THE automated ticketing technology that promised so much and delivered so little for shareholders in listed company ERG has turned into a profitable business for Vix ERG and its backer, Duncan Saville.
Vix ERG emerged from the restructuring of ERG after the NSW government cancelled its integrated transport ticketing contract in 2008, saddling the embattled business with an $89 million loss.
At its peak in the late 1990s, ERG was one of Western Australia’s top 20 stocks.
In 2008, after incurring big losses, ERG was sold to major shareholder and creditor, Mr Saville and his Ingot Entities.
ERG was delisted and renamed Videlli, which retained ERG’s Integrated Transit Systems business and its ongoing litigation with the NSW government.
ERG’s key technologies were sold to Vix Technology, a company associated with Ingot, for $115 million and Vix ERG was born.
Vix Technology chief executive Steve Gallagher said the private company was successful in reassuring ERG’s remaining clients.
“You can imagine the impact on a company when a major contract is terminated in the company’s home country by its own government; that sends shock waves through the business,” Mr Gallagher told WA Business News.
As cash was generated from ERG’s remaining contracts, the company reported good results, however. In its second full year (2009-10) it reported earnings before interest, tax, debt and amortisation of $10 million, and expects to achieve revenue of just under $200 million for the 2011-12 period.
Vix ERG has won new work in Bangkok and been awarded contracts in South Africa, UK, France, North America and major growth target China.
And it has expanded its focus to encompass the entire commuter experience.
“We see ourselves not just as a ticketing business but as a company that enables our partners (transport operators) to help their customers identify where the public transport is, how to get from A to B ... and how to pay for it along that journey,” Mr Gallagher said. “A lot of the cities in Asia are just increasing massively and they are investing billions of dollars in public transport infrastructure, but they also need the IT for people to use it and pay for it.”
Vix ERG is also exploring listing its joint venture with Beijing Infrastructure and Investment Company, a multi-billion dollar arm of the government, through Hong Kong’s secondary board, GEM.
“We think it will unlock a lot of capital that is in the Asian markets that wants to invest in the China growth market,” Mr Gallagher said.
Vix ERG is headquartered in Melbourne but it has retained a significant technology centre in Balcatta, employing about 145 people. It has a global staff of 850.
WA’s resource sector has provided some niche opportunities for its control systems.
The company recently added an international mining company to its client list, and while this isn’t a major growth focus for Vix ERG, it represents a key tool in ensuring the ‘smart’ WA staff are engaged in their local business community.
“We don’t want to diversify the business too broadly, it’s a nice base that we will see steadily tick up and I wouldn’t be surprised to see that was a $5 or $10 million business over the next few years ... it’s more tactically significant for the WA office,” Mr Gallagher said.
