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PCN
PCN
Paracon Holdings - Unaudited Interim Results For The Six Months Ended
31 March 2006
Paracon Holdings
Registration No. 1997/008181/06
ISIN: ZAE000029674 Share code: PCN
("Paracon" or "the Group")
Delivering Technology - Empowering People
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2006
Highlights
- Turnover up by 28%
- EBITDA up by 55%
- Headline earnings per share up by 45%
- Attributable profit up by 43%
- Cash flows from operating activities up by 51%
- Cash balances of R116 million
Abridged Group Income Statement
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 Sept
% 2006 2005 2005
increase R"000 R"000 R"000
Turnover 28 304 036 237 174 533 444
Earnings before
interest, taxation,
depreciation
and amortisation
(EBITDA) 55 25 851 16 684 39 025
EBITDA margin 8.5% 7.0% 7.3%
Depreciation 292 590 977
25 559 16 094 38 048
Investment income 3 875 3 774 7 450
Profit before taxation 48 29 434 19 868 45 498
Taxation 8 478 5 229 12 415
Attributable profit 43 20 956 14 639 33 083
Headline earnings
per share (cents) 45 5.5 3.8 8.6
Basic earnings
per share (cents) 45 5.5 3.8 8.6
Weighted average number
of ordinary
shares in issue ("000) 383 310 387 384 386 814
Number of ordinary
shares in issue,
net of treasury
shares ("000) 383 310 387 384 383 310
Group Balance Sheet
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2006 2005 2005
R"000 R"000 R"000
Assets
Non-current assets 73 745 67 737 73 835
Property, plant and equipment 1 770 1 991 2 023
Intangible assets 71 526 65 161 71 446
Financial assets - 50 -
Deferred taxation 449 535 366
Current assets 165 567 141 632 164 485
Trade and other receivables 49 583 40 840 52 086
Cash and cash equivalents 115 984 100 792 112 399
Total assets 239 312 209 369 238 320
Equity and liabilities
Equity capital and reserves 192 999 180 298 195 050
Share capital and premium 35 395 62 094 58 402
Non-distributable reserves 730 730 730
Distributable reserves 156 874 117 474 135 918
Current liabilities 46 313 29 071 43 270
Amount due to vendor - - 1 625
Trade and other payables 32 447 25 586 34 184
Taxation 13 866 3 485 7 461
Total equity and liabilities 239 312 209 369 238 320
Net asset value per share (cents) 50.4 46.5 50.9
Net tangible asset value
per share (cents) 31.7 29.7 32.2
Abridged Group Cash Flow Statement
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 Sept
% 2006 2005 2005
change R"000 R"000 R"000
Cash flows
from operating
activities 51 28 336 18 765 43 393
Cash generated
from operations 46 26 616 18 256 42 251
Investment income 3 875 3 774 7 450
Taxation paid (2 155) (3 265) (6 308)
Cash flow from
investing activities (85) (1 744) (11 433) (20 761)
Cash flows
from financing
activities 97 (23 007) (11 652) (15 345)
Net increase/(decrease)
in cash and cash
equivalents 3 585 (4 320) 7 287
Cash and cash
equivalents at the
beginning of year 112 399 105 112 105 112
Cash and cash
equivalents at the
end of period 15 115 984 100 792 112 399
Group Statement Of Changes In Equity
Ordinary Non- Total
share capital distri- Distri- share-
and butable butable holders"
premium reserves reserves equity
R"000 R"000 R"000 R"000
Balance as at
1 October 2004 73 746 730 102 835 177 311
Treasury shares
purchased (3 687) - - (3 687)
Capital distribution (11 657) - - (11 657)
Profit of the year - - 33 083 33 083
Balance as at
1 October 2005 58 402 730 135 918 195 050
Capital distribution (23 007) - - (23 007)
Profit for the period - - 20 956 20 956
Balance at
31 March 2006 35 395 730 156 874 192 999
Segment Analysis
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 March 31 March 30 Sept
% 2006 2005 2005
increase R"000 R"000 R"000
Turnover
Paracon Resourcing 18 240 270 202 998 440 346
Business Solutions 87 63 766 34 176 93 098
28 304 036 237 174 533 444
EBITDA
Paracon Resourcing 38 27 265 19 806 43 990
Business Solutions 86 7 508 4 035 10 602
Central costs 25 (8 922) (7 157) (15 567)
55 25 851 16 684 39 025
Comments
Introduction
The directors are pleased to report excellent results for the six months ended
31 March 2006 ("the interim period"). The results reflect meaningful growth in
the Group"s two business units and across all key financial indicators.
Financial results
The Group"s results were driven primarily by organic growth. Turnover
increased by 28% to R304,0 million from R237,2 million in 2005. EBITDA grew
substantially by 55% to R25,9 million from R16,7 million with the EBITDA
margin on revenue improving to a healthy 8,5% from 7,0%.
Headline earnings of R21,0 million increased by 43% and translated into
headline earnings per share and basic earnings per share of 5,5 cents (March
2005: 3,8 cents).
The balance sheet remains healthy with no long-term liabilities and cash
balances of R116,0 million. Notwithstanding the increase in turnover and
resultant increase in working capital, debtors" collections remain good with
the Group"s debtors days at 28 days.
Cash flows from operating activities increased to R28,3 million from R18,8
million with R26,6 million generated from operations translating into a 104%
cash conversion ratio. The cash outflow from financing activities consists of
the R23,0 million net cash distribution paid to shareholders in March 2006.
Review of operations
Paracon Resourcing has performed well during the interim period, recording
significant organic growth. Turnover, which contributed 79% of total Group
turnover, grew by 18% to R240,3 million while EBITDA grew by 38% to R27,3
million. As one of South Africa"s leading specialist-generalist IT resourcing
providers for private sector and Government, Paracon Resourcing benefited from
the buoyant demand for specialist IT resources particularly within the
financial, insurance and ICT sectors. Whilst demand continues unabated, the
supply of suitably skilled resources remains a challenging constraint.
Paracon Business Solutions also produced excellent results during the period
recording 87% growth in turnover and 86% growth in EBITDA, with all three
business operations delivering strong performances. Paracon Networking offers
networking and managed services, Paracon Solutions offers software development
and Paracon Professional Services provides project management and independent
testing services.
Acquisition
Paracon has reached agreement to acquire 34,6% of Nihilent Technologies, a
business consulting and technology services company based in India. Nihilent,
a SEI sm CMMI(r) Level 5 and ISO 9001:2000 certified company, offers both onsite
and offshore outsourcing services and employs in excess of 450 people.
The acquisition offers exciting opportunities for Paracon including offering
our clients an offshore outsourcing solution and countering the current local
skills shortage by accessing Indian skills. The agreement remains subject to a
number of suspensive conditions including, inter alia, Reserve Bank approvals.
Black Economic Empowerment ("BEE")
Paracon is committed to BEE as an ongoing business imperative. We are
particularly pleased to have maintained our EmpowerDex "A" rating and to have
achieved a significantly improved BEE ranking in the 2006 EmpowerDex/Financial
Mail survey. In this survey of Top BEE Companies, Paracon ranked number 1 on
JSE Limited ("JSE") in terms of BEE ownership. Paracon was further ranked 6th
in the ICT sector and 16th overall in SA"s top 200 companies in terms of BEE
on the JSE.
Distribution to shareholders
Paracon"s policy is to declare an annual dividend or cash distribution to
shareholders at the time of publication of the September year-end financial
results. Therefore no dividend/distribution has been declared at this interim
period.
Outlook
In light of the Group"s exceptional performance and the current buoyancy in
the market, Paracon is confident of achieving continued growth. The
acquisition of the stake in Nihilent should offer further exciting
opportunities for Paracon and the directors are optimistic for the full
financial year.
Accounting policies
The accounting policies applied in preparing this report are consistent with
those applied in the audited annual financial statements ended 30 September
2005, and have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and the Companies Act, 1973 (Act 61 of 1973), as
amended.
Paracon has adopted IFRS with effect from 1 October 2005. With an effective
transition date of 1 October 2004, the impact of IFRS on the Group"s results
was assessed and there was no effect on the comparative 2005 results reflected
above.
On behalf of the board.
Mark Jurgens Mireille Levenstein
Chief Executive Officer Group Financial Director
8 May 2006
Transfer Secretaries:
Computershare Investor Services 2004 (Pty) Ltd
Ground Floor, 70 Marshall Street
Johannesburg 2001
(PO Box 71051, Marshalltown, 2107)
Sponsor:
Merchant Sponsors (Proprietary) Limited
Secretary Registered Office:
R J Wasley, Paracon Holdings Limited
300 Kent Avenue, Randburg, 2194
Directors:
G Andrews (Chairman)*#
G Bentley, S Daniels, M Jurgens,
M Levenstein, T Nzimande*
J Ord*, S Sebotsa*, C Stein*#
*Non-executive, #Independent
Date: 08/05/2006 09:45:13 AM Produced by the JSE SENS Department
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