Investment: Special factors help Parity get ahead in IT

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The Independent Online
LIKE MOST companies in the information technology sector, Parity has enjoyed meteoric growth over the past few years. The market has warmed to its combination of systems integration and an IT staff agency business, marking the shares up by a factor of seven since 1993.

Although the shares have come off the boil in the past few months as fears of a downturn have set in, you wouldn't know it from Philip Swinstead, Parity's ebullient chairman.

Reporting pre-tax profits up 54 per cent to pounds 8.75m in the first half, Mr Swinstead was pouring scorn on those who say IT is still a cyclical business that will suffer first in a recession.

His view is that IT contracting is now an accepted part of the corporate landscape and is buoyed by specific factors. One is the year 2000 computer bug. Another is the single currency which, Parity feels, will provide IT systems companies with a bonanza in the next few years.

This optimism may or may not be justified, but the City sees certain aspects of Parity which set it apart. Unlike some rivals, it offers a broad range of services, including project solutions, staff support and training. Its systems business, Parity Solutions, employs one-third of its staff on a contractor basis, giving it greater flexibility.

Mr Swinstead is looking at acquisitions in Europe and America. Parity has received at least three approaches from American suitors looking to go global, he says.

After three acquisitions last year, Parity is planning to restructure into smaller units and rebrand the businesses under the Parity Resources and Parity Solutions banners.

On brokers' forecasts of pounds 19.5m the shares - up 11.5p to 726.5p yesterday - trade on a forward rating of 27. This is not expensive compared to soaraway multiples in the sector such as CMG and Sema, but it remains a bet on whether IT contracting has shrugged off its reputation as highly cyclical. That seems unlikely, making the stock no more than a hold.