| Thu 17 Mar 2011, 17:15 | | PNC - Pinnacle Technology Holdings Limited - Unaudited interim results for the |
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PNC
PNC
PNC - Pinnacle Technology Holdings Limited - Unaudited interim results for the
six months ended 31 December 2010
PINNACLE TECHNOLOGY HOLDINGS LIMITED
(Registration number 1986/000334/06)
Share code: PNC
ISIN: ZAE000022570
("Pinnacle" or "the Group")
www.pinnacle.co.za
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
Revenue increased by 43% to R2.1 billion
EBITDA increased by 49% to R133 million
Net profit after tax increased by 61% to R89 million
Headline earnings per share increased by 40% to 48.0 cents
GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 2 099 498 1 464 836 3 166 925
Cost of sales (1 798 930) (1 242 618) (2 687 295)
Gross profit 300 568 222 218 479 630
Operating expenses (167 340) (133 076) (271 353)
Selling and distribution (8 600) (12 464) (30 454)
Employee expenses (137 264) (104 505) (218 670)
Administration (31 785) (21 047) (42 565)
Profit on foreign exchange 10 309 4 940 20 336
EBITDA 133 228 89 142 208 277
Depreciation (6 176) (3 917) (8 180)
Impairment of intangible
assets (115) (10 791) (10 791)
Amortisation (107) (85) (217)
Operating profit 126 830 74 349 189 089
Investment income 3 582 5 089 10 845
Finance costs (3 779) (17) (1 061)
Net profit before taxation 126 633 79 421 198 873
Taxation (37 980) (24 455) (58 059)
Net profit for the period 88 653 54 966 140 814
Attributable to:
Owners of the Company 86 931 53 828 139 266
Non-controlling interests 1 722 1 138 1 548
GROUP STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
Net profit for the period 88 653 54 966 140 814
Other comprehensive income
Exchange differences from
translating foreign
operations (77) (162) (203)
Deferred losses on unmatched
foreign exchange hedges - 884 884
Total comprehensive income
for the period 88 576 55 688 141 495
Attributable to:
Owners of the Company 86 854 54 550 139 947
Non-controlling interests 1 722 1 138 1 548
RECONCILIATION OF HEADLINE EARNINGS
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
Net profit attributable to
ordinary shareholders 86 931 53 828 139 266
Add back:
Impairment of intangibles 115 8 589 8 589
Profit and loss on sale
of assets (154) (49) (230)
Headline earnings 86 892 62 368 147 625
Weighted average shares
in issue (`000) 180 949 181 837 181 475
Earnings per share (cents)
Basic 48.0 29.6 76.7
Headline earnings 48.0 34.3 81.3
Fully diluted headline earnings 48.0 34.3 81.3
Returns (%)
Gross profit 14.3 15.2 15.1
EBITDA 6.3 6.1 6.6
Net profit 4.2 3.8 4.4
SEGMENTAL ANALYSIS
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
REVENUE
Pinnacle Africa 1 012 708 815 106 1 728 868
WorkGroup 624 029 558 802 1 211 472
Axiz 268 832 - -
DataNet 113 240 80 206 174 205
CentraFin 46 261 - -
Infrasol 28 553 7 277 36 861
Explix Business Solutions 5 576 - 2 384
Wyse 326 - 9 686
RentNet - 3 373 3 373
Holdings and properties (27) 72 76
Total Group 2 099 498 1 464 836 3 166 925
EBITDA
Pinnacle Africa 81 594 51 691 127 808
WorkGroup 30 762 34 572 65 721
Axiz 12 197 - -
DataNet 4 189 2 385 6 635
CentraFin 6 411 - -
Infrasol 299 (1 306) 1 689
Explix Business Solutions (2 966) - (1 964)
Wyse (259) - (417)
RentNet - (501) (839)
Holdings and properties 1 001 2 301 9 644
Total Group 133 228 89 142 208 277
ASSETS
Pinnacle Africa 653 256 490 637 612 586
WorkGroup 401 963 318 071 458 993
Axiz 400 696 - -
DataNet 60 203 44 975 44 094
CentraFin 29 899 - -
Infrasol 15 555 2 017 16 270
Explix Business Solutions 10 315 - 1 697
Wyse 581 - 692
RentNet - 7 571 9 476
Holdings and properties 82 678 106 267 111 023
Total Group 1 655 146 969 538 1 254 831
LIABILITIES
Pinnacle Africa (400 578) (281 145) (349 978)
WorkGroup (306 315) (231 662) (350 952)
Axiz (394 196) - -
DataNet (48 884) (37 361) (34 478)
CentraFin (25 266) - -
Infrasol (17 042) (3 035) (16 845)
Explix Business Solutions (14 514) - (3 185)
Wyse (1 167) - (1 002)
RentNet - 375 (1 407)
Holdings and properties 164 022 41 929 41 935
Total Group (1 043 940) (510 899) (715 912)
GROUP ABRIDGED STATEMENT OF CASH FLOWS
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash and cash equivalents at
the beginning of the period 187 088 163 653 163 653
Cash from operations 132 741 93 707 217 992
Cash utilised in
working capital (144 844) (155 019) (103 171)
Taxation paid (45 925) (25 807) (52 479)
Distribution to shareholders (28 503) (21 835) (21 909)
Cash utilised in investing
activities (205 388) (2 647) (13 659)
Increase in third party
liabilities 1 637 2 831 (2 286)
Treasury shares acquired - (582) (5 625)
Cash and cash equivalents
at the end of the period (103 194) 54 301 187 088
GROUP STATEMENT OF FINANCIAL POSITION
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
ASSETS
Non-current assets 187 685 147 276 146 427
Property, plant and
equipment 105 589 85 603 90 400
Intangible assets 56 880 43 489 43 558
Trust loans 1 165 6 724 3 516
Deferred taxation 24 051 11 460 8 953
Current assets 1 467 461 822 262 1 108 404
Inventories 515 209 293 428 384 347
Trade and other receivables 902 672 474 533 536 665
Taxation receivable 677 - 304
Cash and cash equivalents 48 903 54 301 187 088
Total assets 1 655 146 969 538 1 254 831
EQUITY AND LIABILITIES
Capital and reserves 611 206 458 639 538 919
Share capital and premium 143 993 143 983 143 983
Treasury shares (13 964) (21 186) (26 469)
Non-distributable reserves 31 502 31 481 31 578
Accumulated profit 445 440 301 883 387 108
Non-controlling interests 4 235 2 478 2 719
Non-current liabilities 81 389 24 010 19 852
Interest-bearing liabilities 70 172 12 775 8 630
Deferred taxation 11 217 11 235 11 222
Current liabilities 962 551 486 889 696 060
Trade and other payables 763 565 463 704 677 432
Foreign exchange contracts 8 120 6 640 344
Bank overdrafts 152 097 - -
Current portion of interest-
bearing liabilities 13 839 2 160 806
Warranty provisions 9 452 7 899 6 678
Taxation 15 478 6 486 10 800
Total equity and liabilities 1 655 146 969 538 1 254 831
Shares in issue (`000)
(excluding treasury shares) 183 328 181 860 180 303
Valuation
Net asset value per
share (cents) 331.08 250.83 297.39
Net tangible asset value
per share (cents) 286.94 220.62 268.26
Working capital management
Inventory days 41.5 43.2 52.2
Debtors days 53.3 52.0 52.4
Creditors days 54.0 59.9 80.7
Liquidity and solvency
Debt to equity (%) 13.32 5.24 3.68
Current asset ratio 1.52 1.69 1.59
Acid test ratio 0.99 1.09 1.04
GROUP STATEMENT OF CHANGES IN EQUITY
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2010 2009 2010
Unaudited Unaudited Audited
R`000 R`000 R`000
Opening balance 538 919 425 367 425 367
Shares issued 10 - -
Comprehensive income for
the period 88 576 55 688 141 495
Treasury shares
issued/(acquired) 12 505 (581) (5 864)
On acquisition of
shareholding 60 - (170)
Dividends paid (28 864) (21 835) (21 909)
Total comprehensive income
for the period 611 206 458 639 538 919
Attributable to:
Owners of the Company 606 971 456 161 536 200
Non-controlling interests 4 235 2 478 2 719
COMMENTARY
INTRODUCTION
Pinnacle Technology Holdings Limited is a diversified Information and
Communication Technology Group, active in all areas of ICT hardware, software
and services. The Group consists of seven operating divisions, each with its own
area of expertise.
Through the different operating divisions, a world-class selection of
international branded products are offered, including Acer, Apacer, CA, Canon,
Dell, Hewlett-Packard, IBM, Intel, Logitech, McAfee, Microsoft, Modrac, Novell,
Sony and VMWare, along with Pinnacle`s own range of Proline ICT equipment.
CORPORATE ACTIVITY
Pinnacle acquired an effective 100% of the issued share capital of Axiz
Technology (Pty) Limited, and its subsidiaries, with effect from 1 November
2010, for a purchase consideration of R150 million. 50% of the purchase price
was financed from available cash resources and the balance from a third party
finance.
The Axiz Group is an established and respected channel focused distributor of
tier one brands, and Pinnacle believes the acquisition will unlock synergies and
improve efficiencies in the Group.
To this end, the operations of WorkGroup has been relocated (post year-end) to
the Axiz premises and first steps implemented to initiate the integration of
WorkGroup and Axiz.
As reported in the June 2010 audited results, Pinnacle acquired a 51% stake in
CentraFin (Pty) Limited, a technology focused finance house for a purchase
consideration of R8 million. The vertical integration is expected to enhance
sales in Explix Business Solutions, Pinnacle Africa, WorkGroup, DataNet and
Infrasol through financial services rendered by the experienced CentraFin team.
RESULTS OF OPERATIONS
Pinnacle had a solid first six months. Positive revenue trends were maintained,
reflecting year-on-year growth of 43% to R2.1 billion, of which organic revenue
growth amounted to 25%.
Net profit after tax grew 61% to R89 million and, excluding the Axiz
acquisition, grew by 49% to R80 million.
Four key areas contributed to the profit growth.
- Software impairment: In the previous period Pinnacle impaired R10 million of
software investment that did not occur in the current period;
- Forex profits doubled to R10.3 million from R5 million;
- The profit contribution from Axiz; and
- Pinnacle Africa had a good first half due to its continued diversification
into different market segments.
Gross profit margins decreased to 14.3% from a previous 15.2%. This was,
however, offset by a reduction in the operating costs from 10.5% to 8.8%. As a
result, EBITDA increased to 6.3% from 6.1%. Concerted efforts will however be
made to increase gross profit margins. Actions will include diversifying the
product offering further into higher margin product and increased focus on
service offerings of the Group.
Rand strength continued to put pressure on some of the divisions and the
government IT investment remained below expectations. The period before and
during the Soccer World Cup was challenging due to the relative low corporate
activities, but a quick pick up was noted after the World Cup conclusion.
Pinnacle Africa performed well for the period. Revenue grew by 24% to R1 billion
while EBITDA grew by 59% to R81.6 million.
Large retail customers switched some of their buying to Pinnacle Africa and
small to medium enterprise business remained strong
during this period. Notebooks have become the preferred form factor resulting in
a higher average price per unit.
WorkGroup was affected by the strong rand as well as low corporate activity
during the Soccer World Cup. Revenue grew by 12% to R600 million, but EBITDA
decreased 11% to R31 million. Increased margin pressure was slightly offset by
lower operating costs, but not enough to negate a lower net profit for the
period.
DataNet increased revenue by 41% to R113 million and EBITDA by 76% to R4.2
million. Subdued infrastructure demand was offset by the introduction of the new
voice and data division.
Infrasol continued on its growth path. Revenue increased fourfold and break even
on EBITDA was achieved during the first half. Infrasol however received its
first meaningful installation contract in January, which will turn it
profitable.
CentraFin has started to capitalise on Group finance opportunities and will
contribute to and benefit from Group activities.
Cash flow
Overall, cash generation remains a significant challenge. Working capital
absorbed R144 million, primarily due to investment in normal trade debtors and
CentraFin`s term loans. Additional resources have been allocated to address the
perceived deterioration of payment terms.
The acquisition of Axiz and CentraFin had a combined impact of R191 million on
the consolidated cash balance of the Group, consisting of the respective
purchase considerations, as well as their banks` positive or overdraft balances
at the date of acquisition.
R14.4 million was spent on the acquisition of vehicles and equipment for the
Group, required to maintain and grow revenue.
PROSPECTS
Pinnacle continues to diversify its revenue streams with the addition of
international brands to add and expand on hardware, software and infrastructure
technologies. The addition of Axiz will afford Pinnacle the opportunity to
expand or develop its footprint in large and medium corporate market segments.
The positive economic outlook should however be considered in light of
uncertainty in the retail and government forecasts relating to the next six
months.
ACCOUNTING POLICIES
In terms of the Listings Requirements of the JSE Limited, the interim results
comply with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards and the AC 500
standards, as issued by the Accounting Standards Board, and have been prepared
in accordance with IAS 34 - Interim Financial Reporting, the Listings
Requirements of the JSE Limited and the South African Companies Act. The
accounting policies used in the preparation of these interim financial
statements are consistent with those employed in the preparation of the audited
financial results for the year ended 30 June 2010.
The business combinations referred to in the second paragraph have been
provisionally accounted for in accordance with IFRS3: Business Combinations. The
accounting will be finalised by year-end.
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. The Group is currently in
the process of reviewing and evaluating its compliance with King III and a
detailed programme will be adopted to ensure optimal compliance within an
acceptable time frame.
CHANGES TO THE BOARD OF DIRECTORS
Mr Hano Coetzee resigned as Financial Director during January 2011. The Board
extends its gratitude to Mr Coetzee for his service as well as their best wishes
for his future endeavours. Mr Chris Smyth has accepted the appointment of Group
Financial Director with effect 16 March 2011 and is expected to bring a wealth
of experience to the Group.
SUBSEQUENT EVENTS
No events material to the understanding of the report, other than those
discussed above, had occurred in the period between the period-end date and the
date of the report.
DIVIDENDS
In line with previous years, no interim dividend is proposed for the period
under review.
For and on behalf of the Board
CD Biddlecombe AJ Fourie
Chairman Chief Executive Officer
Midrand
17 March 2011
Directors: CD Biddlecombe* (Chairman), AJ Fourie (Chief Executive Officer), PM
Moyo*, N Mthombeni*, C Smyth (Financial),
TAM Tshivhase, A Tugendhaft*
* (Non-executive)
Registered Office: The Summit, 269, 16th Road, Randjespark, Midrand, 1685
Transfer Secretaries: Computershare Investor Services (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg, 2001
Auditors: BDO South Africa Inc, Registered Auditors, 13 Wellington Road,
Parktown, 2193
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 17/03/2011 17:15:01 Produced by the JSE SENS Department.
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