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PARACON HOLDINGS LIMITED - UNAUDITED RESULTS FOR THE SIX MONTHS ENDED
31 MARCH 2003
Paracon Holdings Limited
(Registration number 1997/008181/06)
JSE Share code: PCN
ISIN: ZAE 000029674
Unaudited results for the six months ended 31 March 2003
Group income statement
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 Sept.
2003 2002 2002
R"000 R"000 R"000
Turnover 166,905 235,377 445,430
Continued operations 166,905 198,708 387,719
Discontinued operations - - 36,669 57,711
offshore operations
Earnings before interest,
tax, depreciation
and amortisation (EBITDA) 10,006 20,057 36,361
Continued operations 12,473 20,358 37,084
- Bad debt write-off (2,467) - -
Discontinued operations - - (301) (723)
offshore operations
Depreciation 1,227 1,236 2,574
8,779 18,821 33,787
Investment income and
foreign exchange
loss/gain (Note 1) 2,474 4,571 9,147
Profit before headline
earning adjustments
and taxation 11,253 23,392 42,934
Headline earning 3,665 4,317 30,073
adjustments:
Amortisation of goodwill 3,665 4,317 8,274
Loss on disposal of - - 5,638
offshore subsidiary
Impairment of goodwill of - - 15,519
offshore subsidiary
Costs incurred on - - 642
unsuccessful acquisition
Profit before taxation 7,588 19,075 12,861
Taxation (Note 2) 3,973 5,791 9,831
Profit after taxation 3,615 13,284 3,030
Outside shareholders" - 186 322
share of losses
Attributable profit 3,615 13,470 3,352
Note 1 - includes a
foreign exchange loss
amounting to R1,54
million.
Note 2 - includes
Secondary Tax on Companies
amounting to R1,06
million.
Cents per share
Headline earnings per 2.1 5.2 9.8
ordinary share
Basic earnings per 1.1 3.9 1.0
ordinary share
Weighted average number of
ordinary shares
in issue ("000) 339,065 344,266 342,464
Number of ordinary shares
in issue net of
treasury and cancelled 335,094 340,514 339,844
shares ("000)
abridged Group cash flow statement
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 Sept.
2003 2002 2002
R"000 R"000 R"000
Cash flows from operating
activities 7,463 32,884 51,867
Cash generated from operations 19,394 34,429 52,744
Dividend paid (8,495) - -
Investment income and foreign 2,474 4,571 9,147
exchange loss/gain
Taxation paid (5,910) (6,116) (10,024)
Cash flows from investing
activities (332) (9,878) (17,673)
Cash flows from financing
activities (2,391) (5,210) (8,907)
Net increase in cash and cash
equivalents 4,740 17,796 25,287
Cash and cash equivalents at the
beginning of the year 72,623 62,441 62,441
Less : Cash in business disposed - - (15,105)
of
Cash and cash equivalents at the
end of period 77,363 80,237 72,623
group balance sheet
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 Sept.
2003 2002 2002
R"000 R"000 R"000
Assets
Non-current assets 62,133 88,200 63,937
Tangible assets 5,096 7,117 5,693
Intangible assets 55,014 77,201 55,782
Loan to WDB Technologies 2,023 71 2,462
Loan to Share Incentive Trust - 3,811 -
Current assets 105,057 133,082 111,451
Trade and other receivables 27,694 52,845 38,828
Cash and cash equivalents 77,363 80,237 72,623
Total assets 167,190 221,282 175,388
Equity and liabilities
Equity capital and reserves 144,197 176,380 151,468
Share capital and premium 56,239 63,443 58,322
Non-distributable reserves 422 4,154 730
Distributable reserves 87,536 102,612 92,416
Shareholders" interest 144,197 170,209 151,468
Minority interests - 6,171 -
Deferred taxation 60 2,467 97
Current liabilities 22,933 42,435 23,823
Trade and other payables 14,470 23,622 16,206
Vendor liabilities 2,650 11,200 -
Taxation 5,813 7,613 7,617
Total equity and liabilities 167,190 221,282 175,388
Net asset value per share (cents) 43.0 50.0 44.6
Net tangible asset value per share 26.6 27.3 28.2
(cents)
group statement of changes in equity
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 March 31 March 30 Sept.
2003 2002 2002
R"000 R"000 R"000
Balance at beginning of year 151,468 163,341 163,341
Dividend paid (8,495) - -
Preference shares redeemed - - (4,499)
Treasury shares purchased - (5,465) (5,489)
Shares repurchased and (2,083) (3,783) (4,461)
cancelled
NDR - foreign currency (308) 2,646 (776)
translation reserve
Attributable profit 3,615 13,470 3,352
144,197 170,209 151,468
segmental analysis
Unaudited Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
ended ended ended ended
31 March 30 Sept. 31 March 30 Sept.
2003 2002 2002 2002
R"000 R"000 R"000 R"000
Turnover
Continued operations: 166,905 189,011 198,708 387,719
Paracon Resourcing 125,762 143,293 159,269 302,562
Business Solutions 41,143 45,718 39,439 85,157
Discontinued
operations
- offshore - 21,042 36,669 57,711
166,905 210,053 235,377 445,430
EBITDA
Continued operations: 12,473 16,726 20,358 37,084
Paracon Resourcing 10,351 10,916 13,661 24,577
Business Solutions 2,122 5,810 6,697 12,507
Discontinued
operations
- offshore - (422) (301) (723)
12,473 16,304 20,057 36,361
Strategic black empowerment shareholder
Shareholders are referred to the announcement which has been
simultaneously released whereby WDB Investment Holdings (Pty) Limited
("WDB") is acquiring a strategic 25% equity stake in Paracon by
purchasing and subscribing for shares in Paracon at an average price
of 48.7 cents.
Commentary on results
Market conditions remained extremely challenging during the past
period, with clients reducing IT spend and postponing scheduled
projects. These factors have affected the group"s overall results.
A profit warning was issued on 12 February 2003 advising shareholders
of particular circumstances that had arisen which have impacted the
interim results significantly and contribute to the decrease in
earnings from the prior period.
Two non-recurring expenses or charges affected the results
significantly, namely:
An amount of R2,5 million has been provided against a significant
debtor, as the debtor does not have sufficient funds to meet its
obligations.
Foreign exchange losses were incurred on dollar funds amounting to
R1,5 million. This amount has been set off against the investment
income in the income statement.
In addition, the tax charge includes an STC charge of R1,1 million
which was paid on the dividend declared. As Paracon paid its first
dividend during this period, no comparative tax charge was incurred.
Paracon"s balance sheet continues to be extremely healthy with
significant cash balances and no long-term liabilities. After paying
out the maiden dividend to shareholders and the resultant STC, of
R9,6 million in December and spending R2,1 million on a general share
repurchase, Paracon still had R77,4 million in cash. Cash balances
will exceed R100 million as a result of the additional R29,8 million
to be received from the sale and issue of shares to WDB in terms of
the BEE transaction announced today.
Management continue to focus on working capital resulting in an
outstanding improvement in the debtors" collection period from 38
days at September 2002 to an excellent 25 days at March 2003. This
low number is not sustainable.
Operating cash flows continue to be excellent with cash generated
from operations of R19,4 million, translating to a cash conversion
ratio of 172%.
Paracon Resourcing: The ongoing market slump continued to force many
of the division"s clients to curtail their IT spend and continue with
their retrenchment plans. This has obviously hampered the division"s
growth in the past period. Notwithstanding this, the last quarter saw
increased client requirements and the division remains stable.
Paracon Resourcing continues to be a market leader and to generate
large annuity based revenue and profit streams.
During the past period Paracon has renamed its IT Services division
to Paracon Resourcing in line with global trends. Management believes
that opportunities for growth exist in certain other markets, and
have therefore rebranded in anticipation of possible new avenues.
Business Solutions: This division has been severely affected by the
poor trading conditions and by customers delaying project start
dates. In addition, overruns on two large projects in the Business
Solutions division have significantly impacted that division"s
results. One of these projects has been concluded and the other
project is due for completion by the end of June.
The division has used this time to put effort into streamlining the
division and ensuring that we are employing best practice quality
assurance. The sales team has been expanded in order to strengthen
pipelines and gain market share.
DIVIDENDS
The company"s policy is to declare an annual dividend to shareholders
at the time of the September year-end results. Therefore no dividend
has been declared at this interim period.
Prospects
As markets remain tough, we have adopted a conservative view for the
remainder of the year. Our excess cash gives us stability and enables
us to assess various potential acquisitions that may arise from the
market consolidation.
Opportunities for growth exist in certain other markets which are
also currently being explored.
Offshore development is in progress and offshore resourcing
opportunities exist which have the ability to increase substantially.
Our relationship with our shareholder Dimension Data furnishes us
with the excellent opportunity to support their resource requirements
worldwide.
It is anticipated that our new BEE shareholder together with our BEE
initiatives will enable us to increase our competitiveness.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Group Financial Director
2 June 2003
The interim results for the period ended 31 March 2003 are consistent
with the group"s accounting policies and are in compliance with South
African Statements of Generally Accepted Accounting Practice.
TRANSFER SECRETARIES:
Computershare Investor Services Limited,
70 Marshall Street,
Johannesburg 2001
SECRETARY AND REGISTERED OFFICE:
RJ Wasley, Paracon
300 Kent Avenue, Randburg, 2194
directors:
G Andrews (Chairman)* G Bentley, J Cumming, M Jurgens (CEO),
M Levenstein, C Stein*, R Taylor*, R J Wasley, R Wilkinson,
A Wilson*, C Vorster*
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