VDM Group shares could come under pressure today after the troubled engineering and construction company warned its first half loss was likely to be up to three times higher than initially flagged.
The company also said it would write off any remaining goodwill on its balance sheet as well as "significantly reduce" the recognised value of deferred tax assets.
VDM had $22.5 million of goodwill on its books at June 30.
Four months after VDM shocked investors by flagging a pre-tax interim loss of $7 million to $9 million, the company said last night the actual result was likely to be $23 million, based on improved visibility since October and taking into account an updated level of unapproved claims and variations.
The bigger forecast loss includes $12 million of provisions against unapproved variations. Although VDM said it was confident the outstanding amounts were "recoverable and contractually due", accounting standards meant the revenue could not yet be recognised.
"Accordingly the company has decided to exclude the revenue on these claims and the variations until certainty is attained on each contact," VDM said in its statement. "These claims and variations will continue to be vigorously pursued by the company.
"This position, whilst conservative, will ensure that the future trading results of the company are not impacted any further by these materially completed projects."
Despite the upbeat assessment by the company, VDM last night also highlighted the perilous state of its operations, flagging positive operation cash flow for the six months to December 31 of just $500,000.
VDM said it retained $22 million cash as at December 31.
The company late last year engaged Azure Capital to help with a partial or overall sales process.
VDM's shares closed steady at 1.3Â¢ yesterday before it released the profit warning. The shares traded around 4.5Â¢ half a year ago.