| Wed 14 Nov 2001, 0:00 | | Paracon Holdings - Audited Results |
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Paracon Holdings
Registration number 1997/008181/06
ISIN Code: ZAE 000029674
Share Code: PCN
Audited results for the year ended 30 September 2001
Turnover up 55%
* EBITDA up 8%
* Diluted headline earnings per share up 5%
* Strong operating cash flows
* Significant cash reserves
Group income statement
Unaudited
Audited pro forma Audited
12 months 12 months 9 months
ended ended ended
30 Sept. 30 Sept. 30 Sept.
Percentage 2001 2000 2000
change R'000 R'000 R'000
Turnover 55 455 737 293 590 243 475
Continued operations 73 415 241 240 263 202 360
Discontinued operations -24 40 496 53 327 41 115
Earnings before interest, tax,
depreciation and
amortisation (EBITDA) 8 42 256 39 006 29 752
Continued operations 26 40 834 32 490 24 764
Discontinued operations -78 1 422 6 516 4 988
Total EBITDA margin 9.27% 13.29% 12.22%
EBITDA margin on
continued operations 9.83% 13.52% 12.24%
Depreciation 1 876 1 119 977
40 380 37 887 28 775
Investment income 11 837 11 036 7 599
Profit before headline earning
adjustments and taxation 52 217 48 923 36 374
Headline earning adjustments 7 359 1 589 1 589
Amortisation of goodwill 6 320 1 589 1 589
Net loss and impairment
on investments 1 039 - -
Profit before taxation 44 858 47 334 34 785
Taxation 13 131 13 144 10 202
Profit after taxation 31 727 34 190 24 583
Outside shareholders' share of profits 425 792 792
Attributable profit 31 302 33 398 23 791
Cents per share
Headline earnings per ordinary
share 2% 9.5 9.3 6.7
Basic earnings per ordinary share -14% 7.7 8.9 6.3
Fully diluted headline earnings
per ordinary share 5% 9.5 9.0 6.5
Weighted average number of ordinary
shares in issue ('000) 408 561 375 710 380 361
Fully diluted weighted average number
of ordinary shares in issue ('000) 408 561 386 810 393 090
Number of ordinary shares in issue net
of treasury and cancelled
shares ('000) 362 600 364 183 364 183
Abridged group balance sheet
Audited Audited
30 Sept. 2001 30 Sept. 2000
R'000 R'000
Assets
Non-current assets 0 592 81 508
Tangible assets 6 092 5 983
Intangible assets 76 499 57 535
Investments 151 738
Deferred taxation - 9 020
Loan to share incentive trust 7 850 8 232
Current assets 130 939 150 410
Trade and other receivables 68 498 65 820
Cash and cash equivalents 62 441 84 590
Total assets 221 531 231 918
Equity and liabilities
Equity capital and reserves 163 341 163 385
Minority interests 6 719 2 883
Deferred taxation 1 977 1 870
Current liabilities 49 494 63 780
Trade and other payables 28 282 30 635
Loans - 4 625
Vendor liabilities 12 840 18 157
Taxation 8 372 10 363
Total equity and liabilities 221 531 231 918
Abridged group Cash flow statement
Audited Audited
12 months 9 months
ended ended
30 Sept. 2001 30 Sept. 2000
R'000 R'000
CASH FLOWS FROM OPERATING ACTIVITIES 5 358 23 933
Cash generated from operations 52 416 33 851
Taxation paid (17 058) (9 918)
CASH FLOWS FROM INVESTING ACTIVITIES(22 223) (57 861)
CASH FLOWS FROM FINANCING ACTIVITIES(35 284) (3 638)
Net decrease in cash and cash equivalents
(22 149) (37 566)
Cash and cash equivalents
at beginning of the year 84 590 122 156
Cash and cash equivalents at end of
the year 62 441 84 590
Abridged group statement of changes in equity
Audited Audited
12 months 9 months
ended ended
30 Sept. 2001 30 Sept. 2000
R'000 R'000
Balance at beginning of year 163 385 97 457
Net proceeds of share issues 10 996 3 287
Share election reserve - 55 530
Treasury shares purchased (15 814) -
Shares repurchased and cancelled (26 231) -
Non distributable reserves (297) (7 309)
Change in accounting policy
re deferred tax - (9 371)
Attributable profit 31 302 23 791
163 341 163 385
Paracon is a leading provider of IT services and solutions. It operates
within two business units, IT Services and Business Solutions.
OPERATIONAL REVIEW
IT Services
Paracon IT Services supplies skilled IT resources to the local and
international markets.
Our IT Services division performed well in a market where the demand for IT
skills has changed. We have managed to maintain the growth of our resource
base and continue to offer a wide variety of relevant IT skills through our
consultants.
The year has seen the continued successful consolidation of the operations
of Dimension Data SilverLine ("SilverLine") and, more recently, Bryan
Hattingh Independent Services into the division. This has further entrenched
IT Services as a leading provider of IT skills to the private sector and
opened up business opportunities in government and parastatals.
Business Solutions
Business Solutions offers tailor-made IT solutions, including application
software developments and e-commerce applications, comprehensive IT
outsourcing solutions, project management services and proprietary software
packages.
In spite of difficult market conditions, Business Solutions performed well
during the year. A number of the sales opportunities which existed in the
first half of the year were successfully concluded during the fourth
quarter. A revised sales strategy, incorporating the extended sales cycles
experienced in the IT industry, has resulted in a greater success rate.
We have expanded the business to provide additional services complementary
to our existing solutions offerings, positioning the division strongly for
the next year. Success has also been achieved with a number of cross-selling
initiatives between the different Paracon divisions, further enhancing our
service offering.
Our offshore US subsidiary, Mercury Technologies, is based near the World
Trade Centre and performance was severely hampered in September. The company
is once again functioning at pre-September capacity, although the US market
remains tough.
Financial commentary
Income Statement
As a result of the change of year-end last year from December 2000 to
September 2000, comparative pro-forma numbers have been presented for the
twelve months ended 30 September 2000.
Turnover for the year increased by 55% to R455,7 million (2000: R293,6
million) and turnover from continued operations increased by 73% to R415,2
million (2000: R240,3 million). This significant increase is mainly due to
the inclusion of SilverLine for the full year and growth from the group's
local operations.
Turnover from discontinued operations represents turnover of Professional
Consulting Network Inc (PCN) to the date of disposal on 30 June 2001.
Paracon's stake in PCN, the US west coast company, was sold as part of the
transaction concluded with Paracon's previous shareholder LogicalOptions
(Pty) Ltd. Shareholders are referred to the SENS announcement dated 26 July
2001 regarding the aforementioned transaction.
During the past year, Paracon's overall EBITDA and headline earnings per
share were impacted by PCN's results. PCN was significantly affected by the
slowdown in the US economy, with turnover decreasing by 24% to R40,5 million
(2000: R53,3 million) and EBITDA decreasing by 78% to R1,4 million (2000:
R6,5 million). With the sale of PCN, Paracon will no longer be exposed to
the vulnerable IT market in the San Francisco Bay Area (Silicon Valley) in
the 2002 financial year.
Group EBITDA increased by 8% to R42,3 million (2000: R39,0 million) whilst
EBITDA from continued operations increased by 26% to R40,8 million (2000:
R32,5 million). EBITDA margins declined to 9,3% (2000: 13,3%), mainly due to
the inclusion of SilverLine for the full year, as well as disappointing
margins achieved offshore. As previously reported, SilverLine's margins were
significantly lower than Paracon's IT Services division, and the subsequent
impact on margins was anticipated. The group is continuing its efforts to
improve the margins in the medium term.
Fully diluted headline earnings per share increased by 5% to 9,5 cents
(2000: 9,0 cents). Earnings per share decreased by 14% to 7,7 cents (2000:
8,9 cents). This comparative decrease is however not meaningful as the
current year's results include a significantly higher charge relating to the
amortisation of goodwill of R6,3 million.
Balance Sheet and Cash Flow Statement
The balance sheet remains strong with cash reserves of R62,4 million, after
utilising R39,0 million in a specific share buy-back in July 2001. The full
benefits of the 60 035 042 shares bought back will be seen in the
forthcoming year.
The deferred tax asset of R9,0 million created last year against goodwill
has been reversed as it related to PCN, which was sold.
Debtors are mainly represented by an established blue-chip customer base and
debtors' collections remain strong with group debtors' days at 47 days.
Cash generated from operations of R52,4 million remains consistently high
and reflects the strict working capital management policies adhered to by
the group. The net increase in working capital amounted to only R1,7
million. Cash flows from financing activities include outflows of R42,0
million for all share buy-backs.
The solid balance sheet and strong operating cash flows provide a platform
for organic growth and further strategic acquisitions.
PROSPECTS
Paracon is well established as a leader in the supply of IT services and
solutions in South Africa and the achievements of both business units have
further consolidated our position.
Our consultant base offers an extensive range of skills and experience and
we are strongly placed to continue our leading position in the IT skills
market. Our joint venture with Women's Development Bank to form WDB
Technologies has presented new areas of opportunity in the government
sector, which we are well positioned to pursue.
We have preferred supplier agreements with a number of our blue-chip clients
and will be focusing on further developing these relationships.
Plans by the Business Solutions division to expand to Cape Town also present
an exciting opportunity to leverage off existing relationships established
by IT Services in the region.
We will continue to consider strategic acquisitions across all areas of our
business.
Change in shareholder base
During the last quarter, LogOpt Limited, which owned 41,3% of Paracon,
delisted and unbundled its shares in Paracon to its public shareholders.
Paracon now boasts significant liquidity with a free float in excess of 40%,
underpinned by two strong shareholder groups, comprising Dimension Data and
management.
Change in board of directors
HS Verdoorn, an executive director of Paracon, has tendered his resignation
as he intends to emigrate from South Africa with his family. We wish him
every success in his new endeavours and thank him for his commitment and
service to Paracon. His resignation will be effective 30 November 2001.
RMO Wilkinson, the current Managing Director of Paracon Business Solutions,
has been appointed to the Paracon Holdings Limited Board with effect from 1
December 2001.
DIVIDENDS
Paracon's current policy is not to pay dividends. The board of directors
will, from time to time, review this policy.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Group Financial Director 14 November
2001
DIRECTORS: GS Andrews (Chairman)*, GC Bentley, C D Stein*,
JL Cumming, DC Hughson*, MA Jurgens, MNJ Levenstein,
J Coetzee*, HS Verdoorn, RJ Wasley
* Non executive
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)
300 Kent Avenue, Randburg, 2194
