Chronic lack of IT skills lifts Paracon

A SEVERE shortage of skills in the IT sector has allowed personnel provider Paracon to double its headline earnings a share by supplying staff to companies struggling to keep their technology systems running, says the company.

But the shortage is a double edged sword.

Paracon could have handled far more work had it been able to recruit more staff of its own.The company generates 88% of its income from supplying technicians to its customers.

For the six months to March its revenue rose to R382m, up 26% from R304 a year before. Attributable profit of R30,5m was 46% up from R20,9m, and headline earnings a share rose 49% to 8,2c from 5,5c.

“One of the constraints is that we didn’t have enough skills,” said chief financial officer Mireille Levenstein. “We have never been in such a situation where there is so much demand for IT skills, and the supply isn’t there.

The demand from our clients is huge. We could do far more work if we could get more people.” Levenstein said the market was more buoyant now even than it was in the run-up to the Y2K rollover, when companies were frantically overhauling systems to handle the date change.

Paracon alleviated its shortage last year by acquiring 34,6% of India’s Nihilent Technologies, a business consultancy and technology services group with a branch in SA.

Paracon was now bringing people in from India, which was a long and more expensive process but the only solution when local skills were simply not available, she said. Paracon also acquired Personnel Concept, another recruitment firm in SA, and was looking for other acquisitions. “We are continuously looking for acquisitions. In particular we are looking at which skills they have more than which customers they have, and we certainly have the money to do it,” Levenstein said.

As well as building up its staff through acquisition and by poaching, Paracon was running graduate recruitment programmes to give graduates work experience with its clients.

So far more than 80 people had been trained, she said.

Paracon’s second division, Business Solutions, contributed 12% of the turnover.

The division also suffered from a skills shortage, and benefited from using Nihilent’s skills.

Paracon’s cash resources stand at R94,2m with no long term liabilities, despite its spending R30m on Nihilent and Personnel Concept and paying out R30m in a dividend to shareholders at the previous year-end.

Focus on working capital management brought debt collection down to a record 24 days.

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Chronic lack of IT skills lifts Paracon