Half Yearly Report

Pinnacle Telecom Group plc ("Pinnacle" or the "Company")

Interim Results for the six months ended 31 March 2011

Continued growth and increased profits

Pinnacle Telecom Group plc (AIM: PINN), the value added solutions based provider of IP focused unified communications to the SME market, today announces its unaudited interim results for the six months ended 31 March 2011.

Key points:

·; 23.2% increase in turnover to £3,821,235 in H1 11 compared with £3,101,747 in H1 10.

·; 31.9% increase in positive EBITDA (1) of £89,673 in H1 11 compared to positive EBITDA of £67,966 in H1 10.

·; 24.4% increase in operating profit (2) of £50,787 in H1 11 compared to an operating profit of £40,841 in H1 10.

·; 37.9% increase in cash at the end of H1 11 to £452,040, compared to H1 10 figure of £327,725.

·; Won "Best Enterprise Hosted Solution" in recognition for excellence at the 2010 Comms National Awards.

Definitions:

1. EBITDA - Earnings before interest, taxation, depreciation, amortisation of intangibles, exceptional acquisition costs, share of results of associates and the embedded fair value adjustment in the convertible loan

2. Operating profit - is before amortisation of intangibles, exceptional acquisition costs, share of results of associates and the embedded fair value adjustment in the convertible loan

H1 11 - The half-year ended 31 March 2011

H1 10 - The half-year ended 31 March 2010

H2 10 - The six months ended 30 September 2010

Commenting on the results, Alan J Bonner the Pinnacle CEO stated:

"The first half of the year has shown steady progress as we continue to build the business. The half-year turnover of £3,821,435 is the highest we have seen over any six month period and, with no acquisitions in the first-half to increase turnover, our organic progress is all the more encouraging.

Our overall gross profit increased 6.2% to £1,111,352. The overall gross profit percentage at the half year was 29.1% holding up well against a changing revenue mix. After all costs, including the costs of discontinued operations relating to previous years, the overall loss for the period has been reduced to £131,594 in H1 11 compared to £166,005 in H1 10.

It is our intention to exploit the opportunities in the provision of cloud computing services, hosted VoIP software solutions, fully managed voice, mobile and data networks, data centre space rentals, managed internet services and IT support to SME business customers in the UK. Our sales strategy is being sharpened to focus on this very significant opportunity, which we believe will show strong growth for a number of years as businesses migrate their business applications, including voice services, onto the internet."

CHAIRMAN'S STATEMENT

With no acquisition activity in the first half to impact the results, it is pleasing to see a solid increase in turnover for the period compared to both the equivalent period last year, and the second half of last year. We have also seen improving EBITDA and reduced losses, while preserving our cash resources.

Given the uncertainty in the wider UK economy, this is an encouraging set of results for Pinnacle. The company has continued to evolve and develop quality bespoke solutions for high profile broadcast events, which included winning a contract for the Royal Wedding in the first half. These events affect the revenue mix and add a small degree of seasonality to the business which reduced the percentage of contracted recurring revenue. Nevertheless, the company is winning new business and building a solid reputation for high quality service provision - a key differentiator in the highly competitive telecommunications market - which bodes well for future growth.

Top line growth is being complemented by steady growth in operating profits and a reduction in the overall accounting losses for the Group. Add to this good cash management and strong controls over operating costs and administration expenses, the company is being prudent and building growth from internal strengths. Alan Bonner, the Group CEO, has noted the opportunities for further acquisitions to reinforce and add new capability to the Group. This is sensible given that Pinnacle needs to add scale and new services to fulfil its ambitions and continue to build shareholder value for the future. With quality revenue growth, good cash management, and a sharper sales focus on new IP services, we continue to look forward to building Pinnacle into a leading service provider to the UK SME market.

The results for the first half are more fully explained in the Business Review.

CHAIRMAN

27 June 2011

BUSINESS REVIEW

Introduction

The first half of the year has shown steady progress as we continue to build the business. The half-year turnover of £3,821,435 is the highest we have seen over any six month period and, with no acquisitions in the first-half to increase turnover, our organic progress is all the more encouraging. Our overall gross profit increased 6.2% to £1,111,352. The overall gross profit percentage at the half year was 29.1% holding up well against a changing revenue mix. After all costs, including the costs of discontinued operations relating to previous years, the overall loss for the period has been reduced to £131,594 in H1 11 compared to £166,005 in H1 10.

I was very pleased to receive on behalf of the Company, the award for Best Enterprise Hosted Solution, a national award, in recognition for excellence, presented at the 2010 Comms National Awards held at the Park Lane Hilton in London last October.

We have also received a significant amount of recognition and publicity associated with the short term contract work that we have completed for the BBC, other broadcasters and the lead contractors for festivals and major events. Following the acquisition of Solwise Telephony Ltd last year, we have introduced a degree of seasonality to our business, with the festivals and sporting events generating significant revenue growth over the summer months, compared to the quieter winter period. The festival work will continue over the 2011 summer period with a number of projects now in hand, and several more expected to be awarded. For broadcasters, we are providing temporary ISDN, broadband and 'quality of service' (QOS) data links that provide broadcast quality sound connections and internet access for outside broadcasts. In addition, several departments in the BBC now use our hosted IP telephone platform for all voice communications at their outside broadcasts. Another significant development this year has been winning contracts to supply temporary high capacity multi-media fibre circuits capable of carrying BBC i-player streams, all radio and sound broadcasts, internet access, site production and security systems plus reserve TV broadcast feeds. These services are carried on fully managed fibre connections to the relevant site. The first circuits of this kind proved highly successful at the recent Radio 1 Big Weekend in Cumbria. After the events, we look to generate additional revenues from these circuits, seeking out commercial broadband providers in the local area that supply community broadband services. For multi-event venues, where Pinnacle is now the communications supplier of choice, we are installing permanent voice and data circuits to the sites, which remain in place for regular repeat use.

It is our intention to exploit the opportunities in the provision of cloud computing services, hosted VoIP software solutions, fully managed voice, mobile and data networks, data centre space rentals, managed internet services and IT support to SME business customers in the UK. Our sales strategy is being sharpened to focus on this very significant opportunity, which we believe will show strong growth for a number of years as businesses migrate their business applications, including voice services, onto the internet.

Turnover has increased by 23.2% compared to the equivalent period last year. As noted above, the festival business has introduced a degree of seasonality to the business. In the half-year we have also noticed a reduction in the revenues from the mobile sector as tariffs have come down. Economic factors have also affected demand for new mobiles and we are now signing customers on longer term contracts. Given these dynamics, it is all the more pleasing to see us deliver a record turnover for a half-year.

Recurring income continues to be a positive feature of our turnover, and we estimate that 84% (H1 10: 94%) of turnover in the first-half was recurring.

Our gross profit for the half-year was £1,111,352 (H1 10: £1,042,338). This has been achieved despite a drop in the margin percentage from 33.6% in H1 10 to 29.1% in H1 11, as the result of a changing revenue mix.

Overall gross margins have also been reduced due to increased revenues from inbound solutions in this period, which attract a lower overall margin.

By contrast, and to improve margins going forward, we have recently withdrawn a number of traditional voice products from supply to our wholesale partners, as we focus more on supporting forward looking wholesale partners, who are capable of delivering converged voice and data IP solutions.

In the first-half, we have incurred an operating loss of £121,067 compared to £125,404 in H1 10. This loss has been incurred as a direct result of the need to amortise our intangible assets. Amortisation in the half-year of £155,386 (H1 10: £152,623) was greater than the entire operating loss. Adding back amortisation and certain other exceptional costs, our operating profit grew to £50,787 compared to £40,841 in H1 10.

EBITDA increased 31.9% in H1 11 to £89,673 compared to £67,966 in H1 10. EBITDA remains the most important key performance indicator that is monitored by the Board on a regular basis.

We continue to exercise significant control over our administration expenses. For H1 11, these totalled £1,060,565, not materially different to the H1 10 figure of £1,001,497. As a percentage of turnover, our overheads are 27.8%, a significant improvement to the H1 10 figure of 32.3%.

At 31 March 2011 our net assets totalled £1,190,610 compared to £967,516 at 31 March 2010. The increase was the result of an issue of equity shares at the end of September 2010, more fully explained in our 2010 Annual Report, available on our web site.

We continue to invest in our hosted IP telephone platform and capitalised development costs at 31 March 2011 totalled £206,713. We will continue to invest in the platform which, we believe, gives us a more consistent margin compared to resellers who are more exposed to pricing as compared to a platform owner.

Cash at the end of the half-year was £452,040. This compares against the equivalent H1.10 figure of £327,725 and the H2 10 figure of £697,189. The negative movement in the first half of 2011 has been largely caused by working capital movements in the ordinary course of business. The H2 10 figure was helped by an issue of Ordinary Shares towards the end of that year.

The focus over the last six months was around continuing to build the business through organic activity. Nevertheless, part of our ongoing strategy is to seek to grow through acquisition. However, we are mindful of the need to preserve as much of our cash as is achievable, and therefore seek to acquire businesses for shares, rather than for cash. This is not always possible to deliver, and we have rejected a number of potential acquisitions because of the need for an all cash consideration. I continue to examine acquisition opportunities on a regular basis and remain hopeful of concluding one or more acquisitions in the second half, that will add customers, enhance customer solutions, profits and bring additional talent to our business.

Alan J BonnerChief Executive Officer27 June 2011

CONSOLIDATED INTERIM INCOME STATEMENT - UNAUDITEDFor the six months ended 31 March 2011

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION - UNAUDITEDAs at 31 March 2011

CONSOLIDATED INTERIM CASH FLOW STATEMENT - UNAUDITEDFor the six months ended 31 March 2011

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME - UNAUDITEDFor the six months ended 31 March 2011

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - UNAUDITEDFor the six months ended 31 March 2011

Note: * Relate to payments made in the period to 31 March 2011 in respect of the new share issue dated 22 September 2010.

NOTES TO THE FINANCIAL STATEMENTS

For the six months ended 31 March 2011

1. Nature of OperationsThe principal activities of Pinnacle Telecom Group plc and its subsidiaries are the provision of integrated telecommunications services including IP and cloud solutions, telecommunications calls and access, consultancy, IT support, mobile solutions, both voice and data and hosted broadband voice services to SME business customers in the UK.

2. Basis of preparationThis interim financial information has been prepared in accordance with the Company's accounting policies as disclosed in the financial statements for the year ended 30 September 2010. Pinnacle Telecom Group plc is a company incorporated in England (registered number 05259846) and trades in the UK from office locations across England and Scotland.The address of its registered office is 5 Fleet Place, London, EC4M 7RD and its principal place of business is Compthall, Brightons, Falkirk, Stirlingshire, FK2 0RW. The company is listed on the AIM market of the London Stock Exchange under ticker symbol PINN. The interim statements were approved by the Board of Directors on 27 June 2011.

3. Segmental ReportingThe segment information is prepared using accounting policies consistent with those of the Group as a whole and all segments are continuing operations. The figures shown for Glen Communications Ltd in the six months to 31 March 2011 include revenues transferred from other smaller wholly owned subsidiary companies, whose assets were hived-up into Glen Communications Ltd on 30 September 2010, as disclosed in the financial statements for the same period.In addition to the measurement of recurring and non-recurring contracted revenue streams, the group currently recognises three major segments for monitoring and reporting purposes as follows:- Mobile Services- IT- Other telecommunications services

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 31 March 2011

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

For the six months ended 31 March 2011

4. Loss per share

5. Intangible assetsIntangible assets are non-physical assets which have been obtained as part of an acquisition and which have an identifiable future economic benefit to the Group at the point of acquisition. The Group's policy regarding assessing impairment of intangible assets remains the same as disclosed in the financial statements for the year ended 30 September 2010. The Group's amortisation policy is for the:- Maintenance contracts to be amortised over 5 years- Customer lists to be amortised over a period of 5 years- Custom Voice over internet systems to be valued and amortised over a maximum of 5 years.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the six months ended 31 March 2011

6. Profit and loss reserve

7. Contingent ConsiderationAs part of the acquisition of the entire issued share capital of Solwise Telephony Limited on 13 January 2010, the acquisition agreement allowed for additional contingent consideration to be awarded, with earn out provisions based on a multiple of one and a half times the earnings before interest and taxation ("EBIT") above agreed thresholds, for the years ending30 September 2010 and 30 September 2011. The total contingent consideration cannot exceed £295,085 in total over the two periods and as at 30 September 2010, for the purposes of calculating the intangible asset under IFRS3, the Group assumed that a total contingent consideration of £80,000 would be payable over the two year period.For the period ending 30 September 2010, the audited EBIT for Solwise Telephony Ltd and its wholly owned subsidiary Sipswitch Ltd, was £39,172 and therefore no additional consideration was payable for that year. Therefore, in accordance with the provisions of IFRS3 Business combinations, the contingent consideration has been reviewed by the Board and adjusted to £60,000 with the adjustment recorded in the Operating profit / (loss) before amortisation, impairment of goodwill and exceptional costs for the 6 months to 31 March 2011.

8. Merger reserveThe Group has taken advantage of the merger relief provisions in relation to the acquisition of Solwise Telephony and its wholly owned subsidiary Sipswitch Limited. The Merger reserve represents the excess over nominal value of the fair value of consideration received for equity shares. In line with International financial reporting standard (IFRS) 3, all costs associated with the acquisition in the period have been expensed to the profit and loss account and shown as an exceptional item.

9. Related Party TransactionsAs part of the acquisition of Accent Telecom UK Limited, the Group acquired a 40% share of the equity of an associated company, Stripe21 Limited. During the 6 month period to 31 March 2011, Accent Telecom UK Limited purchased services totalling £135,452 (6 months to 31 March 2010: £166,890 and 12 months to 30 September 2010: £239,673) from Stripe21 Limited, recorded as cost of sales in the consolidated income statement for each period.In October 2010, the Group redeemed all convertible loan notes in the name of John Anderson, a Non-Executive Director, for £5,000 in cash to fully extinguish the unsecured liability relating to Mr Anderson in the financial statements. Also, in accordance with the terms of his own unsecured convertible loan notes, the company paid interest to Alan Bonner, the group CEO, of £1,250 during the 6 month period to 31 March 2011 (the figure for the 6 months to 31 March 2010: £1,250 and 12 months to 30 September 2010: £2,500) . There are no other related party transactions recorded during the half-year to 31 March 2011.

10. Contingent liabilitiesThere were no contingent liabilities at 31 March 2011, 30 September 2010 or 31 March 2010.

11. Statutory accountsThese financial statements do not constitute statutory accounts. The information is unaudited and has not been reviewed by the auditors. The statutory accounts for the year ended 30 September 2010, contained an unqualified audit report and are filed with the Registrar of Companies.