| Mon 10 May 2010, 9:00 | | PCN - Paracon Holdings Limited - Unaudited interim results for the six months |
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PCN
PCN
PCN - Paracon Holdings Limited - Unaudited interim results for the six months
ended 31 March 2010
Paracon Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 1997/008181/06)
Share code: PCN ISIN: ZAE000029674
("Paracon" or "the Group")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2010 ("the period")
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2010
Unaudited Unaudited Audited
31 March 31 March 30 September
2010 2009 2009
R`000 R`000 R`000
ASSETS
Non-current assets 172 539 143 410 169 722
Property, plant and equipment 5 338 5 644 5 284
Intangible assets 137 659 107 841 129 699
Investment in associates 28 975 29 638 34 352
Other investments - 287 -
Deferred taxation 567 - 387
Current assets 146 133 129 963 144 070
Trade and other receivables 85 557 71 340 70 502
Cash and cash equivalents 60 576 58 623 73 568
Total assets 318 672 273 373 313 792
EQUITY AND LIABILITIES
Equity capital and reserves 232 051 204 062 238 924
Current liabilities 86 621 69 311 74 868
Trade and other payables 80 217 61 112 72 119
Deferred taxation - 231 -
Taxation 6 404 7 968 2 749
Total equity and liabilities 318 672 273 373 313 792
Net asset value per share (cents) 69,1 61,6 71,2
Net tangible asset value per share 28,1 29,1 32,5
(cents)
CONDENSED CONSOLIDATED SEGMENTAL REPORT
for the six months ended 31 March 2010
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
% 2010 2009 2009
change R`000 R`000 R`000
Revenue
Paracon Resourcing 2 413 083 403 831 797 213
Business Solutions 18 71 499 60 642 129 740
4 484 582 464 473 926 953
EBITDA
Paracon Resourcing (8) 41 392 45 201 84 806
Business Solutions 10 8 387 7 611 14 708
Central costs (4) (11 952) (12 438) (25 439)
(6) 37 827 40 374 74 075
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 March 2010
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
% 2010 2009 2009
change R`000 R`000 R`000
CASH FLOWS FROM OPERATING 25 417 14 779 51 422
ACTIVITIES
Cash generated from (6) 37 826 40 374 74 075
operations before working
capital changes
Working capital changes (3 877) (10 553) 5 512
Cash generated from 33 949 29 821 79 587
operations
Investment income 2 727 4 518 6 967
Taxation paid (11 259) (19 560) (35 132)
CASH FLOWS FROM INVESTING (4 840) (66) (21 042)
ACTIVITIES
CASH FLOWS FROM FINANCING (33 569) (37 599) (38 321)
ACTIVITIES
Shares repurchased - (1 179) (1 901)
Net dividends paid (33 569) (36 420) (36 420)
NET DECREASE IN CASH AND (12 992) (22 886) (7 941)
CASH EQUIVALENTS
Cash and cash equivalents 73 568 81 509 81 509
at the beginning of year
Cash and cash equivalents 60 576 58 623 73 568
at the end of period
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2010
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 September
% 2010 2009 2009
change R`000 R`000 R`000
Revenue 4 484 582 464 473 926 953
Earnings before interest, (6) 37 827 40 374 74 075
taxation, depreciation and
amortisation ("EBITDA")
EBITDA margin (%) 7,8 8,7 8,0
Depreciation 995 876 1 724
Amortisation of trademarks 198 198 395
Operating profit (7) 36 634 39 300 71 956
Investment income 2 727 4 518 6 967
Share of profits/(losses) 1 667 (1 579) 3 135
from associates
Profit before taxation (3) 41 028 42 239 82 058
Taxation - Normal (11 067) (12 231) (21 966)
Taxation - Secondary Tax (3 265) (3 643) (3 643)
on Companies
Profit for the year 1 26 696 26 365 56 449
Total comprehensive income 1 26 696 26 365 56 449
attributable to owners of
the company
Earnings per ordinary
share (cents)
- Headline earnings 0 8,0 8,0 17,0
- Basic earnings 0 8,0 8,0 17,0
Weighted average number of 335 688 331 524 332 977
ordinary shares in issue
(`000)
Number of ordinary shares 335 688 331 096 335 688
in issue - net of treasury
shares (`000)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2010
Attributable to Paracon equity holders
Ordinary Ordinary
share share Treasury
capital premium shares
R`000 R`000 R`000
Balance at 30 September 2008 350 881 (13 048)
Dividend paid - - -
Purchase of treasury shares - - (1 179)
Total comprehensive income for - - -
the period
Balance at 31 March 2009 350 881 (14 227)
Purchase of treasury shares - - (722)
Sale of treasury shares - - 5 500
Total comprehensive income for - - -
the period
Balance at 30 September 2009 350 881 (9 449)
Dividend paid - - -
Total comprehensive income for - - -
the period
Balance at 31 March 2010 350 881 (9 449)
Attributable to Paracon equity holders
Non- Total
distri- Distri- share-
butable butable holders`
reserve reserve equity
R`000 R`000 R`000
Balance at 30 September 2008 730 226 383 215 296
Dividend paid - (36 420) (36 420)
Purchase of treasury shares - - (1 179)
Total comprehensive income for - 26 365 26 365
the period
Balance at 31 March 2009 730 216 328 204 062
Purchase of treasury shares - - (722)
Sale of treasury shares - - 5 500
Total comprehensive income for - 30 084 30 084
the period
Balance at 30 September 2009 730 246 412 238 924
Dividend paid - (33 569) (33 569)
Total comprehensive income for - 26 696 26 696
the period
Balance at 31 March 2010 730 239 539 232 051
COMMENTARY
Overview
In the face of tough trading conditions during the period, the board of
directors ("the Board") believes the Group maintained a reasonable performance.
A pleasing feature of these results is the improvement in trading conditions in
the ICT resource market during the period. Paracon`s business has effectively
continued to demonstrate its resilience in an economic down cycle - it remains
robust, scaleable, and highly cash-generative, supported by strong annuity
revenue.
The Group`s key division, Paracon Resourcing, is one of South Africa`s leading
specialist-generalist ICT resource providers for private sector and government.
The division`s revenue of R413,1 million, which comprises both contracting and
permanent placement income, contributed 85% of the Group`s turnover for the
period and was up from R403,8 million in the comparative six months to 31 March
2009 ("the comparative period"). The division posted EBITDA of R41,4 million (31
March 2009: R45,2 million).
Notwithstanding that challenging economic conditions continued to impact on both
demand for recruitment and the length of the sales cycle, activity in the ICT
resource market increased during the period and it is anticipated this will
continue in the second half of Paracon`s financial year.
The Business Solutions division performed ahead of expectations for the period,
with healthy results from professional services and networking. The division`s
revenue grew by 18% to R71,5 million (31 March 2009: R60,6 million) and EBITDA
by 10% to R8,4 million (31 March 2009: R7,6 million).
Financial results
Group revenue increased by 4% to R484,6 million from R464,5 million in the
comparative period and EBITDA decreased by 6% to R37,8 million from R40,4
million. Investment income reduced in line with expectations to R2,7 million
from R4,5 million in the comparative period due to lowering of interest rates.
While the contribution from Indian based associate Nihilent Technologies
("Nihilent") was pleasing for the period, the loss recorded by Nihilent in the
comparative period had related to foreign exchange translation losses. The
extent of the improvement in performance during the period is therefore
misleading. Notwithstanding this, trading conditions have improved and Nihilent
has numerous promising opportunities in the pipeline.
Headline earnings of R26,7 million translated into headline earnings per share
("HEPS") and basic earnings per share ("EPS") of 8,0 cents, respectively, on a
par with the comparative period.
Paracon`s balance sheet remained solid with no long-term liabilities and cash
balances of R60,6 million. Cash balances were reduced by the R33,6 million net
dividend paid to shareholders in March 2010.
Cash flows generated from operations of R33,9 million was 14% higher than the
R29,8 million in the comparative period. Efficient working capital management
resulted in debtors` days equating to 31 days at 31 March 2010. Cash flows from
financing activities comprises the net dividend paid of R33,6 million.
Transformation
Paracon remains committed to transformation and empowerment and continues to
address all seven pillars of empowerment under the guidance of the Group`s
Transformation Committee. Reflecting the Group`s efforts in this regard, Paracon
was ranked in 6th position among South Africa`s Best Empowered Listed ICT
Companies in the recent 2010 Financial Mail/EmpowerDex survey.
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 period. (A dividend of
10 cents per share was paid on 15 March 2010.)
Outlook
Business sentiment is markedly more positive and trading has escalated. However,
short-term prospects for the global economy remain difficult to assess. Further,
notwithstanding the general view that the South African economy has started to
recover from the recession, the Board believes the tough trading conditions will
continue to prevail in the second half of the year with clients likely to remain
cautious in spending for some time. Within this macro-economic framework the
Board finds it difficult to predict short-term trading levels. It remains
confident that the Group is well-positioned for growth when the economy fully
recovers.
Paracon continues to actively pursue both organic and acquisitive growth, to
continue delivering strong returns to shareholders. On the back of a solid
balance sheet and effective business model, the Group`s cash on hand enables
Paracon to regularly evaluate and capitalise on suitable acquisition
opportunities. Paracon`s approach is a prudent one to ensure the Group grows in
a controlled and structured manner.
Changes to the Board
As previously announced Graham Bentley resigned as an executive director with
effect from 2 March 2010. The Board takes this opportunity to thank him for his
valuable contribution and wishes him well in his future endeavours.
Accounting policies
The accounting policies applied in preparing this report are in accordance with
International Financial Reporting Standards and are consistent with those
applied in the previous audited annual financial statements for the year ended
30 September 2009, save that during the period the Group adopted the revised IAS
1 - Presentation of Financial Statements. This report has been prepared in
compliance with International Accounting Standards (IAS 34: - Interim Financial
Reporting), the Companies Act (Act 61 of 1973), as amended and the Listings
Requirements of the JSE Limited.
These interim results have not been reviewed by the Group`s auditors.
Subsequent events
The Board is not aware of any material events or circumstances that have
occurred between the end of the period and the date of this report, which may
have a material impact on the Group.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Chief Financial Officer
10 May 2010
Directors:
G Andrews (Chairman)*
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 Capital
Company secretary
RJ Wasley
Registered office:
24 Peter Place, Lyme Park, Sandton, 2196
(PO Box 526, Olivedale, 2158)
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 10/05/2010 09:00:02 Produced by the JSE SENS Department.
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