Paracon capitalises on skills shortage

By Nicola Mawson for Paracon
Johannesburg, 14 Nov 2006

ICT resourcing and solutions firm Paracon Holdings is optimistic about the year ahead on the back of two acquisitions during the year.

CEO Mark Jurgens says the firm is excited about the year ahead with many large IT projects on the go and believes it is perfectly positioned to benefit from the current skills shortage.

While the company has not ruled out diversifying in the future, it is currently focused on what he says is an "unprecedented" level of skills shortage. "We are slap-bang in the middle of everyone's problem at the moment."

The company posted revenue of R635.4 million, a 19% increase on the previous year, with attributable profit up 33%, at R44.1 million from R33.1 million.

Jurgens says the firm will look at strengthening its capabilities in the year ahead, in terms of delivering skills to the market, especially in SAP as this is a high-growth area.

In October, it acquired specialist recruitment firm The Personnel Concept and SAP skills specialist Mondial IT Solutions.

Paracon also seeks to offer companies the opportunity to offshore projects in India, or to bring some of those skills here, which is where its purchase of a 34.6% stake in India-based Nihilent Technologies fits into its plans.

FD Mireille Levenstein explains that as the acquisition became unconditional just before year-end, it is not included in these results but should contribute to the 2007 results. Nihilent is already active in SA with Paracon shareholder, Dimension Data, also holding a 34.6% share in the company.

Growth in demand

In a statement, the black-empowered group said it "benefited from significant demand for specialist ICT skills, both permanent and contract".

It reported headline earnings per share up 36%, at 11.6c, from 2005's figure of 8.6c. Earnings before interest, taxation, depreciation and amortisation (EBITDA) moved up 41% to R55 million and EBITDA margins increased from 7.3% to 8.6%.

Paracon, which announced its board was recommending an annual capital distribution of 8c compared to 6c last year, said a strict focus on cash management further reduced debtors' days, this time to 28 days.

The company has R115.1 million in cash-on-hand at year-end, after the outflow of R23 million in a capital distribution to shareholders in March and an R18.7 million share repurchase in July of 3% of its share capital.

Paracon's resourcing division was responsible for 79% of the company's revenue and reported income of R502.3 million, a 19% increase on the previous year. Jurgen says the company is "well positioned to capitalise on ongoing demand for technicians".

The business solutions division saw turnover and EBITDA up over 40%, driven in part by an exceptional performance from the new networking division, it said.