Pinnacle's fifth year of growth dampened by falling revenue in telecoms unit

20th Feb 2013 09:51

Shares in AIM-listed cloud technology provider Pinnacle fell sharply on Wednesday after the company posted preliminary results for the full year ending September 30th 2012 and proposed a share consolidation.While the business as a whole posted a fifth consecutive year of growth with gross profits up 61.0% to £3.96m, several business segments posted contractions in revenue.Revenue for the group's telecommunications business segment reduced by 15% to £4.1m. Within the mobility solutions segment, revenue fell 5.0% to £0.54m. Pinnacle reported that the revenue in its telecommunications segment represented 32% of group revenues for the full year compared to 56% of overall revenues in the preceding year.The company said that the reduction in revenues in this business segment was a reflection of the industry move towards an overall reduction in call tarriffs to end users mainly in the cost of calls from landlines to mobiles. Pinnacle reported that reglatory changes reduced the wholesale price that major mobile providers charged it for using their networks."Given the general move towards lowering margins, the reduction in revenues also reflects the impact of the decision in 2011 by the group to withdraw our own wholesale product from sale to other telecommunications resellers."The company added: "For Pinnacle, telecommunications is a cash cow, however, over the next 10 years, we do see most companies moving from traditional voice to VoIP [Voice over internet protocol solutions].However, turnover at the group jumped 49% to £12.7m and there was a 75% increase in total assets to £6.9m.Alan Bonner, the Chief Executive Officer of Pinnacle, commented on the results and possibility of a future share consolidation. "After carefully considering Pinnacle's growth and strategic objectives, we believe that a share consolidation could prove beneficial to the company and its shareholders, as a result, we will be seeking approval for a 1-for-100 share consolidation at the forthcoming AGM on March 26th 2013." He said that there are good reasons to be "optimistic", adding that the company had grown its acquired revenues by 51% and expanded its acquired profit by 48%, both enabling it to enter the financial year in a strong position. "Our financial strength will enable us to continue to invest and reposition the business, and despite the current economic conditions, we intend to make further investment in our sales teams to take advantage of the opportunities we have to increase our market share. "Whilst the results of our cross-selling strategy may take some time to deliver, we are confident that the actions we have taken to date and the strategy we are pursuing will ensure the Group continues to prosper," he added.Pinnacle's share price was down 13.10% to 0.36% at 10:08 on Wednesday.MF