A building company that collapsed suddenly with $10 billion worth of government projects could have been in trouble months before it went under, a report to creditors has revealed.
Perth-based Clough Group went into voluntary administration in December.
It completed industrial projects in the energy, resources and infrastructure sector, with projects such as the Federal Government’s Snowy Hydro 2.0 expansion alongside others in NSW, Western Australia and Papua New Guinea.
However, the creditor’s report from administrators Deloitte revealed that while Clough’s revenue grew from $686.3 million in the 2019 financial year to $1.47 billion in 2022, its costs also tripled from $684.2 million to $1.84 billion in the same period.
Deloitte administrators Jason Tracy and Sal Algeri found the group had “indicators of insolvency” from early as July but was likely insolvent from October, The Australian reported.
A deal to sell the company to Italian construction giant Webuild was identified as the best option to save Clough, but it fell through in December triggering its collapse.
Deloitte report’s said Clough’s demise came about as a result of the skyrocketing costs of raw material costs, outstanding claims against some clients, and the failure of its parent company – South Africa’s Murray & Roberts – to repay $347 million it owed.
Ultimately, Webuild was still able to snap up parts of the company in a deal struck with the administrators, reportedly for millions of dollars less than the proposed merger.
The company received the welcome lifeline with administrators securing a $35.9 million deal to save most of its workforce through a part sale of its projects and assets to Webuild that is a partner on the $5.9 billion Snowy Hydro 2.0 project.
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The creditor’s report also revealed that Clough’s directors sought safe harbour protection from claims against insolvency in May 2022, while the company had $46.4 million worth of invoices owed to creditors for longer than 90 days from June last year.
Creditors must approve the Webuild deal at a meeting on February 15, which will see it take charge of the bulk of contract work, liabilities and staff entitlements for five companies, while seven others will remain in administration.
If the deal goes through, creditors would see a return of 13.2 cents in the dollar, Deloitte estimated.
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