VDM Group slumps on profit forecast

VDM Group is expecting a better second half performance after forecasting its first half profit to fall to $3 million, prompting its shares to fall by as much as 63 per cent in trade today.

Late yesterday afternoon, the company released its earnings guidance for the six months to December 31 2008, expecting net profit to be between $3 million and $3.5 million.

VDM posted a net profit of $11.2 million for the previous corresponding period.

"The expected result for the six-month period is disappointing. However, the second-half performance is expected to be stronger based on current tendering expectations," chief executive John Farrell said.

"The Company has been able to increase revenue, which is expected to be in the $220-240 million range; however, earnings have been materially impacted on a number of challenging construction contracts and reduced margins."

In December last year, VDM announced that it expected a $15 million revenue hit after Rio Tinto-owned Argyle Diamonds scaled back its workload on the underground expansion projects.

The Argyle contract was held as a joint venture between VDM subsidiary Civmec Construction & Engineering and Laing O'Rourke Australia Construction.

Shares in VDM closed down 24 cents or 55.8 per cent to 19c today