Strong demand for IT skills helped IT resourcing and business solutions group Paracon Holdings achieve a 48% increase in pre-tax profit for the six months to March.
The market responded positively to the news yesterday, with the JSE-listed Paracon share gaining 2c or 1.3% to 160c on high trading volumes.
Total turnover rose 28% to R304.04 million from R237.17 million for the same period a year earlier.
Paracon Resourcing, which accounted for 79% of group turnover, experienced an 18% turnover increase to R240.27 million (2005: R203 million). The business solutions division experienced an 87% turnover increase to R63.77 million (R34.18 million).
"Paracon Resourcing benefited from the buoyant demand for specialist IT resources particularly within the financial, insurance and ICT sectors," says Paracon CEO Mark Jurgens.
"While demand continues unabated, the supply of suitably skilled resources remains a challenging constraint."
He adds that all three business operations within Paracon Business Solutions - Paracon Networking, Paracon Solutions and Paracon Professional Services - also performed strongly.
Indian acquisition
Paracon increased earnings before interest, tax, depreciation and amortisation (EBITDA) 55% to R25.85 million (R16.68 million), with the EBITDA margin (EBITDA as a percentage of revenue) improving to 8.5% (7%).
Pre-tax profit rose to R29.43 million (R19.87 million), while attributable profit of R20.96 million compares with a year-earlier figure of R14.64 million.
The group increased earnings and headline earnings per share to 5.5c from 3.8c previously.
Paracon has also entered an agreement to acquire a 34.6% stake in Indian business consulting and technology group Nihilent Technologies, which Jurgens says will give the group access to new business opportunities by offering clients the alternative of offshore outsourcing.
"The acquisition will also enable Paracon to access Nihilent`s skills base to address a local skills shortage," he adds. Nihilent, which has an operation in SA, is also 34.6% held by Dimension Data, which is also a Paracon shareholder.
Financial director Mireille Levenstein says the acquisition will not have a significant effect on Paracon`s cash balances.
"Notwithstanding the substantial cash distribution to shareholders in March 2006, Paracon`s cash balances at interims were a healthy R116 million," she says. This compares with R100.79 million previously. Cash generated from operations was 46% up at R26.62 million (R18.26 million).
Jurgens says the growth during the period was mainly organic, and adds that in the light of this performance, as well as current market buoyancy, the group is confident of continuing its growth.
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