THE new team at Pinnacle ­Technology has delivered a ­critical verdict on the company's recent past and revealed that it is embroiled in a legal action over the "wilful misconduct of various formerly closely associated parties".

Pinnacle was reporting a half-year loss widening from £909,360 a year ago to £1.1million, exceptional costs up from £100,623 to £294,849, and revenue sharply lower from £5.36m to £4.23m.

Dr James Dodd, the industry veteran who was appointed chairman a year ago, and who installed Nicholas Scallan as chief executive to replace founder Alan Bonner in February, said the loss had narrowed from the £1.8m in the second half of 2013.

He went on: "The current board inherited a substantially loss-making business built up from a wide variety of disparate acquisitions which had never been integrated into an efficient corporate structure.

"Furthermore, time and res-ource had been committed to an inappropriate sales strategy which resulted in increased costs and declining sales across nearly all segments."

Pinnacle, which under founder Alan Bonner built up a portfolio of businesses in IT services, IT security, cloud solutions, telecoms and mobile services, parted company with him in February as it reported a trading loss that had more than doubled to £2.4m, with its shares having lost two-thirds of their value in the 12 months following a £2.95m institutional placing.

A year ago, Mr Bonner said: "Pinnacle's previous eight acquisitions are fast becoming a fully integrated business, with a tightly unified organisation and management structure, a single brand, and a clear strategic focus on delivering sales growth."

The board of Pinnacle, which supported broadcast of the London 2012 Olympics, rejected a 21p a share bid from Coms last September, since when its shares have more than halved.

They rallied 16 per cent to 9.75p on yesterday's announcement.

In February the group raised £450,000 from directors, senior management, Mr Scallan, and certain institutional shareholders, for working capital.

Cash at the half-year was £575,616, compared with £2.1m a year earlier. Net assets were almost 70 per cent lower, at £1.05m.

Dr Dodd said recurring revenues had remained high at 88 per cent which "provided a strong base", and the adjusted earnings before interest, tax, depreciation and amortisation were £269,882.

That is a reduction from the £685,099 in the second half of last year, but higher than the £84,004 a year ago.

The first half loss was largely down to non-trading items, the chairman said.

He revealed: "Also, over the last year, a significant proportion of management time has been spent on dealing with the wilful misconduct of various formerly closely associated parties, which has resulted in certain legal actions."

An award of legal costs had already been made in Pinnacle's favour, but no estimate for damages had yet been made in the accounts.

Dr Dodd continued: "On a brighter note, under the leadership of the new CEO, the company is undertaking an operational review to conserve cash, accelerate the return to profitable revenue growth, increase the focus of the business, and continue to reduce costs."

Mr Scallan, an electrical engineering graduate of Strathclyde who was latterly customer solutions director at Virgin Media, said: "Whilst significant progress in turning the business around will take time to achieve, in looking ahead we believe that this review will result in a leaner, more focused organisation.

"The early signs of trading improvement are evident in recent months."