Clough owner concedes contractor faced collapse

Clough’s South African owner confirms embattled engineering firm faced voluntary administration without rescue plan.

Clough and Webuild are delivering the Snowy 2.0 project in NSW.

Embattled contractor Clough was close to financial collapse, its parent company Murray & Roberts has confirmed, with the West Australian engineering firm facing voluntary administration until a rescue deal was hatched.

The Australian first revealed Clough had endured widespread problems paying sub-contractors and suppliers this year, sparking speculation the company could soon be tipped into voluntary administration unless its parent company was able to inject more funds.

New disclosures from Murray & Roberts have confirmed the company faced financial distress, ultimately forcing its hand for the fire-sale to competitor Webuild on November 8.

“Having reviewed all available alternatives, the board of directors of Murray & Roberts concluded that the proposed transaction was the preferred course of action to address Clough’s working capital needs and avoid Clough being placed into voluntary administration,” Murray & Roberts said in an investor update.

Webuild will pay only $500,000 in cash for Clough along with the keys to its multi-billion dollar order book. But key to the future of its South African parent is an agreement for Webuild to waive about $350m it owes to its WA subsidiary – a legacy of Murray & Roberts’ 2013 takeover of the company.

Clough lent Murray & Roberts $200m of the $446m needed to buy out its minority shareholders, and the money has never been repaid.

Clough chief executive Peter Bennett.

“If Clough were placed into voluntary administration, the inter-company loan between Murray & Roberts Ltd and Clough would ultimately become due on its maturity,” the company said. “As Murray & Roberts Ltd has no ability to repay the loan, and in light of security given by Murray & Roberts to certain Clough creditors, Murray & Roberts Ltd would most likely also have needed to be placed into voluntary administration.”

The company’s 2021 financial accounts, filed with the corporate regulator last year, show the company made a $20.8m net profit and held cash of $246.3m.

Murray & Roberts said last week that Clough’s profit fell to a loss of R1180m ($103m) from a profit of R307m for the 2022 financial year.

Clough and Webuild filed more than $2.2bn of additional payment claims on Snowy 2.0, with the joint venture partners blaming the Covid-19 pandemic and surge in material prices for the cost hike.

Clough’s parent flagged a major earnings downgrade in October amid an “acute” cash crunch at the troubled contractor.

Murray & Roberts immediately pointed the finger at Clough’s engineering contracts on the $US650m ($1bn) petrochemicals plant under construction in Texas, Project Traveler, in addition to the Mitsui-operated Waitsia gas project.