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Advantage Half Year Profits Soar 256%

Advantage Half Year Profits Soar 256%
E-Commerce Drives Growth

Auckland – 2 March 2000 – Advantage Group Limited (NZSE: ADV) today announced a profit after tax and before goodwill for the six months ended 31 December 1999 of $3.67 million, up 256% from a profit of $1.03 million for the corresponding period the previous year.

The company achieved this result on revenues of $28.9 million, up 149% from revenues of $11.6 million for the corresponding period the previous year.

Condensed statement of financial performance
(unaudited)

Half Year ended 31 December
(millions)

1999 1998
Total Revenues $28.9 $11.6
Net profit after tax and before goodwill $3.67 $1.03
EPS 4.69 cents 2.8 cents
Cash EPS 8.92 cents 3.7 cents

The result came on the back of a robust second quarter performance, driven by strong revenue growth in business-to-business e-commerce.

Unusual items include $1.2 million profit realised on the sale of investments, a $0.5 million provision against a trademark dispute, and goodwill amortisation of $1.5 million.

“Advantage is a rarity amongst e-commerce companies: we’re profitable,” says Advantage CEO, Greg Cross.

“We’re a new-economy company and ours is a growth story, but we’re delivering the type of profits that you’d expect from a more traditional company. In other words, we’re a real business with real operations, real people and real customers.”

“That hasn’t gone unnoticed,” says Cross. “The first six months of the current financial year have witnessed increased institutional interest in Advantage, culminating in the purchase of shares in Advantage by Soros Quantum Fund and Kingdon Capital Fund. These investments reflect a growing recognition of the company’s capabilities and performance relative to US e-commerce companies, and of our potential within the Asia Pacific region.

“Our investments in FlyingPig.co.nz and Strathmore Group Ltd will remain long-term holds,” added Cross, “the latter has already delivered a substantial return.”

While Advantage is extremely pleased by the 256% profit increase, Mr Cross commented that the company is set for a period of expansion that, while growing the company’s capabilities substantially, would also make considerable calls on

Advantage’s resources
“Over the next six months we expect to continue growing the company vigorously in new categories, in international markets and through acquisition,” says Cross.

“Substantial investment is required to grow our e-commerce capabilities across the group and this will impact on our bottom line in the short term. We have targeted emerging e-commerce categories, such as business-to-employee, which have the potential to reduce business costs and improve service.

“We have now created one of the largest and most experienced teams of web developers in Asia Pacific and we have offices in six Asia Pacific countries. We have been scoping further opportunities in Australia and sizing emerging market opportunities elsewhere in the region. These strategies will also demand significant investment.

“We expect to complete several acquisitions over the remainder of the financial year, strengthening our ability to develop and implement end-to-end e-commerce solutions.

“With ever-decreasing product life cycles and volatile, shifting demand patterns, traditional companies need to be capable of constantly adapting operations to maintain an optimal cost structure,” said Cross. “On that basis we foresee demand continuing to increase for services that enable business-to-business e-commerce in New Zealand, Australia and throughout Asia Pacific.”

About Advantage
Advantage Group Limited, an NZSE listed company, is a leading supplier of e-commerce and transaction processing solutions in New Zealand, Australia and throughout the Southern Hemisphere. The company has three business units: business-to-business e-commerce, retail solutions and point-of-sale equipment. It provides web development capabilities, software development, transaction processing and funds transfer capabilities to enable end-to-end e-commerce solutions.

ENDS

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