LONDON (Alliance News) - IT services company Pinnacle Technology Group PLC Friday said it has raised GBP4.6 million to help fund its acquisition of Ancar-B Technologies Ltd and Weston Communications Ltd, as it reported a narrowed pretax loss for its most recently ended financial year.
Pinnacle raised GBP4.6 million through the placing of 108.4 million shares at a price of 4.2 pence. Shares in the company were down 26% at 8.75 pence Friday afternoon.
Following the conclusion of this placing the company will now launch an open offer to raise up to a further GBP250,000 by issuing up to 5.9 million shares at the same price.
The company plans to acquire Ancar-B for GBP3.5 million, to be paid through GBP2.8 million in cash and GBP750,000 in new shares at the placing price, whilst it will pay GBP1.5 million for Weston Communications for GBP1.5 million to be satisfied in shares at the placing price.
For the year to end-September the company reported a pretax loss of GBP1.4 million, narrowed from a pretax loss of GBP1.9 million a year before, as a fall in revenue to GBP7.9 million from GBP8.4 million was offset by a reduction in operating expenses and exceptional costs not recurring.
The company attributed its fall in revenue primarily to a 25% fall in revenue from its IT Security segment, previously reported acts of "wilful misconduct" and a 14% fall in its traditional telecommunications services revenue.
Pinnacle said that turning around its business will take time, and whilst it has made some progress in reducing costs and becoming more focused, this has "not yet been sufficient to bring the business back to profitability."
The company's ongoing cash requirements mean it will need further funding in the short term, however, the company outlined a strategy to re-focus on higher margin services through a buy and build strategy. It sees "ample consolidation opportunities" in smaller, sub-scale IT services provider, and said its acquisitions of Ancar-B and Weston Communications are the first step in this strategy.
Additionally, the company said that its Chief Executive Officer Nicholas Scallan plans to step down from the board at the company's upcoming annual general meeting in March, and it has appointed Ian Winn, formerly of Accumuli PLC, as its chief financial officer and chief operating officer, effective from the beginning of February.
"We believe that strategically there is a market opportunity for Pinnacle to become the leading provider of 'IT as a service' to the UK SME market, despite a number of operating challenges to address, by embarking on a buy and build strategy and focusing on higher margin services. The acquisitions of Ancar-B and Weston are the first steps in consolidating a highly fragmented market and I look forward to ensuring the organisation is focused on creating both customer and shareholder value," said Executive Chairman Gavin Lyons in a statement.
Lyons, along with Scallan, and Non-Executive Directors James Dodd and Simon Duckworth all subscribed for shares in the placing. Lyons, Black and Duckworth all subscribed for 4 million shares, whilst Dodd subscribed for 1 million.
Proposed chief financial officer and chief operating officer Ian Winn also subscribed for 1.4 million shares in the placing, and following admission with have a less than 1.0% stake in the company.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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