| Thu 17 May 2001, 0:00 | | Paracon - Interim Results |
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INTERIM RESULTS
PARACON HOLDINGS
Registration No. 1997/008181/06
INTERIM RESULTS
For the six months ended 31 March 2001
INTRODUCTION
Paracon, a leading provider of IT services and solutions, with operations in
the local and international markets, is pleased to announce results for the
six months ended 31 March 2001.
FINANCIAL COMMENTARY
As a result of the change in year-end last year from December 2000 to
September 2000, comparative pro forma numbers have been presented for the
six months ended 31 March 2000.
Income Statement
Turnover for the period under review increased by 99% to R225,2 million
(R113,2 million:
March 2000). This significant increase reflects the inclusion of Silverline
and organic growth from the group's local operations. In addition, offshore
operations in the USA contributed 26% of turnover.
EBITDA increased by 36% to R21,7 million (R16,0 million: March 2000) and
fully diluted headline earnings per share increased by 20% to 4,8 cents (4,0
cents: March 2000). Earnings per share decreased by 5% to 3,9 cents (4,1
cents: March 2000) however this comparative decrease is not meaningful as
the pro forma results to March 2000 do not include a charge for amortisation
of goodwill. The current period's results include a R3 million charge
relating to amortisation of goodwill.
EBITDA margins declined to 9,6% (14,1%: March 2000) mainly due to the
inclusion of Silverline in the current period, as well as disappointing
margins achieved offshore. As previously reported, Silverline's margins were
significantly lower than Paracon's IT Services division, and the decline in
margins was anticipated. We are confident that margins will improve in the
medium term as we focus on improving the margins of Silverline and our
international operations.
Balance Sheet and Cash Flow Statement
The balance sheet is strong with cash reserves of R113,8 million, which
provides a platform for organic growth and further strategic acquisitions.
Goodwill has been amortised over a ten-year period and mainly represents
goodwill on Silverline.
Debtors' days remain excellent at 45 days and are mainly represented by an
established blue-chip customer base.
Excellent working capital management has resulted in cash generated from
operations amounting to R27,1 million with a net increase in working capital
of R1,6 million.
Paracon's continued healthy cash flow and annuity income underpins a solid
business model.
OPERATIONAL OVERVIEW
The group operates locally and internationally within two business units,
Paracon IT Services and Paracon Business Solutions.
Paracon IT Services supplies skilled IT resources to the local and
international markets. During the period under review, the operations of
Silverline and Paracon's IT Services business unit have been successfully
merged. This has further entrenched Paracon's IT Services division as the
leading provider of skills in the IT sector.
The South African operations have performed well during tough market
conditions. Although the US operations are well-established and solid
businesses with great potential, they are currently performing below
expectations mainly due to a slowing US economy. However we are confident
that the strong fundamentals of these businesses will allow us to optimise
on opportunities that arise as the current market conditions improve.
Paracon Business Solutions offers tailor-made IT solutions including
comprehensive IT outsourcing solutions, which range from application
software engineering in the e-commerce arena to total IT outsourcing.
Paracon Business Solutions also offers a world class CRM solution, project
management solutions and proprietary software. Paracon continues to invest
in research and development of our software to remain at the leading edge.
Mercury Technologies, based in New York, provides complete Internet-based
solutions including application developments focusing on Java, database
design, implementation and world-class web design.
The period under review has been a difficult period for Paracon Business
Solutions due to the fall in spending in both South Africa and the US, which
was further exacerbated by an extended sales cycle. However, we believe that
the business unit has performed well despite these tough market conditions.
PROSPECTS
Paracon has entrenched itself as one of the leaders in IT services and
solutions in South Africa with an expanding international presence. We are
particularly well placed for the future due to the prominent market position
of our IT Solutions division.
Our status as the preferred supplier of resource to the Dimension Data group
both locally and internationally provides opportunities in the growth of our
IT Services division. The successful integration of Silverline into our IT
Services division is expected to enable the group to increase margins in the
medium term.
Although the upcoming six months is expected to be a difficult period, we
are confident of our continued growth due to our significant skills base and
strong cash generation. We are well positioned to take advantage of
strategic future acquisitions and any improvement in the market.
LOGOPT'S SHAREHOLDING
During the period under review Paracon's 41,3% shareholder, LogicalOptions
(renamed LogOpt), sold all of its assets and liabilities excluding its stake
in Paracon. Paracon is currently waiting for the Board of LogOpt to action
the unbundling of their stake in Paracon. Shareholders will be informed of
developments. Our shareholder portfolio remains well-balanced with Dimension
Data holding a 25% stake.
STRATE
Further to the circular posted to shareholders dated 12 March 2001, Paracon
converted to the STRATE system on 14 May 2001 as part of the JSE's
initiative to progress to an electronic settlement environment for share
transactions.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Group Financial Director 18 May 2001
GROUP INCOME STATEMENT
Unaudited
Unaudited Pro forma Audited
6 months 6 months 9 months
ended ended ended
31 March 31 March 30 Sept
% 2001 2000 2000
Change R'000 R'000 R'000
Turnover 99 225 198 113 204 243 475
Earnings before
interest,tax,
depreciation and
amortisation (EBITDA) 36 21 720 15 970 29 752
Operating margin 9,6% 14,1% 12,2%
Depreciation 950 399 977
Amortisation of goodwill 2 960 - 1 589
Provision against investment 792 - -
Profit after depreciation
and amortisation 17 018 15 571 27 186
Investment income 18 6 977 5 891 7 599
Profit before taxation 23 995 21 462 34 785
Taxation 7 262 6 406 10 202
Profit after taxation 16 733 15 056 24 583
Outside shareholders'
share of profits 407 184 792
Attributable profit 16 326 14 872 23 791
Adjustment for headline earnings purposes:
Amortisation of goodwill 2 960 - 1 589
Provision against investment 792 - -
Cents per share:
Headline earnings per ordinary
share 16 4,8 4,1 6,7
Earnings per ordinary
share - 5 3,9 4,1 6,3
Fully diluted headline
earnings per ordinary
share 20 4,8 4,0 6,5
Weighted average number
of ordinary shares in
issue ('000) 422 656 364 183 380 361
Fully diluted weighted
average number of ordinary
shares in issue ('000) 422 656 376 183 393 090
Number of ordinary shares
in issue ('000) 427 525 364 183 364 183
ABRIDGED GROUP BALANCE SHEET
Unaudited Audited
31 March 2001 30 Sept. 2000
R'000 R'000
Assets
Non-current assets 77 422 81 508
Tangible assets 7 528 5 983
Intangible assets goodwill 54 651 57 535
Investments 29 738
Deferred taxation 8 786 9 020
Loan to share incentive trust 6 428 8 232
Current assets 180 083 150 410
Trade and other receivables 66 322 65 820
Cash and cash equivalents 113 761 84 590
Total assets 257 505 231 918
Equity and liabilities
Equity capital and reserves 194 221 166 268
Share capital and premium 114 855 36 240
Share election reserve - 67 500
Non-distributable reserves 2 294 1 803
Distributable reserves 74 166 57 842
Shareholders' interest 191 315 163 385
Minority interests 2 906 2 883
Deferred taxation 1 586 1 870
Current liabilities 61 698 63 780
Trade and other payables 29 105 30 636
Loans 6 890 4 625
Vendor liabilities 13 943 18 157
Taxation 11 760 10 362
Total equity and liabilities 257 505 231 918
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Audited
6 months 9 months
ended ended
31 March 2001 30 Sept. 2000
R'000 R'000
Cash flows from operating activities 21 202 23 933
Profit before taxation 23 995 34 785
Adjustment for non cash items 4 702 2 566
Cash generated from operations before
working capital changes 28 697 37 351
Increase in working capital (1 580) (3 500)
Cash generated from operations 27 117 33 851
Taxation paid (5 915) (9 918)
Cash flows from investing activities (6 706) (57 861)
Purchase of tangible assets (1 918) (2 899)
Payment of vendor liabilities (4 394) (33 866)
Purchase of businesses and investments (394) (21 096)
Cash flows from financing activities 14 675 (3 638)
Increase (decrease) in loans 1 757 (2 183)
Net proceeds from issue of ordinary
shares 14 475 -
Decrease (increase) in loan to share
incentive trust 1 803 (4 741)
(Cancellation) issue of preference
shares (3 360) 3 286
Net increase (decrease) in cash and
cash equivalents 29 171 (37 566)
Cash and cash equivalents at beginning
of period 84 590 122 156
Cash and cash equivalents at end of
period 113 761 84 590
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
6 months 9 months
ended ended
31 March 2001 30 Sept. 2000
R'000 R'000
Balance at beginning of period 163 385 97 457
Net proceeds of share issues 11 113 3 287
Share election reserve - 55 530
Non-distributable reserves 491 (7 309)
Change in accounting policy re
deferred tax - (9 371)
Attributable profit 16 326 23 791
191 315 163 385
TRANSFER SECRETARIES
Mercantile Registrars Limited
Mercantile Lisbon House, 142 West Street, Sandown, 2195
SECRETARY AND REGISTERED OFFICE
RJ Wasley, Paracon Holdings Limited (1997/008181/06)
Paracon House, Cnr. Olive & Lima Streets, Olivedale, 2158
DIRECTORS
* Non-executive directors
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