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PNC - Pinnacle Technology Holdings - Unaudited Interim Results For The
Six Months Ended 31 December 2007
Pinnacle Technology Holdings Limited
("Pinnacle" or "the Group")
Registration number: 1986/000334/06
Share code: PNC
ISIN: ZAE000022570
www.pinnacle.co.za
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
HIGHLIGHTS
- Revenue increased by 33,7% to R974 million
- Operating profit increased by 39% to R71,2 million
- Headline earnings per share increased by 52,4% to 34,3 cents per
share
GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 974 372 728 867 1 715 844
Cost of sales (804 151) (615 082) (1 440 292)
Gross profit 170 221 113 785 275 552
Operating expenses (96 447) (59 592) (161 145)
EBITDA 73 774 54 193 114 407
Depreciation (2 476) (2 381) (5 336)
Impairment of intangible assets (77) (519) (563)
Operating profit before interest 71 221 51 293 108 508
Investment income 2 702 2 513 4 794
Finance costs (3 102) (4 883) (7 729)
Net profit before taxation 70 821 48 923 105 573
Taxation (19 830) (15 902) (30 246)
Net profit for the period 50 991 33 021 75 327
Attributable to:
Ordinary shareholders 51 106 32 825 74 754
Minority shareholders (115) 196 573
Performance per share
Earnings per share (cents)
- Normal 34,3 22,1 51,2
Headline earnings per share (cents)
- Normal 34,3 22,5 51,6
- Fully diluted 28,0 18,5 42,2
Reconciliation of headline earnings
Net profit for the period
attributable to ordinary
shareholders 51 106 32 825 74 754
Add back:
Impairment of intangibles 77 519 563
Headline earnings - normal 51 183 33 344 75 317
Add back:
- Deemed finance charges
less taxation 1 099 1 022 2 042
Headline earnings - fully diluted 52 282 34 366 77 359
Shares in issue (`000)
- Weighted average 149 186 148 425 146 079
- Fully diluted 186 467 185 707 183 361
Returns (%)
- Gross profit 17,5 15,6 16,1
- EBITDA 7,6 7,4 6,7
- Net profit 5,2 4,5 4,4
SEGMENTAL REPORT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2007 2006 2007
Unaudited Unaudited Audited
Group R`000 R`000 R`000
Revenue
Pinnacle Micro 538 606 482 119 1 027 495
WorkGroup 361 560 239 362 586 385
RentNet 14 008 7 386 26 560
DataNet 60 154 - 75 382
Holdings and
Properties 44 - 22
Total Group 974 372 728 867 1 715 844
EBITDA
Pinnacle Micro 51 055 39 142 79 340
WorkGroup 16 669 13 581 23 469
RentNet 4 126 2 215 6 234
DataNet (1 087) - 4 918
Holdings and
properties 3 011 (745) 446
Total Group 73 774 54 193 114 407
Assets
Pinnacle Micro 366 573 318 426 318 148
WorkGroup 239 552 168 317 239 927
RentNet 15 835 12 212 12 471
DataNet 33 734 - 48 513
Holdings and
properties 60 604 48 050 43 092
Total Group 716 298 547 005 662 151
Liabilities
Pinnacle Micro (274 384) (260 978) (233 548)
WorkGroup (205 366) (150 299) (216 342)
RentNet (9 019) (9 727) (7 497)
DataNet (37 684) - (51 754)
Holdings and
properties 50 740 50 851 59 398
Total Group (475 713) (370 153) (449 743)
GROUP BALANCE SHEET
31 Dec 31 Dec 30 Jun
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Assets
Non-current assets 112 688 101 647 105 719
Property, plant and equipment 49 351 44 213 48 742
Intangible assets 46 659 39 931 41 146
Interest in subsidiaries - 4 478 -
Trust loans 11 733 12 120 12 633
Deferred taxation 4 945 905 3 198
Current assets 603 610 445 358 556 432
Inventories 211 595 177 446 152 988
Trade and other receivables 369 283 220 937 315 252
Cash and cash equivalents 22 732 46 975 88 192
Total assets 716 298 547 005 662 151
Equity and liabilities
Capital and reserves 245 855 175 319 217 174
Share capital and premium 165 704 184 318 184 337
Treasury shares (3 971) - -
Non-distributable reserves 5 274 5 208 5 102
Put option 1 910 1 910 1 910
Accumulated profit/(loss) 76 938 (16 117) 25 825
Minority shareholders` interest (5 270) 1 533 (4 766)
Non-current liabilities
Interest-bearing liabilities 45 272 39 126 51 030
Current liabilities 430 441 331 027 398 713
Trade and other payables 367 736 284 958 357 477
Current portion of interest-bearing
liabilities 10 848 10 670 4 375
Warranty provisions 9 361 8 302 8 713
Taxation 42 496 27 097 28 148
Total equity and liabilities 716 298 547 005 662 151
Valuation per fully diluted share
- Net asset value per share (cents) 128,8 94,7 113,7
- Net tangible asset value
per share (cents) 103,8 73,3 91,6
- Fully diluted number of shares
in issue at the end of
the period (`000) 186 834 186 834 186 882
Working capital management
- Inventory days 47,4 52,8 38,8
- Debtors days 59,8 48,7 58,0
- Creditors days 72,2 73,2 78,4
Liquidity and solvency
- Debt ratio 15,8 14,0 13,0
- Current asset ratio 1,40 1,35 1,40
- Acid test ratio 0,91 0,81 1,01
GROUP STATEMENT OF CHANGES IN EQUITY
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Opening balance 217 174 152 765 152 765
Issue of shares 75 29 48
Share issue expenses - (34) (34)
Net profit for the year 51 106 32 825 74 754
Treasury shares bought (3 971) 9 387 9 387
Treasury shares issued - (2 815) (2 815)
Deferred tax on deemed interest - (3 799) (3 799)
Dividends received/(declared) 87 (13 059) (13 058)
Share premium reduction (18 708) - -
Movement in foreign currency
translation reserve 92 20 (74)
245 855 175 319 217 174
SUMMARISED GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
31 Dec 31 Dec 30 Jun
2007 2006 2007
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash and cash equivalents at
the beginning of the period 88 192 166 190 166 190
Cash from operations 74 801 51 650 113 280
Cash utilised in working capital (101 730) (118 577) (113 385)
Taxation paid (7 238) (5 320) (21 438)
Distribution to shareholders (18 891) (13 034) (12 362)
Cash utilised in investing
activities (9 145) (6 983) (16 240)
Increase in third party
liabilities 714 (33 551) (14 938)
Treasury shares acquired (3 971) 6 600 (12 915)
22 732 46 975 88 192
COMMENTARY
Results
Pinnacle is a diversified Information and Communications Technology supply
group. It focuses in the areas of IT hardware, networking and communications
infrastructure, software licensing and product and installation and support
services. Pinnacle offers a world-class selection of international agencies as
well as its own Proline range of IT equipment. Product and services sales are
handled through individual focused companies, each with its own area of
expertise.
Revenue increased by 33,7% to R974 million, of which 25,4% growth was organic
and 8,3% was through the acquisition of DataNet, the networking infrastructure
supply company.
All lines of business achieved an increase in sales volumes, and gross margins
improved due to product mix and volume buying power. Operating cost as a
percentage of Group revenue increased due to the inclusion of DataNet, which
currently operates at higher cost levels, as well as further investment in
certain key business areas where additional growth is expected due to this
investment. Excluding the revenue and expenses of DataNet, the Group`s expenses
as a percentage of revenue was 9,4% (31 December 2006: 9,3%).
A prior year deferred taxation adjustment and savings in STC reduced the
effective tax rate to 28% (31 December 2006: 32,5%).
Working capital increased to R213 million from R111 million at 30 June 2007. The
increase is due to days stock on hand increasing to 47,4 days from 39 days and
creditors days reducing by 7,2 days. The higher stock holding was necessary to
have sufficient stock available for large orders that was delivered in early
2008. Management believes that the working capital requirement will decrease by
year-end. As a result of the investment in working capital, cash on hand was R22
million by half year, down from R88 million.
Financial overview
31 Dec
2007 2007 2006 2005 2004 2003 2002
6 12 12 12 12 12 12
months months months months months months months
R`000 R`000 R`000 R`000 R`000 R`000 R`000
Returns (%)
Gross profit 17,5 16,1 15,8 17,0 16,9 15,1 14,2
EBITDA 7,6 6,7 6,4 5,8 4,8 4,7 4,0
Operating profit 7,3 6,3 5,9 5,3 4,5 4,1 4,0
Net profit 5,2 4,4 4,2 3,2 2,5 1,7 1,8
Prospects
The slow-down in the retail and commercial spend due to interest rate hikes and
the National Credit Act as well as electricity shortages may have some effect on
future growth. The Group, however, believes that product and market
diversification exists within its product range to ensure future growth. As a
Group we will continue to benefit from government`s investment into
infrastructural development, but are not totally reliant thereon.
Access to the world wide web is driving a global revolution that has been
compared to the invention of the wheel. The volume of data and number of users
continue to increase unabated and technology has become an integral part of
business and everyday life.
The Pinnacle Group is ideally suited to support the continued roll-out of
infrastructure with hardware and software that ranges from best-in-class Sun and
IBM servers to fibre optic cables and connectors that may fulfil the technical
requirements from modest to well established customers.
The benefits of virtualisation technologies continue to drive the roll-out of
VMware and supporting server and storage infrastructure in corporate and
government markets. WorkGroup should capitalise on this, as it has secured the
sole distribution rights for the X64 servers in South Africa.
Channel marketing and loyalty initiatives continue to attract dealers, augmented
with the launch of exciting new products such as Lenovo notebooks and MIO
portable GPS systems.
Government continues to invest in the education of citizens through investment
in IT infrastructure. Value added solutions to address government initiatives in
education, law enforcement and home affairs require ongoing commitment and
support which Pinnacle is ready to provide on a national basis.
Overall increased business volumes is expected which will result in another
growth year.
The roll-out of Microsoft Dynamics AX presents a significant challenge to the
Group. A detailed planning and extensive design phase will culminate in a
measured and cautious roll-out, scheduled to commence in July 2008. The
successful implementation of AX will result in operational cost savings through
synergies identified in the Group.
Corporate activity
Pinnacle has entered into an agreement to acquire 100% of the issued share
capital and shareholders` loans of Tri Continental Distributors (Pty) Limited
("TriCon"). The transaction is subject to Competition Commission approval and
the financial results of Tricon are consequently not included in the period
under review.
Accounting policies
In terms of the Listings Requirements of the JSE Limited, the interim results
have been prepared in accordance with International Financial Reporting
Standards ("IFRS") IAS34 - Interim Financial Reporting, the Listings
Requirements of the JSE Limited and the South African Companies Act. These
accounting policies are consistent with the policies employed in the preparation
of the audited financial results for the year ended 30 June 2007.
Broad-Based Black Economic Empowerment
Pinnacle is a level 4 contributor as measured in accordance with the Broad-Based
Black Economic Empowerment Codes of Good Practice.
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.
Subsequent events
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.
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
19 February 2008
Directors: CD Biddlecombe# (Chairman), AJ Fourie (Chief Executive Officer), H
Coetzee (Chief Financial Officer), HG Motau#, PM Moyo#, TAM Tshivhase, A
Tugendhaft#
#Non-executive
Registered office: The Summit, 269 16th Road, Randjespark, Midrand
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg, 2001
Auditors: BDO Simama Incorporated, 13 Wellington Road, Parktown, Johannesburg
2193
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 19/02/2008 11:06:27 Supplied by www.sharenet.co.za
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