| Mon 17 Nov 2003, 12:47 | | Paracon results for the 12 months ended 30 Sep 03 |
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Paracon Holdings Limited - Audited Results For The Year Ended 30 September 2003
Release Date: 17/11/2003 09:09:00 Code(s): PCN
PARACON HOLDINGS LIMITED - AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2003
PARACON HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration No. 1997/008181/06)
Share code: PCN ISIN: ZAE000029674
("Paracon" or "the group")
DELIVERING TECHNOLOGY/EMPOWERING PEOPLE
Audited results for the year ended 30 September 2003
Abridged Group income statement
Audited 12 months ended 30 2003 2002
September (R"000)
Turnover 344,927 445,430
Continued operations 344,927 387,719
Discontinued operations - offshore - 57,711
Earnings before interest, tax, 16,365 36,361
depreciation and amortisation
(EBITDA)
Continued operations 18,832 37,084
- Bad debt write-off (2,467) -
Discontinued operations - offshore - (723)
Depreciation 2,577 2,574
13,788 33,787
Investment income and foreign Note 1 7,072 9,147
exchange loss/gain
Profit before headline earnings 20,860 42,934
adjustments and taxation
Headline earnings adjustments: 7,534 30,073
Amortisation of goodwill 7,534 8,274
Loss and impairment on disposal of - 21,157
offshore subsidiary
Costs incurred on unsuccessful - 642
acquisition
Profit before taxation 13,326 12,861
Taxation Note 2 5,933 9,831
Profit after taxation 7,393 3,030
Outside shareholders" share of - 322
losses
Profit for the year 7,393 3,352
Note 1 - includes a foreign
exchange loss of R1,54 million for
2003
Note 2 - includes Secondary Tax on
Companies for R1,06 million in 2003
Headline earnings per share (cents) 4.2 9.8
Basic earnings per share (cents) 2.1 1.0
Capital distribution/dividends per 2.5 2.5
share (cents)
Weighted average number of shares 352,885 342,464
in issue (`000)
Number of ordinary shares in issue 392,187 339,844
net of treasury shares (`000)
Group statement of changes in equity
Audited 12 months ended 30 September (R"000) 2003 2002
Balance at beginning of year 151,468 163,341
Net proceeds from issue of shares 11,728 -
Preference shares redeemed - (4,499)
Treasury shares purchased (2,273) -
Sale of treasury shares 17,740 (5,489)
Shares repurchased and cancelled (2,090) (4,461)
NDR - foreign currency translation reserve (372) (776)
Dividends paid (8,495)
Attributable profit 7,393 3,352
175,099 151,468
Group balance sheet
Audited as at 30 September (R"000) 2003 2002
Assets
Non-current assets 59,783 63,937
Tangible assets 3,988 5,693
Intangible assets 55,322 55,782
Financial assets 212 2,462
Deferred taxation 261 -
Current assets 136,483 111,451
Trade and other receivables 26,755 38,828
Cash and cash equivalents 109,728 72,623
Total assets 196,266 175,388
Equity and liabilities
Equity capital and reserves 175,099 151,468
Share capital and premium 86,909 58,322
Non-distributable reserves 358 730
Distributable reserves 87,832 92,416
Deferred taxation - 97
Current liabilities 21,167 23,823
Trade and other payables 17,995 16,206
Vendor liability 1,900 -
Taxation 1,272 7,617
Total equity and liabilities 196,266 175,388
Net asset value per share (cents) 44.6 44.6
Net tangible asset value per share (cents) 30.5 28.2
Abridged group cash flow statement
Audited 12 months ended 30 September (R"000) 2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES 19,016 51,867
Cash generated from operations 33,205 52,744
Dividend paid (8,495) -
Investment income and foreign exchange 7,072 9,147
loss/gain
Taxation paid (12,766) (10,024)
CASH FLOWS FROM INVESTING ACTIVITIES (6,645) (17,673)
CASH FLOWS FROM FINANCING ACTIVITIES 25,106 (8,907)
NET INCREASE IN CASH AND CASH EQUIVALENTS 37,477 25,287
Cash and cash equivalents at the beginning 72,623 62,441
of the year
Cash in business disposed of - (15,105)
Foreign currency translation difference (372) -
CASH AND CASH EQUIVALENTS AT END OF YEAR 109,728 72,623
Segment analysis
Audited 12 months ended 30 September (R"000) 2003 2002
TURNOVER
Continued operations: 344,927 387,719
Paracon Resourcing 267,398 302,562
Business Solutions 77,529 85,157
Discontinued operations: - 57,711
offshore
TOTAL TURNOVER 344,927 445,430
EBITDA
Continued operations: 18,832 37,084
Paracon Resourcing 21,366 24,577
Business Solutions (2,534) 12,507
Discontinued operations: - (723)
offshore
TOTAL EBITDA 18,832 36,361
Calculation of headline earnings
Profit for the year 7,393 3,352
Add: Amortisation of goodwill 7,534 8,274
Add: Loss and impairment on disposal of - 21,157
offshore subsidiary
Costs incurred on unsuccessful acquisition - 642
Headline earnings 14,927 33,425
The year to September 2003 has proved to be the most challenging yet for the
Group since listing. The year was characterised by ongoing difficult trading
conditions and a decrease in corporate spending which impacted the group"s
results. On the positive side, significant progress was made by the Group in its
BEE initiatives across all pillars of the empowerment process as detailed below.
Financial overview
The overall results were disappointing, with a decrease in headline earnings per
share from 9.8 cents in 2002 to 4.2 cents in 2003. Turnover from continued
operations decreased from R387,7 million in 2002 to R344,9 million in 2003,
while EBITDA from continued operations decreased from R37,1 million to R18,8
million in 2003. Attributable profit increased from R3,4 million in 2002 to R7,4
million in 2003.
The Group"s margins and overall results were affected by the Business Solutions
division"s results as reflected in the segment analysis above.
The Group"s results were also impacted by two significant non recurring charges,
namely a bad debt of R2,5 million and a foreign exchange loss of R1,5 million on
dollar funds. In addition, the Group paid STC of R1,1 million for the first time
during the year on the maiden dividend paid out to shareholders in December
2002. The aforementioned factors contributed to the significant decrease in
headline earnings from the prior year.
In contrast, the balance sheet has strengthened considerably with cash balances
of R109,7 million and no long term liabilities. Cash balances increased both
from the issue of new shares and sale of treasury shares to WDB Investment
Holdings Limited (`WDB") and from cash generated from the operations. Cash flows
from financing activities includes inflows of R29,6 million for the
aforementioned WDB transaction. Outflows of cash include R4,4 million spent on a
general share repurchase program to acquire 9,6 million Paracon shares, of which
4,7 million were cancelled.
The Group continues to generate cash on a monthly basis and has a significant
portion of its turnover as annuity business. Operating cash flows continue to be
excellent, with cash generated from operations of R33,2 million translating into
a cash conversion ratio of 204%.
Debtors collections remain exceptional with group debtor days at 32 days. The
Group"s current ratio at 6.4 times is a reflection of the strength of the
balance sheet.
Net tangible asset value per share has increased to 30.5 cents per share at
September 2003 from 28.2 cents per share at September 2002.
Operations
The group reports within two divisions, namely Paracon Resourcing and Paracon
Business Solutions.
Paracon Resourcing - The financial year has been challenging for Paracon
Resourcing, with a drop in the number of billable contractors in the first
quarter, prompting a speedy response to changing market conditions. The number
of contractors stabilised over the last nine months, however, and our major
clients remained supportive, despite evident margin pressure.
This division accounted for 78% of the group"s turnover and continues to
generate significant annuity revenue and excellent cash flows.
Paracon Business Solutions - Early in 2003 Paracon consolidated the various
offerings of our Business Solutions division into two sub-divisions - Paracon
Solutions and Paracon Professional Services.
The division"s results for the past year were extremely disappointing. The
challenging market with longer sales cycles, a significant bad debt, margin
pressure and overruns on projects were the major contributors for the losses
incurred in the division.
During the past quarter remedial action was taken to streamline the internal
operating procedures and to reduce overhead costs. Projects have been subjected
to severe scrutiny with health-checks being performed. The division has been
rationalised and restructured to limit the inherent risks associated with
solution business.
Paracon Professional Services comprising project management and independent
testing performed very well despite the tough trading conditions.
Employment Equity and Empowerment
In response to the draft economic empowerment strategy of the Department of
Trade and Industry and in anticipation of the ICT sector charter on economic
empowerment, Paracon has introduced and implemented various initiatives in order
to enhance its economic empowerment status across all seven pillars of economic
empowerment. Significant progress has already been made since the introduction
of these initiatives in the first half of 2003.
Paracon concluded a deal with WDB, a black economic empowerment ("BEE") group
formed to promote the development of rural women, in June 2003. WDB acquired a
25.1% shareholding in Paracon. The effective BEE shareholding, including
indirect BEE shareholding, stands at 31% as at 30 September 2003.
Significant progress has also been made in all other areas of empowerment
including employment equity, transformation, affirmative procurement, SMME
investment and learnership programs.
The success of the past year"s BEE activities has resulted in Empowerdex, an
independent empowerment rating agency awarding Paracon an Empowerdex-A rating.
This accreditation confirms that Paracon is now truly a black empowered company.
Empowerment brings with it exciting new options for the Group, as doors that
were previously closed to us will now be opening, bringing fresh impetus and
exciting growth opportunities in both the public and private sectors.
Outlook
We expect the challenging market conditions to continue for some time. While
this will place some constraints on organic growth, Paracon has impressive
intellectual capital in the ICT space and remains firmly entrenched as the
strategic ICT partner of choice. Our current cash position will enable Paracon
to take advantage of any acquisition opportunities that may arise. Carefully
planned cost containment programs represent a sound basis for management to
improve margins.
Our BEE credentials, strong client relationships, blue chip client base and
excellent balance sheet ensure we remain one of South Africa"s leading ICT
resourcing and solutions companies.
Capital distribution/Dividends
As a result of the surplus cash reserves in the Group and notwithstanding that
earnings were lower than the previous year, the Board has decided to maintain
the level of the distribution paid to shareholders last year. Therefore a
capital distribution, to be paid out of share premium, of 2.5 cents per share
for the year ended 30 September 2003 has been recommended. Shareholders will be
asked to consider, and if deemed fit, approve the capital distribution at the
annual general meeting of the company to be held on 28 January 2004.
In compliance with STRATE, the following dates will be applicable to the capital
distribution:
Last day to trade Friday, 6 February 2004
Trading commences ex distribution Monday, 9 February 2004
Record date Friday, 13 February 2004
Payment date Monday, 16 February 2004
Share certificates may not be dematerialised or rematerialised between Monday, 9
February 2004 and Friday, 13 February 2004, both days inclusive.
ODD-LOT OFFER
The company is considering making an odd-lot offer to shareholders holding less
than 1 000 Paracon shares. Details of the offer shall be communicated to
shareholders in due course.
Accounting policies
The accounting policies used in preparing this report are consistent with those
used in the annual financial statements which have been prepared in accordance
with South African statements of Generally Accepted Accounting Practice on a
basis consistent with the previous year. The financial statements have been
audited by Grant Thornton whose unqualified audit report is available for
inspection at the Group"s registered address.
On behalf of the board
Mark Jurgens Mireille Levenstein
Chief Executive Officer Group Financial Director
17 November 2003
TRANSFER SECRETARIES
Computershare Limited, 70 Marshall Street, Johannesburg 2001
SPONSOR
Nedbank corporate, a division of Nedbank limited
SECRETARY AND REGISTERED OFFICE
RJ Wasley
300 Kent Avenue, Randburg, 2194
DIRECTORS
G Andrews (Chairman)*+, G Bentley, V Dlamini*, M Jurgens (CEO), M Levenstein, S
Sebotsa*, C Stein*, R Taylor*, A Wilson*, C Vorster*
*Non-executive + Independent
