Technology group Pinnacle Holdings will focus on bedding down its African expansion and focusing on company operations as a strategy to rebuild shareholder confidence.
Pinnacle CEO Arnold Fourie says the focus will now be on growing the business after the technology firm was hit by corporate governance issues and the arrest of an executive director on bribery charges.
Pinnacle currently has exposure to the rest of the African continent through its technology distribution branches in Namibia, Botswana, Mozambique and Zimbabwe.
“We have customers in Angola and Kenya and we might open a branch there. We will be making sure that on all African operations we have good representations, finding more customers,” says Fourie.
Going forward, he says the company, with a market capitalisation of R1,8bn, will not conclude acquisitions haphazardly, but look for “acquisitions of good companies with good skills”.
Part of its strategy to build confidence among shareholders will also involve integrating its key acquisition into the Pinnacle stable. The company acquired a 34,99% stake in Datacentrix Holdings, a move it calls a “long-term investment which people recognise as desirable”.
Fourie admits: “Maybe we were bullish in the acquisition [Datacentrix] and did not realise the integration of businesses that is required.”
He describes the year 2014 as “fairly bad”, confirmed by the company’s interim results for the six months ended December 2014. Pinnacle saw its revenue increase by 14% to R3,6bn and its operating expenses were down 0,6%. But its headline earnings per share dropped by 16% to 80,4c.
“Everybody has their focus back on the business,” Fourie says. “It’s not that we did not focus at the time; these things [bribery charges]occupy your mind. We have a good management team. From here we should see the benefits coming through.”
Pinnacle executive director Takalani Tshivhase was arrested in March last year on charges that he offered a bribe to a senior police officer to win a contract. The company did not disclose the arrest to the market for 20 days — a move seen as withholding share price sensitive information.
At the time, the JSE launched a probe into Pinnacle for the possibility that the company violated rules on disclosure. During the 20 days, Tshivhase, Fourie and a director all sold Pinnacle shares.
On Wednesday, Pinnacle announced that it has been cleared by the JSE of contravening the listing requirements on the disclosure of information to the market.
The Financial Services Board (FSB) also entered the fray by launching its own investigation of insider trading relating to the disposal of shares by the executives. The FSB subsequently cleared Pinnacle.
Reshuffling of executives
The company also announced the reshuffling of its executive team. Pinnacle has appointed Pierre Spies as deputy CEO effective from 1 July. The appointment is part of the succession plan for when Fourie eventually steps down from the firm. Spies is currently the CEO of AxizWorkgroup, a Pinnacle subsidiary.
“I will not handover until the business is strong and powerful,” Fourie says.
The company has also roped in Bheki Sibiya as a lead independent director effective from 10 March.
Sibiya is CEO of the Chamber of Mines and chairman of cement company PPC.
Ashley Tugendhaft, who was acting chairman of the company, has been appointed as a nonexecutive chairman.
Tshivhase will step down from the board but will continue to serve on the executive committee. He will step down as a member of the social and ethics committee.
The company did not declare a dividend to shareholders. Fourie says the annual dividend will be suspended until 50% of gearing is reached by June 2016.
Its gearing for the period under review is 74%. “It’s important to keep the cash and grow the business,” he says. The company plans to reduce its gearing by R250m by disposing of properties and winding down its struggling print services business.
- This was republished from Moneyweb with permission