| Subject: Re: Use this for some balance sheet work. |
Author:
Steve Bonkers.
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Date Posted: 05:04:45 01/07/02 Mon
In reply to:
Steve Bonkers.
's message, "Use this for some balance sheet work----info Hotcopper" on 05:53:54 01/01/02 Tue
The resultant net profit of $6.1 million was below expectations. The final treatment adopted by ERG in respect of a licence fee to the German business card.etc AG was to not recognise the value of that fee at June 2001. Following discussions with our auditors, their view was that the business plan of card.etc was not sufficiently advanced to be able to form an opinion as to the value of the licence fee due to ERG of $31 million. Since closing out the June 2001 year-end, card.etc has been awarded Germanyˇ¦s first large-scale transit smart card project to supply smart card solutions to the Rhein-Ruhr region in Germany. This is anticipated to result ultimately in some 7 million smart cards being issued, which, in turn, represents approximately 35% of the smart card issuance envisaged in the card.etc business plan within Germany.
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In balance sheet terms, total assets at $711 million have increased marginally on the prior year. Cash on hand reduced year on year by $113 million. This reflects the ongoing project build and development costs of the business, as well as investing in future earnings opportunities, most notably acquiring the 50% profit share arrangement from Motorola. This cash requirement was foreseen, as a result of which ERG raised $250 million via a convertible note issue in February 2000.
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I have highlighted a proforma balance sheet, based on the June 2001 ERG balance sheet, incorporating the effect of the Rights Issue and the Proton World acquisition. A key outcome from this transaction is that the ERG balance sheet is strengthened. ERGˇ¦s debt to equity ratio, including the Listed Convertible Notes, improves from 110% as at 30 June 2001 to 80% based on the proforma position, with the Rights Issue and Proton World acquisition taken into account. When looking at the future opportunities available to ERG, increased balance sheet strength will be an important ingredient to being able to deliver on those opportunities. In addition, we believe that having some 8.4% of ERGˇ¦s issued equity held by organisations such as American Express, Visa International, Banksys and Interpay is a positive attribute to our investor base.
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In Rome, ERG now manages the processing operations for the Rome transit authorities, earning a percentage fee based on the total transit revenues managed through that system under an initial eight-year contract. These operations will typically take anything between 18 and 30 months to become profitable, as revenues build up in the early stages, through the issuance of smart cards. Operational costs at the early part of this phase will be higher, as the rollout of smart cards to transit passengers is managed. Operating costs will reduce over time, once the main card base has been issued and operational efficiencies established.
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23 Aug 2001, 4:19 AM CST
Some 80 million Australian dollars ($42.63 million) in fees from a Rome smart card project has been deferred to next year. Fogarty said the results also reflected the sale of ERG's telecommunications business during the year. He predicted better times ahead with more than 200 million Australian dollars ($106.58 million) due in the 2002 year from ERG's Manchester, Rome, San Francisco and Singapore projects.
Exchange Rate: $1 = 1.87 Australian dollars
Reported By Newsbytes.com, http://www.newsbytes.com .
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