Parity holds buyout talks in profit wake

Services provider ready to spend again after 48 per cent revenue increase year-on-year.

Parity has experienced a 44 per cent increase in revenue to #290.2 million for the year ended 31 December 1998 and signalled its intention to embark on more acquisitions after a 12-month recess spent integrating companies it had previously bought.

The services provider turned in annual pre-tax profit of #20 million, representing an increase of 48 per cent year-on-year.

Philip Swinstead, chairman of Parity, said: 'We shut the door to acquisitions in 1998 to complete the integration of the three companies we purchased in 1997, particularly TelTech. We couldn't spend #40 million buying a company in the US, then go off and try to buy something else.'

But Parity is again holding discussions with possible acquisition targets in the US and Europe. Swinstead said: 'We would be looking for another company to increase our coverage in the US in addition to several niche providers in Europe.'

He declined to specify how much the company had available to spend, but said an acquisition of the size of TelTech was possible in the US, while companies worth up to #10 million would be considered in Europe.

Parity's organic growth was due to strong performances across all areas of its international systems and UK IT staffing agency business units, said Swinstead.

The systems business - which incorporates Parity Solutions and Parity Eurosoft in Europe and Parity TelTech in the US - increased annual turnover to #155.1 million, up 66 per cent from 1997. Operating profit increased 84 per cent to #13.6 million.

The UK IT staffing agency, Parity Resources, which provides self-employed contractors to clients, grew 24 per cent year-on-year to #135.1 million and generated a 14 per cent operating profit.

'We traded well across all divisions and have seen no sign of a recession,' Swinstead said, adding that e-commerce was a key hotspot in 1998. He said he expected Parity to settle at a growth rate of between 30 and 40 per cent.

'We won't experience again the dizzy heights of early last year, when the market was supporting growth of up to 70 per cent,' he said.

An increased need for e-commerce and EMU expertise will offset any slowdown in demand for year 2000 skills to maintain consistent growth over the next couple of years, Swinstead claimed.

He was unconcerned by the prospect of an economic slowdown: 'In a recession, companies cut down on their staff numbers and outsource when they need extra skills, so it actually increases revenue in the IT services market.'