July 26 2002 (which means it has been renegotiated for a higher figure no doubt) -- ERG Smartcard2

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Subject: July 26 2002 (which means it has been renegotiated for a higher figure no doubt)

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The bid expired in March, a year after lodgement.

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Date Posted: 25/01/03 2:11:16am

Ruling expected on ERG-Cubic tickets tussle
By Jan Eakin
July 26 2002

Smartcard operator ERG should find out today if its bid to overhaul Sydney's public transport ticketing system has been given the all clear.

After a three-month trial and two months' deliberation, Justice Michael Adams is expected to rule in the NSW Supreme Court on allegations made by ERG rival Cubic Transportation over a NSW Department of Transport contract.

Cubic alleged that the department's process for considering the tenders was tainted.

Neither Cubic nor ERG would speculate on the ruling but the market seems to believe the ERG-led consortium will win.

Shares in ERG have been heavily traded in the run up to the ruling. The stock, up 1.5c to 28.5c yesterday, has gained almost 20 per cent this week.

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Opinions differ on the significance of the Sydney project and whether ERG, leader of the consortium which lodged its original bid for the contract more than 18 months ago, has the financial strength to take on yet another complex and costly contract.

"Even if the judgement goes in ERG's favour, the problem is the time lag between completing the system's implementation and the smartcard group making any money," said one analyst who preferred not to be named.

The average time between installing a system and seeing a return is 12 to 18 months.

If ERG is also maintaining the system, the delay could be another 12 months as the number of travellers using the system increases. ERG gets a percentage of the revenue stream from the ticketing system.

"On paper the whole thing looks impressive, but we've no real idea of when revenue would come through," another analyst said. "The company gives very little guidance."

If Justice Adams's ruling favours Cubic, the company might seek damages or an injunction against giving the contract to ERG, which won preferred tenderer status before Cubic's allegations halted proceedings.

ERG's market worth has fallen dramatically in recent years as analysts, frustrated by a lack of earnings clarity, turned away from the stock.

Since then it has been hit by its own accounting fiasco, the resignation of two finance directors, a change in accounting procedures which resulted in a $190 million profit warning, and concerns over the state of European subsidiaries.

A transport department spokesman refused to comment on whether ERG's preferred tender status, awarded last August, still stood. The bid expired in March, a year after lodgement.

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