Paracon`s talks with WDB Investment Holdings have borne fruit, with WDB acquiring 25% of the company in a deal worth about R48.3 million. Paracon has also reported a 73% decline in interim after-tax profit.
<B>Salient figures</B>
Paracon Holdings results for the six months to 31 March 2003.
Year-earlier figures in parentheses:
Turnover: R166.91m (R235.38m)
EBITDA: R10.01m (R20.06m)
Profit before tax: R7.59m (R19.08m)
Profit after tax: R3.62m (R13.28m)
Attributable profit: R3.52m (R13.47m)
HEPS: 2.1c (5.2c)
EPS: 1.1c (3.9c)
Cash generated from operations: R19.39m (R34.43m)
Current assets: R105.06m (R133.08m)
Cash and equivalents: R77.36m (R80.24m)
Current liabilities: R22.93m (R42.44m)
NAV per share: 43c (50c)
NTAV per share: 26.6c (27.3c)
Paracon and WDB already have a two-year-old relationship as they are joint venture partners in WDB Technologies, in which WDB holds 51% while Paracon owns the balance.
Funded by the Industrial Development Corporation, WDB is to buy 9 317 967 Paracon shares from Dimension Data for 55c a share, 27 953 901 shares from three Paracon management members for 48c each, 37 624 526 treasury shares from Paracon for 48c each, and subscribe for 24 377 702 shares at 48c each.
Paracon says the R29.76 million it will receive will be used to supplement its cash balances and provide a platform for future corporate activity.
Paracon CEO Mark Jurgens says market conditions in the six months to end-March remained challenging, with clients reducing IT spend and postponing scheduled projects.
Revenue fell from R235.38 million to R166.91 million while earnings before interest, tax, depreciation and amortisation halved from R20.06 million to R10.01 million.
Headline earnings per share fell from 5.2c to 2.1c.
Jurgens says two non-recurring expenses or charges affected the results significantly. An amount of R2.5 million was provided against a significant debtor which does not have enough funds to meet its obligations. Foreign exchange losses of R1.5 million were incurred.
"Paracon`s balance sheet continues to be extremely healthy with significant cash balances and no long-term liabilities," Jurgens says.
"After paying out the maiden dividend to shareholders and the resultant secondary tax on companies, of R9.6 million in December and spending R2.1 million on a general share repurchase, Paracon still had R77.4 million in cash.
"Cash balances will exceed R100 million as a result of the additional R29.8 million to be received from the sale and issue of shares to WDB in terms of the black economic empowerment transaction.
"As markets remain tough, we have adopted a conservative view for the remainder of the year," Jurgens says. "Our excess cash gives us stability and enables us to assess various potential acquisitions that may arise from the market consolidation.
"Opportunities for growth exist in certain other markets which are also currently being explored."
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