Forge flags $25m earnings loss

Struggling contractor Forge Group has forecast a loss of up to $25 million for the 2014 financial year, slashing its earnings guidance on the back of cost blow-outs at several projects.

The company now expects to record an earnings before interest, tax, depreciation and amortisation loss of between $20 million and $25 million.

Forge had previously forecast earnings of between $45 million and $50 million, despite expecting to incur losses of up to $155 million on two of its power station projects.

The forecast result represents a major turnaround compared with the 2013 financial year, when the contractor recorded EBITDA of $115.5 million.

Forge said the company's immediate focus had been on generating cash flow to meet its requirements as it works to complete the trouble-plagued Diamantina and West Angelas power station projects, with less emphasis placed on booking major new projects.

The contractor expects to incur further costs from the performance of two contracts managed by its Pilbara Logistics joint venture, resulting in both projects being unprofitable.

Forge also flagged that it is considering third-party approaches, appointing Euroz Securities as a corporate adviser.

"Forge Group is encouraged by the interest shown in the company by third parties despite recent challenges," Forge managing director David Simpson said.

"This level of interest reflects the strength of the underlying business, which is supported by an order book of $1.5 billion and $1.3 billion in active tenders as at January 2014."

Forge said its financier, ANZ Banking Group, would continue to provide overall support to the company through existing facilities. The company is clearly anticipating some mergers and acquisitions activity, possibly a full sale, with the appointment of Euroz "to manage third party interest in the business".

The company said it had secured a further $25 million of asset management works in Western Australia during the past week, taking its total value of new asset management works for FY14 to about $115 million.

Forge shares closed the day's trade 8 cents lower at 82 cents.