SKILLS SWEET SPOT DESPITE THE ECONOMIC SLOWDOWN, information and communication technology skills provider Paracon plays in a sweet spot that – combined with annuity income and a business model that can scale up – should see it relatively cushioned from the worst of the crisis. For the year to September, Paracon reported headline earnings per share growth of 19% to 20,9c, before first time and one-off secondary tax on companies costs related to shareholder distributions and share buybacks that saw R99m effectively paid back to shareholders during the year (R61,7m in buybacks and R37,3m in cash distributions).
HEPS of 19c (after the STC costs) put Paracon on a historic multiple of 6,9 times. Turnover grew by 16% to R916,3m, while Paracon continued to generate good cash from operations: R100m for the year.
Paracon operates two divisions: resourcing and business solutions. The resourcing division accounts for 85% of revenue. But although the business solutions division brings higher margins to the table, its operating margins were down from 15,3% to 13,8% over the year, while resourcing’s margins improved from 11,2% to 11,6%, taking the total to 9,3% from 9,2% previously. OPPORTUNITIES • Continued demand for specialist skills. • To pick up acquisitions at good prices in current climate. RISKS Uncertainty relating to current economic jitters and the impact on its clients. Indian associate company Nihilent performed worse than expected and the rand’s devaluation affected Paracon’s share of that. Paracon says it’s “concerned” about Nihilent’s performance.