| Thu 18 Sep 2008, 7:05 | | PNC - Pinnacle - Reviewed Results For The Year Ended 30 June 2008 and |
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PNC
PNC
PNC - Pinnacle - Reviewed Results For The Year Ended 30 June 2008 and
dividend declaration
PINNACLE TECHNOLOGY HOLDINGS LIMITED
Registration number 1986/000334/06
Share code: PNC
ISIN: ZAE000022570
("Pinnacle" or "the Group" or "the Company")
FINANCIAL HIGHLIGHTS
- Revenue increased by 45% to R2,5 billion
- Operating profit increased by 39% to R151 million
- Fully diluted HEPS increased by 36% to 57,2 cents per share
- Proposed dividend increased by 20% to 12 cents per share
Reviewed Results For The Year Ended 30 June 2008 and dividend declaration
CONDENSED GROUP INCOME STATEMENT
for the year ended 30 June 2008
Reviewed Audited
2008 2007
R`000 R`000
Revenue 2 496 300 1 715 844
Cost of sales (2 115 785) (1 440 292)
Gross profit 380 515 275 552
Operating expenses (222 121) (161 145)
Selling and distribution (21 148) (11 316)
Employee expenses (173 657) (131 654)
Administration (27 316) (18 175)
EBITDA 158 394 114 407
Depreciation (5 317) (5 336)
Impairment of intangible assets (1 357) -
Amortisation (453) (563)
Operating profit 151 267 108 508
Investment income 6 053 4 794
Finance costs (10 770) (7 729)
Net profit before taxation 146 550 105 573
Taxation (41 712) (30 246)
Net profit for the year 104 838 75 327
Attributable to:
Minority shareholders 1 956 573
Ordinary shareholders 102 882 74 754
Performance per share (cents)
Earnings 69,3 51,2
Diluted earnings 55,4 40,8
Headline earnings 70,0 51,6
Fully diluted headline earnings 57,2 42,2
Dividends 12,0 10,0
Dividends cover (times) 4,8 4,2
Net asset value 155,8 116,2
Net tangible asset value 126,8 94,2
Reconciliation of headline earnings
and fully diluted headline
earnings per share
Net profit for the year 102 882 74 754
Add back:
Impairment of goodwill 977 563
Headline earnings 103 859 75 317
Deemed interest on deemed loans 2 288 2 042
106 147 77 359
Average weighted number of shares
in issue for the year (`000) 185 693 183 361
Number Number
`000 `000
Reconciliation of fully diluted
weighted average shares in issue
Weighted average number of shares
in issue 148 411 146 079
Shares issued to Amabubesi Investments
(Pty) Limited 37 282 37 282
Fully diluted weighted average
shares in issue (`000) 185 693 183 361
CONDENSED GROUP BALANCE SHEET
as at 30 June 2008
Reviewed Audited
2008 2007
R`000 R`000
Assets
Non-current assets 126 046 105 719
Property, plant and equipment 56 602 48 742
Intangible assets 52 971 41 146
Trust loans 12 261 12 633
Deferred taxation 4 212 3 198
Current assets 782 137 556 432
Inventories 260 440 152 988
Trade and other receivables 444 498 315 252
Cash and cash equivalents 77 199 88 192
Total assets 908 183 662 151
Equity and liabilities
Capital and reserves 284 926 217 174
Share capital and premium 167 629 186 247
Treasury shares (18 447) -
Non-distributable reserves 7 029 5 102
Accumulated profit 128 715 25 825
Minority shareholders` interest (3 244) (4 766)
Non-current liabilities 48 587 51 030
Current liabilities 577 914 398 713
Trade and other payables 544 260 357 477
Current portion of interest-bearing
liabilities 10 769 4 375
Warranty provisions 9 498 8 713
Taxation 13 387 28 148
Total equity and liabilities 908 183 662 151
Shares in issue
(excluding treasury shares)(`000) 182 905 186 882
Working capital management
Investment in working capital (R`000) 160 678 110 763
Stock days 38,2 38,8
Debtors days 55,5 58,0
Liquidity and solvency
Debt : equity 0,17 0,23
Current ratio 1,35 1,40
Acid test ratio 0,90 1,01
Returns (%)
Gross profit 15,2 16,1
EBITDA 6,3 6,7
Operating profit before interest
and tax 6,1 6,3
Net profit - as published 4,1 4,4
Interest cover (times) 14,0 14,0
CONDENSED GROUP CASH FLOW STATEMENT
for the year ended 30 June 2008
Reviewed Audited
2008 2007
R`000 R`000
Cash and cash equivalents at
the beginning of the year 88 192 166 190
Cash flow from operations 78 215 (21 543)
Cash from operations 152 008 113 281
Cash utilised in working capital (14 328) (113 386)
Taxation paid (59 465) (21 438)
Cash utilised in investing activities (49 147) (16 241)
Cash flow from financing activities (40 061) (40 214)
Distribution to shareholders (18 891) (12 362)
Increase in third party liabilities 1 542 (14 937)
Treasury shares acquired (22 712) (12 915)
77 199 88 192
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2008
Reviewed Audited
2008 2007
R`000 R`000
Opening balance 217 174 152 765
Issue of shares 89 14
Net profit for the year 102 882 74 754
Treasury shares bought (22 823) (2 815)
Treasury shares issued 4 376 9 387
Deferred tax on notional interest - (3 799)
Dividends received/(declared) 90 (13 058)
Distribution of share premium (18 707) -
Movement in foreign currency
translation reserve (390) (74)
Revaluation of property, plant
and equipment 2 599 -
Deferred tax on revaluation (364) -
284 926 217 174
SEGMENTAL REPORT
for the year ended 30 June 2008
Depreciation
and Net
Revenue amortisation EBITDA profit
R`000 R`000 R`000 R`000
2008
Pinnacle Micro 1 464 144 3 853 110 541 73 240
WorkGroup 854 978 823 35 671 23 676
RentNet 20 441 977 5 543 3 469
DataNet 156 659 1 350 4 584 1 528
Holdings and
properties 78 124 2 055 969
2 496 300 7 127 158 394 102 882
2007
Pinnacle Micro 1 027 495 2 468 79 340 53 624
WorkGroup 586 385 938 23 469 14 518
RentNet 26 560 1 730 6 234 3 197
DataNet 75 382 516 4 918 3 153
Holdings and
properties 22 247 446 262
1 715 844 5 899 114 407 74 754
Capital Total Total
expenditure assets assets
2008
Pinnacle Micro 5 056 445 587 (316 351)
WorkGroup 504 337 301 (290 044)
RentNet 2 185 13 599 (6 003)
DataNet 1 263 44 517 (44 720)
Holdings and
properties 4 199 67 179 30 617
13 207 908 183 (626 501)
2007
Pinnacle Micro 2 069 318 148 (233 548)
WorkGroup 469 239 927 (216 342)
RentNet 1 774 12 471 (7 497)
DataNet - 48 513 (51 754)
Holdings and
properties 6 145 43 092 59 398
10 484 662 151 (449 743)
COMMENTS
Results
Pinnacle is a diversified Information and Communications Technology supply
group. It focuses in the areas of IT hardware, networking and communications
infrastructure, software licensing and product and installation and support
services. Pinnacle offers a world class selection of international agencies
as well as its own Proline range of IT equipment. Product and services sales
are handled through individual focused companies, each with its own area of
expertise.
Revenue increased by 45% to R2,5 billion. Net profit increased 39% to R104,8
million. Cash flow from operations yielded R78,2 million, versus an outflow
of R21,5 million the previous year. Fully diluted headline earnings per share
reflected an increase of 35,5% to 57,2 cents per share.
Diversification strategies continue to benefit the Group as our Proline and
international branded hardware, software, networking, infrastructure and
support services ranges continued to expand during the year.
The acquisition of Tri Continental Distribution (TriCon) introduced IBM and
Lenovo as tier one server and mobile offerings to Pinnacle Micro. Additional
agreements were entered into to distribute Sony, Lexmark and Hewlett Packard
products in South and southern Africa, of which the full impact will only be
felt in the 2009 financial year.
During the year, volume growth mandated additional warehouse and office space
be leased in Cape Town, Bloemfontein, Midrand and Nelspruit. A sales office
was established in East London and warehouse space in Port Elizabeth is being
expanded. Additional sales offices have been tabled for consideration in
outlying business centres. The new premises were selected on their viability
to support all lines of business of the Group as we continue to leverage off
volumes to minimise expenditure as a percentage of sales.
The government line of business showed its customary innovation with the
successful roll-out of Phase 6 of Gauteng-on- Line. The model developed was
applied in the other provinces with the execution of geographically
distributed government funded education projects. Channel branches in the
regions successfully rolled out local government initiatives and, in doing
so, secured the right to compete for future roll-outs.
The CCTV line of business stabilised its product offering and improved its
technical solution and support skills with the appointment of experienced
staff to offer value added solutions to clientele.
Mass retail exceeded budget expectations as the product range offered to its
clientele was expanded to include notebooks, printers and peripherals.
WorkGroup experienced good demand for infrastructure software and strong
spending by government. Technologies that drive down IT expenditure, such as
virtualisation, showed increased demand, whilst storage expenditure continued
to grow with the continued proliferation of data.
In the Microsoft space, WorkGroup sustained its growth by focusing on
increasing overall Microsoft product deployment within medium-sized
corporates and small businesses.
With the simultaneous emphasis on environmental issues and the continued
demand for high-end computing within government and corporates, WorkGroup has
successfully grown the market with Sun Microsystems in South Africa and
expect further penetration as WorkGroup and Sun were selected as providers of
server technologies for government over the next three years.
DataNet relocated to secure modern premises in Midrand, appreciably reducing
risk and generating positive feedback from staff and customers alike. The
relocation, combined with the turnaround strategies implemented over the past
eighteen months, contributed to the much improved second half EBITDA profit
of R5,6 million posted by DataNet.
Gross profit as a percentage of sales dropped from 16,1% to 15,2%. This was
as a result of the introduction of TriCon and other international branded
products into our offering. The gross profit margins surrendered was
partially recovered by the reduction in operating cost as a percentage of
turnover from 9,4% to 8,9% year-on-year. As a result, operating profit was
maintained above 6% of sales.
Investment in working capital increased from R111 million to R161 million on
acquisition of Tri Continental Distribution (Pty) Limited, which contributed
R31 million in working capital at date of acquisition.
Normal operations required an investment of R14 million, significantly
improving on the R113 million invested in 2007.
Prospects
Despite the tough economic and social conditions experienced during the past
six months, South Africa is enjoying a period of sustained GDP growth.
Reducing broadband costs, internet-based services and the roll-out of high-
speed wireless networks have introduced increased levels of communication to
an eager South African market making information and communications
technology, more than ever before, a vital part of business and everyday
life.
Our diversified and compelling brands and varied channels to market allow us
to compete effectively in tough economic conditions and we shall pursue
opportunities as they arise.
The promise offered by the introduction of Hewlett Packard, Lexmark, Lenovo
and IBM to our product portfolio is expected to benefit sales but will impact
gross profit and EBITDA margins in 2009, mandating additional focus on Group
efficiencies.
Corporate activity
Pinnacle acquired 100% of the issued share capital and shareholders` loans of
Tri Continental Distributors (Pty) Limited with effect from 31 October 2007.
Ongoing Contribution
operations TriCon Total
R`000 R`000 R`000
2008
Financial impact
Revenue 2 214 651 281 649 2 496 300
Net profit before tax 142 101 4 449 146 550
Tri Continental Distribution (Pty) Limited at acquisition date
Book value Fair value
R`000 R`000
Financial analysis
Property, plant and equipment 309 309
Deferred taxation 125 125
Inventories 26 619 25 114
Trade and other receivables 47 595 43 098
Cash (overdraft) (21 837) (21 938)
Shareholder loans (3 529) (3 529)
Trade and other payables (36 943) (7 085)
Taxation payable (796) (1 798)
Share capital, premium and
retained income 11 543 4 305
Goodwill on acquisition 6 872
Purchase amount 11 177
Cash 10 177
Treasury shares 1 000
Impact on cash flow (32 115)
Broad-Based Black Economic Empowerment
Pinnacle is a level 4 contributor as measured in accordance with the Broad-
Based Black Economic Codes of Good Practice.
Corporate governance
The Group recognises the need to conduct its business with integrity,
transparency and equal opportunity and subscribes to the spirit of good
corporate governance as set out in the King II Report.
Subsequent events
No events material to the understanding of the report have occurred in the
period between the period-end date and the date of the report.
Changes in share capital
225 202 (2007: 119 826) ordinary shares were issued at a premium of 39 cents
each in favour of Pinnacle Holdings Limited shareholders under a blanket
offer to exchange shareholding in Pinnacle Holdings Limited for shareholding
in Pinnacle Technology Holdings Limited.
735 445 (2007: 2 500 000) ordinary shares were issued to the Pinnacle
employee share trust to settle trust obligations.
213 220 shares were issued as part payment for the acquisition of Tri
Continental Distribution (Pty) Limited.
Dividends
The Board of Directors have proposed a cash dividend of 12 cents per share
(2007: capital distribution of 10 cents per share) for the year under review.
The salient dates are as detailed below:
Annual general meeting Friday, 31 October 2008
Results of annual general meeting
announcement published on SENS and
cash dividend distribution of
12 cents per share confirmed Friday, 31 October 2008
Last date to trade "CUM" dividend Friday, 14 November 2008
Ordinary shares trade "EX" dividend Monday, 17 November 2008
Record date Friday, 21 November 2008
Payment date Monday, 24 November 2008
No share certificates may be dematerialised or rematerialised between Monday,
17 November 2008 and Friday, 21 November 2008, both days inclusive.
Statement of compliance
These condensed financial statements for the year ended 30 June 2008 are
prepared in accordance with International Financial Reporting Standards
(IFRS) applicable to interim financial reporting (IAS 34), the Listings
Requirements of the JSE Limited and the Companies Act of South Africa.
Accounting policies
The reviewed results for the year ended 30 June 2008 have been prepared in
accordance with the Group`s accounting policies which comply with IFRS. The
accounting policies adopted are consistent with those applied in the
preparation of the audited annual financial statements for the year ended 30
June 2007, with the exception of the adoption of IFRS 7, Financial
Instruments: Disclosures.
Audit status
The condensed consolidated financial statements for the year have been
reviewed by BDO Spencer Steward (Johannesburg) Inc and their unqualified
review report is available for inspection at the Company`s registered office.
For and on behalf of the Board
CD Biddlecombe AJ Fourie
Chairman Chief Executive Officer
Midrand
18 September 2008
Registered Office: The Summit, 269, 16th Road, Randjespark, Midrand
Transfer Secretaries: Computershare Investor Services (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg 2001
Directors: CD Biddlecombe* (Chairman), AJ Fourie (Chief executive officer),
H Coetzee, HG Motau*, MP Moyo*, TAM Tshivhase, A Tugendhaft*
* (Non-executive)
Auditors: BDO Spencer Steward (JHB) Inc, Registered Auditors, 13 Wellington
Road, Parktown 2193
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 18/09/2008 07:05:05 Produced by the JSE SENS Department.
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