| Mon 16 Nov 2009, 11:00 | | PCN - Paracon - Reviewed Provisional Results For The Year Ended 30 September |
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PCN
PCN
PCN - Paracon - Reviewed Provisional Results For The Year Ended 30 September
2009 And Dividend Declaration
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 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009 AND
DIVIDEND DECLARATION
GROUP BALANCE SHEET
Reviewed Audited
30 September 30 September
2009 2008
R`000 R`000
ASSETS
Non-current assets 169 722 146 494
Property, plant and equipment 5 284 5 936
Intangible assets 129 699 107 927
Investment in associates 34 352 32 133
Deferred taxation 387 498
Current assets 144 070 149 974
Trade and other receivables 70 502 68 465
Cash and cash equivalents 73 568 81 509
Total assets 313 792 296 468
EQUITY AND LIABILITIES
Equity capital and reserves 238 924 215 296
Current liabilities 74 868 81 172
Trade and other payables 72 119 68 790
Taxation 2 749 12 382
Total equity and liabilities 313 792 296 468
Net asset value per share (cents) 71,2 64,9
Net tangible asset value per share (cents) 32,5 32,4
SEGMENT ANALYSIS
Reviewed Audited
year ended year ended
30 September 30 September
% 2009 2008
change R`000 R`000
Turnover
Paracon Resourcing 2 797 213 782 871
Business Solutions (3) 129 740 133 477
1 926 953 916 348
EBITDA
Paracon Resourcing (7) 84 806 90 938
Business Solutions (20) 14 708 18 454
Central costs 6 (25 439) (23 909)
(13) 74 075 85 483
CONDENSED GROUP CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30 September 30 September
2009 2008
R`000 R`000
CASH FLOWS FROM OPERATING ACTIVITIES 51 422 83 346
Cash generated from operations 79 587 100 031
Investment income 6 967 12 609
Taxation paid (35 132) (29 294)
CASH FLOWS FROM INVESTING ACTIVITIES (21 042) (18 140)
CASH FLOWS FROM FINANCING ACTIVITIES (38 321) (98 995)
Shares repurchased (1 901) (61 685)
Net dividends paid (36 420) (18 655)
Capital distribution to shareholders - (18 655)
NET DECREASE IN CASH AND CASH EQUIVALENTS (7 941) (33 789)
Cash and cash equivalents at the
beginning of year 81 509 115 298
Cash and cash equivalents at the end of year 73 568 81 509
GROUP STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary Non-
share share Treasury distributable
capital premium shares reserve
R`000 R`000 R`000 R`000
Balance at
30 September 2007 400 16 783 (24 520) 730
Issue of shares 2 2 890 - -
Capital distribution - (20 101) 1 446 -
Dividend paid - - - -
Transfer - 1 309 27 -
Share repurchase
and cancellation (52) - 22 400 -
Purchase of treasury shares - - (12 401) -
Profit for the year - - - -
Balance at
30 September 2008 350 881 (13 048) 730
Dividend paid - - - -
Purchase of treasury shares - - (1 901) -
Sale of treasury shares - - 5 500 -
Profit for the year - - - -
Balance at
30 September 2009 350 881 (9 449) 730
Total
Distributable shareholders`
reserve equity
R`000 R`000
Balance at
30 September 2007 247 046 240 439
Issue of shares - 2 892
Capital distribution - (18 655)
Dividend paid (18 655) (18 655)
Transfer (1 336) -
Share repurchase
and cancellation (71 635) (49 287)
Purchase of treasury
shares - (12 401)
Profit for the year 70 963 70 963
Balance at
30 September 2008 226 383 215 296
Dividend paid (36 420) (36 420)
Purchase of treasury
shares - (1 901)
Sale of treasury shares - 5 500
Profit for the year 56 449 56 449
Balance at
30 September 2009 246 412 238 924
CONDENSED GROUP INCOME STATEMENT
Reviewed Audited
year ended year ended
30 September 30 September
% 2009 2008
change R`000 R`000
Turnover 1 926 953 916 348
Earnings before interest,
taxation, depreciation
and amortisation ("EBITDA") (13) 74 075 85 483
EBITDA margin (%) 8,0 9,3
Depreciation 1 724 1 305
Amortisation of trademarks 395 395
Operating profit (14) 71 956 83 783
Investment income 6 967 12 609
Share of profits from associates 3 135 7 719
Profit before taxation (21) 82 058 104 111
Taxation - Normal 21 966 26 385
- Secondary Tax on Companies ("STC") 3 643 6 763
Attributable profit (20) 56 449 70 963
Earnings per ordinary share (cents)
- Headline earnings (11) 17,0 19,0
- Basic earnings (11) 17,0 19,0
Weighted average number of
ordinary shares in issue (`000) 332 977 372 601
Number of ordinary shares in issue
- net of treasury shares (`000) 335 688 331 868
COMMENTARY
Overview
The directors present the reviewed group results for the year ended 30
September 2009 ("the year").
Paracon is a leading South African ICT resource provider operating through two
strategic divisions, namely Resourcing and Business Solutions. The two
divisions offer services including ICT contracting, permanent placements,
project management consulting and training, resource solutions and ICT
professional services.
The overall impact on the group of the economic downturn has not been as severe
as may have been expected, due largely to the nature of Paracon`s revenue
profile and especially the high percentage of annuity-based income. Despite
this defensive attribute, certain areas of the business, in particular those
dependent on permanent placement sales, suffered a decline in revenues as a
result of the poor economy.
Paracon Resourcing, comprising ICT contracting and permanent recruitment
services, continued to account for the majority of group revenue and operating
profit. The division posted revenue of R797,2 million (2008: R782,9 million), a
2% increase from the previous year. The decrease in high margin permanent
placement income reduced EBITDA margins to 10,6% with EBITDA of R84,8 million
(2008: R90,9 million). Paracon`s core competence - ICT Contracting - remains
stable benefiting from ongoing client demand and provides a stronghold for the
group in the tough economic climate.
Business Solutions - Although stable this division slightly underperformed
against expectations during the period, contributing R129,7 million, or 14%, to
group turnover (2008: R133,5 million) and R14,7 million to group EBITDA (2008:
R18,5 million). Lower contributions from the Professional Services and
Networking operations accounted for the majority of the decline.
Pending legislation
Paracon continues to monitor closely and participate in the public debates
regarding labour brokers in South Africa. Through membership of the Information
Technology Association, Paracon has representation at BUSA and NEDLAC where
input from organised business on proposals in this regard is given. The exact
nature of the impending changes to legislation is still uncertain at this
stage. However, it appears that the proposals are aimed at further regulating
certain sectors of the market to protect vulnerable workers and to promote
`decent work`. Should this be the case, given Paracon`s highly skilled
consultant base, it is anticipated that Paracon would be minimally affected.
Financial results
Group turnover of R927,0 million was achieved, up from R916,3 million in the
previous year, reflecting a credible result against the backdrop of a weak
market. EBITDA declined by 13% to R74,1 million from R85,5 million as a result
of the decrease in the margins from 9,3% to 8,0%. Central costs were again
minimised as management continued to control expenditure prudently, without
compromising quality.
As a result of the share repurchase at the end of the previous year, which
reduced cash balances significantly, the dividend paid in March 2009 and the
reduced interest rate yields on cash balances during the year, investment
income decreased to R7,0 million (2008: R12,6 million).
Headline earnings of R56,4 million translated into an 11% decrease in headline
earnings per share and basic earnings per share to 17,0 cents (2008: 19,0
cents).
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.
Nihilent`s results were disappointing due to lower than expected revenue growth
for the year. The strength of the Rand against the US Dollar at 30 September
2009 was fortunate for Paracon as Nihilent`s results are sensitive to exchange
rate fluctuations. However, the foreign exchange translation losses/profits for
which Nihilent accounts have no cash impact on Paracon`s balance sheet.
The balance sheet is still solid with no long-term liabilities and cash
balances of R73,6 million.
Working capital management remains exceptional with debtors` days at 25 days
and cash generated from operations of R79,6 million, translating into an 107%
cash conversion ratio. Cash flows from financing activities mainly comprises of
the dividend of R36,4 million paid to shareholders in March 2009.
Outlook
It is difficult at this stage to determine the impact of the economic slowdown
on Paracon in the year ahead as the timing and extent of a recovery is still
uncertain. Paracon`s performance is likely to track economic indices closely,
with our firm positioning, strong client base, niche sector focus and
annuity-based revenue streams ensuring the group is able to tackle the year
ahead. Paracon is confident of its financial health and strategic direction,
and will continue to build on its tested business model.
Distribution to shareholders by way of cash dividend
The board is pleased to declare the eighth annual distribution to shareholders
of 10,0 cents (2008:
11,0 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, 5 March 2010
Trading commences ex the dividend Monday, 8 March 2010
Record date Friday, 12 March 2010
Payment date Monday, 15 March 2010
Share certificates may not be dematerialised or rematerialised between Monday,
8 March 2010 and Friday, 12 March 2010, both days inclusive.
Post-balance sheet events
No material events have occurred subsequent to 30 September 2009 which may have
an impact on the group`s reported financial position at this date.
Accounting policies
The provisional group 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 2008, and have been prepared in compliance with
International Financial Reporting Standards (IFRS), IAS 34, the Companies Act
(Act 61 of 1973) as amended, and the Listings Requirements of JSE Limited.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Chief Financial Officer
16 November 2009
Paracon Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008181/06)
Share code: PCN ISIN: ZAE000029674
("Paracon" or "the group")
Directors: G Andrews (Chairman)*^, G Bentley, M Jurgens (Chief Executive
Officer), M Levenstein (Chief Financial Officer), Z Malele*^,
T Mokgosi-Mwantembe*^, T Nzimande*, J Ord*, C Stein*^ *Non-executive,
^ Independent
Sponsor: Merchantec (Proprietary) Limited
Company secretary: R J Wasley
Registered office: 24 Peter Place, Lyme Park, Sandton, 2196
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 16/11/2009 11:00:01 Produced by the JSE SENS Department.
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