| Tue 14 Sep 2010, 7:30 | | PNC - Pinnacle Technology Holdings Limited - Reviewed results for the year ended |
|
PNC
PNC
PNC - Pinnacle Technology Holdings Limited - Reviewed results for the year ended
30 June 2010
PINNACLE TECHNOLOGY HOLDINGS LIMITED
Registration number 1986/000334/06
Share code: PNC
ISIN: ZAE000022570
REVIEWED RESULTS for the year ended 30 June 2010
HIGHLIGHTS
REVENUE increased by 11.8% to R3.17 billion
FULLY DILUTED HEADLINE EARNINGS PER SHARE increased by 37.6% to 81.3 cents per
share
DIVIDENDS increased by 33.3% to 16 cents per share
CASH AND CASH EQUIVALENTS increased by 14% to R187 million
CONSOLIDATED INCOME STATEMENT for the year ended 30 June
Reviewed Audited
2010 2009
R`000 R`000
Revenue 3 166 925 2 833 716
Cost of sales (2 687 295) (2 395 040)
Gross profit 479 630 438 676
Operating expenses (271 353) (271 291)
Selling and distribution (30 454) (9 712)
Employee expenses (218 670) (193 726)
Administration (42 565) (42 904)
Profit/(loss) on foreign exchange 20 336 (24 949)
Earnings before interet, tax,
depreciation and amortisation 208 277 167 385
Depreciation (8 180) (8 305)
Impairment of intangible assets (10 791) -
Amortisation (217) (439)
Operating profit 189 089 158 641
Investment income 10 845 7 428
Finance costs (1 061) (12 056)
Net profit before taxation 198 873 154 013
Taxation (58 059) (43 891)
Net profit for the year 140 814 110 122
Attributable to:
Owners of the Company 139 266 105 454
Non-controlling interests 1 548 4 668
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
Reviewed Audited
2010 2009
R`000 R`000
Net profit for the year 140 814 110 122
Other comprehensive income
Exchange differences from translating
foreign operations 681 242
Deferred losses on unmatched foreign
exchange hedges - (884)
Gains on revaluation of properties - 30 230
Deferred tax thereon - (9 636)
Total comprehensive income for the year 141 495 130 074
Attributable to:
Owners of the Company 139 947 125 406
Non-controlling interests 1 548 4 668
RECONCILIATION OF HEADLINE EARNINGS
Net profit for the year attributable to
ordinary shareholders 139 266 105 454
Impairment of goodwill 8 589 -
Profit on sale of property, plant and
equipment (230) (23)
Headline earnings 147 625 105 431
Weighted average number of shares in
issue for the year (`000) 181 475 182 664
FINANCIAL REVIEW
Performance per share (cents)
Earnings 76.7 72.5
Fully diluted earnings 76.7 57.7
Headline earnings 81.3 72.5
Fully diluted headline earnings 81.3 59.1
Dividends 16.0* 12.0
Dividend cover (times) 5.1 4.9
Net asset value 298.9 233.9
Net tangible asset value 274.7 204.1
*Proposed
Working capital management
Investment in working capital 243 580 153 054
Stock days 52.2 44.6
Debtors days 52.4 44.5
Creditors days 80.7 72.1
Liquidity and solvency
Debt to equity 0.04 0.06
Current ratio 1.59 1.51
Acid test ratio 1.04 1.00
Returns (%)
Gross profit 15.1 15.5
EBITDA 6.6 5.9
Operating profit before interest and tax 6.0 5.6
Effective tax rate 29.2 28.5
Net profit 4.4 3.7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June
Reviewed Audited
2010 2009
R`000 R`000
Assets
Non-current assets 146 427 159 479
Property, plant and equipment 90 400 86 960
Intangible assets 43 558 54 210
Trust loans 3 516 10 536
Deferred taxation 8 953 7 773
Current assets 1 108 404 856 248
Inventories 384 347 292 910
Trade and other receivables 536 665 399 685
Taxation receivable 304 -
Cash and cash equivalents 187 088 163 653
Total assets 1 254 831 1 015 727
Equity and liabilities
Capital and reserves 538 919 425 367
Share capital and premium 143 983 143 983
Treasury shares (26 469) (20 605)
Non-distributable reserves 31 578 30 780
Accumulated profit 387 108 269 858
Non-controlling interests 2 719 1 351
Non-current liabilities 19 852 24 452
Interest-bearing liabilities 8 630 13 777
Deferred taxation 11 222 10 675
Current liabilities 696 060 565 908
Trade and other payables 677 432 539 541
Foreign exchange contracts 344 9 993
Current portion of interest-bearing
liabilities 806 2 417
Warranty provisions 6 678 9 674
Taxation 10 800 4 283
Total equity and liabilities 1 254 831 1 015 727
Shares in issue (excluding treasury
shares) (`000) 180 303 181 860
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June
Reviewed Audited
2010 2009
R`000 R`000
Cash and cash equivalents at the
beginning of the year 163 653 77 199
Cash flow from operations 62 342 127 539
Cash from operations 217 309 165 113
Cash (utilised in)/released from
working capital (102 488) 17 150
Taxation paid (52 479) (54 724)
Cash utilised in investing activities (13 659) (10 047)
Cash flow from financing activities (25 248) (31 038)
Distribution to shareholders (21 909) (21 970)
Increase/(decrease) in third party
liabilities 2 286 (7 411)
Treasury shares acquired (5 625) (1 657)
Cash and cash equivalents at
the end of the year 187 088 163 653
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Reviewed Audited
2010 2009
R`000 R`000
Opening balance 425 367 281 682
Treasury shares acquired (5 864) (2 158)
Net profit for the year 140 814 110 122
Acquisition of minority interest (170) -
Revaluation of property, plant
and equipment - 30 230
Deferred tax on revaluation - (9 636)
Capitalisation of Amabubesi deemed
financial liability - 36 948
Reversal of deferred taxation thereon - 794
Deferred losses on unmatched
foreign hedges - (884)
Dividends declared (21 909) (21 973)
Movement in foreign currency
translation reserve 681 242
538 919 425 367
SEGMENTAL REPORT
for the year ended 30 June
Depreciation
and Net
Revenue amortisation EBITDA profit
R`000 R`000 R`000 R`000
2010 (Reviewed)
Pinnacle Africa 1 728 868 3 361 127 808 95 039
WorkGroup 1 211 472 607 65 721 46 766
DataNet 174 205 1 116 6 635 2 064
Infrasol 36 861 872 1 689 780
Sharp 2 384 - (1 964) (759)
RentNet 3 373 2 925 (839) (802)
Wyse 9 686 56 (417) (158)
Holdings and
Properties 76 10 251 9 644 (3 664)
3 166 925 19 188 208 277 139 266
Capital
expenditure
including Total Total
revaluation assets liabilities
R`000 R`000 R`000
2010 (Reviewed)
Pinnacle Africa 5 903 612 586 (349 978)
WorkGroup 589 458 993 (350 952)
DataNet 1 187 44 094 (34 478)
Infrasol 1 560 16 270 (16 845)
Sharp 3 038 1 697 (3 185)
RentNet - 9 476 (1 407)
Wyse - 692 (1 002)
Holdings and
properties 1 289 111 023 41 935
13 566 1 254 831 (715 912)
Depreciation
and Net
Revenue amortisation EBITDA profit
R`000 R`000 R`000 R`000
2009 (Audited)
Pinnacle Africa 1 619 099 3 213 88 908 57 925
WorkGroup 1 023 895 633 57 262 41 472
RentNet 23 294 1 951 6 374 3 388
DataNet 167 397 1 240 10 367 1 618
Holdings and
properties 31 1 707 4 474 1 051
2 833 716 8 744 167 385 105 454
Capital
expenditure
including Total Total
revaluation assets liabilities
R`000 R`000 R`000
2009 (Audited)
Pinnacle Africa 5 474 481 487 (310 214)
WorkGroup 546 348 756 (269 044)
RentNet 1 835 15 055 (4 872)
DataNet 1 185 54 129 (48 184)
Holdings and
properties 30 536 116 300 41 954
39 576 1 015 727 (590 360)
COMMENTS
INTRODUCTION
Pinnacle is a diversified group active in all areas of Information,
Communication and Technology hardware, software and services. Pinnacle offers a
world-class selection of branded products including Microsoft, VMWare, Apacer,
Dell, Hewlett-Packard, Sun, Intel and IBM as well as its own Proline range of IT
and audio-visual equipment. Product and services sales are handled through
individual focused companies, each with dedicated management teams and own areas
of expertise.
RESULTS OF OPERATIONS
Overall
Revenue increased by 11.8% to R3.17 billion, primarily due to organic growth in
WorkGroup and Pinnacle Africa. Gross profit reduced from 15.5% to 15.1% as
WorkGroup`s better than average growth and the loss of RentNet`s high margin
business diluted the increased gross profit contribution by Pinnacle Africa.
Operating expenses amounted to R271 million, reducing to 8.6% of revenue (2009:
9.6%) as profit and loss on foreign exchange realised a profit of R20 million, a
marked improvement on the loss of R24 million reported in 2009. Included in
operating expenses is a R13 million charge relating to bad debts, following a
record level of business failures during the year.
Fully diluted headline earnings per share increased by 37.6% to 81.3 cents per
share (2009: 59.1 cents per share).
Working capital investment increased to R243.6 million from R153 million. Trade
days outstanding increased to 52.4 days (2009: 44.5 days), reflecting the impact
of a material but secure government debt outstanding at year-end. Days stock on
hand increased to 52.2 days (2009: 44.6 days) following the 30% reduction in
business volumes experienced during the Soccer World Cup. Cash flow from
operations yielded R62.3 million (2009: R127.5 million) being 44% of operating
profit. Net cash on hand at year-end amounted to R187 million.
Net tangible asset value per share has increased to 274.7 cents per share (2009:
204.1 cents per share).
Pinnacle Africa
Revenue increased by 6.8% to R1,73 billion in difficult trading conditions.
Government ICT spend was curtailed as a result of lower tax collections,
prioritised funding for the new national departments, and focus on the Soccer
World Cup. Retail sales showed commendable growth (25%) for the year under the
prevalent economic conditions, which was realised as a result of innovative and
attractive retail solutions. Regional sales, being the SME focused, run rate
business, grew 10% on last year.
Bad debts and related provisions amounted to R8.6 million (bad debt recovery of
R3.5 million last year), highlighting the need for caution in an environment
where large and established concerns have failed due to difficult trading
conditions.
WorkGroup
Revenue increased by 18% to R1.2 billion due to accelerated growth in its new
IBM hardware agency, good growth in retail, IBM corporate software and
virtualisation technologies. WorkGroup has positioned itself as a virtualisation
and data centre consolidation specialist representing a number of vendor
agencies in a fast-growing market segment. Annuity-based licensing renewals
continue to grow and additional investment was allocated to manage this
business. WorkGroup is well set to expand further into the highly skilled
security, identity management and virtualisation solutions markets through its
dedicated network of reseller partners. To this end it has acquired additional
product offerings like Wyse & Veeam which should add to the growth opportunities
of WorkGroup for the foreseeable future
DataNet
DataNet`s revenue increased by 4% to R174 million. The depressed construction
industry contributed to restricted revenue growth although additional security
and network agencies have been brought on board to diversify revenue streams.
The introduction of voice data solutions from Alcatel-Lucent, Mitel and Siemens
Gigaset is expected to add to revenue and continue to offer diversification to
the DataNet revenue stream.
Infrasol
In its first year of operation, Infrasol has successfully rolled out its project
management solutions, incorporated the RentNet Rentals business and offered
innovative rental solutions that offer potential to the Group. The company is
focused on building a solid order book for the next 12 months in various
infrastructure projects, in both the government and corporate arena.
Sharp
Sharp multi-functional copiers and printers are recognised internationally as an
advanced and reliable range of office automation solutions and Pinnacle agreed
to act as finance partner to Moyahabo Digital Solutions in this capital
intensive business model. Following the successful conclusion of the acquisition
in December 2009, significant time has been invested to secure premises,
implement business processes, deliver on government orders and build a credible
order book. The business model retains significant growth potential as products
are introduced and marketed to government, large and medium corporates and
synergies with CentraFin are realised.
CAPITAL EXPENDITURE
R6.1 million was invested to facilitate the upgrade and expansion of IT, R2.4
million on the acquisition of delivery vehicles and R2.3 million on leasehold
improvements. No material capital expenditure commitments have been entered into
at year-end.
PROSPECTS
Market sentiment is largely positive, with market indicators reporting improved
earnings and jobs data. During the run up to and the hosting of the 2010 Soccer
World Cup, government showcased its ability to effectively execute high value
projects on time. Improvements in economic efficiency resulting from the new
road infrastructure and improved policing and law enforcement resulting from
these investments should pay dividends for all South Africans for years to come.
Improved risk management and reporting strategies should contribute to a global
platform for sustained, stable growth.
The Group will, however, continue to focus on cost containment to reduce
pressure on revenue generation. Working capital management and cash generation
will continue to enjoy attention as the Group aims to further improve its
balance sheet and corresponding credit ratings.
The Group is constantly striving to acquire new product agencies and businesses
that will assist in the diversification of the Group`s existing markets,
products and clientele, and trust we will be able to report positive feedback on
this in the foreseeable future.
CORPORATE ACTIVITY
2010 will be noteworthy for the growth opportunities taken. During the year
Pinnacle established Moyahabo Digital Solutions, in which it has a 51% interest,
and increased its equity holding in DataNet by a further 9,9%, effective 31
December 2009. Pinnacle also entered into transactions to acquire equity stakes
in CentraFin and CentraVoice, effective 1 July 2010.
The Competition Commission is furthermore considering Pinnacle`s bid to acquire
Axis Technology, which, if successful, will result in new direct and working
capital investment by Pinnacle into these business units amounting to R210
million. This transaction was announced on SENS on 20 July 2010 and in the press
on 21 July 2010.
TRANSFORMATION
Pinnacle continues to embrace the principles of transformation set by the B-BBEE
codes. The Group is actively applying policies to improve its contribution in
procurement, employment equity, skills development and social economic
development.
The Group holds a level 4 rating as measured in accordance with the DTI B-BBEE
codes.
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 2 report. The Group is currently in
the process of reviewing and evaluating its compliance with King 3 and a
detailed programme has been adopted to ensure optimal compliance.
SUBSEQUENT EVENTS
No events material to the understanding of the report, other than those
discussed above, had occurred in the period between the year-end date and the
date of the report.
DIVIDENDS
The Board of Directors has proposed a dividend of 16 cents per share (2009: 12
cents per share) for the year under review, yielding a dividend cover of 5
times, which it believes will be sustainable.
The salient dates applicable to the dividend are as follows:
2010
Forms of proxy for annual general
meeting of shareholders to be received
by 10:00 Wednesday, 27 October
General meeting of the shareholders held
at 10:00 Friday, 29 October
Results of annual general meeting
announcement published on SENS and
dividend distribution of
16 cents per share confirmed Friday, 29 October
Last day to trade "CUM" dividend Friday, 12 November
Ordinary shares trade "EX" dividend Monday, 15 November
Record date to be recorded in the
register to participate in the
dividend distribution Friday, 19 November
Payment to shareholders in respect of the
dividend distribution Monday, 22 November
Posting of cheques or electronic bank
transfers in respect of certificated
shareholders. Accounts credited at CSDP
or broker in respect of dematerialised
shareholders.
No share certificates may be dematerialised or rematerialised between Monday, 15
November 2010 and Friday, 19 November 2010, both days inclusive.
STATEMENT OF COMPLIANCE
These condensed consolidated financial statements for the year ended 30 June
2010 have been prepared in accordance with and containing the information
required by IAS 34 and comply with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards
(IFRS), the AC 500 standards as issued by the Accounting Standards Board and its
successor, 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 2010 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 2009.
STANDARDS ADOPTED DURING THE YEAR
During the year Pinnacle adopted IAS 1 and IFRS 8. IAS 1 has affected the
terminology used and the presentation of the comprehensive income and the
statement of changes in equity, but has had no effect on the financial position
or financial results. The adoption of IFRS 8 has had no effect as Pinnacle
already complied with its requirements.
REVIEW
The condensed consolidated financial statements for the year have been reviewed
by BDO South Africa Incorporated, and their unmodified 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 14 September 2010
Pinnacle Technology Holdings Limited
Incorporated in the Republic of South Africa
("Pinnacle" or "the Group" or "the Company")
Registered Office: The Summit, 269, 16th Road, Randjespark, Midrand, 1685
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, MP Moyo*, N Mthombeni*, TAM Tshivhase,
A Tugendhaft*,
* (Non-executive)
Auditors: BDO South Africa Inc, Registered Auditors,
13 Wellington Road, Parktown, 2193
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 14/09/2010 07:30:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
