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Tech company's share price under scrutiny after trades

By Deborah Hill Cone

Thursday 24th April 2003

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The Stock Exchange said yesterday it was "well aware" of a lift in Provenco Group shares and it was monitoring the stock.

The share price shift for the small technology company has raised eyebrows because it preceded an announcement of a share buyback and came in the midst of a flurry of filings to the exchange.

Formerly named Advantage Group, the company often seemed to put as much effort into trying to rally its sagging share price as it did in trying to flog its Eftpos machines and other products.

The mantra of the key players in the company, now Evan Christian and Nick Gordon, has been that the share price is undervalued.

But Provenco's shares have been on a roll in the past few weeks, lifting from 24c a month ago to 34c this week.

The shares have traded as low as 15c and as high as 52c over the past year. At the height of the dotcom boom, in March 2000, they were trading at $5.45.

Major shareholder Mr Gordon is still out of the money after buying his stake in the company from Eric Watson's Calibre Investments last year for 37c a share.

Four substantial security holder notices last week showed interests linked to director and major shareholder Mr Christian had lifted his stake in the company from seven million shares to 10.7 million shares.

The Equinox Trust owned 3.8 million shares, Matrisse Trust 12,000 and the Evan Christian Family Trust 6.8 million shares after the offmarket transactions.

Chief executive Tony Bradley also notified the market he had bought more shares.

On April 11 the company, which has a market capitalisation of about $25 million, announced it would buy back up to 16% of its stock over the next 12 months.

The decision was considered puzzling by some, given that the company had just raised $10 million through its capital notes issue last year.

"It doesn't make much sense looking at the balance sheet," one investor observed.

At the time of the capital notes issue the company said the money was to finance business growth.

But Provenco chief financial officer Stewart McKenzie explained the buyback was now considered the best use of the funds since they were not needed for working capital or acquisitions.

"When we raised the money we had been looking at opportunities to add businesses ... we have not come across anything at this stage," Mr McKenzie said.

Mr McKenzie said the lift in the share price was not specifically related to the buyback.

"It was going up before that."

The rise reflected the company going through some difficult trading conditions internationally but that that had improved slightly recently.

The fact directors had been increasing their stakes was also positive.

"You can take it as a vote of confidence in the company," Mr McKenzie said.

The window for directors to trade would close at the end of the month as they would not be able to trade until after the annual result which was expected to be in mid-August, Mr McKenzie said.

Mr McKenzie said the company had settled all outstanding pieces of litigation, much of which arose from its acquisition spree at the height of the dotcom frenzy.

"All litigation is sorted out and everything is tidied up."

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