| Thu 8 Sep 2005, 18:04 | | Pinnacle - Audited results for the year ended 30 J |
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Pinnacle - Audited results for the year ended 30 June 2005 and cautionary
Pinnacle Technology Holdings Limited
(Registration number 1986/000334/06)
Share code: PNC * ISIN: ZAE000022570
(`Pinnacle` or `the Group` or `the Company`)
Audited results for the year ended 30 June 2005 and cautionary announcement
Group income statement for the year ended 30 June
2005 2004
R`000 R`000
Revenue 715 468 497 202
Cost of sales (594 015) (413 289)
Gross profit 121 453 83 913
Operating expenses (79 904) (59 965)
EBITDA 41 549 23 948
Depreciation (3 912) (3 389)
Amortisation of intangibles (2) (431)
Operating profit 37 635 20 128
Share of net profit from associates - 2 134
Profit before interest 37 635 22 262
Interest received 3 790 2 706
Interest paid (4 479) (4 407)
Profit before taxation 36 946 20 561
Taxation (12 291) (6 386)
Net profit after taxation 24 655 14 175
Net profit attributable to minority shareholders (2 248) (1 513)
Net profit for the year 22 407 12 662
Weighted average number of shares in issue (`000) 148 446 149 020
Earnings per share (cents) 15,1 8,5
Headline earnings per share (cents) 15,1 8,9
Reconciliation of headline earnings
Net profit for the year 22 407 12 662
Amortisation of goodwill - 431
Impairment of investments and loans - 100
Headline earnings 22 407 13 193
Segmental report for the year ended 30 June
2005 2004
R`000 R`000
Revenue
Infrastructure and support 519 524 472 996
Software and storage 188 790 16 721
ICT services 5 405 5 241
Telecommunication 1 749 2 244
Holdings and properties - -
Total group 715 468 497 202
EBITDA
Infrastructure and support 33 816 25 018
Software and storage 8 194 2 050
ICT services 3 780 876
Telecommunication (2 789) (3 092)
Holdings and properties (1 452) (904)
Total group 41 549 23 948
Group balance sheet as at 30 June
2005 2004
R`000 R`000
Assets
Non-current assets 50 399 62 365
Property, plant and equipment 35 785 35 000
Intangible assets 9 608 3 707
Investments - 11 969
Deferred taxation 5 006 11 689
Current assets 223 461 132 425
Inventories 64 270 47 932
Trade and other receivables 96 626 55 116
Cash and cash equivalents 62 565 29 377
Total assets 273 860 194 790
EQUITY AND LIABILITIES
Capital and reserves 106 386 91 783
Share capital and premium 126 094 126 066
Treasury shares (4 138) -
Non-distributable reserves 9 729 9 663
Accumulated loss (25 299) (43 946)
Minority shareholders` interest 2 590 1 670
Non-current liabilities 7 887 8 912
Interest-bearing liabilities 7 887 8 912
Current liabilities 156 997 92 425
Trade and other payables 140 055 76 671
Short-term loans 1 693 5 325
Current portion of interest-bearing
liabilities 6 361 3 169
Warranty provisions 7 256 4 854
Taxation 1 632 2 406
Total equity and liabilities 273 860 194 790
Net asset value per ordinary share (cents) 75,0 61,6
Number of shares in issue (`000) 141 819 149 057
Summarised Group cash flow statement for the year ended 30 June
2005 2004
R`000 R`000
Cash flows from operating activities 40 137 31 962
Cash flows from investing activities 3 798 (11 025)
Cash flows from financing activities (10 747) (3 003)
Increase in cash and cash equivalents 33 188 17 934
Cash and cash equivalents at the
beginning of the year 29 377 11 443
Cash and cash equivalents at the
end of the year 62 565 29 377
Statement of changes in equity for the year ended 30 June
Non-
Share Share Treasury distribu- Accumu-
capital premium shares table lated
reserves loss Total
R`000 R`000 R`000 R`000 R`000 R`000
Balance at
1 July 2003 1 486 124 400 - 10 310 (56 608) 79 588
Issue of shares 5 175 - - - 180
Net profit for
the year - - - - 12 662 12 662
Deferred
taxation on
revaluation of
fixed property - - - (675) - (675)
Movement in foreign
currency translation
reserve - - - 28 - 28
Balance at
30 June 2004 1 491 124 575 - 9 663 (43 946) 91 783
Issue of shares 1 27 - - - 28
Net profit for
the year - - - - 22 407 22 407
Treasury shares
bought - - (4 138) - - (4 138)
Dilution of
subsidiary
shareholding - - - - (154) (154)
Dividends declared - - - - (3 606) (3 606)
Movement in foreign
currency translation
reserve - - - 66 - 66
Balance at
30 June 2005 1 492 124 602 (4 138) 9 729 (25 299) 106 386
Comments
Accounting policies
The results for the year ended 30 June 2005 have been prepared in accordance
with South African statements of Generally Accepted Accounting Practice. The
accounting policies used are consistent with those used in the preparation of
the results for the year ended 30 June 2004. The results of Explix Technologies
(Pty) Limited (`Explix`) were proportionately consolidated in accordance with
South African statements of Generally Accepted Accounting Practice as the Group
acquired joint control with effect 1 July 2004. The Group results have been
audited by the Group`s auditors, Grant Thornton, and their unqualified audit
report is available for inspection at the Company`s registered office.
Financial review
Revenue increased by 43,9% (2004: 18,9%). Organic growth supported by
significant volume increases attained through the penetration of government,
mass retail and dealer sales markets accounted for 9,4% whilst the proportional
consolidation of Explix contributed 34,5% to the growth of the consolidated
results.
When analysed against the weaker US dollar, the organic growth in turnover shows
a year-on-year increase of 18,8% compared to the previous year (2004: 55,3%)
during which period the rand strengthened by an average 7,8% (2004: 23,4%).
Combined with a broader client base, a diverse product range contributed to the
increase in gross profit to 17,0% (2004: 16,9%) of turnover.
Savings in legal fees and other administrative expenses allowed the cost base of
the Group to remain stable, reducing overall operating expenses to 11,2% of
turnover (2004: 12,1%).
Earnings before interest, tax, depreciation and amortisation (`EBITDA`)
increased to R41,5 million (2004: R23,9 million) or 5,8% of turnover (2004:
4,8%).
Interest paid remained steady at R4,4 million (2004: R4,4 million) due to the
improved working capital of the Group and application of the available cash to
reduce short-term financial requirements. Interest received increased to R3,8
million (2004: R2,7 million) as a treasury function was established during the
year to maximise returns on available assets.
Net profit attributable to minority shareholders increased to R2,2 million
(2004: R1,5 million) primarily as a result of significantly improved operational
results of Pinnacle Micro Cape (Pty) Limited and RentNet Rentals (Pty) Limited.
Segmental review of operations
Infrastructure and support
Infrastructure and support remains the core of the Pinnacle group of companies,
contributing 72,6% (2004: 95,1%) to the overall turnover and 81,4% (2004: 105%)
of the EBITDA results of the Group.
Infrastructure and support is represented by Pinnacle Micro styled branches
located at eight major business centres in South Africa, Namibia and Botswana.
Focused marketing and pricing strategies during the latter part of the year
contributed significantly to attract and retain new clients.
Additional revenue streams were introduced through the use of existing
infrastructure, whilst exciting new products and technologies such as Proline
plasma and CCTV were introduced.
Existing technologies and stock holding were also expanded to further secure
dealer loyalty.
Software and storage
The Software and storage group increased its turnover by R172 million on the
proportional consolidation of Explix.
In line with the strategic objective to expand Pinnacle`s presence to other
product groups, the software and storage group now contributes 26,4% (2004:
3,4%) to the overall turnover and 19,7% (2004: 8,6%) to the EBIDTA results of
the Group.
ICT services
The ICT services group results were significantly improved on the disinvestment
of a loss-making subsidiary, Assuage Management Services (Pty) Limited, at the
beginning of the financial year and provisions raised in favour of outstanding
loans to that subsidiary.
Discounting the above provisions on the outstanding loans shows an increase in
the year-on-year EBITDA results to R2,5m (2004: R0,9) with returns on revenue
amounting to 46,3% (2004: 16,8%).
The momentum generated in the provision of short-term technology rentals shall
continue to benefit from experience gained and the clientele won during the past
three years.
Telecommunication
The year has however brought its share of disappointment. As a result of
legislative changes deregulating the telecommunication industry and the impact
of Telkom`s reduced international call charges, the initial prospects of the
telecommunications group have not been met. We have addressed this by refocusing
the business group on the delivery of telecommunication hardware platforms
rather than the delivery of international least cost routing services.
New products have been tested and respective agencies secured to support the
revitalisation of the Telecommunication group in Pinnacle.
Holdings and properties
A contra entry effected in the holdings and properties group to recognise the
negative impact of the provision raised on the outstanding loans to Assuage
Management Services (Pty) Limited generated the bulk of the loss of
R1,4 million (2004: R0,9 million) in that operating group.
Acquisitions
Shareholders are referred to the announcement released on SENS on 25 October
2004 in terms of which Pinnacle acquired the further 15% of the ordinary
shareholding of Explix, for an amount of R6,1 million, taking its shareholding
in the company up to 50% (2004: 35%).
Goodwill increased by R4,7 million as a result of this transaction whilst a
further R1,1 million was reallocated from investments to intangibles to describe
the nature of the asset more accurately.
Shareholders are also referred to the announcement published in the press on 9
June 2005 advising that Pinnacle entered into a sale of shares agreement to
acquire the remaining 35% shareholding in Pinnacle Micro Cape (Pty) Limited from
Craig Nowitz, Timothy Humphreys-Davies and Rudolf Thietz, the current management
team, who are also directors of Pinnacle Micro Cape (Pty) Limited (`the
acquisition`). In terms of the Listings Requirements of the JSE, the acquisition
is a related party transaction and requires a fair and reasonable opinion from
an independent financial adviser appointed by the board of directors. The board
of directors have appointed Grant Thornton Corporate Finance (Pty) Limited as
the independent financial adviser. The acquisition is subject to approval by
Pinnacle shareholders at a general meeting to be convened for that purpose.
Details of the acquisition and of Pinnacle Micro Cape (Pty) Limited are set out
in a separate circular to shareholders which will be posted to shareholders on
or about 27 September 2005.
Black Economic Empowerment
Pinnacle is in advanced negotiations with a notable BEE legal entity regarding a
transaction in terms of which the BEE entity will acquire up to 20% shareholding
in Pinnacle. The BEE transaction will be subject to shareholder and JSE
approval.
The Pinnacle Group has subscribed to BEE transformation in its broadest sense.
Pinnacle`s transformation encompasses the advancement of historically
disadvantaged individuals over a wide front including skills development,
employment equity, advancement in the workplace, procurement practices,
enterprise creation and equity ownership of the company. Pinnacle therefore
proposes to convert the existing Pinnacle Share Purchase Scheme into a share
incentive scheme for black senior employees of the Pinnacle Group. The purpose
of the Pinnacle BEE Share Purchase Scheme is to incentivise black senior
employees of the Pinnacle Group to promote profit growth in the Pinnacle Group,
to simultaneously increase the black shareholding of Pinnacle, and to encourage
black senior employee retention. The creation of the Pinnacle BEE Share Purchase
Scheme is subject to the shareholders approving the adoption of a new trust deed
at a general meeting convened for that purpose. Details of the Pinnacle BEE
Share Purchase Scheme are set out in a separate circular to shareholders which
will be posted to shareholders on or about 27 September 2005.
Together with existing black shareholders, the above transactions will result in
Pinnacle having up to 35% BEE shareholding.
Corporate governance
Pinnacle is committed to the principles of transparency, integrity and
accountability espoused in the King Code of Corporate Practices and Conduct.
There have been no changes in the board of directors during the year under
review.
Prospects
Pinnacle is perfectly poised to enter new vertical markets to complement its
existing client base and remains committed to the development of ICT product
ranges to build on the synergies of the convergent communication and information
technologies.
The Group`s focused channel management team is empowered to identify and source
new technology products that, as often as not, differ from the traditional
component based offering.
Annual general meeting and general meeting of shareholders
Pinnacle will on or about 27 September 2005 post to shareholders the 2005 annual
report, which annual report will incorporate a notice of the annual general
meeting of shareholders to be convened for 10:00 on Friday, 28 October 2005.
Pinnacle will also on or about 27 September 2005 post to shareholders a circular
containing the relevant information in respect of the acquisition and the
Pinnacle BEE Share Purchase Scheme, which circular will incorporate a notice of
a general meeting of shareholders to be convened for 11:00 on Friday, 28 October
2005 (or immediately after conclusion of the abovementioned annual general
meeting, to be held at 10:00 on 28 October 2005).
Dividends
Notice is hereby given that on 2 September 2005 the board of directors proposed
a dividend of 4 cents (2004: 1,5 cents) per share for the year ended 30 June
2005, subject to shareholder approval. This dividend will be paid to ordinary
shareholders recorded as such in the register of the Company at the close of
business on Friday, 18 November 2005. The last day to trade to participate in
this dividend is Friday, 11 November 2005. The shares will commence trading ex-
dividend from Monday, 14 November 2005.
Important dates pertaining to this dividend are as follows:
Last day to trade `CUM` dividend Friday, 11 November 2005
Shares trade `EX` dividend Monday, 14 November 2005
Record date Friday, 18 November 2005
Payment date Monday, 21 November 2005
Share certificates may not be dematerialised or rematerialised from Monday, 14
November 2005 to Friday, 18 November 2005, both days inclusive.
Cautionary announcement
As a result of the ongoing negotiations regarding the acquisition of a 20%
shareholding by a BEE entity, shareholders are advised to exercise caution when
dealing in the Company`s securities until a full announcement is made.
For and on behalf of the Board
CD Biddlecombe AJ Fourie Midrand
Chairman Chief Executive Officer 8 September 2005
Registered office: Pinnacle Park, 269 16th Road, Randjiespark, Midrand
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg 2001
Executive directors: AJ Fourie (Chief Executive Officer), TA Tshivhase
Non-executive directors: CD Biddlecombe (Chairman), A Tugendhaft
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited, (Incorporated in the
Republic of South Africa), (Registration number 1996/000034/07)
www.pinnacle.co.za
