VDM Group has reported a loss of $106 million for the 2009 financial year on the back of hefty writedowns coupled with weak business confidence and highly competitive tendering.
VDM Group has reported a loss of $106 million for the 2009 financial year on the back of hefty writedowns coupled with weak business confidence and highly competitive tendering.
The announcement is below:
VDM Group Ltd (ASX: VMG) ("VDM" or "the Company") today announced an after tax loss of $106 million for the full year ended 30 June 2009. As foreshadowed in recent profit guidance announcements, the loss was impacted by impairment charges totalling $88.9 million and property development related losses totalling $12.1 million. The impairment charges include goodwill impairment of $81.9 million and assets impairment of $7.0 million including $3.1 million attributable to development properties.
Although revenue growth of 8.6% to $442.5 million was achieved, profit was materially impacted by the downturn in the economy, weak business confidence and highly competitive tendering, all of which caused margin erosion. Bad debts of $7.1 million were also booked, as were restructuring costs of $2.2 million and legal settlements totalling $1.6 million. Excluding these amounts, the Company's adjusted operating EBITDA was $21.6 million.
VDM acting Chief Executive Officer, Jim van der Meer said: "the full year result is obviously disappointing, however management and staff have responded positively to the implementation of the restructuring initiatives designed to stabilise the business operations of the Company with a renewed focus on operational performance and cash flow management. VDM is well positioned in the market as evidenced by the recently awarded bulk earthworks contract for the Sino Iron port project. The financial benefits of this and other recently awarded contracts will mostly flow into the 2009/10 financial year. Our order book for 2009/10 continues to improve and now stands at approximately $270 million being 68% of our anticipated $400 million in forecast revenue for the 2010 financial year".
"Consolidation of the corporate head office and other business operations to our Osborne Park office will result in considerable savings in overheads and will also improve efficiencies. These initiatives, together with a simplified business structure and improving business conditions, place VDM in an encouraging position going forward. However, it is recognised that business conditions remain fragile and in FY2010 VDM management expect to experience continued business challenges," Mr van der Meer said.
Despite the recent trading difficulties, the Company has remained cash flow positive from operating activities. The Company has also made significant progress in reducing borrowings by achieving a reduction of $10.9 million in net interest bearing debt during the six months period to 30 June 2009, to $72.9 million.
VDM has anticipated a breach of bank covenants that were in place as at 30 June 2009. VDM and its lender are at an advanced stage of renegotiating banking facilities, including new covenants going forward. As a result of this, it has been deemed necessary under accounting standards to classify certain bank loans as current liabilities.
As foreshadowed in the announcement of 10 August 2009, VDM confirms that it has finalised the agreement for the release of obligations between VDM and a third party arising from various property related transactions. As part of this release, VDM has agreed to pay $2 million which has been settled with the payment of $291,530 in cash and the issue of 6,150,000 shares at a deemed issue price of $27.78 cents per share.
