Pinnacle Technology Holding (PNC) release their FY 12 results

Pinnacle Technology Holding (PNC) released its FY 12 results late yesterday and held a results presentation at their AxizWorkGroup Midrand offices on Friday last week.

In a nutshell, the Group grew revenues 17.8% to R5.8bn (FY 11: R4.9bn) and, more importantly, achieved an improved GP margin of 15.5% (FY 11: 15.0%). Operating expenses grew from an enlarged business and Net Interest jumped >300% due to the CentraFin’s consolidation and growth in the Group (CentraFin is an in-house financing company for internal and external projects).

The Group’s H2:12 revenue growth was only 7.6% due to some large orders only being completed post-year end. That said, this revenue has now been booked in FY 13 and thus the new financial year has already started out well. The GP margin expansion was due to a change in sales mix towards higher margin products (and services).

All these developments saw HEPS grow by 48% to 175.1cps (FY 11: 117.7cps) and the Group hiked its DPS by 52% to 35cps.

The Group’s R3.6bn cash balance at the end of FY 11 became a net overdraft position of R140m mostly due to increased working capital funding, the investment in CentraFin’s book, and the R131m paid for the Amabubesi share repurchase.

Of the Group’s three segments, ‘ICT Distribution’ segment (Pinnacle Africa, AxizWorkgroup, Datanet, Sharp and e Secure) is by far the largest. It saw revenue up 19%, GP margin up to 14.5% from 13.7% and EBITDA grew 25.7%.

Also, the Group’s ‘Projects and Services’ segment (Infrasol and 51%-stake in merqu) reported revenue down 13.2% due to a strategic focus on specific jobs. This focus on “quality work” was reflected by an improvement in GP margin up to 33.2% from 19.1%. This segment is the strategic growth focus of the Group with management seeing “many” potential mid-tier acquisitions in this market.

Finally, the Group’s ‘Financial Services’ segment (CentraFin) reported a 16.8% drop in turnover because the business is a 58.7% drop in discounting of leases sold. Reflecting this drop in discount, the segment’s Gross Profit actually rose 18.4% to R28m (FY 11: R23.6).

Overall, another set of quality results by Pinnacle. The Group’s management are cautious (read: expectation management) about the coming year (despite the positive start in Q1:13 from the newly booked revenue noted above). Management will use the year to bed down acquisitions and, perhaps more importantly, targeting service contracts in Infrasol.