Pinnacle Holdings has issued a trading statement alerting shareholders to the likelihood of its earnings declining for the six months to 31 December, despite an increase in revenue.
Revenue is expected to grow 14% to 15% but headline earnings will likely be down 16% to 21%, with earnings per share (HEPS) down 22% to 27% and headline earnings per share (HEPS) down 14% to 19%.
The group states in its trading statement that revenue for the six months ended 31 December 2014 grew in a satisfactory manner with particularly pleasing growth into markets outside South Africa being recorded. This revenue growth was achieved despite a month-long Numsa strike that hampered trading at the Pinnacle Africa facilities in Gauteng during July 2014.
However, gross margins have continued to be under pressure and, as a percentage of revenue, will be approximately 2,5% lower than the comparative period. The group states that this was brought about by competitive pressures and
product mix as the group continues its progress into large technology projects which typically carry lower margins.
To counter the trend, management has addressed the declining gross margins by focusing specifically on the procurement process and all aspects of margins are a top priority for the group.
The group adds that cost management during the period was acceptable, with increased efficiencies resulting in operating expenses, as a percentage of revenue, decreasing by approximately 0,5% when measured against the prior period.
This is after adjusting for the once-off profit on sale of assets of R10,5-million and the reclassification adjustment of R4,3-million, which was recorded in the prior period. The EPS decline is higher than the HEPS decline due to these effects.
The statement concludes the Pinnacle’s board is currently considering various options to mitigate the group’s high level of gearing and hopes to inform the market in the near term of its intentions.
Results for the six months are expected to be reported on 9 March 2015.
Pinnacle earnings decline as revenue grows
Pinnacle Holdings has issued a trading statement alerting shareholders to the likelihood of its earnings declining for the six months to 31 December, despite an increase in revenue.
Revenue is expected to grow 14% to 15% but headline earnings will likely be down 16% to 21%, with earnings per share (HEPS) down 22% to 27% and headline earnings per share (HEPS) down 14% to 19%.
The group states in its trading statement that revenue for the six months ended 31 December 2014 grew in a satisfactory manner with particularly pleasing growth into markets outside South Africa being recorded. This revenue growth was achieved despite a month-long Numsa strike that hampered trading at the Pinnacle Africa facilities in Gauteng during July 2014.
However, gross margins have continued to be under pressure and, as a percentage of revenue, will be approximately 2,5% lower than the comparative period. The group states that this was brought about by competitive pressures and
product mix as the group continues its progress into large technology projects which typically carry lower margins.
To counter the trend, management has addressed the declining gross margins by focusing specifically on the procurement process and all aspects of margins are a top priority for the group.
The group adds that cost management during the period was acceptable, with increased efficiencies resulting in operating expenses, as a percentage of revenue, decreasing by approximately 0,5% when measured against the prior period.
This is after adjusting for the once-off profit on sale of assets of R10,5-million and the reclassification adjustment of R4,3-million, which was recorded in the prior period. The EPS decline is higher than the HEPS decline due to these effects.
The statement concludes the Pinnacle’s board is currently considering various options to mitigate the group’s high level of gearing and hopes to inform the market in the near term of its intentions.
Results for the six months are expected to be reported on 9 March 2015.
