Towards the end of last year, VDM warned of a $7-9 million pre-tax loss for the first six months of the 2013 financial year.
At the time, the expected loss was subject to a number of factors, including the resolution of unapproved variations and excluding any potential impairment of goodwill or reduction in the carrying value of deferred tax.
VDM said it now had a better idea of the above impacts, resulting in the company predicting a $23 million loss when it releases its financials on February 28.
The larger forecast loss includes the additional provision against unapproved variations in the order of $12 million.
In the four months since last updating the market, VDM said it had considered its position in relation to the unapproved claims and variations.
“Whilst the company believes these amounts are recoverable and contractually due … it is not possible to recognise as revenue unapproved variations or claims where there is a risk that the client may not approve payment,” VDM said.
“Accordingly, the company has decided to exclude the revenue on these claims and variations until certainty is attained on each contract.”
VDM admitted it was taking a conservative approach, but said it was important that the future trading results of the company were not impacted by these materially completed projects.
In addition, the company expects to impair the entire carrying value of its goodwill and will significantly reduce the recognised value of its deferred tax assets.
In afternoon trade, VDM shares were up 7.7% to 1.4c. However, shares were significantly lower than last year’s high of 8.5c in March.
At the end of December, VDM’s cash balance stood at about $22 million.
The company expects to report positive cash flows from operating activities for the first-half of FY13 of about $500,000.
VDM has contracts in Western Australia with iron ore clients BHP Billiton, Rio Tinto, CITIC Pacific Mining and Karara Mining.