IT solutions and resourcing company Paracon has warned that its interim results for the six months to 31 March are expected to be lower than the interim results of the previous year.
Among other things, the group has had problems with trying to collect a debt amounting to about R2.3 million.
"A significant debtor, which arose in the prior year, has not paid for software developed for an Internet communication portal as it has indicated that it does not have sufficient funds," Paracon says. "While the debtor is attempting to raise further funds no progress in this regard has yet been made."
Although the board has decided to provide for the value of the debt, various alternatives, including legal action, are being considered.
Adding to Paracon`s woes is the fact that overruns on two projects in the business solutions division have had a significant effect on the division`s results for the first four months of the financial year.
Tough trading conditions are affecting overall operating margins and the strengthening of the rand means that the translation of dollar funds in Paracon`s overall bank balances will result in a foreign exchange loss of $609 000.
The group has moved to assure shareholders that the business is still sound and says it continues to generate strong cash flows and has significant reserves.
"After paying out a dividend (and resultant secondary tax on companies) to shareholders of R10 million in the past quarter, Paracon still has in excess of R70 million in cash and no long-term liabilities.
"Paracon generates profits on a monthly basis and the balance sheet remains extremely strong."
The Paracon share was untraded at 45c on the JSE this morning.
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