JSE-listed IT distribution group Pinnacle Holdings, which is in the process of changing its name to Alviva Holdings (share code from PNC to AVV), said it will consider acquisitions worth as much as R1,3bn.
The acquisition talk follows a strong set of interim results for the six months ended 31 December 2016, in which revenue jumped by 47% to R6,3bn. Operating profit margins improved to 5,7%, from 5,3% previously.
Pinnacle CEO Pierre Spies cautioned, however, that the group will not make acquisitions at any cost and has already walked away from one potential deal over a disagreement over valuation.
“We will not buy any business if it doesn’t make sense, if it’s not accretive [to Pinnacle],” Spies said at the presentation at the JSE on Friday morning.
He said the group is focusing on local acquisitions — though international deals are not out of the question — and ones that add intellectual property value. The focus in on services and solutions rather than distribution businesses. It is prepared to increase its gearing — the ratio of debt to equity — to 50% to facilitate a deal.
Though it’s eyeing potentially large acquisitions, it will also do smaller deals that are “strategic or complementary”, Spies said.
Already, the group has made two acquisitions that have contributed to the stronger interim results. The bigger of these was IT services business Datacentrix, but solar power specialist Solareff also contributed.
“The strategy to diversify the group’s business from that of predominantly distribution is bearing fruit with the contribution from the services and solutions cluster becoming more significant,” Pinnacle said in notes accompanying its financial results.
“In addition, the focus on delivering profits into cash has transformed the gearing of the group, which has allowed us to recommence our acquisition strategy.”
Spies said a big focus for the group over the next year will be complying with the new ICT black economic empowerment codes. “I don’t think people realise how important this is. We stand to lose more than by what we gain [by not complying].”
He said Pinnacle will work with its shareholders to ensure its black ownership reaches the 51% target in the codes. “Getting shareholding into black hands is a big drive for us.”
Pinnacle’s share price was trading up almost 1% at 11.37am on Friday at R20,79/share after touching a 52-week high of R20,99/share earlier in the session. The counter has added 72,4% in the past 12 months. — © 2017 NewsCentral Media
