Headline earnings per share (Heps) at technology group Pinnacle Holdings have slumped by 19% in the year ended 30 June 2014, despite an 8% increase in revenue to R7,1bn. As a result, Pinnacle has decided not to pay shareholders a dividend.
Net profit for the year was R273,1m, down from R325,7m in 2013.
Explaining the pressure on the bottom line, Pinnacle said it decided to discount some of its slow-selling stock that was at risk of becoming obsolete. “This resulted in substantial write-downs but helped ensure that the company starts the new year with inventory that is better priced and technologically up to date.”
In addition, margins decreased during the last six months due to “certain large deals that were done at low margins and due to competitive pressures”. Operating expenses increased by 15%.
In the past, Pinnacle has had a policy of declaring a dividend of 20% of Heps. “After careful consideration, the board has decided that this policy be suspended and that no dividend be declared for the current year. The group wishes to preserve its cash resources to ensure that gearing (its debt to equity ratio) reduces to more acceptable levels and that it invests into growth areas of the business.”
Management described the financial year as one of the most challenging in its 21-year history. It said the bribery charges brought about executive director Takalani Tshivhase was the most significant challenge. Charges against Tshivhase were withdrawn recently.
Pinnacle said the incident caused its stakeholders “a great deal of concern and resulted in a steep decline in the share price”.
“The company, on the evidence available to it, was of the view that there was no reason to doubt the veracity of Mr Tshivhase’s denial of the allegations. While, therefore, the company is greatly aggrieved that these unfounded allegations were made against one of its directors, which caused reputational harm to the company, it draws some comfort from the fact that the senior directorate of the National Prosecuting Authority, on reviewing the matter and assessing the reliability of the witnesses concerned, determined that the allegations were unsustainable and that the charges should be withdrawn.” — © 2014 NewsCentral Media