trading halt, page-115

Forge Group Ltd provides trading and financial update
• Additional $23 million to $28 million profit writedown in FY2014 attributable to the West Angelas Power Station project
• $14 million to $19 million net cash outlay is required to complete WAPS which is to be funded from existing cash and facilities
• Financiers including Australian and New Zealand Banking Group remain fully supportive of Forge Group
• New bonding facilities in place to complete full bonding for Roy Hill Project
Update on West Angelas Power Station Project
Forge Group Ltd (ASX:FGE) (“Forge Group” or “Company”) today announced that a further $23 million to $28 million deterioration of profit and cash will be realised on the West Angelas Power Station (“WAPS”) project.
As a result of full engineering nearing completion on the project and a revised extended delivery schedule, the Company has identified previously unplanned scope and subsequent unplanned and extended delivery durations which are forecast to result in additional costs to complete.
The additional costs include additional engineering, construction and site establishment costs for the additional delivery schedule.
First fire of the gas turbines for the project is expected to be completed in FY2014, with commissioning in early FY2015.
Forge Group’s Managing Director & CEO, David Simpson commented: “I regret having to inform shareholders of this additional deterioration in profit for FY2014.”
Financing Update
Forge Group’s financiers have agreed to continue to provide overall support to the Company through existing facilities. New bonding facilities have been provided by Forge Group’s surety providers to fully bond phase three of the Roy Hill project. The Company continues its dialogue with other key stakeholders to formalise and secure their ongoing support.
Mr Simpson added: “The ongoing and expected support provided by our financiers and other key stakeholders gives Forge Group the confidence to continue to trade on a business as usual basis and deliver on our current work in hand.”
MARKET ANNOUNCEMENT
Operational Initiatives and Organisational Restructure
As announced on 28 November 2013, Forge Group management has commenced a
number of operational initiatives within the Power division and organisation more
broadly.
Forge Group has delivered $10 million in cost savings as part of this program of work,
with a further $5 million to be implemented before the end of FY2014. In addition, there
are a further $5 million in one-off items expected to be achieved in FY2014. These
initiatives remain on track and will not impact ongoing business operations or project
delivery. Further areas for improvement have been identified and will be accelerated
during FY2014.
Forge Group has completed the restructure of its organisation into two geographic
segments to ensure greater operational accountability, financial and customer focus. The
business segments are Australia & Africa, and North America.
Company Outlook
As at 13 January 2014, Forge Group has a contracted order book exceeding $1.5 billion,
of which approximately $600 million is expected to be delivered in FY2014. In addition,
Forge Group has a growing base of global Asset Management contracts and a qualified
weighted tender pipeline valued in excess of $1.3 billion.
Mr Simpson said “Overall market conditions remain difficult with increased competition
and a general tightening of the resources market. Our strategy of diversification
geographically and into Asset Management remains a key focus for the management
team.”
The Board of Forge Group does not expect to pay any dividends during FY2014.
ENDS