Pinnacle suspends dividend as earnings tumble

JSE-listed technology firm, Pinnacle Holdings says it has suspended its dividend payout for the year ended June 2014, following a 19% decline in headline earnings per share.

“This year would have to rank as one of the most  challenging in the 21-year history of the company, with the attempted bribery allegations against one of our long serving executive directors, Mr Takalani Tshivhase, in March 2014 being the single most significant issue,” the group said in a statement on Friday (5 September).

The allegations have subsequently been retracted, while the charges, which led to the arrest, are in the process of being withdrawn, Pinnacle noted.

An investigation into possible insider trading in shares of Pinnacle Holdings however, is still ongoing.

Pinnacle said that the incident caused stakeholders a great deal of concern and resulted in a steep decline in the group’s share price.

The group wiped off almost half its value following the announcement of an arrest, to a low of R11.20, before recovering to R14.15 when it announced a reprieve for Tshivhase on August 25.

In afternoon trade on Friday however, Pinnacle declined nearly 7% to R12.50 in intraday trade on the JSE.

Pinnacle said it is considering its legal position on the matter having suffered “reputational harm”.

In financial results published on Friday, the group reported an 8% rise in revenue to R7.1 billion, but gross profit  decreased by 1% on margins that decreased to 14.4% (2013: 15.6%).

Operating profit before interest declined to  R379.5 million, from R472.5 million in 2013, while HEPS declined to 166.5 cents.

“Towards the end of the year, the company decided to discount certain slow moving inventory that would have become technologically obsolete,” it said, resulting in substantial write downs.

“After careful consideration, the board has decided that this policy be suspended and that no dividend be declared for the current year,” Pinnacle said.

The group said it wishes to preserve its cash resources to ensure that gearing reduces to more acceptable levels and that it invests into growth areas of the business.

Pinnacle said that efforts to expand its offerings into the rest of Africa are paying off, with year on year revenue growth into the region reaching 23% for the year to June 2014.

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Pinnacle suspends dividend as earnings tumble