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Pinnacle - Unaudited Interim Results For The Six Months Ended 31 December 2004 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 2004 Highlights - Turnover up 10.4% - EPS and HEPS up 105% Group Income Statement 6 months 6 months 12 months ended ended ended 31 December 31 December 31 December 2004 2003 2004
(Unaudited) (Unaudited) (Audited) R"000 R"000 R"000 Revenue 200 596 181 660 497 202 Cost of sales (164 014) (147 364) (413 289) Gross profit 36 582 34 296 83 913 Operating expenses (27 781) (28 780) (63 785) Operating profit 8 801 5 516 20 128 Share of net profit from 1 382 670 2 134 associates Operating profit before 10 183 6 186 22 262 interest Interest received 1 030 827 2 706 Interest paid (1 359) (2 292) (4 407) Net profit before 9 854 4 721 20 561 taxation Taxation (2 992) (1 213) (6 386) Net profit after taxation 6 862 3 508 14 175 for the year Net profit attributable to outside shareholders (990) (651) (1 513) Net profit for the period 5 872 2 857 12 662 Weighted average number 149 103 148 797 149 020 of shares in issue ("000) Earnings per share 3.9 1.9 8.5 (cents) Headline earnings per 4.1 2.0 8.9 share (cents) Reconciliation of headline earnings Net profit for the period 5 872 2 857 12 662 Ammortisation of goodwill 212 148 431 Impairment of investments 100 and loans Headline earnings 6 084 3 005 13 193 Segmental Report Revenue Infrastructure and 188 071 170 665 472 996 support Software and storage 9 540 7 704 16 721 ICT services 2 059 2 925 5 240 Telecommunication 926 366 2 245 Holdings and properties Total group 200 596 181 660 497 202 Net profit Infrastructure and 4 038 1 897 12 397 support Software and storage 1 073 401 1 441 ICT services 1 586 (499) (1 612) Telecommunication (909) (359) (2 292) Holdings and properties 84 1 417 2 728 Total group 5 872 2 857 12 662 Group Balance Sheet Assets Non-current assets 71 853 62 323 62 364 Property, plant and 34 398 34 138 35 000 equipment Intangible assets 3 486 2 037 3 707 Investments 22 933 10 928 11 969 Deferred taxation 11 036 15 220 11 688 Current assets 129 128 122 160 132 426 Inventories 59 403 51 980 47 932 Trade and other 63 330 61 973 55 116 receivables Cash and cash equivalents 6 395 8 207 29 378 Total assets 200 981 184 483 194 790 Number of ordinary share 149 126 149 057 149 057 in issue at end of period (`000) Net asset value per 63.9 55.2 61.6 ordinary share (cents) Share capital and premium 126 094 126 066 126 066 Non-distributable 9 671 10 012 9 663 reserves Accumulated loss (40 465) (53 751) (43 946) Outside shareholders interest 1 699 2 739 1 670 Non-current liabilities 10 210 10 703 8 912 Current liabilities 93 772 88 714 92 425 Trade and other payables 71 393 69 668 76 671 Short-term loans 11 545 13 135 5 325 Current portion of long- term liabilities 3 594 2 514 3 169 Warranty provisions 5 188 2 240 4 853 Taxation payable 2 052 1 157 2 407 Total equity and 200 981 184 483 194 790 liabilities Summarised Group Cash Flow Statement Cashflows from operating (10 770) 1 569 31 962 activities Cashflows from investing (10 621) (4 918) (11 025) activities Cash flows from financing (1 592) 112 (3 003) activities (Decrease)/increase in cash and cash equivalents (22 983) (3 237) 17 934 Cash and cash equivalents 29 378 11 444 11 444 at the beginning of the period Cash and cash equivalents 6 395 8 207 29 378 at the end of the period Statement of Change in Equity Non-dis- Accu- Share Share tributable mulated capital premium reserves loss Total
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 (Audited) Share issued 4 176 180 Net profit for 2 857 2 857 the period Deferred capital gains tax on revaluation of (300) (300) property Movement in foreign currency translation 2 2 reserve Balance at 31 December 2003 (Unaudited) 1 490 124 576 10 012 (53 751) 82 327 Net profit for 9 805 9 805 the period Deferred capital gains tax on revaluation of (375) (375) property Movement in foreign currency translation 26 26 reserve Balance at 30 June 2004 (Audited) 1 490 124 576 9 663 (43 946) 91 783 Shares issued 1 27 28 Dilution of (154) (154) subsidiary shareholding Net profit for 5 872 5 872 the period Movement in foreign currency translation 8 8 reserve Dividends paid (2 237) (2 237) Balance at 31 December 2004 (Unaudited) 1 491 124 603 9 671 (40 465) 95 300 Comments 1. Accounting policies The Interim results have been prepared in accordance with South African Statements of Generally Accepted Accounting Practice, the Listing Requirements of the JSE Securities Exchange South Africa ("JSE") and the South African Companies Act. The accounting policies used in the preparation of the interim financial statements are consistent in all material respects with those applied in the Annual Financial Statements for the year ended 30 June 2004. Earnings per share and Headline earnings per share are calculated with reference to the weighted average number of shares, calculated by considering the date of issue and the quantum of the shares in relation to the period under review. 2. Operating results The last quarter of 2004 saw a significant increase in activity in the Infrastructure and Support group as savings realised on Dollar denominated procurement were passed on to clients and end users. Although the Group"s gross profit margin reduced to 18,3% (Dec 2003: 18,9%), stringent cost control and gains made on foreign exchange contributed to increase the operating profit for the period to 4.4% of turnover (Dec 2003: 3%). Revenue growth in the Infrastructure and Support group was achieved through the development of additional product ranges, most notably Point of Sale and Closed Circuit monitoring equipment. Through these convergent technologies the Group delivers complete technology solutions to end users. The Group has also entered into supply agreements with various national mass retailers that will substantially contribute to the public"s awareness and understanding of the quality and international standing of the locally produced Proline brand. The now wholly owned Intelligent Systems (Pty) Ltd continued to service the growing demand in the data storage market, and consolidated it"s long term relationships with high profile vendors, thus contributing to the 167% increase in net profit after taxation of the Software and Storage group over the corresponding 6 month period to December. The disposal of our interest in Assuage Management Systems (Pty) Ltd required a provision against the outstanding liability in the Holdings Operating group; resulting in a loss as shown on the attached segmental analysis for the Holdings and Properties group. This loss was however offset by the recognition of the corresponding gain in ICT Services. Telecommunications provider, Etel Telecommunications Solutions (Pty) Ltd ("eTel") successfully defended legal action by an American Service provider wherein it was alleged that Etel was utilising certain proprietary software in the provision of international telephony services, and can now cement business relationships that were dependent on the outcome of the above case. The Group"s cash-flow was negatively impacted by the necessary investment in stock to cater for additional orders received, as referred to in future prospects, and the cyclical deterioration of the debtors book over the December holiday period. 3. Acquisition of additional 15% of Explix Technologies (Pty) Ltd ("Explix") All conditions precedent listed in the 25 October 2004 SENS announcement have been fulfilled and the acquisition of an additional 15% of Explix equity has been completed. As the criteria of "control" as defined in IAS 27 have not been met, the results of Explix for the 6 months to 31 December 2004 have not been consolidated, and are included in the "Share of net profit from associates" 4. Future prospects The Group has received significant orders from various institutions for delivery in the 1st half of 2005. These orders are expected to contribute significantly to the operating results for the period ending 30 June 2005. 5. Social upliftment Negotiations with prospective Black Economic Empowered ("BEE") partners are continuing. Shareholders will be advised when material terms and conditions have been agreed. 6. Corporate governance The Group subscribes to the King Report on Corporate Governance for South Africa 2002 and complies with the main features thereof. 7. Dividends 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 21 February 2005 Registered office: Transfer Secretaries Pinnacle Park Computershare Investor 269 16th Road Services 2004 (Pty) Ltd Randjiespark Ground Floor Midrand 70 Marshall Street Johannesburg, 2001 Executive Directors Non-Executive Directors AJ Fourie (Chief Executive Officer) CD Biddlecombe (Chairman) TA Maraga-Tshivhase A Tugendhaft Sponsor Deloitte & Touche Sponsor Services (Pty) Ltd (Incorporated in the Republic of South Africa) (Registration number 1996/000034/07) Date: 21/02/2005 07:00:20 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department
