| Mon 10 Nov 2008, 11:30 | | PCN - Paracon - Reviewed Provisional Group Annual Results For The Year Ended 30 |
|
PCN
PCN
PCN - Paracon - Reviewed Provisional Group Annual Results For The Year Ended 30
September 2008
Paracon Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008181/06)
Share code: PCN ISIN: ZAE000029674
("Paracon" or "the group")
REVIEWED PROVISIONAL GROUP ANNUAL RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2008
("the year")
Highlights
Turnover up 16%
EBITDA up 17%
HEPS before first-time and once-off STC charges up 19%
Cash generated from operations up 25%
Cash distribution to shareholders up 10%
ABRIDGED GROUP INCOME STATEMENT
Reviewed Audited
year ended year ended
30 Sept 30 Sept
% 2008 2007
increase R`000 R`000
Turnover 16 916 348 792 265
Earnings before interest, 17 85 483 72 945
taxation, depreciation and
amortisation ("EBITDA")
EBITDA margin 9.3% 9.2%
Depreciation 1 305 1 112
Amortisation of trademarks 395 395
Operating profit 17 83 783 71 438
Investment income 12 609 8 286
21 96 392 79 724
Profit on sale of associate - 957
Share of profits from associates 7 719 9 533
Profit before taxation 15 104 111 90 214
Taxation - Current 26 385 23 184
Taxation - Secondary Tax on 6 763 -
Companies ("STC")
Attributable profit 6 70 963 67 030
Reconciliation of basic to
headline earnings:
Profit on sale of associate - 957
Headline earnings 7 70 963 66 073
Earnings per ordinary share
(cents)
- Headline earnings 8 19.0 17.6
- Headline earnings before STC 19 20.9 17.6
charge
- Basic earnings 6 19.0 17.9
Weighted average number of 372 601 374 121
ordinary shares in issue (`000)
Number of ordinary shares in 331 868 374 121
issue - net of treasury shares
(`000)
SEGMENT ANALYSIS
Reviewed Audited
year ended year ended
30 Sept 30 Sept
% 2008 2007
increase R`000 R`000
Turnover
Paracon Resourcing 14 782 871 689 721
Business Solutions 30 133 477 102 544
16 916 348 792 265
EBITDA
Paracon Resourcing 18 90 938 77 052
Business Solutions 17 18 454 15 737
Central costs 20 (23 909) (19 844)
17 85 483 72 945
GROUP BALANCE SHEET
Reviewed Audited
30 Sept 30 Sept
2008 2007
R`000 R`000
ASSETS
Non-current assets 146 494 126 692
Property, plant and equipment 5 936 1 842
Intangible assets 107 927 99 864
Investment in associates 32 133 24 414
Deferred taxation 498 572
Current assets 149 974 182 415
Trade and other receivables 68 465 67 117
Cash and cash equivalents 81 509 115 298
Total assets 296 468 309 107
EQUITY AND LIABILITIES
Equity capital and reserves 215 296 240 439
Current liabilities 81 172 68 668
Trade and other payables 68 790 59 064
Taxation 12 382 9 604
Total equity and liabilities 296 468 309 107
Net asset value per share (cents) 64.9 64.3
Net tangible asset value per share 32.4 37.6
(cents)
ABRIDGED GROUP CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30 Sept 30 Sept
% 2008 2007
increase R`000 R`000
CASH FLOWS FROM OPERATING
ACTIVITIES 9 64 691 59 601
Cash generated from operations 25 100 031 79 939
Investment income 12 609 8 286
Taxation paid (29 294) (28 624)
Dividend paid (18 655) -
CASH FLOWS FROM INVESTING (18 140) (29 500)
ACTIVITIES
CASH FLOWS FROM FINANCING (80 340) (29 951)
ACTIVITIES
Shares repurchased (61 685) -
Capital distribution to (18 655) (29 951)
shareholders
NET (DECREASE)/INCREASE IN (33 789) 150
CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 115 298 115 148
the beginning of year
Cash and cash equivalents at 81 509 115 298
the end of year
GROUP STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary
share share Treasury
capital premium shares
R`000 R`000 R`000
Balance at 30 September 370 42 983 (26 622)
2006
Issue of shares 4 5 879 -
Capital distribution - (32 079) 2 128
Profit for the year - - -
Balance at 30 September 374 16 783 (24 494)
2007
Issue of shares 2 2 890 -
Capital distribution - (20 101) 1 446
Dividend paid - - -
Transfer - 1 309 27
Share repurchase and (36) - 22 384
cancellation
Purchase of treasury (7) - (12 394)
shares
Profit for the year - - -
Balance at 30 September 333 881 (13 031)
2008
Non- Total
distributable Distributable shareholders`
reserve reserve equity
R`000 R`000 R`000
Balance at 30 September 730 180 016 197 477
2006
Issue of shares - - 5 883
Capital distribution - - (29 951)
Profit for the year - 67 030 67 030
Balance at 30 September 730 247 046 240 439
2007
Issue of shares - - 2 892
Capital distribution - - (18 655)
Dividend paid - (18 655) (18 655)
Transfer - (1 336) -
Share repurchase and - (71 635) (49 287)
cancellation
Purchase of treasury - - (12 401)
shares
Profit for the year - 70 963 70 963
Balance at 30 September 730 226 383 215 296
2008
Commentary
The directors of Paracon are pleased to report another solid performance for the
group. The demand for specialist skills in South Africa continued to boost
growth for the year in Paracon Resourcing and Paracon Business Solutions.
Paracon Resourcing, comprising IT Contracting and Permanent Recruitment
Services, performed commendably despite the ongoing scarcity of ICT skills in
South Africa and the general slowdown in the local economy. The division
continued to account for the majority of group revenue and operating profit with
revenue of R782.9 million increasing 14% from the previous year and EBITDA of
R90.9 million up 18% year-on-year. Paracon Resourcing`s performance reflected
the benefit of strict focus on building a leading ICT resourcing and talent
management business for sustainable growth and profitability. The performance
from Permanent Recruitment Services was not as strong as expected in the second
half of the year, however IT Contracting continued to perform steadily. The
large portion of annuity business stands the division in good stead in the face
of the current significant economic challenges.
Paracon Business Solutions, comprising Paracon Professional Services, Paracon
Networking and Paracon Solutions, posted strong results for the year with
revenue up by 30% to R133.5 million and EBITDA increasing by 17% to R18.5
million. Professional Services benefited from the provision to clients of skills
from India as well as a strong performance from project management consulting
services. The division was positively impacted by the success of its hybrid
Indian onshore-offshore solutions offerings. Further, the ongoing investment in
the black graduate programme helped boost the division`s performance. Paracon
Networking underperformed due to its existing customer base experiencing a
slowdown, however it has since been refocused and the outlook is more positive
for the year ahead.
In accordance with IAS 28, the results of Paracon`s two associates - India-based
Nihilent Technologies ("Nihilent") and Mondial IT Solutions - are equity
accounted and are therefore not included in revenue and operating profit.
Mondial IT Solutions, the SAP service provider, posted excellent results for the
year with significant growth in all areas of the business. Nihilent`s results
were extremely disappointing due to lower than expected revenue growth for the
year, compounded by the significant impact on Nihilent of the devaluation of the
Rand against major world currencies. The further devaluation of the Rand since
year-end will continue to impact on Nihilent`s earnings in the year ahead.
However, this foreign exchange translation loss has no cash impact on Paracon`s
balance sheet.
Financial commentary
Turnover increased by 16% to R916.3 million from R792.3 million in 2007. EBITDA
rose by 17% from R72.9 million to R85.5 million, with operating margins
increasing slightly from the previous year from 9.2% to 9.3%.
Paracon`s headline earnings and earnings per share for 30 September 2008 were
affected by the once-off and first-time STC charges arising from the specific
share repurchase and cancellation of shares as set out in the circular posted to
shareholders on 4 September 2008 (approved by shareholders at the general
meeting held on 26 September 2008).
In terms of the specific share repurchase, Paracon acquired 36 300 000 Paracon
ordinary shares at 135 cents per share from black empowerment shareholder, WDB
Investment Holdings (Proprietary) Limited ("the WDB specific share repurchase").
The WDB specific share repurchase cost amounted to R49.3 million with an
additional R4.9 million STC charge thereon.
The WDB specific share repurchase resulted in the additional STC charge of R4.9
million for the year in the income statement, with no reduction in the weighted
average number of shares in issue as the transaction was only effective at year-
end on 30 September 2008. The benefit of the cancelled shares will be effective
for the full 2009 financial year. Therefore in order to provide shareholders
with a more meaningful comparison, headline earnings per share excluding first-
time once-off STC charges has been disclosed.
Notwithstanding that R99.0 million was returned to shareholders during the year
(in the form of R61.7 million on share repurchases and R37.3 million in cash
distributions), the balance sheet demonstrates the stability of the group with
significant cash reserves and no long-term gearing.
Cash flows remain healthy with cash generated from operations increasing by 25%
to R100.0 million equating to a 118% cash conversion ratio. Continued focus on
accounts receivables resulted in debtors` days remaining consistent with the
previous year`s 27 days. Cash flows from financing activities of R80.3 million
is made up of the R18.7 million net capital distribution paid to shareholders in
March 2007, the payment of R49.3 million for the WDB specific share repurchase
and R12.3 million in terms of a general share repurchase.
Black Economic Empowerment
In line with the BBBEE Codes of Good Practice, Paracon remains committed to
transformation at all levels of the organisation. Paracon`s landmark BEE
transaction - the WDB specific share repurchase - continues the recognised
success of its empowerment strategy. The WDB specific share repurchase enabled
WDB to settle its debt with the original transaction funder, the Industrial
Development Corporation of South Africa Limited, and hold its remaining 60
million shares in Paracon unencumbered. WDB now has access to Paracon`s
dividends to fund its various rural programmes.
The group was ranked as South Africa`s `best empowered listed ICT company`,
according to the Financial Mail/EmpowerDex 2008 Survey. Paracon achieved 12th
position in SA`s Top 200 listed companies overall, up from the previous year`s
ranking of 17th.
The group`s success in the above survey and current `Level 4` rating affirm
Paracon`s ongoing progress of and commitment to BEE.
Appointment of director
The board of directors is pleased to announce that Mrs Thoko Mokgosi-Mwantembe
has been appointed as an independent non-executive director with effect from 17
November 2008. Thoko has held a number of senior positions in the ICT industry
and currently serves as a director on a number of boards. She recently resigned
from Hewlett-Packard South Africa (Proprietary) Limited where she has been CEO
since November 2004. Thoko`s extensive experience and knowledge will add value
to the Paracon board.
Cash dividend to shareholders
The board is pleased to declare the seventh annual distribution to shareholders
of 11.0 cents (2007: 10 cents) per share by way of a cash dividend ("the
dividend"). In compliance with Strate the following dates will be applicable to
the dividend:
Last day to trade cum the dividend Friday, 6 March 2009
Trading commences ex the dividend Monday, 9 March 2009
Record date Friday, 13 March 2009
Payment date Monday, 16 March 2009
Share certificates may not be dematerialised or rematerialised between Monday, 9
March 2009 and Friday, 13 March 2009, both days inclusive.
Outlook
It is difficult at this stage to determine the impact of the global financial
crisis and market volatility on Paracon in the year ahead. However given that
Paracon`s business is solid, scaleable and cash generative with a large portion
of annuity-based revenue, the directors are confident that Paracon is positioned
well to maintain a good performance and overcome the economic downturn.
Accounting policies
The provisional annual results for the year have been reviewed by Paracon`s
auditors, Grant Thornton, whose unqualified review report is available for
inspection at Paracon`s registered office.
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 (IFRS), IAS 34 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
10 November 2008
Directors: G Andrews (Chairman)*; G Bentley; M Jurgens (CEO);
M Levenstein (CFO); T Nzimande*; J Ord*; Z Malele*; C Stein* *Non-executive,
Independent
Sponsor: Merchantec (Proprietary) Limited
Company secretary: RJ Wasley
Registered office: 24 Peter Place, Lyme Park, Sandton, 2021
Transfer secretaries: Computershare Investor Services (Proprietary) Limited,
Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051,
Marshalltown, 2107)
Date: 10/11/2008 11:30:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
