PINNACLE TECHNOLOGY GROUP PLC 22 January 2016 Company Registered No: 05259846
FINAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015
The highlights are as follows:-
The key measures for the year to 30th September 2015 are as follows:
Revenues of £7.9m for the year (2014: £8.4m)
EBITDA losses of £572k (2014: loss £512k)
Gross profit of £2.32m for the year (2014: £2.67m)
Loss for the period after tax fell to £1.3m (2014: loss £1.8m)
Recurring and renewable revenues remain high at 85% of Revenue, providing a strong base for the Company*
Total liabilities fell £126k to £2.42m (2014: £2.55m)
Intangible assets reduced to £491k (2014: £992k)
Balance sheet strengthened with two successful capital raises totalling £1.3m during the year (net of fees), the second of which facilitated a strategic investment from MXC Capital
MXC Capital Advisory LLP appointed as financial adviser to support acquisition activities
Post Period End, appointment of Gavin Lyons as Executive Chairman
Advanced stage of negotiations to acquire complementary businesses funded by a Placing to raise approximately £4.5m due to be announced today.
* Note: Recurring and renewable revenues relate to customers who have entered into ongoing or fixed term contracts with the Group to supply services for a duration exceeding 1 month.
Pinnacle Technology Group plc Gavin Lyons, Executive Chairman Nicholas Scallan, Chief Executive | 0208 185 6393 |
N+1 Singer (Nominated Adviser and Broker) Shaun Dobson Jen Boorer | 020 7496 3000 |
MXC Capital Markets LLP Marc Young Charlotte Stranner | 020 7965 8149 |
Beattie Communications Chris Gilmour David Walker | 0844 842 5490 |
The year ending 30th September 2015 was one of transition for Pinnacle Technology, as we continued to expend considerable effort in resolving many of the problems which have been well documented in previous annual reports, and announced both a strategic investment from MXC and their appointment as M&A advisers.
Operational costs have continued to be reduced and legacy issues addressed, resulting in the business being in a cleaner state. The impact of the previously reported acts of irregular behaviour has been worked through. Poor performing areas of the business have been reduced or exited, whilst we have invested in stronger areas of growth. There are signs of encouragement on account management, sales and marketing, and it is particularly pleasing to note the calibre of some of the recent customer wins and renewals. However, this progress will take time to flow through to the financial results and the legacy problems which have beset the Group continue to act as a drag on overall performance, resulting in an EBITDA loss for the year as a whole.
In May of this financial year the business raised £0.86m before expenses to facilitate a strategic investment by MXC, coupled with an increase by Livingbridge of their holding in the business to 10% of issued equity, and with welcome participation from Hargreave Hale and the Board of Directors. MXC was also appointed financial adviser to the Group at the same time, to act as adviser for acquisition activity.
The results for the year show losses being reduced to £1.3m (2014: loss of £1.8m) and there was a positive cash balance at year end of £641k.
Group revenues fell overall by 6% compared to the prior year, and these reductions mainly arose in fixed line telecommunications, in the less attractive areas of the IT Security market, and from the previously reported acts of wilful misconduct. However our strategy of focusing on IT and Cloud based services saw both enjoying strong growth in the year, coupled with an increased rate at which professional services are being sold alongside IT-based solutions.
The overall loss from operating activities of £1.3m resulted in net cash outflow of £747k during the year. The Group balance sheet continues to show the impact of a number of poor acquisitions made in prior years, where loss making businesses were acquired for relatively small consideration but with significant liabilities. The acquisitions have not delivered the returns anticipated at the time of purchase and have consumed funds to repay the inherited net liabilities of the businesses. The work undertaken to rectify these problems has produced a much cleaner and more stable business but one which is below critical mass for profitability. Therefore, the Board is firmly of the view that growth by acquisition on this now more stable platform is the correct course of action going forward and the appointment of MXC as adviser is an integral component of that strategy.
PeopleColleagues within the business have adapted well to a challenging year. The Board recognises the importance of their contribution engaging with restoring Pinnacle Technology to health, and would like to thank them for their commitment to the business, their sense of responsibility and their professionalism during the past year.
We also wish to welcome Gavin Lyons, who was appointed post year end as Executive Chairman. Gavin joins the business from MXC after a distinguished career in the TMT sector, most recently as CEO of Accumuli PLC, a successful buy and build in the IT security sector sold to NCC Group plc for £55m. After standing down from the Chair, I am
continuing to support Gavin as we transition responsibilities following which it is my intention to retire from the Board at the forthcoming AGM.
OutlookThe Board has said repeatedly that turning around Pinnacle Technology will take time, as demonstrated by these results. However the reduction in operating costs, the efforts expended in resolving legacy issues, the investments in account management, sales and marketing within the business, and the resulting growth in the strategically important IT and Cloud based revenues all result in the business being on a cleaner and more stable foundation on which to undertake acquisition activity.
Therefore, with value creation in mind, the Board could look to the longer term future of the business, particularly given Pinnacle's corporate structure and the opportunity presented by being a listed business. It is notable that the Group operates in a highly fragmented and regionalised market which presents an obvious opportunity to consolidate similar businesses. With the support of MXC, Pinnacle Technology is now in a very advanced stage of negotiation to acquire complementary businesses which are due to be announced today in conjunction with a proposed Placing (subject to shareholder approval). These significant steps forward underpin the Board's confidence in the future prospects of the Company.
Pinnacle Technology Group plc issued this content on 2016-01-22 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 2016-01-22 10:09:19 UTC
Original Document: http://www.pinnacletechnology.co.uk/uploads/offers/f20114f5-c1b1-452b-97b1-653f3af3641f-Pinnacle Preliminary Results Announcement.pdf
