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Pinnacle suffers trading loss of £2.4m

Pinnacle Technology has reported a trading loss of £2.4 million last year against the £1.1m for 2012, and appointed a new chief executive, who will have to lift the shares from a five-year low.

The Scottish group said Alan Bonner, who founded the group in 1998, would be replaced as chief executive by Nicholas Scallan on March 3.

Pinnacle announced in December that Mr Bonner would be standing down. It said Mr Scallan "has a distinguished career record with some of the best names in the industry".

Mr Scallan, an electrical engineering graduate of Strathclyde, was latterly customer solutions director at Virgin Media Business.

He has held a variety of commercial and operational roles at Virgin Media and was previously responsible for broadband, data and internet related programmes at Energis.

A year ago Pinnacle raised £2.95m from institutional investors in a placing.

But Pinnacle's shares have lost three-quarters of their value in the past 12 months, and closed down 9% yesterday at 9.75p, their lowest since 2009, valuing the business at £3.3m.

Chairman James Dodd, appointed a year ago to replace former Thus chief Bill Allan, admitted that the year to September 30 had been "a very difficult one".

He added: "After the rapid growth by acquisition of previous years, the company had been left with a high cost base, large and (at that time) uncertain liabilities, and a severely stretched balance sheet with significant amounts outstanding to trade and other creditors."

Pinnacle took another £1.1m in restructuring and impairment costs after the near-£1m in 2012, while operating costs rose from £3.68m to £4m. It said cross-selling its various products into the existing customer base had proved "more difficult than had been expected".

The group's move into IT security continued to disappoint, with a 41% fall in revenues prompting a downsizing. IT services saw a 12% rise in customers, but revenues fell by 8.7%. Cloud services and data connectivity revenues were down 18%, largely due to the absence of the high-profile events of 2012 including the Olympics.

Telecoms, Pinnacle's original business and still accounting for 36% of its revenues, saw a fall of 8.8% while the mobile solutions arm was down 4.3%.

The group said new partnerships had been formed with Gamma Telecom and Virgin Media "to enhance our future offerings in the markets for mobile services and broadband connectivity", and the cross-selling strategy would continue.

Pinnacle said despite the trading loss, recurring and renewable revenues increased from 79% to 85% and gross margin percentage was up from 31.2% to 32.1%. During the year, liabilities, excluding deferred tax, reduced 40% to £2.97m.

Mr Dodd said: "Liabilities have been addressed to assume more normal levels and operating costs have been reduced by headcount and premises reductions."

The chairman looked forward to Mr Bonner's "continuing counsel and support as a major shareholder".

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