Telecoms and IT managed services provider Pinnacle Technology has built a strong base from which to grow in the current financial year.
Pinnacle has a full range of products and services and a strong balance sheet. Cross-selling products and services to existing customers is an important part of the strategy.
The core customer base is 3,000 small and medium sized companies. Pinnacle is divided into five divisions. IT services, IT security, cloud-based services, telecoms services, which is predominantly the fixed line telecoms operations, and mobile phone services. The first three divisions are the growth areas for the group, while the other two have been hit by falling prices. However, for the time being most of the profit is generated by these two divisions.
In the year to September 2012, overall revenues improved from £8.52m to £12.7m mainly from acquisitions but there was also an underlying improvement in the three main growth divisions. Recurring revenues are 90% of the total. Various write-offs, amortisation and gains on acquiring businesses below NAV make the profit/loss figure confusing. On the face of it the reported loss increased from £117,000 to £1.12m. However, underlying EBITDA improved from £208,000 to £285,000 and if only depreciation and interest charges are subtracted from this then Pinnacle makes a small pre-tax profit.
There were £564,000 of restructuring costs relating to the three most recent acquisitions, of which Online Computer Developments and RMS Managed IT Security were during the past financial year.
Net debt was £344,000 at the end of September 2012 and since then has raised £2.95m for further share issues.
A 100-for-one share consolidation is planned. It is always difficult timing share consolidations, particularly for penny shares. The positives are a higher share price that is likely to mean that the company is taken more seriously by institutions and a possible narrowing of the spread.
Up until now acquisitions have been small and broadened the customer base or added new services. A future acquisition is more likely to be a substantial one, probably larger than Pinnacle.
At 0.31p a share, Pinnacle is valued at £9.59m.
Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFFebruary2013_41.pdf
© 2021 Aim Micro. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.