IT products and services supplier Pinnacle Technology Holdings experienced a tough year to 30 June 2001, reporting a plunge in headline earnings to just 0.15c from 3.74c previously.
<B>Figures at a glance</B>
Pinnacle Technology Holdings results for the year to 30 June 2001
Previous year`s figures in parentheses:
Revenue: R295.75m (R302.64m)
Operating profit before interest: R6.17m (R13.7m)
Net profit: R883 000 (R5.02m)
HEPS: 0.15c (3.74c)
Current assets: R97.46m (R120.15m)
Current liabilities: R63.95m (R88.01m)
Cash and equivalents: R792 000 (R342 000)
Cash flow from operating activities: -R1m (-R386 000)
Pinnacle says the static revenue compared to the previous year reflects the difficult trading conditions in the IT sector during the period.
"A decrease in revenue was recorded in the government and retail segments of the market," it says. "The new government tender was awarded five months later than anticipated resulting in a negative growth in this segment.
"Due to the decline experienced in operating margins in this retail segment of the market we restructured to focus on more profitable business."
A 55% decrease in operating profit has been blamed largely on a decrease in gross margin.
"The ongoing worldwide decline in demand for IT products resulted in an increase in competition between IT companies to grow revenue, which has had a direct impact on revenue growth and gross margins.
"A cost containment strategy was followed which resulted in the cost being reduced by 13% when compared to the previous financial year. The cost saving did not offset the decline in operating margin," the company adds.
During the year the group disposed of its 50% stake in finance company Invescor and discontinued the development of its business-to-consumer e-commerce business due to low demand and high costs.
Strict inventory control measures were implemented during the year, resulting in a reduction of inventory by 24%, equating to a rand reduction of R13.7 million. Outstanding debtors were reduced by R9.4 million, resulting in a positive impact on gearing.
Looking ahead, the company says although it expects the negative worldwide IT sentiment to continue to put pressure on revenue growth and operating margins, consolidation in the industry will offer growth opportunities.
"These opportunities extend to new product offerings, which will open new markets for the company and improve our accessibility into existing markets."
It adds that it will seek growth by increasing market penetration in the public and corporate sector, continuing to refocus the Proline brand in the public and corporate, exploring opportunities in the media and consumables market, expanding its value-added services offering, and exploring opportunities in the rest of Africa.
The Pinnacle share price was unchanged at 6c on the JSE by midmorning today.
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