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| Subject: July 18th"What it's really going to come down to is whether they can make money or not, and so far they haven't proven to the market that they can," he said. | |
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Author: July 18th--Hartleys analyst Steve Piotrowski |
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Date Posted: Saturday, July 19, 03:29:24am In reply to: 's message, "Perth tender lodged 29/11/02." on Wednesday, December 25, 08:35:31pm http://www.thewest.com.au/20030718/business/tw-business-home-sto105551.html ERG loses $30m deal By John Phaceas THE State Government has delivered a psychological blow to the Balcatta-based ticketing group ERG, awarding the $30 million-plus ticketing contract for Perth's public transport network to a foreign-backed consortium. A venture between Delairco Bartrol, a division of Malaysian-controlled engineering group Downer EDI, and the UK's Wayfarer Transit Systems was yesterday named preferred tenderer for the Transperth contract, with ERG relegated to the position of reserve tenderer. ERG shares subsequently tumbled as much as 16 per cent, before closing 13¢ lower at $1.03, down 11 per cent. The plunge wiped $35 million off ERG's market value, more than the entire value of the contract to replace the decade-old MultiRider magnetic stripe ticketing system on Perth's buses, trains and ferries by the end of 2004. Planning and Infrastructure Minister Alannah MacTiernan said the tender by Delairco-Wayfarer, which supplied and maintained the MultiRider system, was more than 30 per cent lower than its nearest competitor. All tenders had been evaluated by the Public Transport Authority and Department of Treasury and Finance, and approved by the State Supply Commission. Heading off criticism that the Government had shunned a local supplier, Ms MacTiernan said the evaluation process had included requirements for a significant "buy local" component in the contract. "More than two thirds of the contract value, which covers supply, installation, maintenance and management services over 10 years, will be spent in Perth," she said. Delairco-Wayfarer would also be expanding its national service centre in Perth to maintain the system and similar ticketing systems in the Eastern States, she said. ERG chief executive Peter Fogarty and ERG's Asia Pacific chief Rob Noble were overseas on business yesterday. In a statement, Mr Noble said ERG was "very disappointed" at missing the Perth contract, given it had been good enough to win new contracts in Seattle, Stockholm, Sydney and Washington expected to generate revenues of more than $500 million. The company also has ticketing contracts in Singapore, Rome, Hong Kong and San Francisco. But Mr Noble stressed ERG refused to chase contracts at the expense of margins. "In tendering for projects, ERG is committed to achieving a positive cash-flow profile and return for shareholders and is not prepared to compromise these principles simply to gain market share," he said. Analysts described yesterday's news as an embarrassment for ERG on its home turf, but were mixed in their assessment of the broader implications. "I think it is actually quite positive . . . looking at their statement that they're not chasing contracts as much as they used to," Austock analyst Craig Stranger said. "When you look back now at some of the contracts they've won (previously), they've had to wear a lot of pain in the first couple of years." Hartleys analyst Steve Piotrowski questioned ERG's claims to greater financial discipline, and said the group still faced a tough task to win back the faith of the investment community. "What it's really going to come down to is whether they can make money or not, and so far they haven't proven to the market that they can," he said. "The only way they can do that is to get runs on the board." ERG completed a crucial $250 million debt restructure to stay alive in May after almost 18 months of turmoil in which it lost more than $350 million on the back of high upfront costs and delays at some of its big overseas contracts. [ Next Thread | Previous Thread | Next Message | Previous Message ] |