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| Subject: ERG improves but still in red | |
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Author: March 7 2003 The Melbourne Age. |
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Date Posted: Thursday, March 06, 09:12:11am In reply to: Newspapers reporting result--March 7 2003 SMH 's message, "Noteholders have tickets to ride" on Thursday, March 06, 08:38:56am ERG improves but still in red March 7 2003 By Ian Porter ----------------------------------------------------------- Peter Fogarty says ERG's operating business is breaking even in a shocking year. ----------------------------------------------------------- Fare collection and smartcard group ERG unveiled yet another round of write-downs yesterday and the surprise sale of a major software group it purchased only a year ago. ----------------------------------------------------------- The Perth-based company reported a loss of $125 million, down from the $199 million reported in the previous first half, reducing its shareholders' funds to $29.4 million. ----------------------------------------------------------- The company's auditors have again issued a "matter of emphasis" with the accounts, stating that "there is significant uncertainty" about ERG's status as a going concern. ----------------------------------------------------------- However, ERG directors said that, apart from the capital reconstruction announced last November, they were about to finalise $30 million of bank facilities. ----------------------------------------------------------- Yesterday, managing director Peter Fogarty said ERG was negotiating the sale of its Proton World smartcard and banking technology subsidiary, which it bought last March. The sale would net ERG $63 million in cash and eliminate about $10 million in interest payments and $15 million in amortisation charges in a full year, he said. ----------------------------------------------------------- While the sale resulted in a loss of $52.4 million, Mr Fogarty said directors did not book an expected $40 million in future "earn-out" payments from Proton, which are payable if the company attains specified performance targets. ----------------------------------------------------------- "We think the transaction will end up being around about break-even for us," he said in Melbourne yesterday. ----------------------------------------------------------- Crucially, ERG has retained the rights to Proton technology for the next 20 years, underpinning its push into the expanding market for security over online banking and commerce transactions. ----------------------------------------------------------- After the Proton sale and the capital reconstruction, ERG's gearing would be reduced from more than 1000 per cent to around 20 per cent, Mr Fogarty said. ----------------------------------------------------------- A major cost-cutting drive helped pull operating cash flow into the black in the half-year, achieving an inflow of $3 million before interest, financing and restructuring costs. ------------------------------------------------------------ "Basically, our operating business is breaking even in a shocking year. Going forward, we expect it to be strongly cash-flow positive." ------------------------------------------------------------ Mr Fogarty said the contracts ERG was implementing at the moment would generate a minimum of $1.2 billion in revenue over the next five years, and that assumed no add-ons, no card growth and no new contracts. ------------------------------------------------------------ "We hope those figures will actually be about 50 per cent of our real revenues in that time." ------------------------------------------------------------ He said that while ERG had reported "a lot of poor results" in recent years, actual operating losses were less than $40 million over the past two years. ------------------------------------------------------------ The reporter holds ERG shares. ------------------------------------------------------------ [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| ERG loses $125m, seeks funds | By Colin Kruger March 7 2003 SMH | Thursday, March 06, 09:25:55am |