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PCN
PCN
PCN - Paracon Holdings Limited - Unaudited interim results for the six months
ended 31 March 2008
Paracon Holdings Limited
("Paracon" or "the Group")
Registration number 1997/008181/06
Incorporated in the Republic of South Africa
ISIN: ZAE 000029674 Share code: PCN
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2008
HIGHLIGHTS
* TURNOVER UP 15%
* EBITDA UP 29%
* HEADLINE EARNINGS PER SHARE UP 24%
* HEADLINE EARNINGS PER SHARE
EXCLUDING FIRST TIME STC CHARGE UP 30%
* CASH BALANCES R108 MILLION
* Ranked no. 1 in the ICT sector in the Financial Mail/ Empowerdex 2008 Top
Empowerment Company Award
Abridged Group Income Statement
For the six months ended 31 March 2008
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2008 2007 2007
% increase R`000 R`000 R`000
Turnover 15% 438 735 382 417 792 265
Earnings before 29% 43 357 33 638 72 945
interest,
taxation,
depreciation and
amortisation
(EBITDA)
EBITDA margin 9,9% 8,8% 9,2%
Depreciation 555 470 1 112
Amortisation of 198 198 395
trademark
42 604 32 970 71 438
Investment income 6 613 3 204 8 286
Profit on sale of - - 957
associate
Share of profits 3 810 4 998 9 533
from associates
Profit before 29% 53 027 41 172 90 214
taxation
Taxation - Normal 13 333 10 589 23 184
- Secondary Tax 1 868 - -
on Companies
(STC)
Attributable 24% 37 826 30 583 67 030
profit
Earnings per
ordinary share
(cents)
- Headline 24% 10,1 8,2 17,6
earnings
- Headline 30% 10,6 8,2 17,6
earnings -
excluding STC
charge
- Basic earnings 24% 10,1 8,2 17,9
Weighted average 374 214 374 121 374 121
number of
ordinary shares
in issue (`000)
Number of 373 094 374 121 374 121
ordinary shares
in issue - net of
treasury shares
(`000)
Group Balance Sheet
As at 31 March 2008
Unaudited Unaudited Audited
31 March 31 March 30 September
2008 2007 2007
R`000 R`000 R`000
ASSETS
Non-current assets 137 127 123 159 126 692
Property, plant and 2 770 2 189 1 842
equipment
Intangible assets 105 207 99 293 99 864
Investment in associates 28 224 21 289 24 414
Deferred taxation 926 388 572
Current assets 184 307 147 735 182 415
Trade and other receivables 76 755 53 569 67 117
Cash and cash equivalents 107 552 94 166 115 298
Total assets 321 434 270 894 309 107
EQUITY AND LIABILITIES
Equity capital and reserves 239 299 203 992 240 439
Current liabilities 82 135 66 902 68 668
Amount due to vendors - 1 000 -
Trade and other payables 66 194 52 243 59 064
Taxation 15 941 13 659 9 604
Total equity and liabilities 321 434 270 894 309 107
Net asset value per share 64,1 54,5 64,3
(cents)
Net tangible asset value per 35,9 28,0 37,6
share (cents)
Segmental Analysis
For the six months ended 31 March 2008
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2008 2007 2007
% increase R`000 R`000 R`000
Turnover
Paracon 12% 373 833 334 622 689 721
Resourcing
Business 36% 64 902 47 795 102 544
Solutions
15% 438 735 382 417 792 265
EBITDA
Paracon 21% 45 064 37 131 77 052
Resourcing
Business 42% 10 310 7 258 15 737
Solutions
Central costs 12% (12 017) (10 751) (19 844)
29% 43 357 33 638 72 945
Group Statement of Changes in Equity
For the six months ended 31 March 2008
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 43 353 (26 622) 730 180 016 197 477
October 2006
Issue of 5 883 - - - 5 883
shares
Capital (32 079) 2 128 - - (29 951)
distribution
Profit for - - - 67 030 67 030
the year
Balance at 1 17 157 (24 494) 730 247 046 240 439
October 2007
Issue of 2 892 - - - 2 892
shares
Capital (18 597) - - - (18 597)
distribution
Dividends - - - (18 597) (18 597)
paid
Purchase of - (4 664) - - (4 664)
treasury
shares
Profit for - - - 37 826 37 826
the period
Balance at 1 452 (29 158) 730 266 275 239 299
31 March
2008
Abridged Group Cash Flow Statement
For the six months ended 31 March 2008
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
2008 2007 2007
R`000 R`000 R`000
Cash flows from 26 819 38 773 59 601
operating activities
Cash generated from 47 018 47 359 79 939
operations
Investment income 6 613 3 204 8 286
Taxation paid (8 215) (11 790) (28 624)
Dividend paid (18 597) - -
Cash flows from (11 305) (29 804) (29 500)
investing activities
Cash flows from (23 260) (29 951) (29 951)
financing activities
Net (decrease)/increase (7 746) (20 982) 150
in cash and cash
equivalents
Cash and cash 115 298 115 148 115 148
equivalents at the
beginning of year
Cash and cash 107 552 94 166 115 298
equivalents at the end
of period
Commentary
Overview
The directors are pleased to report strong results for the six months ended
March 2008 ("the interim period").
The Group`s two divisions, Paracon Resourcing and Business Solutions, continued
to capitalise on the ICT skills shortage in South Africa to deliver excellent
performances for the interim period.
Paracon Resourcing performed well in line with expectations, driving revenue to
R373,8 million - a contribution of 85% to total Group revenue. The division`s
value proposition has been significantly enhanced by the development of
scaleable staffing solutions, further assisting Paracon Resourcing in achieving
its results.
Paracon Business Solutions performed ahead of expectations and delivered strong
results during the interim period, contributing 15% to Group turnover amounting
to R65,0 million and R10,3 million to EBITDA. Growth in this division was
fuelled by the demand for networking services, the success of the black graduate
programme as well as the continued provision of skills from India.
As a specialised resource provider, the acute shortage of skills in the South
African market represents both opportunities and challenges to the Group. The
prevailing shortage of specialised skills within our client base enables Paracon
to take advantage of its entrenched position as the leading provider of ICT
skills in South Africa. However, notwithstanding the access to skills from
India, the supply of suitably skilled resources in the South African market
remains a challenging constraint for the Group. In addition, the increase in the
emigration of skilled resources is becoming a significant concern.
Group turnover increased by 15% to R438,7 million from R382,4 million in the
comparative interim period. EBITDA grew substantially by 29% to R43,4 million
from R33,6 million at March 2007 with a pleasing improvement on EBITDA margin on
revenue to 9,9% from 8,8%, supported by a favourable business mix during the
interim period. Looking ahead to the second six months, margins are expected to
reduce slightly from this record high following the recent conclusion of several
large contracts which are lower in margin.
Headline earnings of R37,8 million translated into a 24% increase in headline
earnings per share ("HEPS") and basic earnings per share of 10,1 cents (March
2007: 8,2 cents). For the first time the Group incurred a STC charge of R1,9
million with respect to the dividend payment in March 2008 - the Group`s cash
distributions in previous years have taken the form of capital reductions in
respect of which no STC expense is incurred. To enable more meaningful
comparison to the comparative interim period, HEPS excluding the first-time STC
charge increased by 30% to 10,6 cents per share.
Income from associates, comprising the contribution from India-based Nihilent
Technologies and Mondial IT Solutions, a SAP services provider was lower than
the previous period due to the significant impact on Nihilent Technologies of
the devaluation of the Rand. Excluding the impact of foreign exchange currency
translation differences, the associates are performing well and on budget.
The balance sheet remains solid with no long-term liabilities and cash balances
of R108 million. Cash balances were affected by the R37,2 million net
distribution paid to shareholders in March 2008.
The working capital management continues to be efficient with debtors` days at
33 days and cash generated from operations of R47,0 million, translating to a
108% cash conversion ratio. Cash flows from operations is lower than the
comparative interim period only as a result of the dividend payment made in
March 2008. The cash distribution to shareholders of 10,0 cents per share was
split into a dividend of 5,0 cents per share and a capital reduction
distribution of 5,0 cents per share. The total net distribution of R37,2 million
is therefore reflected in cash flows from operations as a dividend of R18,6
million and in cash flows from financing activities as a capital distribution of
R18,6 million. Cash flows from financing activities also includes R4,7 million
spent on a share repurchase programme in the interim period.
Black Economic Empowerment (BEE)
Paracon has again proved the success of its empowerment strategy by emerging as
South Africa`s best empowered listed ICT company, according to the recent
Financial Mail/EmpowerDex Top Empowerment Companies Survey 2008. Further,
Paracon has risen to 12th position in SA`s Top 200 listed companies overall.
Distribution to shareholders
Group 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 has been declared for the interim period.
Outlook
The directors remain optimistic about Paracon`s prospects. The positive growth
trend in earnings is expected to continue for the remainder of the financial
year.
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 2007, and have been prepared in compliance with International
Financial Reporting Standards and in accordance with International Accounting
Standards (IAS 34: Interim Financial Reporting Standards) 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
12 May 2008
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor:
Merchant Sponsors (Proprietary) Limited
Company Secretary:
R J Wasley
Registered Office:
24 Peter Place, Lyme Park, Sandton 2196
Directors:
G Andrews (Chairman)* , G Bentley, M Jurgens (CEO), M Levenstein (CFO), T
Nzimande*,J Ord*, S Sebotsa* , C Stein*
* Non-executive Independent
Date: 12/05/2008 10:21:04 Produced by the JSE SENS Department.
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