Commitment. This ensures that our human resource policies equitably support the recruitment and retention of all employees, including veterans.
Senior management and key employees receive regular training on ethical business practices. These employees are required to sign a declaration that no unethical or anti-competitive conduct was apparent in the preparation of tenders. A whistle-blower hotline exists for employees to report any unethical behaviour. Independent forensic consultants investigate all cases thoroughly and findings are actioned.
Collaborating with our stakeholders and understanding their views have always been of value and importance to the platform. Our commitment to stakeholder engagement is built on the understanding that knowledge-sharing, widening of experiences and adopting a learning mindset will help us achieve our strategic objectives.
While engagement with our stakeholders is embedded in our way of doing business, noteworthy initiatives include:
The progress we have made in our diversification strategy is reflected in a robust project pipeline. This combines complex and iconic projects in the enabling infrastructure, resources and energy industries in APAC, North America and the EMEA.
In FY2022, our portfolio of existing contracts, new contracts and near orders is set to double our FY2021 revenue, exceeding FY2014’s historical peak. Revenue earned from our current contracts should grow significantly in FY2022, as we enter the major construction phase of some key projects.
The platform’s proven specialist capability to deliver complex infrastructure and energy projects will convert into opportunities for accelerated earnings growth in the short and medium term.
Snowy Hydro is an existing hydro-electric power scheme in New South Wales, Australia. Snowy 2.0 will add a 2GW hydro-electric power station to the existing scheme in a pumped hydro arrangement. This circa R18 billion (Clough’s share) EPC project is being delivered in joint venture with Italian firm, WeBuild (formerly Salini Impregilo).
The main works include a new underground power station linked by tunnels to two of the existing scheme reservoirs. The underground excavations will include massive powerhouse caverns and approximately 40km of tunnels. Supporting works to deliver this project include establishing or upgrading approximately 45km of access tracks and roads, along with electricity connections to the various construction sites, accommodation camps, and a pre-cast factory.
One of the three 11m diameter TBMs has recently commenced tunnelling, the second TBM is being assembled at the portal, with the third TBM stored in Sydney prior to mobilisation. The excavation of the powerhouse caverns will commence once the first TBM provides access.
The project is located near Houston in Texas, USA. This is a circa R9 billion project for the EPC, commissioning, and start-up of a petrochemical facility. The 28 000bpd alkylate facility will consist of a new ethylene dimerization and alkylation units to produce high octane alkylate for sale into the gasoline blending market.
Construction activities continue to ramp-up and are well advanced with outside battery limits construction and pipe fabrication construction progressing as per schedule.
Oyu Tolgoi in Mongolia mines one of the world’s largest known copper and gold deposits.
The project scope, undertaken by our GCR Mongolia joint venture, is for the design, construction and commissioning of Shafts No 3 and No 4, as well as the underground materials handling system that includes civil, structural, architectural, mechanical, piping, electrical, instrumentation, control and communication works.
Due to COVID-19, the project has experienced significant delays, though a restart is imminent.
The platform, in a 50/50 joint venture with Saipem, was awarded the EPC contract for the development of Perdaman Industries’ urea plant on the Burrup Peninsula, approximately 8km from Dampier and 20km northwest of Karratha on the northwest coastline of Western Australia.
The facility will consist of the urea fertiliser plant and related facilities with a capacity of two million tonnes of urea per annum. The facility includes a water treatment plant, a 100MW power plant, as well as urea storage, loading and unloading facilities. A closed conveyer will transport the urea directly to the Pilbara Ports Authority for shipping to local and offshore markets, with 50 to 100 shiploads expected per year.
FID is expected by the end of this calendar year, with EPC commencement planned for February 2022.
ElectraNet and TransGrid are partnering to deliver an energy interconnector between the power grids of South Australia (starting at Robertstown) and New South Wales (finishing in Wagga Wagga), with an added connection to Victoria (Red Cliffs).
The platform, in a 50/50 joint venture with Spanish company Elecnor, was awarded a circa R8 billion (Clough’s share) contract for the EPC of TransGrid’s portion of Project EnergyConnect, which includes four substations and approximately 700km of 330kV transmission lines.
The platform was awarded the head contractor scope to redevelop the Lombrum Naval Base in PNG. The scope of the Lombrum Infrastructure Project was developed and agreed in consultation with the PNG Defence Force. It has been designed to benefit the local community and includes the construction, support, maintenance and repair services of the Lombrum Naval Base, located in Manus Province.
Mobilisation to site has been delayed due to COVID-19 restrictions.
The Tallawarra Gas Plant Stage B is a 300MW expansion of the existing Tallawarra A power station, which is located at Yallah in the Illawarra region of New South Wales, approximately 13km southwest of Wollongong.
The platform, in consortium with General Electric, was awarded the EPC scope for Tallawarra Stage B, Australia’s first net-zero emissions hydrogen and gas capable power plant. Direct carbon emissions from the project will be offset over its operational life.
The Waitsia gas field is located near the town of Dongara, approximately 350km north of Perth and 65km south of Geraldton in Western Australia.
The Waitsia gas field is one of the largest gas fields ever discovered onshore in Australia and it is forecast to bring significant economic benefits to the mid-west region during both construction and operating phases. The Waitsia Gas Project Stage 2 includes a new 250 TJ/day gas processing plant with a 15-year life cycle that will convey gas via the nearby Dampier to Bunbury Natural Gas Pipeline.
The project has been designed to incorporate BESS as energy storage units, as they provide both commercial and sustainability benefits, with reductions in both OPEX and CAPEX spend, as well as reducing fuel gas consumptions and CO2 emissions for the life of the project. It is an effective demonstration of the platform’s sustainability capabilities.
The platform was awarded the EPC scope at the beginning of calendar year 2021 and work is about to commence.