Viento cuts HVLV purchase price

Mining services contractor Viento Group has forecast a trading loss in the current half year after disclosing that recently acquired subsidiary HVLV has run into problems on one of its contracts.

Viento announced late on Monday that it has responded by cutting the price it will pay for the HVLV business by $9.5 million.

When the HVLV deal was announced in January, Viento said the purchase was on an enterprise value of $21.3 million.

The terms of the purchase have also been substantially revised, with the result that Viento’s debt to HVLV’s vendors has been reduced by up to $10.6 million.

The original deal involved the issue of 23.6 million convertible notes, 7.9 million Viento shares and a deferred $3 million cash payment.

The revised deal involves the issue of 6.5 million Viento shares and 11.8 million Viento options; the issue of convertible notes and the deferred cash payment have been scrapped.

Viento said it was now forecasting an EBITDA loss of between $7.5 million and $8.5 million in the half year to December 2014, on turnover of $60 million to $70 million.

It said this result was significantly affected by the projected loss of $8 million on one largely completed HVLV project, for an oil and gas sector client.

Viento said is outlook for the second half of the financial year was much stronger, with a positive EBITDA of $7.5 million-$10.5 million on turnover of $100 million-$120 million.

“it is disappointing that a loss has been incurred on one HVLV project when others have been completed successfully,” Viento chairman Ray Munro said.

“The impact of the projected loss has been significantly softened based on the vendors of HVLV agreeing to reduce Viento’s acquisition price.”

Viento noted that it achieved its financial covenants for the first quarter and has the ongoing support of its financiers.

Hazelmere-based HVLV is a specialist manufacturer of transportable switchrooms.

It was founded by Steve de Mol, who was also the company’s controlling shareholder; he joined the Viento board after the purchase.