Pinnacle Holdings has reported revenue of R3,6-billion for the six months ended 31 December 2015.
However, gross profit was down 2,3% on margins of 14,4%. For the period, headline earnings were down 17% to R125-million, with headline earnings per share (HEPS) down 16% to 80,4 cents.
Operating expenses increased by 12,6% to leave operating income (EBITDA) down by 18,7%. Included in operating expenses in the 2013 period was a profit on sale of assets of R10,5-million and a reclassification adjustment of R4,3-million. Excluding these once-off items, operating expenses increased by 7%.
The increase in interest paid of 27,5% is largely due to the acquisition of the 34,99% share in Datacentrix Holdings for the full six months, with the concomitant increase in the share of equity accounted income.
There was a saving on the tax rate due to the release of minor over-provisions in previous years, to bring total comprehensive income to R121,5-million.
The Distribution division increased revenue by 14%, but net profit after tax decreased by 38%. In July 2014, this division was prevented from trading effectively in its Pinnacle Africa Gauteng premises due to the month long NUMSA strike.
Since then, the division has traded well in a difficult market although gross margins have reduced by 2,4 percentage points, brought about by competitive pressures and the product mix as the group continues its progress into large technology projects which typically carry lower margins.
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 division. Cost management was acceptable, with increased efficiencies resulting in operating expenses, as a percentage of revenue, decreasing by approximately 0,3 percentage points when measured against the prior period.
The continued focus into growing other markets outside South Africa is being rewarded with an increase of revenue into Africa of 24% and it now represents 16% of Distribution revenue.
Pinnacle Business Solutions, the Managed Print Services division, has constantly disappointed in its ability to penetrate the market sufficiently to be able to operate at an acceptable level of return and the group will look to substantially reduce its investment.
Infrasol, the IT Projects and Services division, was unable to sustain the project revenue recorded in the first half of the prior year and with increased expenses, recorded a decrease in net profit after tax to R2,7-million. Management has developed a good pipeline, but has been unable to finalise the larger projects in the current period.
Centrafin increased its revenue by 32% and achieved net profit after tax growth of 47%. The book continues to grow strongly (now at R445-million from R333-million a year ago). The margins have been maintained and customer defaults continue to be well controlled.
