Wounded Advantage rebuilds

By DANIEL RIORDAN technology writer

Advantage Group is rebuilding itself without chief executive Greg Cross after yesterday reporting an interim profit down 82 per cent.

The former high-tech darling, whose share price has been savaged amid speculation that several major investors want out, is making each of its four divisions standalone businesses with their own chief executives reporting to an as-yet-unnamed group managing director.

The businesses will focus on organic growth after the past 18 months' expansion.

Mr Cross, who will remain a director, said he was unsuited to the leadership style of the new structure's "process-driven business" - a view shared by chairman Evan Christian. Mr Christian brought Mr Cross into the company when he became its then-major shareholder three and a half years ago.

"Greg's a very strategic guy and has been the perfect guy to take the business from a sleepy little $20 million eftpos company to what it is today.

"What we're looking for now is someone who will be more of a process-driven guy, someone who loves the nitty gritty.

"Greg and I will be there in the background providing the strategic advice and looking at potential acquisitions, but there will not be as many as there have been in the past. We're heading into a consolidation phase."

Mr Cross said he would manage the transition and head the search for a group managing director.

He said he had several possible roles lined up post-Advantage, but declined to specify them. He earned $321,000 in the year to June and had share options worth another $313,000, according to the company's last annual report.

E-services chief executive Mike Stobbs looms as the leading internal CEO candidate after chief operating officer Andy Wilkinson recently returned to Singapore for personal reasons and was not replaced.

However, analysts doubted there was a suitable candidate within the company.

Advantage made a profit of $386,000 in the six months to December, compared with $2.16 million for the same period in 1999.

Included in the result was a $3.34 million gain on the sale of its stake in Strathmore Group and a $1.86 million loss on its investment in internet portal Flying Pig.

Operating profit was down 78 per cent over the period. Operating cashflow was $180,000, far better than the negative flow of $1.9 million for the same period in 1999, but still a cause of concern for analysts.

No dividend was posted and earnings per share fell to 0.61c from 4.69c.

Mr Christian said the result reflected a poor performance from the biggest division, e-services, which posted an operating loss of $1.6 million. The other three divisions - payment solutions, retail automation and portable technology - returned a combined operating profit of $3.9 million.

He said e-services had been hurt by the global downturn in spending on information technology and a flat local economy.

The company expects a soft third quarter but a fourth-quarter recovery.



Staff numbers in the e-services business have been slashed from about 335 six months ago to 280, but further layoffs were not planned. The company employs about 400 staff and had revenues of $42.6 million in the last half year.

Former Countrywide Bank managing director David Wolfenden has been added to the board. There has been frequent criticism that the board, Mr Christian, Mr Cross and founding shareholder Nick Gordon, (who owns 4 per cent), lacked experience and independence.

Mr Wolfenden is to represent small shareholders. His expertise in banking and IT would benefit the company's payment solutions business, whose major customers were banks, said Mr Christian.

Mr Christian said the board was looking for one more director.

Meanwhile, Mr Watson isn't commenting on reports he is considering selling his stake to overseas buyers.

The Business Herald understands an information memorandum was circulated last month on behalf of Mr Watson, Mr Christian and Mr Gordon by CS First Boston, seeking a buyer for their combined stake. At least two overseas parties are understood to be interested.

However, Mr Christian, who owns 12 per cent, denied he was a seller, and said Mr Watson (who owns 18 per cent) had told him he was a long-term holder of his shares when they last spoke several weeks ago and he had no reason to suspect anything had changed subsequently.

Mr Watson described the rumours as "pure speculation" but refused to comment directly on whether he was looking to sell his stake, valued at $16.5 million at yesterday's closing price of $1.35, down 10c on the day and well below its April 2000 high of $5.65.