The following two years I would expect again to see an increase in activity and also more movement to higher margin work resulting in the first pre-tax profits, simultaneously moving on to Phase 4 of Pinnacles implementation plan “As a result of aggregating all our customers’ services onto Pinnacle’s Managed Services Platform, deliver new technology-based solutions that drive business transformation, agility, speed to market, and cost reduction for our customers."
Carried over losses will reduce tax liability and after a period of profits it will be possible to pay the first dividend.
The above is what I believe is a not too difficult stretch from where we are now assuming only that the company maintains its current course but is meant only as a basis for discussion and no advice is intended.
The recent name change from Pinnacle Telecom to Pinnacle Technology shows the intention of being a one-stop, one bill partner for more than just telephony. Recent acquisitions, as well as widening the range of services available, have increased the size of the customer base to in the region of 3000 companies buying 1.4 options each. If each client bought one more service, that could double the revenue depending on the mix. Recruitment and training is addressing this increase in sales and I believe Alan Bonners background as summarised in the thread header is the man to make this happen. The team has been recruited and built and although H1 was early for it to start performing and for new sales revenues to start to come through the team are heavily incentivised to make H2 a successful period for Pinn.
See the following link for the current revenue analysis on page 5
The company will do doubt move to changing the mix of services to increase the gross margin by increasing the proportion of higher margin work. Such as more VOIP and less fixed line telephone where many providers are driving down margins, more cloud and IT services, more security consulting and data transmission such as seen in recent events.
The increased use of tablets and smart phones makes this interesting ” With only around 200 customers currently buying mobile services from the Group, the mobility market offers Pinnacle a very exciting opportunity for growth.”
87% of revenues are now recurring and renewable
I believe that this year end will see an improvement in revenue and margin as the new sales team builds up momentum. Admin costs were reduced considerably by headcount and office space reduction after rationalisation of acquisitions, £471,000 for H1 compared to H1 last year and cash has been raised to fund the new sales team.
I’m going to take a stab at forecasting some figures:
Previous increments in revenue have been
So bearing in mind the previous statement that just one extra service per customer with a higher margin could double revenue, I’m going to suggest that a 50% annual increment should definitely be achievable. Increasing h1 figure for 2013 by 50% gives 5.3x1.5=7.95, therefore full year =13.25.
The increase in admin costs this year from the extra sales staff has been partly offset by the previous reduction of headcount and office rationalisation. With extra sales in H2 and the heavy writedowns that were lumped into H1, it is perfectly possible to see a not insignificant profit for H2 and therefore a reduction in the loss for the whole year.
Many tks, my thoughts the same, next cashflow results will tell all. If the core biz sound and lean then the corporate spin may well deliver those promises, Not everybody can get on the world stage "olympics" without impressing the major players but you need the cash to deliver the dream.
I can understand why people want to put a positive spin on these results but they are actually quite disappointing and I feel embarrassed for having been more bullish than I should have been.
The point has been made earlier that I can confirm from my own experience, acquisitions tend to take management's eye off the ball and KPMG concluded a few years ago that the vast majority, far from adding value actually decrease the enterprise value.
Sadly that is what these figures show in hard cold facts and it explains a why Dodd and Black have taken over and b why there was a strategic decision to take as much cash as possible right now because PINN could not keep doing drip drip placings without wearing out the sp and they cannot return to the market with any credibility for at least a year, so this is make or break for AB and the new Sales Director.
It is also a bold strategy to stick with the existing 3,000 customers rather than seek customer growth alongside the "milking" process.
Let me be clear that PINN's Board and its new II cohort give it much better market credibility. And I know it looks like I sold prematurely, but actually the figures bear out my decision, as follows:
The key statement in AB's Report is this
" Whilst the results of our cross-selling strategy may take some time to deliver...."
PINN has nailed its colours to this mast and here is why AB's statement implies a reality check.
Many people have picked up on 79% recurring revenues but at the half year it was 86%. That is some decline and if you disaggregate the figures it means recurring revenues were only 72% in the second half. So the strategy is failing at the moment, hence the need for a Sales Director.
Looking in more detail at the figures and comparing the forst half with the second half gives a much less rosy picture than AB has painted for the year as a whole.
Despite integration of the acquisitions, Revenues FELL in the second half from 6383 to 6327.
Gross profit fell from 2003 to 1957
While EBITDA rose from 107 to 178, the Operating Loss increased from 495 to 603 and
The Pre-Tax Loss increased from 498 to 618.
And before anyone explains all this away with one-offs and exceptionals, the underlying truth is that
Net Cashflow from Operating activities turned negative from 16k to MINUS 291k.
It is a pity that AB has not disaggregated the BBC contract because it would have been nice to know the Gross Value but my feeling all along was that it probably made little or no profit and also took managements eye off the ball.
It did however massively raise PINNACLE's corporate profile.
So in conclusion, with no Olympic contract this year, it seems reasonable to assume that Gross Revenues might be stagnant this year at best, so Simon Poole is going to have to work very hard to "sweat" the customer base and AB is going to have to dig into the cost base and remove the fat.
As DB himself said 'Lets put this to bed right now. Pinn is not happening'.
I am a shareholder in both PINN and COMS and the fact is since the bid PINN has gone up 28% while COMS has fallen by 22%. I'm sure COMS will go from strength to strength but IMHO the bid did more for PINN than COMS.
First...it's like a grave on ADVFN...says it all really...
Interesting point about Group structure, Ged. In an ideal world the Group structure would reflect the overall strategy and the focused revenue streams...which appears more or less right..
However, in all the aggro that followed my objective review of the last results over in the graveyard, nobody picked up on a key point that the "old" sustainable revenue streams are doing better than the "new" ones, if you strip out the one off effects of the Olympics, Jubilees, etc. That is worrying.
Even allowing for the post-acquisition rationalisation, RMS is still not delivering against its ambitious growth targets.
PINN needs the sort of game-changing contracts that COMMs have won...
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