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PCN
PCN
PCN - Paracon - Unaudited Interim Results For The Period Ended 31 March 2007
Paracon Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1997/008181/06)
ISIN: ZAE000029674 Share code: PCN
("Paracon" or "the Group")
Delivering Technology | Empowering People
UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 MARCH 2007
HIGHLIGHTS
- Turnover up 26%
- EBITDA up 30%
- Headline earnings per share up 50%
- Attributable profit up 46%
- Cash generated from operations up 78%
- Cash balances R94 million
Abridged Group Income Statement
For the six months ended 31 March 2007
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
% 2007 2006 2006
increase R`000 R`000 R`000
Turnover 26 382 417 304 036 635 404
Earnings before 30 33 638 25 851 55 037
interest,
taxation,
depreciation
and
amortisation
(EBITDA)
EBITDA margin 8.8% 8.5% 8.7%
Depreciation 470 292 887
Amortisation of 198 - -
trademark
32 970 25 559 54 150
Investment 3 204 3 875 7 708
income
Share of 4 998 - 22
profits from
associates
Profit before 40 41 172 29 434 61 880
taxation
Taxation 10 589 8 478 17 782
Attributable 46 30 583 20 956 44 098
profit
Earnings per
ordinary share
(cents)
- Headline 50 8.2 5.5 11.6
earnings
- Basic 50 8.2 5.5 11.6
earnings
Weighted 374 121 383 310 379 828
average number
of ordinary
shares in issue
(`000)
Number of 374 121 383 310 370 356
ordinary shares
in issue - net
of treasury
shares (`000)
Segment Analysis
For the six months ended 31 March 2007
R`000 Turnover EBITDA
Paracon Resourcing 334 622 37 131
Business Solutions 47 795 7 258
Central costs - (10 751)
382 417 33 638
During the past six months, the Group restructured various business units to
optimise capabilities within the Group. This resulted in a merging of certain
business units to extract efficiencies. As a result, it would be meaningless to
compare the divisional segmented results (both at the turnover and EBITDA level)
to those of prior years as the reported segments are not comparable.
Group Statement of Changes in Equity
For the six months ended 31 March 2007
Ordinary
share Non- Total
capital Distri- Distri- share-
and Treasury butable butable holders`
premium shares reserves reserves equity
R`000 R`000 R`000 R`000 R`000
Balance at 1 67 194 (8 792) 730 135 918 195 050
October 2005
Treasury - (18 660) - - (18 660)
shares
purchased
Capital (23 011) - - - (23 011)
distribution
Profit for - - - 44 098 44 098
the year
Balance at 44 183 (27 452) 730 180 016 197 477
30 September
2006
Capital (29 951) - - - (29 951)
distribution
Shares 5 883 - - - 5 883
issued
Profit for - - - 30 583 30 583
the period
Balance at 20 115 (27 452) 730 210 599 203 992
31 March
2007
Group Balance Sheet
As at 31 March 2007
Unaudited Unaudited Audited
31 March 31 March 30 September
2007 2006 2006
R`000 R`000 R`000
ASSETS
Non-current assets 123 159 73 745 85 723
Property, plant and 2 189 1 770 2 357
equipment
Intangible assets 99 293 71 526 71 446
Investment in associates 21 289 - 11 655
Deferred taxation 388 449 265
Current assets 147 735 165 567 176 510
Trade and other receivables 53 569 49 583 61 362
Cash and cash equivalents 94 166 115 984 115 148
Total assets 270 894 239 312 262 233
EQUITY AND LIABILITIES
Equity capital and reserves 203 992 192 999 197 477
Current liabilities 66 902 46 313 64 756
Amount due to vendors 1 000 - 10 266
Trade and other payables 52 243 32 447 44 376
Taxation 13 659 13 866 10 114
Total equity and liabilities 270 894 239 312 262 233
Net asset value per share 54.5 50.4 53.3
(cents)
Net tangible asset value per 28.0 31.7 34.0
share (cents)
Abridged Group Cash Flow Statement
For the six months ended 31 March 2007
Unaudited Unaudited Audited
six months six year
months
ended ended ended
31 March 31 March 30 September
% 2007 2006 2006
increase R`000 R`000 R`000
Cash flows from 37 38 773 28 336 48 632
operating
activities
Cash generated from 78 47 359 26 616 55 952
operations
Investment income 3 204 3 875 7 708
Taxation paid (11 790) (2 155) (15 028)
Cash flows from (29 804) (1 744) (4 212)
investing
activities
Cash flows from (29 951) (23 007) (41 671)
financing
activities
Net (20 982) 3 585 2 749
increase/(decrease)
in cash and cash
equivalents
Cash and cash 115 148 112 399 112 399
equivalents at the
beginning of year
Cash and cash 94 166 115 984 115 148
equivalents at the
end of period
Commentary
The directors are pleased to report another excellent set of results for the six
months to March 2007 ("the interim period"). The results reflect both strong
organic growth across all divisions as well as the marked benefits to the Group
of recent acquisitions.
Turnover increased by 26% to R382,4 million from R304,0 million in the
comparative interim period. EBITDA grew substantially by 30% to R33,6 million
from R25,9 million at March 2006 with the EBITDA margin on revenue improving to
8,8% from 8,5%.
The Group`s two key divisions performed above expectations, capitalising
effectively on the ongoing buoyant demand for ICT skills across all industries.
As one of South Africa`s leading specialist-generalist ICT resource providers
for private sector and government, Paracon remains well placed to take advantage
of this demand.
Paracon Resourcing performed well during the interim period contributing 88% of
total Group turnover amounting to R334,6 million. The division contributed R37,1
million to EBITDA, which translates into a 11,1% margin. The acquisition of The
Personnel Concept, South Africa`s leader in specialised recruitment, further
boosted this division`s results.
Paracon Business Solutions also delivered strong results during the interim
period contributing 12% to turnover at R48,0 million and R7,3 million to EBITDA.
The growth in networking services positively impacted on the division`s
performance. In addition, the division benefited from the provision of services
and solutions utilising India-based associate, Nihilent Technologies
("Nihilent"), as a channel partner to some of Paracon`s key clients.
Notwithstanding the access to additional skills in India, the supply of suitably
skilled resources remains a challenging constraint for the Group in the face of
unabating demand. To alleviate this, the Group continues to develop ongoing
graduate training and mentorship programs.
Headline earnings of R31,0 million translated into a 50% increase in headline
earnings per share and basic earnings per share of 8,2 cents (March 2006: 5,5
cents). Income from associates, mainly comprising the contribution from
Nihilent, also exceeded expectations and positively impacted growth in headline
earnings. The lower tax rate is attributable to the fact that the share of
profits from associates is disclosed as an after tax amount.
The balance sheet remains healthy with no long-term liabilities and cash
balances of R94,2 million. Streamlined working capital management ensured
debtors` collections remained exceptionally efficient with debtors` days down to
a record 24 days.
The efficient working capital management resulted in cash generated from
operations increasing by 78% to R47,4 million from R26,6 million and translated
into a 143% cash conversion ratio. Cash outflows from investing activities of
R29,8 million is mainly reflective of the cash paid to the vendors of Nihilent
and The Personnel Concept. The cash outflow from financing activities consists
of the R29,9 million net cash distribution paid to shareholders in March 2007.
Black Economic Empowerment (BEE)
Paracon has again proved the success of its empowerment strategy by retaining
its position at the forefront of the information and technology (ICT) sector,
according to the recent Financial Mail/EmpowerDex Top Empowerment Companies
Survey 2007. Paracon has risen into the top 3 companies in the ICT sector in
terms of BEE ownership. Further, notwithstanding a number of strong new
contenders, Paracon has ranked 17th in SA`s Top 200 listed companies overall.
In line with the new ICT charter to be finalised this year, Paracon remains
committed to continued transformation at all levels of the organisation.
Distribution to shareholders
Paracon`s policy is to declare an annual dividend or cash distribution to
shareholders at the time of publication of the September year-end financial
results. Therefore no dividend / distribution has been declared at this time.
Outlook
In light of the Group`s exceptional performance and the current buoyant trading
conditions, the directors remain optimistic about Paracon`s prospects and are
confident of achieving continued growth. The healthy economic environment and
prevailing skills shortage will enable Paracon to take advantage of its
entrenched position as the leading provider of ICT skills in South Africa. In
addition, the solid balance sheet puts Paracon on sound footing to maintain its
growth while strong ties with its associates provide further opportunities for
Paracon.
Accounting Policies
The accounting policies applied in preparing this report are consistent with
those applied in the previous audited annual financial statements for the year
ended 30 September 2006, and have been prepared in accordance with International
Financial Reporting Standards (IFRS) and the Companies Act (Act 61 of 1973), as
amended.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Chief Financial Officer
7 May 2007
Company Secretary and Registered Office:
R J Wasley
Paracon Holdings Limited
300 Kent Avenue, Randburg, 2194
Directors:
G Andrews (Chairman)*^, G Bentley, S Daniels, M Jurgens (CEO),
M Levenstein, T Nzimande*, J Ord*, S Sebotsa*, C Stein*^
* Non-executive ^Independent
Sponsors:
Merchant Sponsors (Proprietary) Limited
Transfer Secretaries:
Computershare Investor Services 2004 (Proprietary) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 07/05/2007 09:00:02 Produced by the JSE SENS Department.
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