Hi/Pessimist/question/BK/11/3/2002/profitable
http://www.ozestock.com.au/MessageView.asp?PostID=118443&Symbol=ERG Hi/Pessimist/question/BK/11/3/2002/profitable --------------------------------------------------------------------- http://www.stockhouse.com.au/bullboards/viewmessage.asp?no=4981252&tableid=1 --------------------------------------------------------------------- Hi Haha, depends on your time view---I believe ERG will be succesful eventually---it is however short term driven by promotional things not on fundamentals----the entity has stated by the next time it reports it expects to be profitable--by 2003 P Fogarty has stated certainly so. Hopefully all that will come to be and this is cheap ERG.Cheers. -------------------------------------------------------------------- ERG LIMITED 2002-03-11 ASX-SIGNAL-G
HOMEX - Perth
+++++++++++++++++++++++++ MEDIA RELEASE
ERG Limited today announced an after tax loss of $199.4 million for the six months ended 31 December 2001, following the decision by ERG Directors to substantially write down the carrying value of ERGs assets.
The comprehensive review conducted by the ERG Directors of the carrying value of ERG's assets, particularly investments in unlisted companies that have taken up licences of ERG technology, resulted in one-off non-cash entries totalling $155.4 million. Although the Directors are confident of the business plans of each of these entities, they believe it is difficult to precisely measure the future returns these investments will generate.
Further, the ERG Directors have not sought to include in revenue or profits the non-cash licence fees attributable to ERG's technology. The value of such licences was approximately $55 million in the half-year.
The ERG Directors believe this very conservative accounting treatment will permit the ERG financial statements to be more transparent. In addition, ERG has decided that it will now provide the market with a breakdown of the financial performance of its individual business segments, which will again allow the market greater insight into the Group's financial position and performance.
Following the accounting adjustments to ERG's balance sheet, total assets were $662 million at the end of December 2001, compared with $736 million a year earlier. ERG reported a closing cash balance of $118.2 million for the period.
ERG's revenues totalled $136.4 million in the half. In the corresponding period of the previous year, ERG's revenues totalled $184.2 million. However, this figure included revenue from the telecommunications business which has since been sold. On alike basis, ERGs revenues in the half-year to 31 December 2001 were 8% higher than the $126 million in revenues it achieved (that is, excluding the telecommunications business) in the corresponding period in 2000.
EBITDA for the six months ended 31 December 2001 was ($134.4 million), compared with $31.3 million for the prior half-year. EBITDA for the current half-year period included one-off write-downs of $117.4 million.
Research and development (R&D) spending in the half-year to end-December 2001 totalled $17.4 million (equivalent to 13% of revenue).
Depreciation and amortisation charges have increased from $8.6 million to $49.2 million, representing an increase of $40.6 million. The depreciation and amortisation in the half-year to 31 December 2001 include a component of the one-off write-downs of $38.0 million.
Earnings per share for the period decreased to (31.1 cents) from 2.5 cents, reflecting the substantial one-off write-downs. At the end of the period, net asset backing was 19 cents per share.
ERG's Directors are confident that the Company is on track to build recurring revenue streams from its major infrastructure projects around the world. While this process is under way, ERG has sought to exploit its technology through transactions such as licensing agreements.
As previously noted, the Directors decided not to recognise non-cash licence fees attributable to ERGs technology of $55 million. In addition, delays have been experienced on certain tenders and the commencement of major projects, notably Sydney. ERG has also been carrying costs in anticipation of Manchester, Rome, San Francisco and Singapore projects commencing full-scale operations.
Going forward, ERG is committed to improving its cost efficiency and maintaining significant levels of liquidity. The Group has targeted annualised savings exceeding $20 million, of which $12 million annualised has been achieved since November 2001.
As the core development of ERG's MASS technology is substantially complete ERG has been able to reduce its R&D expenditure. However, ERG will continue to invest in order to customise its MASS technology to the requirements of particular projects. In addition, ERG will ensure that its resourcing levels going forward will be appropriate for the projects it anticipates in cities such as Sydney and Seattle.
ERG is also involved in negotiations to collect major receivables, particularly the Melbourne scope creep claim.
Commenting on the results, ERG's Chief Executive, Mr Peter Fogarty said: "The decision to adjust carrying values and not include non-cash licence values has had a significant impact on the results for the half. However, we will continue to take equity stakes in entities such as card.etc and PCL because we believe they put ERG's shareholders in an excellent position to benefit from the wider application of smart cards over time.
"Our mass transit projects are now maturing. We are now getting recurring long-term revenue from our projects in cities such as Rome and San Francisco, and we will focus on growing that infrastructure side of our business. We have now reached that point in our development where we can reap greater returns from our previous investments by adding more cities to our existing infrastructure, as well as expanding the use of the cards beyond transit applications.
"With more than $2 billion of work on hand and further new contract wins announced today, we expect ERG to be profitable in the second half of the current financial year, and certainly for the full 2003 financial year. Obviously, project delays have an impact on our profitability. However, we are hopeful that our internal cost-cutting initiatives will go some way towards neutralising their impact."
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