ERG writes off A$52.4 million as it prepares to ditch Proton World

ERG writes off A$52.4 million as it prepares to ditch Proton World

Loss-making Australian ticketing group ERG is in advanced negotiations to sell Belgian smart card outfit Proton World barely one year after buying the company for A$150 million.

ERG says negotiations to offload Proton World to an unspecified third party are at an advanced stage, with final signing scheduled this month.

The news comes as ERG reported an overall operating loss totalling $124.9 million for the half-year to 31 December 2002, compared to $199.4 million in the previous corresponding period. ERG recorded an EBITDA loss of $19.6 million (compared to a loss of $17 million in the previous year), before one-off write-downs and charges against an aggressive cost-cutting programme initiated last year.

The half-year result includes a write-down of A$52.4 million on the book value of Proton World. An additional A$40.9 million due to ERG on an earn-out basis under the proposed sale has not been accounted for. As part of the deal, ERG will retain access to the Proton technology by taking a 20-year global licence for its technology.

ERG chief executive, Peter Fogarty, says the disposal of Proton World is in line with the strategy announced at the 2002 AGM to strengthen the group's balance sheet and reduce cash outflow.

The transaction is expected to realise approximately A$110 million at settlement, excluding the A$40.9 million earn out payment.

Selling Proton World will allow a significant amount of capital to be redeployed to ERG's core transit ticketing business, says Fogarty, while ensuring long-term access to PW's core technology which will allow the group to continue with its multi-application smart card strategy.

He says: "The proposed transaction will provide a positive impact on operating results by reducing ERG's operating cash outflows and eliminating annual goodwill amortisation charges of approximately $15 million."

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