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Provenco could do much better

Friday 19th September 2003

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Provenco Group's share price has flatlined lately despite news of the loss of one contract and the winning of another.

Neither appeared to be substantial, although the company doesn't make the impact clear.

Subsidiary APL Plus lost an applications support contract that was a major part of its business but not a material part of the group's. Provenco last year had revenues of $47 million.

The retail automation division this week won a $4.5 million contract to supply an "integrated service automation solution" for "one of its international clients," starting early next year.

Provenco's June-year profit announcement was a masterpiece of the art of trying to put a positive spin on a dog of a result. The profit before unusuals and tax was $1 million, down from $2.5 million the year before, and a $6.6 million writedown of intellectual property took the bottom line to a $6.4 million loss.

The stock exchange release dwelt on the improvement in second-half operating earnings, which were $843,000, compared with $183,000 in the first half.

With a cost of capital of about 16%, however, the company is going to have to do a lot better than that before investors are impressed.

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