Main Menu

Year of transition for IT group

Pinnacle buys two firms and plots more deals

Gavin LyonsPinnacle Technology, the Glasgow IT communications company, has acquired two companies based in Leeds for £5 million as it continues its turnaround strategy.

It will pay £2.75m in cash and £750,000 in shares for Ancar-B which has a customer base of 315 SMEs and generated revenues of £2.2m (59% recurring) and an EBITDA of £580,000.

It has also paid £1.5m in shares for Weston, a provider of telecoms and IT support services to 225 SMEs, councils and universities which generated revenues of £2.8m (59% recurring) and EBITDA of £220,000.

The company announced a proposed placing to raise approximately £4.55m in respect of the acquisition of Ancar-B and to provide working capital.

Pinnacle said the acquisitions create the hub for centralised support functions and that an opportunity exists to consolidate a highly fragmented market of smaller IT services companies to become a provider of ‘IT as a service’ to the SME market in the UK

It has longer-term strategy to complete further acquisitions and drive synergies.

Ian Winn to join the board as chief operating officer and finance director with effect from 1 February. This is the same role he held at Accumul where he worked with Gavin Lyons, who was appointed executive chairman of Pinnacle before Christmas.

Mr Lyons said: “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”.

Nicholas Scallan will also step down from the board at the forthcoming AGM.

The company reported an EBITDA loss of £572,000 (2014: £512) on reduced revenues of £7.9m for the year (2014: £8.4m).  Loss for the period after tax fell to £1.3m (2014: loss £1.8m). It said recurring and renewable revenues remain high at 85% of revenue, providing a strong base for the Company.

Outgoing chairman James Dodd, who also steps down from the board at the AGM,  said: “The year was one of transition for Pinnacle Technology, as we continued to expend considerable effort in resolving many of the problems which have been well documented in previous annual reports, and announced both a strategic investment from MXC and their appointment as M&A advisers.

“Operational costs have continued to be reduced and legacy issues addressed, resulting in the business being in a cleaner state. The impact of the previously reported acts of irregular behaviour has been worked through.

“Poor performing areas of the business have been reduced or exited, whilst we have invested in stronger areas of growth. There are signs of encouragement on account management, sales and marketing, and it is particularly pleasing to note the calibre of some of the recent customer wins and renewals.

“However, this progress will take time to flow through to the financial results and the legacy problems which have beset the Group continue to act as a drag on overall performance, resulting in an EBITDA loss for the year as a whole.

“The Group balance sheet continues to show the impact of a number of poor acquisitions made in prior years, 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. The work undertaken to rectify these problems has produced a much cleaner and more stable business but one which is below critical mass for profitability.

“Therefore, the board is firmly of the view that growth by acquisition on this now more stable platform is the correct course of action going forward and the appointment of MXC as adviser is an integral component of that strategy.”

 



Leave a Reply

Your email address will not be published. Required fields are marked as *

This site uses Akismet to reduce spam. Learn how your comment data is processed.