Wrap Text
Reviewed annual results for the year ended 30 June 2012
PINNACLE TECHNOLOGY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 1986/000334/06)
REVIEWED ANNUAL RESULTS FOR THE YEAR ENDED 30 JUNE 2012
Revenue increased by 18% to R5.8 billion
EBITDA increased by 30% to R419 million
HEPS increased +49% to 175.1 cents
Dividends per share increased by 52% to 35 cents
CONSOLIDATED CONDENSED INCOME STATEMENT
for the year ended 30 June
Reviewed Audited
2012 2011
R?000 R?000
Revenue 5 844 592 4 960 074
Cost of sales (4 936 620) (4 215 662)
Gross profit 907 972 744 412
Operating expenses (488 635) (421 478)
Earnings before interest, tax,
Depreciation and amortisation 419 337 322 934
Depreciation and amortisation (18 662) (13 916)
Net impairment/(reversal of impairment)
of intangible assets 315 (12)
Excess of book value over cost on
acquisition of subsidiary – 5 199
Operating profit before interest 400 990 314 205
Net finance costs (20 386) (4 567)
Profit before taxation 380 604 309 638
Taxation (98 253) (87 297)
Net profit for the year 282 351 222 341
Attributable to:
Owners of the Company 280 228 220 226
Non-controlling interests 2 123 2 115
RECONCILIATION OF HEADLINE EARNINGS
Net profit for the year attributable to
ordinary shareholders 280 228 220 226
Impairment of goodwill 69 12
Reversal of prior impairment after tax (276) –
Reversal of prior impairment (384) –
Less: Taxation thereon 108 –
Excess of book value over cost on
acquisition of subsidiary – (5 199)
Profit on sale of property, plant
and equipment net of taxation (339) (880)
Headline earnings 279 682 214 159
Weighted average number of shares
in issue („000) 159 721 181 965
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
Reviewed Audited
2012 2011
R?000 R?000
Net profit for the year 282 351 222 341
Exchange differences from translating
foreign operations 324 (374)
Total comprehensive income for the year 282 675 221 967
Attributable to:
Owners of the Company 280 552 219 852
Non-controlling interests 2 123 2 115
FINANCIAL REVIEW
Performance per share (cents)
Earnings (normal and fully diluted) 175.4 121.0
Headline earnings (normal and
fully diluted) 175.1 117.7
Dividends 35.0 23.0
Dividend cover 5.0 5.1
Returns (%)
Gross profit 15.5 15.0
Operating expenses (8.4) (8.5)
EBITDA 7.2 6.5
Operating profit before interest and tax 6.9 6.3
Effective tax rate 25.8 28.2
Net profit 4.8 4.4
RECONCILIATION OF ORDINARY SHARE MOVEMENTS
for the year ended 30 June
Reviewed Audited
2012 2011
Issued shares at beginning of year 181 316 452 187 107 270
Shares issued 142 273 24 545
Shares repurchased and cancelled (11 482 801) (5 815 363)
Issued shares at the end of the year 169 975 924 181 316 452
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
as at 30 June
Reviewed Audited
2012 2011
R?000 R?000
ASSETS
Non-current assets 357 144 228 578
Property, plant and equipment 112 189 105 145
Intangible assets 72 060 60 541
Long-term loans 28 214 –
Finance lease receivables 108 562 36 240
Deferred taxation 36 119 26 652
Current assets 1 862 614 1 500 117
Inventories on hand 644 431 502 878
Inventories in transit 150 915 73 506
Trade and other receivables 987 071 822 621
Finance lease receivables 35 624 11 801
Taxation receivable 2 114 1 904
Cash and cash equivalents 42 459 87 407
Total assets 2 219 758 1 728 695
EQUITY AND LIABILITIES
Capital and reserves 810 813 629 374
Share capital and premium 25 945 112 009
Treasury shares (42 166) (74 885)
Non-distributable reserves 31 528 31 204
Accumulated profits 791 190 560 786
Non-controlling interests 4 316 260
Non-current liabilities 61 436 66 869
Interest-bearing liabilities 43 911 55 230
Deferred taxation 17 525 11 639
Current liabilities 1 347 509 1 032 452
Trade and other payables 1 021 133 863 743
Interest-bearing liabilities 14 973 15 632
Short-term loan 115 384 52 088
Deferred revenue 10 460 10 646
Taxation payable 2 853 6 621
Bank overdrafts 182 706 83 722
Total equity and liabilities 2 219 758 1 728 695
Shares in issue – externally („000) 157 889 165 528
Capital management
Net asset value per share (cents) 513.5 380.2
Net tangible asset value
per share (cents) 467.9 343.6
Working capital management
Stock days (excluding in transit) 47.6 38.5
Debtors days 52.1 45.8
Creditors days 64.3 60.4
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June
Reviewed Audited
2012 2011
R?000 R?000
Cash generated by operating activities 192 550 240 973
Transfer of increases in finance
lease receivables to investing
activities – 47 388
Cash generated by operating
activities (restated) 192 550 288 361
Net finance costs (20 386) 4 567
Tax paid (106 565) (103 176)
65 599 180 618
Cash flows from investing activities
Property, plant and equipment acquired
less disposals (20 637) (20 165)
Acquisition of software and trademarks (7 134) (2 048)
Acquisition of subsidiaries (8 100) (159 622)
Investment in finance lease book (96 145) (47 388)
Acquisition of non-controlling interests (7 400) (20 587)
(139 416) (249 810)
Cash flow from financing activities
Net increase in interest-bearing
liabilities (65 532) 61 426
Repurchase of Amabubesi shares (130 596) (110 705)
Treasury shares issued and sold 48 980 30 305
Increase in short-term loans 115 384 52 088
Increase in trust loans – 3 516
Dividends paid (39 685) (29 498)
(71 449) 7 132
Decrease in net cash/overdraft (145 266) (62 060)
Net cash/overdraft acquisitions 1 334 (121 343)
Opening net cash/(overdraft) at
beginning of year 3 685 187 088
Net cash/(overdraft) at end of year (140 247) 3 685
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Non-
Share distribu-
capital/ Treasury table Retained
premium shares reserve earnings
R?000 R?000 R?000 R?000
Balance 30 June 2010 143 983 (26 469) 31 578 387 108
Net treasury shares
movement – (48 416) – –
Shares issued less
cancelled (31 974) – – –
Net profit and other
comprehensive income – – (374) 220 226
Dividends paid – – – (29 137)
Acquisition of
non-controlling
interests – – – (17 411)
Balance 30 June 2011 112 009 (74 885) 31 204 560 786
Shares issued less
acquired and
cancelled (86 064) – – –
Shares sold and
issued less
acquired – 77 194 – –
Net profit and other
comprehensive income – – 324 280 228
Acquisition of
non-controlling
interests – – – (10 326)
Dividends paid – – – (39 498)
Balance 30 June 2012 25 945 (42 166) 31 528 791 190
Non-
control-
Ordinary ling Total
shareholders interest equity
R?000 R?000 R?000
Balance 30 June 2010 536 200 2 719 583 919
Net treasury shares
movement (48 416) – (48 416)
Shares issued less
cancelled (31 974) (251) (32 225)
Net profit and other
comprehensive income 219 852 2 115 221 967
Dividends paid (29 137) (360) (29 497)
Acquisition of
non-controlling
interests (17 411) (3 963) (21 374)
Balance 30 June 2011 629 114 260 629 374
Shares issued less
acquired and
cancelled (86 064) (330) (86 394)
Shares sold and
issued less
acquired 77 194 – 77 194
Net profit and other
comprehensive income 280 552 2 123 282 675
Acquisition of
non-controlling
interests (10 326) 2 450 (7 876)
Dividends paid (39 498) (187) (39 685)
Balance 30 June 2012 806 497 4 316 810 813
SUMMARISED SEGMENTAL REPORT
for the year ended 30 June
Depre- Net
Revenue EBITDA ciation* interest
R?000 R?000 R?000 R?000
2012
ICT Distribution 6 308 411 374 406 (14 665) (24 065)
IT Projects and
Services 154 067 19 653 (2 639) 44
Financial Services 25 520 22 687 (175) 7 637
Group Central
Services – 2 591 (868) (4 002)
Less: Intergroup
revenue (643 406) – – –
5 844 592 419 337 (18 347) (20 386)
2011
ICT Distribution 5 035 749 297 850 (3 934) (10 088)
IT Projects and
Services 158 559 15 954 (2 059) (242)
Financial Services 22 778 8 294 (258) 1 983
Group Central
Services 154 836 (2 478) 3 780
Less: Intergroup
revenue (257 166) – – –
4 960 074 322 934 (8 729) (4 567)
* Depreciation comprises depreciation amortisation, impairments
and goodwill acquired on business combinations.
Net Total Total
profit assets liabilities
R?000 R?000 R?000
2012
ICT Distribution 256 204 1 881 469 (1 355 535)
IT Projects and
Services 12 096 38 109 (21 199)
Financial Services 20 661 185 718 (167 819)
Group Central
Services (8 733) 114 462 135 608
Less: Intergroup
revenue – – –
280 228 2 219 758 (1 408 945)
2011
ICT Distribution 209 728 1 560 551 (1 172 133)
IT Projects and
Services 9 809 16 149 (6 915)
Financial Services 3 662 66 390 (65 747)
Group Central
Services (2 973) 85 605 145 474
Less: Intergroup
revenue – – –
220 226 1 728 695 (1 099 321)
BUSINESS COMBINATIONS
30 June 2012
Merqu
Communications E-Secure
(Pty) Limited Distribution Total
R?000 R?000 R?000
Assets
Property, plant and
equipment 1 811 – 1 811
Deferred taxation 64 – 64
Intangibles – – –
Inventories 387 739 1 126
Trade and other receivables 5 971 – 5 971
Cash and cash equivalents 1 730 – 1 730
9 963 739 10 702
Liabilities
Trade and other payables (4 525) (119) (4 644)
Bank overdrafts (396) – (396)
Short-term loan (1 466) – (1 466)
Deferred revenue – – –
Shareholders loan (2 286) – (2 286)
Taxation (817) – (817)
(9 490) (119) (9 690)
Net assets acquired 473 620 1 093
Less: Non-controlling
interests (232) – (232)
Goodwill on acquisition 2 759 4 480 7 239
Purchase amount 3 000 5 100 8 100
Turnover since acquisition 24 997 15 898 40 895
Profit before tax since
acquisition 1 312 1 341 2 653
PTH Turnover * 5 890 417
PTH Profit before tax * 384 332
30 June 2011
Centravoice/
Axiz Centrafin
(Pty) Limited (Pty) Limited Total
R?000 R?000 R?000
Assets
Property, plant and
equipment 7 219 69 7 288
Deferred taxation 18 465 145 18 610
Intangibles 2 492 39 2 531
Inventories 134 106 1 148 135 254
Trade and other
receivables 287 659 10 895 298 554
Cash and cash equivalents 4 863 5 234 10 097
454 804 17 530 472 334
Liabilities
Trade and other payables (156 538) (15 581) (172 119)
Bank overdrafts (126 602) (4 838) (131 440)
Short-term loan – – –
Deferred revenue (5 249) – (5 249)
Shareholders loan – – –
Taxation (10 016) (1 411) (11 427)
(298 405) (21 830) (320 235)
Net assets acquired 156 399 (4 300) 152 099
Less: Non-controlling
interests – (22) (22)
Goodwill on acquisition (5 199) 12 744 7 545
Purchase amount 151 200 8 422 159 622
Turnover since
acquisition 1 005 000 4 657 1 047 657
Profit before tax since
acquisition 53 000 10 907 63 907
PTH Turnover * 5 645 359
PTH Profit before tax * 289 387
* If Business Combinations had been acquired at the beginning of
the year.
All receivables and inventories acquired in these business
combinations were assessed at acquisition and written down to
expected net realisable value immediately prior to acquisition so
the values shown herein are net of any additional write-downs
deemed necessary.
COMMENTARY
INTRODUCTION
The Pinnacle Technology Holdings Limited Group (“PTH” or the
“Group”) is a diversified technology distribution and service
provider active in all sectors of the ICT industry. PTH?s brands
include Proline Computers and most of the world?s leading ICT
brands. The PTH group operates throughout sub-Sahara Africa.
RESULTS OF OPERATIONS
Although 2012 was a challenging year we did produce improved
results. PTH revenues increased by 18%, the majority of which
came from organic growth. The gross profit margin increased from
15.0% to 15.5%. This was attributable to improvements in margins
in hardware distribution and the increase in mix of higher margin
value-add services and financing solutions, offset to some degree
by tighter margins in software distribution, which remained a
difficult market throughout the year. We were able to reduce
operating expenses as a percentage of turnover by a further 0.1%
from 8.5% to 8.4%. This was due to the realisation of further
synergies from the merger of Axiz and WorkGroup and through the
incorporation into Pinnacle Africa of Explix and DataNet
Infrastructure Group. Some of these benefits were however offset
by the continued investment into new business divisions that will
ensure further organic growth for PTH.
EBITDA increased by 30% and net profit attributable to
shareholders increased by 27%. The offset between the EBITDA and
PAT numbers came from higher interest costs arising out of the
funding of our repurchase of 37 281 647 shares at a cost of R241
million between June 2011 and January 2012. The net result was an
increase in attributable net profit margin from 4.4% in 2010 and
2011 to 4.8% in the current year.
Headline earnings per share increased by 49% to 175.1 cents per
share (2011: 117.7 cents per share) which is an aggregate
increase of 115% over the last two years and a compounded average
annual growth rate of 44% over the past 10 years.
Working capital (stock, trade debtors and trade creditors)
increased from R525 million to R858 million at the half year due
to a strategic increase in stock discussed in the interim report.
We have pulled some of this back ending on R751 million, which is
still inflated, partly due to the increase in stock in transit by
R77 million, as a result of the IFRS requirement to include all
stock in transit on CIP terms. Stock and debtor levels have
however continued to improve after the year-end. On a
statistical level, trade debtors? days outstanding ended at 52.1
days (2011: 45.8 days and 2010: 52.4 days) which is down from the
55.3 days at the half year. Days? stock on hand (excluding stock
in transit) moved up to 47.6 days from 38.5 days last year, but
this is also down from 57.0 days at the half year. Creditors?
days at 64.3 are up on last year?s 60.4 days.
Operating cash flow yielded R419 million (2011: R323 million).
Cash generated from operating activities (before net financing
and tax) reduced from R288 million to R193 million. Net capital
expenditure on plant, property, and equipment, net of disposals,
was unchanged at R20 million. A further R15.5 million was spent
on acquisitions of new business and non-controlling interests,
compared to R180 million during last year. There was a
considerably higher investment in the finance lease book than
last year at R96 million (2011: R47 million) as a result of the
success of our interests in this business segment in the year.
The initial Amabubesi loan of R52 million was paid off in full
and R66 million of the R131 million cost of our second repurchase
of shares was also paid from cash resources. The net funding
needed was obtained mainly from short-term bank loans (R115
million) and our general banking facilities (R136 million). The
closing net overdraft position was R140 million (2011: net cash
of R4 million). This is considerably down from the net overdraft
of R356 million at half year. We are confident that with the
major share repurchase costs behind us, continued profitability,
current asset normalisation and strong net cash inflows
experienced in the second half of the year, we will continue
towards a more cash neutral position. (Please note that this
forward looking statement has not been reviewed nor reported on
by the auditors).
The net tangible asset value per share has increased to 468 cents
per share (2011: 344 cents per share).
CORPORATE ACTIVITY
Business combinations PTH has completed two acquisitions during
the financial year.
Merqu Communications (Pty) Ltd
PTH?s services company, Infrasol (Pty) Ltd acquired 51% and
therefore control of Merqu Communications for R3 million on 1
October 2011. Merqu brings expertise and a strong track record in
data centre design and installation. Data Centres are an integral
part of the cloud computing infrastructure and the demand for
data centre expertise will grow together with the explosive
expansion currently being experienced in cloud computing.
The value of the goodwill recognised from this acquisition is
derived from the purchase price negotiated (which was based on
the discounted future cash flow valuation of the company) less
the net book value of the company?s equity. Synergies with an
existing subsidiary, Infrasol (Pty) Ltd will result in the
enhancement of PTH?s value added services segment, which provides
further assurance that the goodwill recognised is fairly valued.
This goodwill is not tax deductible. Costs of this transaction
were limited to legal fees of R168 000 which are including in
administration costs in PTH?s income statement. Non-controlling
interests were calculated as 49% of the net book value of the
company?s equity at the date of the acquisition plus 49% of net
profit after tax for the period from the acquisition to the year-
end.
E-Secure Distribution
AxizWorkgroup acquired the entire business of e-Secure as a going
concern for R5.1 million on 1 January 2012. E-Secure is a
business that imports and distributes internet security and
network optimisation products. It has a number of international
brands in its product portfolio, including Blue Coat Systems, a
leading US-based provider of web security and WAN optimisation
solutions and F5 Networks, which manufactures and supplies
networking devices designed to balance network loads and provide
intelligent compression.
The value of the goodwill recognised from this acquisition is
derived from the purchase price negotiated (which was based on
the discounted future cash flow valuation of the business) less
the net book value of the assets and liabilities acquired. In
addition this acquisition will allow us to broaden our product
range into the new areas mentioned above, giving us a wider
spectrum of product offerings and less reliance on the ITC
distribution segment.
This goodwill is not tax deductible. There were no separately
identifiable costs for this transaction.
PROSPECTS
PTH envisages meeting all the market challenges during the year
ahead. This has been re-enforced by our positive first quarter
results.
The advent of cloud computing will bring many exciting
opportunities to PTH. Private as well as public clouds will
require additional investment into data centre infrastructure
solutions. Products such as F5 and Bluecoat that enhance the
performance, security and availability of these networks will be
in high demand as networking speed becomes critical. PTH will
also enhance its product offering in the physical security and
fire prevention technologies. The launch of Windows 8 will
reinvigorate the IT market through the introduction of new
enhanced features for both business as well as home users.
Infrasol is expanding its services offering and is seeing
increased traction, while Centrafin, PTH?s finance subsidiary, is
adding value to the Group?s offering.
SUBSEQUENT EVENTS
No events material to the understanding of the report, other than
those discussed above, had occurred in the period between the
year-end date and the date of the report.
DIVIDENDS
Notice is hereby given that a final and only gross dividend of 35
cents per share has been declared by the Board of Directors of
PTH for the year ended 30 June 2012, payable to shareholders
recorded in the register of the Company at the close of business
on the record date appearing below. This dividend is declared out
of income reserves. There are 169 975 924 ordinary shares in
issue and ranking for dividend at the date of this declaration.
STC credits to value of R345 660 (or 0.2 cents per share) will be
offset against the dividend before calculating dividend
withholding tax at 15% so the net dividend payable to
shareholders who are not exempt from dividend tax will be 29.78
cents per share after paying dividend tax. This dividend tax is
not reclaimable by foreign shareholders unless specifically
provided for in a double taxation treaty between South Africa and
the applicable shareholders? countries of residence.
The salient dates applicable to the final dividend are as
follows: 2012
Last day to trade “CUM” dividend Friday, 9 November
Ordinary shares trade “EX” dividend Monday, 12 November
Record date to be recorded in the register
to participate in the dividend distribution Friday, 16 November
Payment date of dividend Monday, 19 November
No share certificates may be dematerialised or rematerialised
between Monday, 12 November 2012 and Friday, 16 November 2012,
both days inclusive.
Pinnacle Technology Holdings Limited?s tax reference number is
9675/146/71/7.
STATEMENT OF COMPLIANCE
These condensed consolidated financial statements for the year
ended 30 June 2012 have been prepared in accordance with the
Group?s accounting policies under the supervision of the Chief
Financial Officer, FC Smyth CA(SA), with and containing the
information required by IAS 34. They comply with the framework
concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500
standards as issued by the Accounting Standards Board and its
successor, the Listings Requirements of the JSE Limited and the
Companies Act (No 71 of 2008, as amended) of South Africa. No new
standards came into effect during the year and the accounting
policies adopted are consistent with those applied in the
preparation of the audited annual financial statements for the
year ended 30 June 2011.
REVIEW
The condensed consolidated financial statements for the year have
been reviewed by BDO South Africa Incorporated, and their
unmodified review report is available for inspection at the
Company?s registered office.
For and on behalf of the Board of Directors:
D Mashile-Nkosi AJ Fourie
Chairperson Chief Executive Officer
Midrand
6 September 2012
PINNACLE TECHNOLOGY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 1986/000334/06)
Share code: PNC
ISIN: ZAE000022570
(“Pinnacle” or “the Group” or “the Company”)
www.pinnacle.co.za
Directors: D Mashile-Nkosi ** (Chairperson), S Chaba **, AJ
Fourie (Chief Executive Officer), FC Smyth (Chief Financial
Officer), TAM Tshivhase, A Tugendhaft*, E van der Merwe **
* (Non-executive) ** (Independent 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: 06/09/2012 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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