| Mon 15 Nov 2010, 10:13 | | PCN - Paracon Holdings Limited - Reviewed results for the year ended 30 |
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PCN
PCN
PCN - Paracon Holdings Limited - Reviewed results for the year ended 30
September 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")
REVIEWED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2010
Highlights
Revenue up 10% to R1,02 billion
HEPS up 1%
Operating cash flow up 4%
Cash in hand R86,7 million
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
as at 30 September 2010
Reviewed Audited
30 September 30 September
2010 2009
R`000 R`000
ASSETS
Non-current assets 178 185 169 722
Property, plant and equipment 5 946 5 284
Intangible assets 137 605 129 699
Investment in associates 33 775 34 352
Deferred taxation 859 387
Current assets 165 349 144 070
Trade and other receivables 78 614 70 502
Cash and cash equivalents 86 735 73 568
Total assets 343 534 313 792
EQUITY AND LIABILITIES
Equity capital and reserves 263 467 238 924
Current liabilities 80 067 74 868
Trade and other payables 79 271 72 119
Taxation 796 2 749
Total equity and liabilities 343 534 313 792
Net asset value per share (cents) 78,5 71,2
Net tangible asset value per share (cents) 37,5 32,5
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2010
Reviewed Audited
year ended year ended
30 September 30 September
Change 2010 2009
% R`000 R`000
Cash flows from operating activities 4 53 283 51 422
Cash generated from operations before
working capital changes 71 918 74 075
Working capital changes 2 403 5 512
Cash generated from operations 74 321 79 587
Investment income 4 609 6 967
Taxation paid (25 647) (35 132)
Cash flows from investing activities (6 496) (21 042)
Cash flows from financing activities (33 620) (38 321)
Shares repurchased - (1 901)
Net dividends paid (33 620) (36 420)
Net increase/(decrease) in cash and cash equivalents 13 167 (7 941)
Cash and cash equivalents at the beginning of year 73 568 81 509
Cash and cash equivalents at the end of year 86 735 73 568
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2010
Reviewed Audited
year ended year ended
30 September 30 September
Change 2010 2009
% R`000 R`000
Revenue 10 1 021 219 926 953
Earnings before interest, taxation,
depreciation
and amortisation ("EBITDA") (3) 71 918 74 075
EBITDA margin (%) 7,0 8,0
Depreciation 2 086 1 724
Amortisation of trademarks 395 395
Operating profit (4) 69 437 71 956
Investment income 4 609 6 967
Share of profits from associates 6 466 3 135
Profit before taxation (2) 80 512 82 058
Taxation - Normal (19 407) (21 966)
- Secondary Tax on Companies (3 275) (3 643)
Total comprehensive income for the year 2 57 830 56 449
Total comprehensive income
attributable to:
- Equity holders of the Company 57 730 56 449
- Non-controlling interest 100 -
2 57 830 56 449
Earnings per ordinary share (cents)
- Basic earnings 1 17,2 17,0
- Headline earnings per share 1 17,2 17,0
Weighted average number of ordinary
shares in issue (`000) 335 688 332 977
Number of ordinary shares in issue -
net of treasury shares (`000) 335 688 335 688
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2010
Ordinary Ordinary Non-
share share Treasury distributable
capital premium shares reserve
R`000 R`000 R`000 R`000
Balance at 1 October 2009 350 881 (13 048) 730
Dividend paid - - - -
Purchase of treasury shares - - (1 901) -
Issue of treasury shares - - 5 500 -
Total comprehensive income
for the year - - - -
Balance at 30 September 2009 350 881 (9 449) 730
Acquisition of non-controlling
interest - - - -
Dividend paid - - - -
Total comprehensive income for
the year - - - -
Balance at 30 September 2010 350 881 (9 449) 730
Attributable
to equity
holders Non- Total
Distributable of the controlling shareholders`
reserve parent interest equity
R`000 R`000 R`000 R`000
Balance at 1
October 2009 226 383 215 296 - 215 296
Dividend paid (36 420) (36 420) - (36 420)
Purchase of treasury
shares - (1 901) - (1 901)
Issue of treasury
shares - 5 500 - 5 500
Total comprehensive
income for the year 56 449 56 449 - 56 449
Balance at 30
September 2009 246 412 238 924 - 238 924
Acquisition of
non-controlling
interest - - 333 333
Dividend paid (33 569) (33 569) (51) (33 620)
Total comprehensive
income for the year 57 730 57 730 100 57 830
Balance at 30
September 2010 270 573 263 085 382 263 467
CONDENSED CONSOLIDATED SEGMENTAL REPORT
for the year ended 30 September 2010
Reviewed Audited
year ended year ended
30 September 30 September
Change 2010 2009
% R`000 R`000
Revenue
Paracon Resourcing 8 864 026 797 213
Business Solutions 21 157 193 129 740
10 1 021 219 926 953
EBITDA
Paracon Resourcing (4) 81 070 84 806
Business Solutions 11 16 277 14 708
Central costs (25 429) (25 439)
(3) 71 918 74 075
Trade and other receivables
Paracon Resourcing 62 922 57 849
Business Solutions 15 692 12 653
78 614 70 502
COMMENTARY
The directors of Paracon ("the board") present the reviewed results for the year
ended 30 September 2010 ("the year"). As anticipated market conditions remained
tough during the year with the global recession leading to substantial cost
cutting amongst clients, especially of labour-related expenses. Nonetheless
Paracon weathered the challenging economic environment to perform commendably,
effectively sustaining our top and bottom line year-on-year.
Our well-balanced business model, scale and brand power continued to prove
strong competitive advantages.
Overview
The Paracon Resourcing division is the leading supplier of ICT resources in
South Africa and provides skilled ICT candidates for both consulting and
permanent positions. Consulting services were in good demand during the year and
continued to play a stabilising role in the difficult economic climate.
Permanent placements, especially of financial personnel, suffered the impact of
hiring freezes and general cost cutting at clients. The Vendor-On-Premise model
continued to provide a key revenue boost for the division, with proposals
implemented during the year working extremely well and entrenching Paracon`s
position as a preferred supplier to blue-chip clients.
Revenue generated from the Paracon Resourcing division accounted for the
majority of the group`s revenue (85%) and increased by 8% to R864,0 million
(2009: R797,2 million) with EBITDA of R81,1 million down slightly from the
previous year (2009: R84,8 million). Notwithstanding the impact of the global
economic slowdown, the division is well placed to capitalise on growth
opportunities in the year ahead.
Accounting for the balance of group revenue and profit, Business Solutions grew
revenue by 21% to R157,2 million (2009: R129,7 million) and EBITDA by 11% to
R16,3 million (2009: R14,7 million). Professional Services, which provides
project management and capability assessments, enjoyed an increase in new
contracts secured while Networking, which specialises in IT infrastructure
installation, performed steadily. The project management training academy
underperformed as a result of many clients trimming their training budgets
during the year, although an escalation in demand in the final quarter has
generated a stronger pipeline for the year ahead. Paracon successfully leveraged
its SAP expertise through wholly-owned subsidiary, Mondial IT Solutions
(Proprietary) Limited, to capitalise on this high growth market.
Financial results
Group revenue increased by 10% to R1,02 billion (2009: R927 million). EBITDA was
slightly lower by 3% at R71,9 million (2009: R74,1 million).
Margins declined to an extent when compared to 2009 levels, squeezed by the
dearth of higher margin permanent placements and general economic pressure. This
is expected to continue for some time.
Group associate Nihilent Technologies, headquartered in India, recorded robust
growth year-on-year in all areas of competence, with the offshore support
offering in particular performing very well.
Higher headline earnings of R57,7 million (2009: R56,4 million) translated into
headline earnings per share ("HEPS") of 17,2 cents (2009: 17 cents), a 1%
increase.
The group`s statement of financial position remains sturdy with cash on hand of
R86,7 million and no long-term liabilities.
Cash flows from operating activities totalled R53,3 million, a 4% increase from
the previous year (2009: R51,4 million). Continued stringent working capital
management resulted in debtors` days equating to 28 days at year-end (2009: 25
days). Cash outflows from financing activities amounted to R33,6 million,
representing the dividend paid in March 2010.
Transformation
Paracon achieved significant BEE milestones during the year, reflecting our
commitment to transformation as an integral component of long-term
sustainability. Black direct shareholding increased to 51% making the group
majority black-owned. Paracon has also improved to a Level 3 (AA) rating. Even
prior to this higher rating, Paracon was ranked 6th during the year in the ICT
sector`s Best Empowered Companies by Financial Mail/EmpowerDex. The group`s BEE
platform remains a strong competitive advantage.
Distribution to shareholders
In line with policy and in light of the group`s strong financial position the
board has declared a final dividend of 10 cents per share for the year ended 30
September 2010 (2009: 10 cents per share).
2011
Last day to trade "cum" dividend Friday, 4 March
Shares trade "ex" dividend Monday, 7 March
Record date Friday, 11 March
Payment date Monday, 14 March
Share certificates may not be dematerialised or rematerialised between Monday, 7
March 2011 and Friday, 11 March 2011, both dates inclusive.
Outlook
Prospects remain difficult to assess conclusively with current trends
inconsistent in the wake of the initial, tentative emergence from the recession.
A significant recovery is not expected in the short- to medium-term. Growth in
the job market will be slow in the year ahead. To the group`s advantage this
provides the opportunity to capitalise on our flexible consulting solutions and
assist companies during the ongoing economic downturn.
While consulting resources remain the key contributor to Paracon`s performance,
with a sustainable revenue stream, strategically we intend to focus on the
project management solution and SAP spaces to grow, both organically and by
acquisition.
With the group`s solid financial position and mix of consulting and permanent
resources, we are well-positioned to take advantage of any future uptick in the
economy. In addition our size and leading position in resourcing in South Africa
should enable Paracon to remain a preferred supplier.
Pending legislation
The framework of labour broking regulation in South Africa remains uncertain.
Despite undertakings for effective resolution by the Department of Labour more
than a year ago and negotiations at industry level (through NEDLAC) during the
year, updated legislation drafts have failed to materialise. It was suggested by
the Parliamentary Portfolio Committee during the year that labour broking would
not be banned outright, but rather more heavily regulated. We maintain that our
business should be less affected as a specialist in the placement of high level
candidates in professional sectors. We will closely monitor developments in this
regard.
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 2009, and have been
prepared in compliance with International Financial Reporting Standards (IFRS),
IAS 34, the Companies Act (Act 61 of 1973), as amended, the AC 500 Standards and
the Listings Requirements of the JSE Limited ("JSE"). The group has early
adopted IFRS 9: Financial instruments which changes the financial asset
categories classification in terms of IAS 39.
Post-balance sheet events
Post year-end the group has acquired a 50,2% equity stake in all about project
management (Proprietary) Limited ("AAPM"). AAPM is a fast-growing project
management solutions company which specialises in project office and related
services, including consulting, tools, resourcing and full blown programme and
project management. The company complements Paracon`s existing operations in the
field of project management and gives impetus to the group`s strategy to grow
market share in this arena. Existing management shareholders have signed three
year service agreements with the group and retained the 49,8% shareholding
balance in AAPM.
As detailed in a circular to shareholders dated 20 September 2010, Paracon
repurchased 5 165 192 ordinary shares in the group from Rasputin 4th Investments
(Proprietary) Limited, whose sole director and shareholder is a former director,
Mr Graham Bentley, who resigned from the board with effect from 2 March 2010,
for 145 cents per share. Although the circular was posted to shareholders on 20
September 2010, the share repurchase and cash consideration of R7 489 528 were
only effected after year-end.
Save for the above, no material events have occurred subsequent to 30 September
2010 which may have an impact on the group`s reported financial position at this
date.
Share incentive scheme
The company intends introducing a share incentive scheme, the Paracon
Forfeitable Share Plan, in line with FTSE 100 and FTSE 250 company initiatives
in the United Kingdom and plans announced by several large JSE listed companies.
We aim to reward directors and select key employees, whose average years of
service with Paracon exceeds a decade, for their valuable contribution. This is
intended to align their interests with all other stakeholders` and advance
Paracon`s growth. The initiative is also critical to rewarding director and
employee dedication so as to ensure we retain our key people for long-term
sustainability. A circular detailing the proposed scheme will be distributed to
shareholders during this week. The general meeting in this regard will be held
on or about 30 November 2010.
Directorate
Save for the resignation of Mr Bentley on 2 March 2010 as mentioned above, there
have been no other changes to the board during the year under review.
Appreciation and changes to the board
We thank our employees and consultants for their hard work in continuing to
deliver to our standards of excellence during hard times. We also extend our
appreciation to our clients, business associates, and shareholders for their
ongoing support and loyalty.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Chief Financial Officer
15 November 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: 15/11/2010 10:13:26 Produced by the JSE SENS Department.
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