Author:
The Australian I.T.NOVEMBER 29, 2002--budgeted for Aug 2002
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Date Posted: 16/01/03 9:48:06am
http://australianit.news.com.au/articles/0,7204,5582449^15316^^nbv^15306,00.html
Delays prompt ERG restructure
Wires
NOVEMBER 29, 2002
Smartcard group ERG has unveiled a major capital restructure including a rights issue for up to $50 million after delays in transtport contracts put the company's financial results for Q1 below target.
ERG said the proposed restructure, if approved by noteholders and shareholders early next year, would transform the company's balance sheet.
"Through the proposed restructure, ERG can eliminate future liabilities of $250 million and around $18 million per year in interest payments to noteholders; raise up to $50 million cash; and give the group a substantially debt free balance sheet," ERG chairman Sandy Murdoch said in a statement.
ERG chief executive officer Peter Fogarty also said the group expected to win five to ten new public transit ticketing tenders over the next 12 months which would deliver strong recurrent revenues over many years.
He said financial results, however, for the first four months of the current financial year were tracking below budget due to the timing of contracts.
"But due to our focus on cost reduction and cash flow management, the net cash outflow from operating activities was kept to less than $500,000 negative for this period," he said.
He said provided the capital restructure was approved, the company would have the capacity to secure a growing portfolio of large scale transit ticketing contracts producing a long-term income stream.
"With this in place and the finalisation of ten or 12 new contracts imminent, ERG will be well placed to move to sustainable profitability in the medium term," Mr Fogarty said.
Mr Fogarty told ERG's annual general meeting that the Sydney ticketing smartcard contract had been budgeted to start in August but was now unlikely to start until January or February.
He also said ERG's ability to be profitable at the earnings before interest, tax, depreciation and amortisation (EBITDA) level in 2002/03 was dependent on new projects contributing revenues in the second half.
But he reiterated that ERG did not expect to report a net profit for 2003.
Mr Fogarty told shareholders that market conditions made it unwise to wait for the $250 million in listed convertible notes to mature in October 2005 before taking action to strengthen the balance sheet.
The proposed restructure involves the conversion of $13.2 million of unlisted convertible notes to five year unlisted convertible notes.
AAP
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