25 November 2014
PHSC PLC
("PHSC", the "Company", or the "Group")
Interim Results for the six months ended 30 September 2014
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
Financial Highlights
* Group turnover for first half up 4.7% at £4.129m compared with £3.942m last
year.
* EBITDA up 44% to £518k before costs of acquisitions, versus £359k last
year.
* Basic earnings per share of 2.26p on enlarged share capital, compared with
2.30p last year.
* Net asset value (unaudited) of £6.622m.
* Pro-forma net asset value (unaudited) per share of 52.2p compared to a
current share price (mid) of 30.0p.
* Performance of both new subsidiaries exceeds expectations, increasing
profits and resulting in higher earn-out payments
Trading overview
Our trading performance has exceeded the board's expectations and this has
resulted in increased revenue and profits. Financial statistics for each
trading subsidiary are given later in this statement.
The positive effect of our recent acquisitions continues to be felt, with the
legacy health and safety businesses also making a valuable contribution.
The stand-out performance is from B to B Links Limited which has more than
doubled its profit to around £402,000. This was assisted by a one-off project
commissioned in the second quarter by our largest client who required
significant works to their high street retail property portfolio within a short
space of time. The project presented great challenges to everybody involved in
the installation programme, and their efforts ensured that the client's
deadlines were met. This work was in addition to the normal installation
programme that the client engages us to deliver. The subsidiary also benefitted
from significant new business from a national chain of builders' merchants and
an accelerated programme of work from a leading high street fashion chain.
The two-year earn-out period following the acquisition of QCS International
Limited ended on 31 July 2014 and, as subsequently announced, an agreed final
payment of £105,285 was made to the vendors. This was funded from existing cash
and brought the total cash payment for the transaction to £425,285. At the time
of acquisition an allowance of £80,000 was made for the final payment but the
extra profits generated meant that this provision was exceeded by £25,285.
Under IFRS rules the excess has been expressed as a charge to the Group
Statement of Comprehensive Income.
In the case of B to B Links Limited, the two-year earn-out period concluded on
30 September 2014. As announced today, an exceptionally strong performance in
the last quarter has resulted in an earn-out entitlement of £458,243. Of this,
£250,000 was provided for at the date of acquisition so it will be necessary to
charge the excess amount of £208,243 to the Group Statement of Comprehensive
Income.
The strong results for the half-year have been assisted by a reversal of
fortune for Quality Leisure Management Limited which was loss-making at this
stage last year but has posted a profit of around £57,000 in the first half.
Outlook
In the past, the Group's financial performance has always been better in the
second half of the year. We expect this cycle to be maintained in respect of
the majority of our subsidiaries, but not for the Group as a whole. This is
because the exceptional one-off contribution from B to B Links in Q2 is
expected to be balanced out by normalised revenues in the second half.
Nevertheless, with each trading subsidiary having a strong forward order book,
we expect to build on the impressive performance that has been delivered in the
first half.
Take-up of RSA Environmental Limited's "SafetyMARK" programme to support safety
excellence in schools is increasing, and is on the way to compensating for the
continued contraction in Local Authority-derived inspection work. Our Adamson's
Laboratory Service Limited subsidiary is engaged in extensive programmes of
work for two leading Universities. Our Scottish subsidiary, QCS International
Limited, is gearing up to deliver training and consultancy support in
connection with pending revisions to international quality standards.
Dividend prospects
The Board is not declaring an interim dividend but intends to recommend an
appropriate final dividend at the end of the year in line with its stated
policy of at least maintaining the level of dividend paid.
Cash Flow
The bank balance stood at £138,398 as at 30 September 2104 (the date of the
interim accounting period) and £156,830 at the close of business on the last
trading day prior to this announcement.
Cash demands over the coming weeks are considerable. Large amounts are tied up
in outstanding invoices associated with B to B Links Limited's exceptional
invoicing achievements in September 2014, much of which is on agreed 90 day
payment terms. Trade and other receivables across the Group were £2.922m at 30
September compared with £1.935m at 31 March 2014.
Of the £458,243 final payment due in connection with the acquisition of B 2 B
Links Limited, a sum of £120,000 was advanced to the vendors in July 2014. In
exchange for part-payment earlier than it fell due, the vendors agreed to defer
the bulk of the remaining payment until 31 December 2014. By that time it is
anticipated that sufficient cash will have been generated from settlement of
invoices we issued in September to cover this liability.
Our banking arrangements with HSBC include the ability to put in place an
overdraft facility of £100k upon 48 hours' notice, although as at today's date
that facility is not being called upon.
Performance by Trading Subsidiaries
Profit/loss figures for individual subsidiaries are stated before tax and
inter-company charges (including the costs of operating the plc which are
recovered through management charges to trading subsidiaries), interest paid
and received, depreciation and amortisation.
Adamson's Laboratory Services Limited
Revenue of £1,288,600 yielding a profit of £67,400 (the equivalent figures for
the same period last year were £1,329,700 and £127,400). The work in progress
level at the end of September 2014 was particularly high.
Inspection Services (UK) Limited
Invoiced sales of £96,300 yielding a profit of £8,900 (the figures for the same
period last year were £98,300 and £3,500).
Personnel Health and Safety Consultants Limited
Invoiced sales of £390,800 yielding a profit of £191,200 (the figures for the
same period last year were £360,500 and £153,300).
RSA Environmental Health Limited
Invoiced sales of £198,200 resulting in a profit of £8,000 (the figures for the
same period last year were £237,900 and £20,900).
Quality Leisure Management Limited
Invoiced sales of £246,400 resulting in a profit of £57,000 (the figures for
the same period last year were £186,800 and a loss £27,300).
QCS International Limited
Invoiced sales of £254,000 yielding a profit of £58,900 (the figures for the
same period last year were £253,000 and £79,200).
B to B Links Limited
Invoiced sales of £1,654,300 yielding a profit of £402,000 (the figures for the
same period last year were £1,475,400 and £198,700)
Stephen King - Group Chief Executive Officer
For further information please contact:
PHSC plc
Stephen King 01622 717700
www.phsc.plc.uk
Northland Capital Partners Limited
(Nominated Adviser and Broker)
Gavin Burnell / Edward Hutton 020 7382 1100
John Howes / Alice Lane (Broking)
Group Statement of Comprehensive Income Six Six
months months Year
ended ended ended
30 Sept 14 30 Sept 13 31 Mar 14
Note Unaudited Unaudited
£'000 £'000 £'000
Continuing operations
Revenue 3 4,129 3,942 7,594
Cost of sales (2,249) (2,332) (4,356)
Gross profit 1,880 1,610 3,238
Other income 1 1
Administrative expenses (1,383) (1,274) (2,583)
Exceptional administrative expenses 2 (75)
Profit from operations 422 337 656
Finance income - - -
Finance costs - - (1)
Profit before taxation 422 337 655
Corporation tax expense (136) (93) (161)
Profit for the period after tax attributable
to owners of parent 3 286 244 494
Total comprehensive income attributable to 286 244 494
owners of the parent
Attributable to:
Equity holders of the Group 286 244 494
Basic and diluted Earnings per Share 5 2.26p 2.30p 4.24p
for profit after tax from continuing
operations attributable to the equity
holders of the Group during the
period
Group Statement of Financial Position 30 Sept 14 30 Sept 13 31 Mar 14
Unaudited Unaudited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 4 686 702 696
Goodwill 4,560 4,637 4,609
Deferred tax asset - 3 -
5,246 5,342 5,305
Current assets
Inventories 228 184 155
Trade and other receivables 2,922 2,422 1,935
Cash and cash equivalents 138 - 712
3,288 2,606 2,802
Total assets 3 8,534 7,948 8,107
Current liabilities
Trade and other payables 1,475 1,480 1,135
Financial liabilities 2 7 7
Current corporation tax payable 237 264 127
Short term provisions 130 410 330
1,844 2,161 1,599
Non-current liabilities
Financial liabilities - 6 -
Deferred taxation liabilities 68 69 68
68 75 68
Total liabilities 1,912 2,236 1,667
Net assets 6,622 5,712 6,440
Capital and reserves attributable to
equity
holders of the Group
Called up share capital 1,268 1,061 1,268
Share premium account 1,831 1,555 1,831
Capital redemption reserve 144 144 144
Retained earnings 3,379 2,952 3,197
6,622 5,712 6,440
Group Statement of Changes in Equity
Share Share Capital Retained Total
Capital Premium Redemption Earnings
Reserve
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 2013 1,061 1,555 144 2,867 5,627
Profit for the period - - - 244 244
attributable to equity
holders
Dividends - - - (159) (159)
Balance at 30 September 2013 1,061 1,555 144 2,952 5,712
Balance at 1 April 2014 1,268 1,831 144 3,197 6,440
Profit for the period - - - 286 286
attributable to equity
holders
Dividends - - - (104) (104)
Balance at 30 September 2014 1,268 1,831 144 3,379 6,622
Group Statement of Cash Flows Six Six
months months Year
ended ended ended
30 Sept 14 30 Sept 13 31 Mar 14
Unaudited Unaudited
£'000 £'000 £'000
Cash flows (used by)/ generated from
operating activities
Cash generated from operations (231) 191 856
Interest paid - - (1)
Tax paid (27) (3) (211)
Net cash (used by)/generated from (258) 188 644
operating activities
Cash flows used in investing activities
Purchase of property, plant and equipment (12) (11) (31)
Purchase of subsidiary companies net of (200) (361) (441)
cash acquired
Interest received - - -
Net cash used in investing activities (212) (372) (472)
Cash flows (used in)/generated by
financing activities
Proceeds from placement of shares - - 483
Dividends paid to group shareholders (104) (159) (159)
Net cash (used in)/generated by financing (104) (159) 324
activities
Net (decrease)/increase in cash and cash (574) (343) 496
equivalents
Cash and cash equivalents at beginning of 712 216 216
period
Cash and cash equivalents at end of period 138 (127) 712
Notes to the cash flow statement
Cash generated from operations
Operating profit - continuing operations 422 337 656
Depreciation charge 22 22 48
Goodwill impairment 49 - 28
Increase in inventories (73) (31) (1)
(Increase)/decrease in trade and other (987) (384) 102
receivables
Increase in trade and other payables 341 253 36
Decrease in financial liabilities (5) (6) (13)
Cash (used by)/generated from operations (231) 191 856
Notes to the Financial Statements
1. Basis of preparation
These condensed consolidated financial statements are presented on the basis of
International Financial Reporting Standards (IFRS) as adopted by the European
Union and interpretations issued by the International Financial Reporting
Interpretations Committee (IFRIC) and have been prepared in accordance with AIM
rules and the Companies Act 2006, as applicable to companies reporting under
IFRS.
The financial information contained in this report, which has not been audited,
does not constitute statutory accounts as defined by Section 434 of the
Companies Act 2006. The Group's statutory financial statements for the year
ended 31 March 2014, prepared under IFRS have been filed with the Registrar of
Companies. The auditors' report for the 2014 financial statements was
unqualified and did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
The same accounting policies and methods of computation are followed within
these interim financial statements as adopted in the most recent annual
financial statements.
New IFRS standards and interpretations not adopted
Certain new standards, amendments and interpretations of existing standards
that have been published and which have not been applied in these financial
statements were in issue but not yet effective (and in some cases had not yet
been adopted by the EU)
IFRS standards and interpretations issued (and EU adopted) but Effective date -
not yet effective accounting
period beginning
Title on/after
IFRS 13 Fair Value Measurement 01/01/2013
IFRIC 20 Stripping Costs in the Production of a Surface Mine 01/01/2013
IFRS 1 Amendments - Government Loans 01/01/2013
Transition Guidance (Amendments to IFRS 10, 11 and 12) 01/01/2013
Novation of Derivatives and Continuation of Hedge Accounting 01/01/2014
(Amendments to IAS 39)
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 01/01/2014
27)
IAS 36 Amendments Recoverable Amount Disclosures for 01/01/2014
non-Financial Assets
IFRIC 21 Levies 01/01/2014
IFRS Standards and Interpretations issued by IASB but not yet Effective date -
EU approved accounting
period beginning
Title on/after
IAS 19 Amendment - Defined Benefit Plans: Employee 01/07/2014
Contributions
IFRS 10 and IAS 28 Amendments: Sale or Contribution of 01/01/2016
Assets between an Investor and its Associate or Joint
Venture
IAS 27 Amendment: Equity Method in Separate Financial 01/01/2016
Statements
IAS 16 and IAS 41 Amendments: Agriculture Bearer Plants 01/01/2016
IFRS 14 Regulatory Deferral Accounts 01/01/2016
IAS 16 and IAS 38 Amendments: Clarification of Acceptable 01/01/2016
Methods of Depreciation and Amortisation
IFRS 11 Amendments: Accounting for Acquisitions of Interest 01/01/2016
in Joint Operations
IFRS 15 Revenue from Contracts with Customers 01/01/2017
IFRS 9 Financial Instruments 01/01/2018
The adoption of these standards, amendments and interpretations is not expected
to have a material impact on the group's profit for the period or equity.
Application of these standards will result in some changes in presentation of
information within the condensed interim financial statements.
The information presented within these interim financial statements is in
compliance with IAS 34 "Interim Financial Reporting". This requires the use of
certain accounting estimates and requires that management exercise judgement in
the process of applying the Group's accounting policies. The areas involving a
high degree of judgement or complexity, or areas where the assumptions and
estimates are significant to the interim financial statements are disclosed
below:
(a) Provisions
The Group recognises a provision where a legal or constructive obligation
exists at the balance sheet date and a reliable estimate can be made of the
likely outcome. A liability of £130,000 relating to the final payment due under
the B to B Links Limited sale and purchase agreements is included in short term
provisions.
(b) Impairment of goodwill
Our interim review of the value of goodwill in the balance sheet highlighted a
balance within PHSC plc relating to contracts which have expired and the
associated goodwill of £49,392 has been written off in the consolidated
accounts. The review did not highlight any further conditions which would give
rise to a material impairment and for this reason the Board is to defer any
decision regarding any additional impairment of goodwill until the year end.
30 Sept 14 30 Sept 13 31 Mar 14
Unaudited Unaudited
2 Exceptional Administrative £'000 £'000 £'000
Expenses
QCS International Limited: 26 - -
Acquisition payment in excess of
provision
PHSC plc: 49 - -
Goodwill impairment as detailed
in (b) above
75 - -
Notes to the Financial Statements
(continued)
30 Sept 14 30 Sept 13 31 Mar 14
Unaudited Unaudited
3 Segmental Reporting £'000 £'000 £'000
Revenue
PHSC plc - - -
Personnel Health & Safety 391 361 750
Consultants Ltd
RSA Environmental Health Ltd 198 238 499
Adamson's Laboratory Services Ltd 1,289 1,330 2,660
Inspection Services Ltd 96 98 195
Quality Leisure Management Ltd 246 187 464
Q C S International Ltd 254 253 516
B to B Links Ltd 1,655 1,475 2,510
4,129 3,942 7,594
Profit/(loss) after taxation
PHSC plc (41) 1 (1)
Personnel Health & Safety 78 53 116
Consultants Ltd
RSA Environmental Health Ltd - 12 35
Adamson's Laboratory Services Ltd (45) 35 114
Inspection Services Ltd 2 (3) (1)
Quality Leisure Management Ltd 24 (53) (54)
Q C S International Ltd 42 64 116
B to B Links Ltd 301 135 180
361 244 505
Taxation adjustment (group loss relief - - 17
and deferred tax)
Additional acquisition payment (QCS) (26) - -
Goodwill impairment (49) - (28)
286 244 494
Total assets
PHSC plc 5,890 5,892 5,186
Personnel Health & Safety 464 493 725
Consultants Ltd
RSA Environmental Health Limited 492 495 592
Adamson's Laboratory Services Ltd 1,219 1,260 1,419
Inspection Services Ltd 54 44 96
Quality Leisure Management Ltd 111 65 245
Q C S International Ltd 88 118 272
B to B Links Ltd 1,730 1,119 1,043
10,048 9,486 9,578
Adjustment of goodwill (1,514) (1,538) (1,471)
8,534 7,948 8,107
Notes to the Financial Statements 30 Sept 14 30 Sept 13 31 Mar 14
(continued)
Unaudited Unaudited
4 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,124 1, 097 1,097
Additions 12 11 27
Acquisition of subsidiary - -
Disposals - -
Carried forward 1,136 1,108 1,124
Depreciation
Brought forward 428 384 384
Charge 22 22 44
Disposals - -
Carried forward 450 406 428
Net book value 686 702 696
5 Earnings per share
The calculation of the basic earnings per share is based on
the following data.
30 Sept 14 30 Sept 13 31 Mar 14
£'000 £'000 £'000
Unaudited Unaudited
Earnings
Continuing activities 286 244 494
Number of shares 30 Sept 14 30 Sept 13 31 Mar 14
Weighted average number of
shares for
the purpose of basic earnings 12,686,353 10,410,473 12,686,353
per share