Wrap Text
Pinnacle Technology Holdings Limited - Unaudited Interim Results For The Six
Months Ended 31 December 2005
PINNACLE TECHNOLOGY HOLDINGS LIMITED
(Registration number 1986/000334/06) * Share code: PNC * ISIN: ZAE000022570 *
("Pinnacle" or "the Group")
UNAUDITED INTERIM RESULTS for the six months ended 31 December 2005
HIGHLIGHTS
Turnover increased by 95% to R390m
EBITDA increased by 143% to R26m
Headline earnings increased by 198% to 12,2 cps
GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2005 2004 2005
Unaudited Restated Restated
R"000 R"000 R"000
Revenue 390 736 200 596 715 468
Cost of sales (326 042) (164 014) (594 015)
Gross profit 64 694 36 582 121 453
Operating expenses (43 886) (25 903) (79 904)
Recovery of bad debt 5 159 - -
EBITDA 25 967 10 679 41 549
Depreciation (2 718) (1 566) (3 712)
Amortisation of intangible assets - (212) (2)
Operating profit/(loss) 23 249 8 901 37 835
Share of net profit from associate - 1 382 -
Profit/(loss) before interest 23 249 10 283 37 835
Interest received 1 759 1 030 3 790
Interest paid (1 565) (1 359) (4 479)
Profit before taxation 23 443 9 954 37 146
Taxation (6 643) (3 021) (12 349)
Net profit/(loss) after taxation 16 800 6 933 24 797
Net profit attributable to
minority shareholders 377 (990) (2 248)
Net profit/(loss) for the year 17 177 5 943 22 549
Performance per share
Earnings per share (cents) 11,9 4,0 15,2
Headline earnings per share (cents) 12,2 4,1 15,2
Reconciliation of headline earnings
Net profit for the period 17 177 5 943 22 549
Amortisation of goodwill - 212 -
IAS36 impairment of goodwill 470 - -
Headline earnings 17 647 6 155 22 549
Weighted average number of
shares in issue (`000) 144 109 149 103 148 446
Returns % % %
Gross profit 16,6 18,2 17,0
EBITDA 6,6 5,3 5,8
Net profit 4,4 3,0 3,2
SEGMENTAL REPORT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2005 2004 2005
Unaudited Restated Restated
R"000 R"000 R"000
Revenue
Infrastructure and support 277 865 188 071 519 524
Software and storage 109 026 9 540 188 790
ICT services 3 845 2 059 5 405
Telecommunication - 926 1 749
Holdings and properties - - -
Total Group 390 736 200 596 715 468
EBITDA
Infrastructure and support 14 818 8 797 33 816
Software and storage 6 180 573 8 194
ICT services 1 225 3 346 3 780
Telecommunication - (1 075) (2 789)
Holdings and properties 3 744 (962) (1 452)
Total Group 25 967 10 679 41 549
Assets
Infrastructure and support 180 704 131 580 165 038
Software and storage 67 570 12 878 65 974
ICT services 6 045 2 635 4 573
Telecommunication (37) 397 2 170
Holdings and properties 37 752 54 604 37 289
Total Group 292 034 202 094 275 044
Liabilities
Infrastructure and support (161 319) (137 933) (155 172)
Software and storage (68 197) (12 335) (64 633)
ICT services (5 179) (2 544) (3 448)
Telecommunication - (19) (7 667)
Holdings and properties 65 669 48 849 66 036
Total Group (169 026) (103 982) (164 884)
GROUP BALANCE SHEET
31 Dec 31 Dec 30 Jun
2005 2004 2005
Unaudited Restated Restated
R"000 R"000 R"000
ASSETS
Non-current assets 67 282 72 966 51 583
Property, plant and equipment 41 403 35 499 36 986
Intangible assets 19 731 3 953 10 075
Investments - 22 933 -
Trust loans 3 220 - -
Deferred taxation 2 928 10 581 4 522
Current assets 224 752 129 128 223 461
Inventories 81 983 59 403 64 270
Trade and other receivables 125 902 63 330 96 626
Cash and cash equivalents 16 867 6 395 62 565
Total assets 292 034 202 094 275 044
EQUITY AND LIABILITIES
Capital and reserves 121 656 96 413 107 570
Share capital and premium 126 155 126 094 126 094
Treasury shares (1 400) - (4 138)
Non-distributable reserves 8 962 9 671 9 729
Accumulated loss (12 061) (39 352) (24 115)
Minority shareholders" interest 1 352 1 699 2 590
Non-current liabilities 1 644 10 210 7 887
Interest-bearing liabilities 1 144 10 210 7 887
Shareholders loans 500 - -
Current liabilities 167 382 93 772 156 997
Trade and other payables 138 339 71 393 140 055
Short-term loans 9 828 11 545 1 693
Current portion of interest-bearing
liabilities 8 055 3 594 6 361
Warranty provisions 7 335 5 188 7 256
Taxation payable 3 825 2 052 1 632
Total equity and liabilities 292 034 202 094 275 044
Valuation per share
Net asset value per share (cents) 82,1 64,7 75,9
Net tangible asset value per
ordinary share (cents) 68,8 62,0 68,7
Number of ordinary shares in issue
at the end of the period ("000) 148 096 149 126 141 819
Working capital management
Inventory days 46,0 66,3 39,5
Debtors days 51,7 50,7 43,2
Liquidity and solvency
Debt ratio 177,6 19,8 34,9
Current asset ratio 1,3 1,4 1,4
Acid test ratio 0,9 0,7 1,0
SUMMARISED GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2005 2004 2005
Unaudited Restated Restated
R"000 R"000 R"000
Cash flow from operations (17 151) (10 769) 40 137
Cash flow from investing activities (17 319) (10 621) 3 798
Cash flow from financing activities (11 228) (1 592) (10 747)
(Decrease)/increase in cash and
cash equivalents (45 698) (22 982) 33 188
Cash and cash equivalents at the
beginning of the period 62 565 29 377 29 377
Cash and cash equivalents at the
end of the period 16 867 6 395 62 565
TRANSITIONAL REPORT
GROUP
31 Dec 30 June 1 July
2004 2005 2004
R"000 R"000 R"000
Assets
SA GAAP 34 398 35 785 35 000
IAS16 1 568 1 668 1 468
IAS38 (467) (467) -
As reported under IFRS 35 499 36 986 36 468
Deferred taxation
SA GAAP 11 036 5 006 11 689
IAS16 (455) (484) (426)
As reported under IFRS 10 581 4 522 11 263
Equity
SA GAAP (40 465) (25 299) (43 946)
IAS16 1 113 1 184 1 042
As reported under IFRS (39 352) (24 115) (42 904)
Profit
SA GAAP 5 872 22 407 -
IAS16 - reduced depreciation 100 200 -
IAS16 - deferred taxation (29) (58) -
As reported under IFRS 5 943 22 549 -
STATEMENT OF CHANGES IN EQUITY
Non-distri Accumu-
Share Share Treasury butable lated
capital premium shares reserves loss Total
R"000 R"000 R"000 R"000 R"000 R"000
GROUP
Balance at
30 June 2004 1 491 124 576 - 9 663 (43 946) 91 784
IAS16 fair value
adjustments - - - - 1 042 1 042
Restated balance
at 30 June 2004 1 491 124 576 - 9 663 (42 904) 92 826
Issue of shares - 27 - - - 27
Net profit for
the year
- unaudited - - - - 5 872 5 872
IAS16 fair value
adjustments - - - - 71 71
Dilution of
subsidiary
shareholding - - - - (154) (154)
Dividends paid - - - - (2 237) (2 237)
Movement in foreign
currency translation
reserve - - - 8 - 8
Balance at
31 December 2004
- Restated 1 491 124 603 - 9 671 (39 352) 96 413
Issue of shares - - - - - -
Net profit for
the year - - - - 16 535 16 535
IAS16 fair
value adjustments - - - - 71 71
Treasury shares
bought - - (4 138) - - (4 138)
Dividends paid - - - - (1 369) (1 369)
Movement in
foreign currency
translation reserve - - - 58 - 58
Balance at
30 June 2005
- Restated 1 491 124 603 (4 138) 9 729 (24 115) 107 570
Issue of shares 2 59 - - - 61
Net profit for
the year - - - - 17 177 17 177
Treasury shares
utilised - - 2 738 - - 2 738
Profit on sale
of subsidiary - - - (801) 801 -
Dividends paid - - - - (5 924) (5 924)
Movement in foreign
currency translation
reserve - - - 34 - 34
Balance at
31 December 2005
- Unaudited 1 493 124 662 (1 400) 8 962 (12 061) 121 656
Comments
Impact of IFRS
1 Accounting policies
In terms of the Listings Requirements of the JSE Limited ("JSE"), the interim
results have been prepared in accordance with International Financial Reporting
Standards ("IFRS") IAS34 - Interim Financial Reporting, the Listings
Requirements of the JSE and the South African Companies Act.
The Group has adopted and applied IFRS for the first time for the year ending 30
June 2006.
The transition date is 1 July 2004 ("the transition date"). The Group"s opening
IFRS balance sheet at the transition date and the comparative results for each
of the reporting periods have therefore been restated to reflect all statements
expected to be applicable at 30 June 2006.
The Transitional Report contains details of the adjustments effected.
2 Adjustments implemented with effect 1 July 2004
a. IAS16 - Revision of estimated useful lives of property, plant and equipment
Past interpretation of SA GAAP did not provide for the re-assessment of an
asset"s useful life and residual value annually. The revised
statement version of IAS16 requires useful lives and residual values to be
reviewed at least at each financial year end. This resulted in an increase in
distributable reserves with a corresponding increase in property, plant and
equipment.
b. IAS38
Computer software previously included under property, plant and equipment has
retrospectively been classified as intangible assets.
c. Further developments in IFRS reporting
The interim results have been prepared on the basis of the Group"s expectation
of the standards that will be applicable as at 30 June 2006. IFRS information at
year end may differ from the information contained herein for the following
reasons:
i) Further standards and interpretations may be issued that are applicable for
2006 reporting or which are applicable to later accounting periods but with an
option to adopt for earlier accounting periods.
ii) Different practice may develop with regard to the interpretation and
application of the standards currently in effect.
3 Operational overview
Continued improvement of the Pinnacle business model, favourable
international and domestic economic conditions as well as increased market share
continue to contribute to the financial results across the Group.
This has allowed the Directors to focus on brand awareness and
perception in our target markets by improving pricing, enlarging stock holding,
extending credit terms, maintaining quality and effective brand communication.
a. Revenue increased by 95% to R391 million (2005: R201 million). Primary growth
factors include the proportional consolidation of Explix Technologies (Pty)
Limited of R107 million (2005: Nil),
previously reported under the equity method of business
combinations, and a noteworthy improvement of 48% in Infrastructure and support
turnover to R278 million (2005: R188 million).
b. Gross profit declined from 16,98% as reported in June 2005 to 16,56% (2005:
18,24%) in line with management expectations and internal budgets designed to
secure loyalty amongst our Infrastructure and support customer base.
c. The Group exercised a right to take possession of Pinnacle shares previously
held as collateral for a debt owed by a now dormant international entity. The
value of the debt had previously been
written down to reflect the diminished value of the underlying
security, and has now been recovered to the value of R5,1 million.
The shares obtained in the above action have been applied in the acquisition of
35% of Pinnacle Micro Cape (Pty) Limited as approved by shareholders on 28
October 2005.
d. The Share of Net profit from Associate relating to the contribution of Explix
Technologies as reported under the equity accounting
methodology in the 2005 comparative results has been substituted with the
proportional results of that company on a line-by-line basis in the 2006
accounts.
e. The Group moved into a Net interest earned position on the
settlement of non-current liabilities, improved cash management and effective
treasury functions.
f. On 28 October 2005 shareholders approved the acquisition
of 35% of Pinnacle Micro Cape (Pty) Limited. The agreement had,
as one of its terms, limited the minority shareholders entitlement
to the distributable income to the earnings realised up to
31 December 2004.
As the acquisition had not been approved by shareholders, the Group continued to
provide for the minority shareholders share of income. Subsequent to the
approval on 28 October 2005, the provision of R1,04 million recognised for the
period 1 January 2005 to 30 June 2005 was reversed.
g. Intangible Assets increased to R19,7 million (2005: R3,9 million) on the
acquisition of 15% of Explix Technologies (Pty) Limited, 35% of Pinnacle Micro
Cape (Pty) Limited and the reclassification of software to intangible assets.
h. Trust Loans were created by the implementation of the Pinnacle
Black Executive Share Trust as approved by shareholders on
28 October 2005.
i. Deferred Taxation assets were reduced to R2,9 million (2005: R10,5 million)
on the utilisation of assessed losses.
j. Inventory levels were increased to R81,9 million (2005: R59,4
million) to accommodate the growth in turnover and ensure stock availability in
light of anticipated sales in the first quarter of the 2006 calendar year.
k. The average days sales outstanding increased from 50,7 to 51,7 days as
clients and potential clients are progressively more successful in meeting
credit control criteria, allowing the Group to extend additional credit
facilities to our customers.
l. Non-current liabilities
The mortgage to finance the acquisition of the Pinnacle offices in Midrand has
entered its final year, but additional leases were entered into to finance
vehicle acquisitions.
4 Future prospects
The convergence of IT, home entertainment and mobile technologies will usher in
a new wave of enabling and entertainment focused product offerings over the next
five years. Combined with the imminent launch of Microsoft and Intel"s new 64
bit technologies, management believe demand for ICT products will be stimulated
in all sectors of the market.
Reliable data storage and disaster recovery technologies are fast
becoming a necessity in all sectors of the economy as SME, corporate and
government clients are increasingly dependent on information technology for
their effective operation. Pinnacle remains actively committed to the delivery
of fit for purpose solutions across these various sectors.
Under the guidance of the African renaissance programme, NEPAD, school
laboratories in Mauritius and Uganda were equipped with Proline hardware. On
completion of the assessment phase a number of projects are expected to be
awarded to successful contributors. Pinnacle remains confident in its ability to
participate and contribute in this highly regarded endeavor.
5 Broad Based Black Economic Empowerment
Pinnacle and Amabubesi Investments (Pty) Limited ("Amabubesi") have concluded an
agreement in terms of which Amabubesi will subscribe to 20% of the total issued
share capital of Pinnacle and appoint two of their representatives to the
Pinnacle Board.
The Group has embarked on a systematic process, guided by The Codes of Good
Practise issued by the Department of Trade and Industry, to fulfil the
requirements of Broad Based Black Economic Empowerment including employment
equity, management and control, skills development, procurement and equity
ownership.
6 Corporate activity
Subsequent to the balance sheet date, Pinnacle in principle agreed to acquire
30% of the shareholding of RentNet Rentals (Pty) Limited for an amount of R1 590
000 from existing shareholders and directors. On conclusion of the transaction,
Pinnacle will hold 90% of the shareholding in the company.
7 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 Report.
8 Subsequent events
Other than as disclosed in Paragraph 6, 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.
9 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
14 March 2006
Registered Office: The Summit (previously Pinnacle Park), 269, 16th Road,
Randjespark, Midrand
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
Ground Floor, 70 Marshall Street, Johannesburg 2001
Directors: CD Biddlecombe* (Chairman), AJ Fourie (Chief executive officer),
TAM Tshivhase, A Tugendhaft* * (Non-executive)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 14/03/2006 11:22:26 AM Supplied by www.sharenet.co.za
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