Diversified ICT group Pinnacle Technologies has warned the global economic meltdown and currency volatility would impact its business. However, it is making plans to mitigate this effect.
Yesterday, the JSE-listed group released its interim results for the period ended December 2008. It said revenue increased by a healthy 42%, to R767.3 million, as all lines of business achieved revenue and gross profit targets, apart from the government unit, which was refocused to recapture service delivery in the second half of this year.
The global economic crisis, considered to be the worst in living memory, has had a knock-down effect following the failure of a number of international banks, located primarily in developed countries. This has led to a tightening of credit and other lending facilities.
Pinnacle says global market conditions have effectively limited and, in certain cases, cancelled bank facilities previously available to customers. “The lack of cash in the market is thus expected to impact negatively on collection terms and may lead to an increase in collection charges over the remainder of the year.”
Counter the crunch
However, the group says it is making plans to counter the credit crunch.
“Attention will be afforded to develop annuity-based revenues, and to market, distribute and support technologies that drive down overall cost of ICT ownership, targeted at our government and corporate customer base,” notes Pinnacle's interim results statement.
These plans include the introduction of small form factor notebooks, known as netbooks, which will supply affordable, portable ICT solutions to value market segments. A tier-one server range introduces another product set with which to target the corporate market segment.
The group says the addition of tier-one brands into the Pinnacle portfolio diluted gross profit margins.
“Reduced technical support cost on these product sets and improved efficiencies have, however, contributed to realise an adjusted earnings before income, tax, depreciation and amortisation (adjusted for the exceptional foreign exchange loss) of 7.1% (31 December 2007: 9.5%).”
Pinnacle has introduced a foreign exchange policy to limit its exposure to foreign exchange fluctuations following a R33 million loss in October. However, it believes the worst is not necessarily over.
“While operations are manageable at current exchange levels, further deterioration of the South African rand, should it occur, is expected to impact ICT spend in the SME and retail segments.”
Pinnacle is also keeping a close eye on potential government business, saying: “Government continues to invest in the education of citizens through investment in IT infrastructure. Value-added solutions to address government initiatives in education, law enforcement and home affairs require ongoing commitment and support, which Pinnacle is ready to provide on a national basis.”
In mid-morning trade, Pinnacle's share price had slipped 1c, to 187c, after only 100 shares had changed hands.
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