Cash-rich Pinnacle Technology has made a faltering start for its new City shareholders with the shares falling to a four-year low on the back of a £200,000 profit reverse.
The firm, which raised £2.65 mil-lion from a group of institutions in February and has two new high-powered non-executives, has reported a 16% fall in revenue in its first half and negative adjusted earnings of £84,000 following a positive £115,000 a year ago. However, the operating loss was almost £1.1m, just below the full-year figure for 2012, after non-cash hits, including another £603,574 of impairment charges on Pinnacle's 2011 acquisition of its IT security arm RMS, on top of a £410,290 charge for 2012.
In explanation, the company said: "Whilst we currently expect the RMS-acquired customer base to generate positive cash flows over the next eight years, as part of this review and the changing market conditions, our calculations indicate that we should consider the current carrying value of the RMS customer base."
It said RMS had also prompted exceptional restructure costs since acquisition of £464,855, including £100,623 in the half-year. "Whilst these necessary one-off costs are considerable, they are essential in order to transform RMS from a loss-making business."
However, chief executive Alan Bonner, who founded the company as a telecoms specialist 15 years ago, insisted: "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."
Pinnacle has 2800 business customers across the UK and its strategy is to increase the average 1.4 products sold to each business, from its portfolio of IT services, IT security, cloud solutions, telecoms, and mobile services. Mr Bonner stressed that 87% of revenues were recurring (86% a year ago). He said turnover had been "stable", not counting "the additional high-profile revenues of last year's Queen's Diamond Jubilee celebrations and the 2012 London Olympic and Paralympic Games".
Mr Bonner went on: "Challenging trading conditions, a lower level of high-profile event-related activity, and a reduction in the number of IT security projects impacted upon the results in this half year. However, our high levels of recurring revenue, new, stronger non-executive board, strengthened senior management team, and the financial support in the form of a £2.65m placing from City institutions, mean we look to the future with great optimism."
He said Pinnacle was "now engaged in a programme of appropriate investments to deliver growth in the future". Employee numbers were up by six, to 68, compared with a year ago, due to recruitment of sales staff and despite the closure of a data centre in Brighton and an administration centre in Northampton. Administration costs had been reduced by 19% to just over £2m.
New chairman Dr James Dodd said he was "delighted to be joining Pinnacle at this key stage in its development", adding that he was "happy to welcome a select group of City institutions as new shareholders who have clearly expressed support for the group".
The shares, however, slumped by almost 25% to 19.25p, their lowest in nearly four years.
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