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| Subject: ERG loses $125m, seeks funds | |
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Author: By Colin Kruger March 7 2003 SMH |
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Date Posted: Thursday, March 06, 09:25:55am 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 loses $125m, seeks funds By Colin Kruger March 7 2003 ----------------------------------------------------------- Smart card vendor ERG is betting on a capital restructuring and asset sales to address concerns about its solvency after a $124.9 million loss in the first half. ----------------------------------------------------------- Directors were forced to state that there "continues to be significant uncertainty" over its ability to continue as a going concern as the company - which recently was awarded a $320 million contract to revamp Sydney's public transport ticketing - burnt a further $10 million cash during the six months to December 31. ----------------------------------------------------------- ERG is hoping a $50 million capital raising, a proposed conversion of its $250 million worth of convertible notes into shares, and the planned sale of its subsidiary Proton World will give it the necessary support. ----------------------------------------------------------- "We're hoping that by June 30 the company will have a clean bill of health," said chief executive Peter Fogarty. ----------------------------------------------------------- He said the capital restructure was needed to ensure that the company could continue to bid for big contracts rather than to ensure its viability. ----------------------------------------------------------- "We're not saying that if it doesn't proceed the company is insolvent," Mr Fogarty said. ----------------------------------------------------------- The company also denied that the capital issues would have much of an impact on its recent project wins, which include Sydney's integrated ticketing project and a $104 million deal in Seattle. ----------------------------------------------------------- Representatives from the Department of Transport NSW confirmed they had conducted due diligence and were satisfied with ERG's health. ----------------------------------------------------------- The first-half loss included what the company described as a recoverable $52.4 million write-down of Proton World, which it was negotiating to sell for $110 million. The price does not include a $41 million "milestone payment" due to ERG. ----------------------------------------------------------- ERG said the combined effect of the various plans would cut $15 million from the company's depreciation charge, as well as $18.8 million in interest charges on its convertible notes. ----------------------------------------------------------- Losses aren't new for ERG. The company reported a $199.4 million loss for the first half of 2001-02 on revenues of $136.4 million compared with revenues of $120.9 million this latest period. ------------------------------------------------------------ It blamed delays in the Sydney and Seattle contracts for the revenue shortfall. ------------------------------------------------------------ Mr Fogarty said the company expected to be cash flow positive after the restructure as major contracts start paying off. ------------------------------------------------------------ "The group has over $750 million of new contracts to deliver and is committed to ensuring those projects are profitable," Mr Fogarty said. ------------------------------------------------------------ If all went to plan with the sales and restructuring, ERG said it would increase cash reserves to $113 million and increase net assets from a current $29 million to $311 million. ------------------------------------------------------------ But issued capital will balloon out from less than 1 billion shares to more than 3 billion, which is expected to keep the share price depressed. ------------------------------------------------------------ The company's latest announcements are unlikely to attract institutional support either, said one analyst who didn't wish to be named. ------------------------------------------------------------ "It's in the too hard basket, nobody knows what's going on," he said. ------------------------------------------------------------ Noteholders will vote on the proposed conversion on March 28, while ERG shareholders, who have watched their shares go from a peak of $4 during the tech boom to finish down 0.5c at 12c yesterday, will consider the proposal next month. ------------------------------------------------------------ [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Proton World Sale Is Near, ERG Says "at an advanced stage of negotiation" | Washington, D.C. area.--clearinghouse and customer service center--Northrup Grumman 6/3/03 | Saturday, March 08, 08:28:29am |