stock to watch: clough limited

Stock to Watch: CLOUGH LIMITED
07:40, Thursday, 13 May 2004


SEASONED WA ENGINEERING GROUP ADDS PROPERTY FOR MORE BALANCE

Sydney - Thursday - May 13: (RWE)
********************************
OVERVIEW
********

Clough, the long time engineering group with its home base in WA
has broadened its strategies into the property market to smooth out the
troughs in its various activities.

Today the company's prospects are much brighter than this time
last year as it fended off the red ink.

The West is booming again through huge Chinese contracts for the
state's LNG gas from the North West Shelf and a continuing stream of iron
ore from the Pilbera.

Spending in minerals infrastructure, government infrastructure
and oil and gas continues to rise and are expected to produce significant
opportunities.

Clough provides a complete project development service for
leading international clients in the oil & gas, minerals, infrastructure
and property industries.

The Group's turnkey services range from complex front-end
engineering design and construction to long-term operations and
maintenance.

Managing director and CEO David Singleton says "We are pursuing a
range of high profile bids worth collectively in excess of $1.5 billion
which are due for award over the next nine months.

"Given the nature of Clough’s business we do not expect to win
them all but our success rate in being awarded this new business will
govern profitability next year," he declared.

But the CEO wants to insulate the company against a multiplicity
of contract involvements by diversify into the property as well.

Clough this week reported a new joint venture with Sydney-based
Elderslie Property Investments,which has bought seven adjoining parcels
of land at Mernda, 30 minutes north of the Melbourne CBD, for a major
residential and commercial development.

The Elderslie-Clough JV plans to develop 1500 residential lots
on the 77-hectare aggregated greenfields site.

The site also includes about 30,000 sqm of commercial land.
Sales are forecast to exceed $220 million over the next eight
years.

Mr Singleton said, "The earnings of the property division,
coupled with the services division, will form the base to support the
re-growth of Clough's contracting business.
"The Mernda project is a major long-term development.

"It will underpin our strategic decision to make the property
division a much more significant contributor to the group's bottom line
than it has been in the past," Mr Singleton declared.

SHARE PRICE MOVEMENTS
*********************

Clough shares sold steady at 47c yesterday. Rolling high for the
year has been 81c and low 45c. Although the company moved into the black
in the first half of this year directors believed it prudent not to
declare a dividend at this stage until more improvement was evident. But
with forecast of an even better second half the chances of a dividend
resumption this year seems quite good. RWE says the stock looks
undervalued on fresh prospects.

Clough reported an after tax interim profit of $3.2 million for
the six months to December 31, 2003 in contrast to a net loss of $4.9
million in the previous corresponding period.

As indicated late last year, the company’s full year profit is
forecast to be higher in the second half of the 2003-04 financial year.

During this period a number of large contracts are expected to be
completed.

Group turnover dropped 26.3 per cent to $435.8 million while
Clough’s work in hand at the end of the period was $510.9 million, down
57.6 per cent.

The company’s pre-tax profit included an operating loss on
Engineering and Construction programs of $2.3 million, including a net
provision of $9 million on 2001 and 2002 contracts.

This was offset by profits from the sale of Clough’s interests in
the Miitel/Wannaway (Miitel) mines (+$3.9 million) and the reversal of a
provision on the valuation of its shareholding in Mermaid Marine (+$3.6
million).

Mr Singleton pointed out that the first half result was also
impacted by an estimated $3 million foreign exchange loss on Engineering
and Construction programs due to the stronger Australian dollar.

The exchange rate movements had impacted both contract
performance, where for example the company had not hedged contract
overheads and margins until agreed with the customer, and revaluation of
retained earnings in Clough’s overseas subsidiaries and joint ventures.

The company has been taking a more proactive hedging position on
most major contracts.

At the same time successful partnerships, joint ventures and
strategic alliances have been a key feature of Clough's strategy for
growth and diversification.

Clough has formed dynamic partnerships across a broad spectrum of
industries with clients and associates who are recognised as
world-leaders in their field.

Today, these include joint venture partners Aker Marine
Contractors & Clough Offshore Joint Venture; Baulderstone Clough Joint
Venture - a joint venture between Baulderstone Hornibrook & Clough
Engineering Limited; Clough - AMC Subsea Partnership (CASP);
Clough Lucas Joint Venture - a joint venture between AJ Lucas Contractors
& Clough Engineering Limited; Clough Seymour Whyte Joint Venture; Kellogg
Joint Venture - a joint venture between Kellogg Brown & Root, JGC
Corporation, Kaiser Engineers & Clough Engineering Limited; Kvaerner
Clough Joint Venture; MPA Energy Services - a joint venture between
Pozzolanic Industries & Clough Engineering Limited;

PTSC Clough Joint
Venture; Shark Bay Salt Joint Venture - a joint venture between Mitsui
Salt P/L, AMP Society and Clough Engineering Limited

Current Alliance Partners are AGL Alliance - AGL Construction, AJ
Lucas Contractors and Clough Engineering Limited; Roe 7 Alliance - Main
Roads WA, Henry Walker Eltin, Maunsell Australia and Clough Engineering
Limited and S & B Engineers & Constructors and Clough Engineering Limited

BACKGROUND
**********

Clough originated in 1919 as a building company, J.O. Clough and Son, in
Perth, Western Australia.

Clough Group was listed as a public company on the Australian
Stock Exchange in March 1998.

It claims an international reputation for excellence in multi
disciplinary engineering and construction contracting.

The organisation's early growth and diversification was
spearheaded by the success of a number of landmark civil construction and
resource development contracts during the 1950s and 1960s.

The experience gained on major civil engineering and
infrastructure contracts associated with Western Australia's iron ore
boom of the 1960s and 1970s, prompted Clough to pursue new opportunities
overseas.

Contracts were secured in the Middle East, Indonesia and Africa
and offices were established on Australia's eastern seaboard.

The strategic acquisition, in 1984, of the Petrosea Group of
Companies secured for Clough a permanent base in the Asian region.

Onshore and offshore oil and gas developments became a major
thrust for the Group in the 1980s and 1990s.

Clough provides turnkey services to the oil and gas, minerals,
infrastructure and property industries.

These capabilities are supported by the Group's depth of skill
and demonstrated commitment to international standards of quality and
safety.

For the past three decades, Clough has nurtured the growth of
engineering talent via an undergraduate scholarship programme at
universities in Australia and Indonesia.

Logistical strength, technical innovation and a proven track
record in remote locations have assisted the company to build its
4000-strong workforce which operates throughout Australia, Asia, the
South Pacific, Middle East and offshore Europe.

Innovative engineering and the flexibility to meet changing
market conditions have assisted Clough to deliver world class solutions
in the most remote and isolated regions of Australia, Asia, the South
Pacific, the Middle East and offshore Europe.

Copyright © 2004 RWE Australian Business News. All rights reserved.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Cheers,

Fig Jam

It's been a painful ride down from a high of $0.81 last November, perhaps it will now start the hard road back. This could be an opportune time to buy in remembering to keep a tight stoploss.

Let's hope so.

I don't hold CLO