observations of erg agm

ERG observations of AGM 23rd November 2008
The below is straight from my notes make of it what ever way you want.

Address by Colin Henson Chairman
Improving and overall solid performance in all areas of the business.
Europe Australia and Asia strong performances- cash flow good
SF key project successful commissioning early 2008 two new uptakes.
Seattle/Stockholm nearing completion for system launch, they are requesting higher performance which is not part of the original scope, which will be charged out as extras.
Gothenburg up and going rewarded by new 4 year contract. Rome and Beijing going good.
Sydney T Card to continue close to implementation tragedy if stopped, bus system full commuter trial robust and working well. Train system replicated the whole rail system been in progress for last 6 months. Minor back office problems should not stop testing in light of this T Card should be rail and bus network June 08. Delays are not uncommon in technical implementation. Our performance should have been better identifying the problems, it should now go ahead. This week (26rthNovember) fully documented remedial plan should deliver T Card in a reliable manner. If rejected condemning the NSW transport commuters to a second rate ticket system, we are confident of delivery. If terminated by NSW ERG will pursue all money and mitigate any impact of the
termination.

Outlook we can give no guidance at this stage because of Sydney sensitivities. On going growth in Asia Australia and Europe. Solid cash flow and a profitable future.

Steve Gallagher
SF in September, this is the first time one of the MASS based projects has been rolled out, very pleased with response exceeding our performance, this is a major milestone in ERG history. Seattle well received.
Stockholm Bus system delivered. Train 1,200 gates delivered 800,000 transactions per day. Customer relationship continues to improve.
New orders = $100 million last year. Major projects limited our bidding for new large contracts.
$150 million cash to come. Close to realizing backend payments. Project methodology capability maturing model now implemented. Key staff are now project managed and certified. European base recurring income up to 50% and getting more contracts by customer satisfaction. 4-5 million taken out of costs last 4 months. Retaining staff by options and incentives last 12 months training is producing results. Parts have been operating extremely well Op Co. New management of solution delivery are proving substantial in there knowledge.
Utah pilot stage has moved to contact stage.
U.K. new projects with stagecoach.
First time significant cash contributions have made ERG cash positive last half of year.
Sydney
Government started 10 bus trial would not release to public until satisfied, now have 250 buses inner west, ramp up phase 100 cards issued per week.
NSW Government has changed CEO and other top line staff for T Card we are working with new team, bringing in people from SF and outside consultants. WE have sacked old manager found a new General Manager and have appointed quality staff now, bringing the best expert from around the world to help. This will prove to Govt. that we can meet deadline and functionality. Bus is close to roll out. Rail had to replicate a competitors system was difficult no documentation, we had not done a thorough enough job on the documentation. We have the methodology to deliver. We have managed the Sydney bus system for the past 15 years twice its delivery life its impossible to get equipment and to rely on second hand equipment from all over the world. Green light on this we can deliver the new equipment very quickly as we have the equipment waiting to be installed.
Rail model 2008 = phase 1
300 Rail stations 400 busses = phase 2
Part of the proposal will be informing how quickly we can roll out T Card, could be ready in 2009 more conservatively delivered 2010. Key person from SF now in Sydney.
SF
Growing 5,000 cards per month
BART revenue ready soft launch 2008 software ready, cutting over old system to new system right now. Low risk phase over next six months.
Every transaction we get a payment ie. call centre, loading of cards, customers using system etc. Will gain extra income after full implementation as 18 small operators will be put onto the system after the successful implementation. This is all extra income.
Stockholm
A defect free contract was signed years ago and this is very hard to implement, we are now down to logos used may be in wrong place or a word is spelt wrong this is onerous, they have given us an additional 9 months of work at very high margins, all we want to do is roll out the system get paid but they keep giving us more work.
Seattle
Significant variations in work $1million extended payment.
Beijing
Well on target 95% through testing stage. Customer very happy.
France
40% market share outside of Paris we are leveraging the talent from the French team to other areas.
Gothenburg
Wanting new functions
Washington
Unable to implement as old competitor delay, three rounds of testing making regular claims on customer.
U.K.
4000 to 6000 bus terminals Government is to privatize all must have a smart card it will commence on South West rail transport. Pilot system in first quarter next year, Stagecoach is our partner. We are the only ITSO approved company in the world with the smart card ticketing system, we are VERY EXCITED about the opportunities in the U.K.
Service and Operations
Market trends. U.S. Clear trends to open payment system so that building security cards or VISA cards etc can be used similar to tolling on highways, we are right at the forefront of this. First contract has been tendered for Utah we have been selected working with credit card companies.
Pockets are going fantastically well within ERG, made major progress in field trials in SF, customer relations are much better.


James Carroll Finance
World class portfolio
Small projects service maintenance will give a more important growth in income. Next three years Melbourne to decline will be replaced by SF, Sydney, and Stockholm, this will form a large part of our income. 2007-08 will lead to an improved result.
Higher margins in maintenance and upgrading.
No forecast for next year uncertainty of Sydney at this stage, ERG will be more profitable and stronger
Sydney plan goes in Friday 30th November and should be informed by Christmas.
When we deliver you should see the share price move.

The above was the formal part of proceedings afterwards I listened and asked some questions
I talked to Duncan Saville, Colin Henson, James Caroll and Steve Gallagher but not in any order.
Would you consider a share consolidation in the future? We will do that when we have the company bedded down in the future.
Where do you see the company in three years? $400 million income received $100million DCF.
Sydney is committed to an integrated ticketing system which is the only viable proposition. It has demonstrated this with a bus roll out of the last 15 years.
Which part of the business is going best financially? OpCo is very profitable.
Do you foresee the ERG will pay a dividend some day? When OpCo takes over we will be in a position to pay dividends.
What happened to the Manila contract? It is on hold as they have paid $100,000 as a deposit, we now require $1million for the planning stage, we are waiting for the approval and payment before moving onto the next stage.(My emphasis Different story than when the old management accepted any contract with arduous conditions still being felt today)
Around January 08 we will be in profit and that is without any of the 150million net cash flow to come.
We have written nearly everything off, a $500 million loss to be carried forward means that no tax on Australian income and profit will go straight to the bottom line.
I have been to the last three AGM’s I felt this was the most upbeat and I get a sense that ERG are knocking on the door of profitability.
James Carroll and Steve Gallagher after talking to them are committed very intelligent enthusiastic and know what they are talking about. Now that they have an incentive with substantial options in place.
I believe this co. will become a respected company upon delivering the major systems.
The problem with investors is that as markets decline you personally extrapolate into the future and get concerned about the losses. As investors grow restless, the big money continues to be made by those who stay the course.

I am considering buying more.