Rejuvenated engineering contractor Clough is looking to the flood of emerging LNG developments and potential consolidation of niche local service providers as the platform for continued growth over the coming years.
Rejuvenated engineering contractor Clough is looking to the flood of emerging LNG developments and potential consolidation of niche local service providers as the platform for continued growth over the coming years.
The iconic Perth company today continued its two year bounce back from near-death to post a 74 per cent increase in underlying pre-tax profits to $56 million on the back of its renewed focus on servicing the booming oil and gas sector.
The rise was built on a 22 per cent increase in revenues from continuing operations to $637.7 million, and delivered full year net earnings of $52.4 million. While down on the $66.6 million result posted in 2008, the prior result was skewed by a $32.1 million gain on the sale of Clough's non-core Shedden Uhde and CEM businesses.
Clough chief executive John Smith said Clough was now reaping the benefits of its strategy of focusing on its core capability as an EPC (engineering, procurement and construction) and marine construction contractor to the oil and gas sector.
With that sector now in expansion mode, he said Clough expected to grow its revenues another 10-15 per cent this financial year despite a lag in actual customer commitments, caused by the recent market downturn, which may take 12 months to dissipate.
Mr Smith said revenue growth would also be offset by a return to more sustainable margins of 6.5-7 per cent, down from a massive 8.8 per cent last year, when Clough worked on several higher margin one-off jobs, such as the emergency rebuild of the Varanus Island gas plant.
Clough is well set to cash in on the regional gas development boom. It is already providing front-end engineering and design services to the $50 billion Gorgon LNG project, worked on the jetty construction for Woodside's Pluto LNG project and recently secured the preliminary works contract for ExxonMobil's massive onshore LNG project in Papua New Guinea.
Similarly, it is working on the Apache-led Devil Creek/Reindeer domestic gas project in the Pilbara, and the Montara oil project in the Timor Sea.
But it is also in the running for $1.8 billion in additional EPCM and jetty contracts at Gorgon and for the upstream infrastructure development work at Exxon's PNG LNG project.
Similarly it is targeting EPC opportunities at BHP Billiton's planned Macedon domestic gas project in WA, and the slew of coal-seam-gas based LNG projects proposed in Queensland.
"There is a big opportunity for us here (in WA), at the gas projects in Queensland and in PNG," Mr Smith said.
"There is strong international competition ... but we've been in WA for 90 years, we know how to work here and understand the local environment, so we are as good a chance as anybody to pick up a fair proportion of that work."
Mr Smith said Clough was also eyeing non-organic growth through corporate opportunities to consolidate local "niche" service providers.
"We are strategically looking at niche opportunities ... (and) there are opportunities locally that would be very synergistic," he said.
Clough made its first move earlier this week with a deal to acquire Houston-based subsea engineering specialist Ocean Flow International for an undisclosed sum.
Mr Smith said Clough had significant capacity for acquisitions with over $140 million in cash and relatively strong paper. Clough's share price has more than trebled since March, rising from under 30 cents to current levels above 90 cents.
