Nick Evans
Are Clough’s woes a sign of the times, or self-inflicted?
The hundreds of subcontractors on Clough-led projects must surely be ruing the day they agreed to work for Australia’s oldest contracting company.
While the full state of Clough’s troubles won’t be clear until Deloitte administrators finish their initial assessment of its finances, the last set of accounts with Australian Securities and Investments Commission suggest the picture will not be a pretty one.
Clough owed $426.4m in trade and other payables at the end of June 2022, up from $374.6m the previous year. That figure is likely to be higher five months on, given that even Clough has now been forced to admit its financial woes have deepened.
Deloitte’s first order of business will be to stabilise the company, find a short-term cash injection to pay staff and keep work on its contracts ticking over.
But when that first work is done, there will be plenty of hard questions Clough’s administrators should be asking before they present their reports to the company’s creditors, and then to the corporate regulator.
How does a company borrow $167m from a joint venture partner without the loan showing on its books for two years?
When asked that question on Monday, Clough’s glib response was that it only disclosed the borrowings this time round because a change in Australia’s accounting rules required it to do so.
That is surely not good enough, particularly in light of repeated public comments by chief executive Peter Bennett – to creditors, staff, clients and the media – that the company was “debt free”. When did Clough write down $268.3m of the $345m it was owned by its parent company – a debt that dates back to Murray & Roberts 2013 buyout of Clough – and why was it allowed to do so?
And what will Deloitte do to recover the debt, given M&R has sent the subsidiary that owns Clough – and pretty much only Clough – into administration in South Africa? For that matter, how did M&R get away with raiding Clough’s cash kitty to buy the company in 2013, and never repay any of the initial $200m debt.
But, more importantly – and this goes directly to the heart of the concerns of subcontractors working for Clough – how did it keep winning contracts, given its precarious financial position?
Since 2018 Clough has been pointing to its growing order book as a sign the company was on track to return to its best years.
What Clough said to prospective clients about its health before winning work is a question that should be asked by Deloitte. It is also one for the agencies responsible for issuing the contracts in the first place, given Clough’s collapse throws doubts over its ability to deliver on any of those promises.
