IT services and solutions company Paracon Holdings showed strong growth in the nine months to end-September, and expects the upward trend to continue.
The JSE-listed group has issued results for the nine months in accordance with a change in year-end so its financial year is in line with that of its largest shareholder, Logical Options, and Dimension Data, which has a 25% stake in Paracon.
Turnover of R243.48 million is a 165% increase from the pro forma R92.04 million of the nine months to September 1999. Dollar-based revenue accounted for 31% of turnover, beating the 22% initially targeted for the end of this year.
Earnings before interest, tax, depreciation and amortisation rose 115% to R29.75 million (1999: R13.84 million).
Financial director Mireille Levenstein says the decrease in the operating margin from 15.03% to 12.22% is largely as a result of lower margins in the US operations as well as lower margins at SilverLine.
She does not expect a major improvement in the margins this year, since only three months of SilverLine`s results were included in the review period. SilverLine was acquired from Dimension Data in a share swap which gave Dimension Data an initial 12.5% stake in Paracon, which it increased later.
The deal, which diluted Logical Options` stake in the group, from 50% to 41%, made Paracon the largest supplier of skilled IT resources to the private sector, says CEO Mark Jurgens.
Attributable earnings rose 54% to R23.79 million (R15.43 million) although Levenstein says this is not an accurate reflection since it is impacted by R1.59 million amortisation of goodwill.
Headline earnings per share were boosted to 6.7c (4.8c), with fully diluted headline earnings per share up 38% to 6.5c (4.7c).
Cash and cash equivalents at the end of the period amounted to R84.59 million (R122.16 million). Investing activities, mainly funding for offshore acquisitions, accounted for a cash outflow of R57.86 million.
Jurgens says cash reserves are now closer to R100 million.
He says the group`s customer relationship management business battled this year. Staff and costs have been cut back.
The group`s expanded presence offshore (it now operates in San Francisco, Los Angeles, Denver and New York) will enable Paracon to carry out application development for foreign companies in SA, ensuring rand-based development costs and dollar earnings.
Levenstein says the group, which expects to continue its strong growth, plans further expansion offshore, organically and by acquisition.
The share price was 3c up at 128c late this morning.
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