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UPDATE: ProvencoCadmus placed in receivership

Monday 3rd August 2009

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ProvencoCadmus, the eftpos technology company, was placed in receivership, unable to make up a shortfall in working capital in the face of weak sales and high interest costs.

ANZ National Bank appointed Michael Stiassny and Brendon Gibson of Korda Mentha as receivers, the company said in a statement.

Its shares and notes were suspended from trading after the announcement, having sunk to 3.5 cents on Friday from as much as $1.17 in February 2007, before the merger of Provenco and Cadmus that created the company.

“An unsustainable debt burden, sluggish investment and product markets and a weaker than expected trading performance has combined to stop the company from achieving the strategic objectives set by the board,” chairman Rick Christie said.

The support of heavyweight shareholders such as Todd Capital, and interests associated with Stephen Tindall and Alan Hubbard wasn’t enough to help ensure survival of the eftpos company which counts Warehouse Group among customers of its point-of-sale technology.

Shareholders turned down its last plea for additional funds over the past few weeks, having pumped in additional funds last year.

The company has some $45 million of debt, costing about $6 million a year to service. That’s compared to a market capitalization of its shares of $7.5 million. In the first half, ProvencoCadmus had negative cash flow of $10.7 million, of which $9.5 million related to increased debtors and inventory.

First-half sales of $89.9 million generated EDITDA before one time items of just $550,000. Goodwill, impairments and losses on asset sales pushed the net result to a loss of $25.6 million.

“The inability to meet trading expectations has been the company’s Archilles heel, dating back to 2007, when expected major contracts for the retail automation business failed to materialize,” Christie said.

The company’s own forecasting suggested a “strong recovery” in 2010 to 2012 “but the company has not the cash to build inventory in anticipation of this,” he said.

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