2.5 cents -- ERG trade data forum

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Date Posted: 02:34:32 02/26/03 Wed
Author: 10 12.5 15 17.5 20 22.5
Subject: 2.5 cents

ERG shares nosedive on back of auditors report

SHARES in smart card company ERG fell towards ten year lows Tuesday as reports that the group's auditor doubted its viability spooked already unsettled investors.

The shares fell 9.6% or 2.5 cents to close at 23.5 cents on turnover of 41.2 million, their lowest level since 1992. ERG last week posted a $199.4m net loss after the company substantially wrote down the carrying value of investments.

Confidence in the group fell further after an article in the Sydney Morning Herald claimed ERG's auditor PricewaterhouseCoopers, said:"there is significant uncertainty whether the consolidated entity will be able to continue as a going concern."

Paterson Ord Minnett industrial analyst Robert Gee said the article had unsettled the market.

"There's nothing new in it but it's obviously unsettled the market again." Gee said, adding he was not concerned by PwC's statement.

"I'm not concerned. I've spoken to the company many times in the last few days and they've said we are going concern - we have cash in the bank, we've got the capabilities of delivering on all our existing contracts, we're not going out the back door," he said.

The write-downs combined with the operating loss, resulted in ERG technically breaching a number of its banking covenants however the breaches were waived by each of group's bankers.

Following the accounting adjustments to ERG's balance sheet, total assets at December 31 were $682m compared with $736m a year earlier. The group's closing cash balance was $118.2m.

Gee, who regarded the company's bid to make their books more transparent as a positive move, said he had always viewed ERG as a long term play.

"You can see the recurring revenue is building," he said.

But he said he was not sure when the selling pressure on the stock was going to end.

"It could go to 20 cents, it could go to 15, it could do anything,� Gee said.

"It will drop out of the ASX 100 and 200. If there are any remaining institutions they will be getting out."

21 March 2002

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Replies:

10.5 13 14.5 17 19.5 22 24.5 (NT) -- No name, 02:35:48 02/26/03 Wed
- wrong 10.5 13 15.5 18 20.5 23.--correction. (NT) -- No name, 02:37:08 02/26/03 Wed