Pinnacle to pursue 'substantial' deals

Pinnacle Technology Holdings hopes to have Competition Commission approval to buy out Axiz by month end.

Once the deal has been given the green light, the JSE-listed company aims to start work on another “substantial” deal that will add value, CEO Arnold Fourie says. Pinnacle told the market in July that it was buying Axiz for R170.9 million.

Fourie expects Competition Commission approval by mid-September, or at the end of the month at the latest. Commission approval is the last condition before the deal can be implemented and Pinnacle will then spend a year bedding down Axiz, he adds.

Once the acquisition has been sanctioned, Pinnacle will move ahead with seeking its next target to add volume to the firm.

Pinnacle targets one “substantial” deal that will add volume to the company and aid it in maintaining its growth path each year, says Fourie. He was speaking at the company's annual results presentation for the year to June this morning.

During the year, Pinnacle bolstered revenue by 11.8%, to R3.17 billion, and grew net profit 27.9%, to R141 million. Cash on hand increased 14.3%, to R187 million. Fully diluted headline earnings per share added 37.6%, to 81.3c.

Pinnacle wrote off about R15 million in bad debt due to liquidations in the IT sector during the year. Two of the biggest collapses recently were Faritec's liquidation of its Enterprise Services division, and Eclipse Networks' liquidation.

Fourie says he expects more consolidation in the industry in the near future, and is open to having discussions with companies that want to be merged into larger entities.

Axiz will be one of Pinnacle's key growth drivers in the near future. Fourie says Axiz and Workgroup, which will be merged, will become the largest ICT infrastructure distributor in the Southern African Development Community region.

Axiz should add about another R2 billion, or 60% in revenue, to Pinnacle, according to Fourie. However, margins from the combined entity will initially be lower, as Axiz works on thin margins, he notes. The company aims to improve this over time.

Pinnacle aims to expand its services arm, but will remain focused on providing IT products and services, Fourie explains. He says the company wants to grow areas in which it has not traditionally been strong, such as networking and audio-video.

Fourie expects future growth to come from its Sharp division, which was recently added to the fold. Sharp is 51% owned by Pinnacle, with the balance owned by an empowerment partner.

So far, the entity has had its first success, selling 200 multi-function printers to Eskom, says Fourie. He adds that the company is the only black-owned office automation distributor in SA, which bodes well for orders from the public sector.

In addition, growth in the future will also be aided by its Infrasol division, which plays in the audio-video space. The division is still in its infancy, but is showing signs of potential and has won several government bids, says Fourie.

Its infrastructure entity, Datanet, has experienced margin pressures, but is another growth driver for the group, notes Fourie. He explains that its product range has been bolstered by the addition of CentraVoice, which provides products such as Mitel, Alcatel-Lucent and Gigaset.

Pinnacle's shares were 10c higher in early morning trade at 490c.

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