Pinnacle's sales slump as it battles ex staff

Management say they are making headway in efforts to turn around AIM-listed IT and comms VAR

Troubled telecoms and IT reseller Pinnacle Technology claims it is making headway in its pursuit of profitable growth despite posting another ugly set of full-year numbers.

The AIM-listed firm, which is still feeling the after-effects of a number of misjudged acquisitions it made in 2011 and spent much of last year in a legal battle with former staff, saw net losses for the 12 months to 30 September narrow to £1.77m on revenues that tumbled 17 per cent to £8.4m.

It blamed the revenue drop on its refocus away from unprofitable business, increased competition in the security market and its legal battle defending the "wilful misconduct" of a former vendor and a number of former employees, for which it was recently awarded costs.

Pinnacle claimed the results are a "material improvement" on the previous year and that it is making "positive headway" under its new chief executive's drive to sharpen the focus on the business, return to profitable growth and chop costs.

Pinnacle's pallid share price is currently hovering around seven pence, less than a fifth of their value two years ago.

As revealed by CRN back in October, Pinnacle confirmed it will exit its own datacentre facility near Glasgow during 2015, as part of a wider infrastructure simplification project. It will fund this partly through a £560,000 placing in November.

Breaking it down by activity area, telecoms generated 40 per cent of turnover, cloud and data connectivity 26 per cent, IT security – which is based on its acquisition of RMS IT Security – 17 per cent, IT services 11 per cent and mobile six per cent.

Chairman James Dodd said Pinnacle's balance sheet continues to show the impact of "a number of poor acquisitions made during 2011, where loss-making businesses were acquired for relatively small consideration but with significant liabilities".

"The acquisitions have not delivered the returns anticipated at the time of purchase and have consumed funds to repay the inherited net liabilities of the businesses," Dodd said.

"Although further time and efforts are still required to restructure the group into the appropriate form for its operations, the opportunities available to Pinnacle Technology and the early signs of progress... underpin the board's confidence in the future prospects of the company," he added.