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March 3, 1999


By CBR Staff Writer

IT services group, Parity Group Plc, has announced 1998 net income of 13.4m pounds, a 48.5% rise on 1997, on revenues that rose 44% to 290.2m pounds. Wednesday’s figures see a return to the kind of revenue growth Parity experienced in the mid 90s, after two years growing at around 24%.

The Parity Group in its present incarnation was formed in 1993 by a management buy-in of Comac Group Plc, an IT staff agency. Current chairman Philip Swinstead and merchant bank Samuel Montagu & Co took 19.5% and 10.5% stakes in the company, when 47% owner HIT Investments Plc decided to sell its entire holding. After an initial surge in share price, the group, which was still known as Comac almost immediately set about a string of acquisitions, starting later 1993 with CSS Trident for 18.5m pounds. The group paid for this recruitment agency with a four for one rights issue.

It was around this time that Comac executed a full flotation on the London Stock Exchange. Spurred on by the flotation, the company renamed in 1994, when it bought the UK consulting division of Learmouth & Burchett Management Systems for 1.75m pounds in cash. In the next few months the group also picked up training firm Class Ltd for half a million pounds, and two of ACT’s subsidiaries – ACT Business Systems and BIS Training – with rights issues.

The spending spree reaped its reward when the company reported a boost in 1994 pre-tax income of 600% to 4.2m pounds. Since then Parity has continued in its acquisitive evolution, picking up a further nine companies in Europe and the US. Often, actual growth has been masked by revenues from acquisitions. In 1997, the group reported pre-tax income of 13.5m pounds, a growth of 34% compared to the previous year. However, without the revenues from the group’s three 1997 acquisitions, profit growth was below 20%.

The various subsidiaries in the UK have now been subsumed and form three core companies. Extensive re-branding in Europe and the US has seen the formation of Parity Eurosoft, the mainland European arm of Parity set up in 1995 with several small German acquisitions, and Parity Teltech, the US training division formed from Teltech International Inc and Personnel Solutions Inc. The Eurosoft side of the company has since been expanded upon, with divisions now in the Netherlands, Germany, France, Switzerland, Belgium, Luxembourg.

Parity Solutions Ltd is a consultancy that focuses on bespoke development. This area of the group would seem to have the most short-term potential. Parity’s work with recently deregulated industries shows it has the ability to take advantage of sea- changes in the way business works, and with Solutions concentrating on European Monetary Union and developing e- commerce strategies, it could well find itself riding out another revolution. Parity Training Ltd encompasses the various training firm acquisitions Parity has made, including CSS Trident. The company was the winner of the UK Training Company Of The Year award in 1998, conducting over 5,000 courses for 30,000 delegates. Parity Resources supplies freelance IT staff and products, and tends to work largely with governmental and utility clients, as well as petrochemical, banking and pharmaceutical companies.

Financially, Parity has seen consistent growth since it formed. However, although Parity’s share price has risen from 0.18 pounds in 1993 to the current level of 7.00 pounds, the market has not always been kind to the group. Last year saw a massive fall in its share price, from over 800 pence to below 400 pence, which prompted Swinstead to issue a statement reassuring shareholders that the company continued to trade well. But this highlights the volatile nature of the industry. A spokesperson for the company blamed a downturn in the UK economy and the self-fulfilling prophecies of certain industry commentators for the crash. It seems pundit predictions that IT staff agencies would be the first to get hit by a slowing economy had a quick and adverse effect on share price. Philip Swinstead begs to differ, stating: In a difficult economy, IT directors tend to reduce permanent headcount and depend more on services and outsourcing.

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Although the group has not made any acquisitions in the last 12 months, Swinstead cautiously speculates continued growth across the three main sectors, and over the three geographical areas. The US foothold is the most likely area for future development. In terms of future opportunities, Swinstead says: Electronic commerce will cause a fundamental revolution in the way all companies do business. There will be a great demand for the analytical and system development skills required to implement e- commerce across business.

This article is part of ComputerWire’s European Computer Services information service. Some articles from the service are being provided to ComputerGram subscribers for a trial period only.

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