Listed staffing solutions company Paracon expects the industry to consolidate as businesses trim their vendor lists, with a law regulating the industry still on the cards.
At the end of March, the heated labour broking debate was still ongoing, with Parliament wanting to regulate - rather than ban - the industry.
The Congress of South African Trade Unions wants labour broking banned. The federation has threatened mass action if it doesn't get its way in getting rid of a sector it says takes advantage of workers.
However, the Department of Labour proposes amendments to several Acts, which all fall under the Labour Relations Act. The new amendments would either abolish labour broking, or increase regulation of all temporary employment services.
Paracon, which offers both temporary and permanent work placements, says it would benefit from better regulation of the industry.
Trimming lists
CEO Mark Jurgens told analysts and investors yesterday at the company's results presentation that a change in the legislation is likely to remove smaller businesses from the industry, which will give Paracon the opportunity to increase its market share.
In addition, more paperwork may be too costly and onerous for small companies, giving Paracon the chance to buy out their contracts at large corporates. Paracon's top 10 clients account for about half of its revenue.
Jurgens explains that this will also allow large clients to get out of contracts with small companies, without leaving contract workers in the lurch. In addition, he says, larger firms are trimming their vendor lists, which will allow Paracon to gain a larger slice of the pie.
The company is keeping its eyes open for possible acquisitions, says Jurgens. However, despite the recent economic turmoil, target companies are still pricing themselves at higher levels than their realistic value.
Yesterday, Paracon reported its interim results to March. Revenue was up 4%, to R484.6 million, and net profit up a percent, to R26.7 million. The company has cash on hand of R60.6 million.
FD Mireille Levenstein says the company is cautiously optimistic about the future. “Right now, things look good for the next six months.”
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