Final Results
PHSC PLC Preliminary Results 2005/06
________________________________________________
MANAGING DIRECTOR'S STATEMENT
for the year ended 31 March 2006
Highlights:
• Largest acquisition to date completed
• Successful AIM flotation
• Group revenues increased to £3.7m from £2.2m
• Dividend of 0.75p per Ordinary Share proposed
At the conclusion of a highly eventful year for PHSC plc, I report on the
performance of the company, activities that have taken place during the period,
and prospects for the future.
PHSC plc left OFEX and moved to AIM at the beginning of July 2005. In
consequence the Group's corporate team was strengthened, and new systems and
procedures were put in place. This enables us to comply with the more exacting
disciplines required in a growing company, and to conform to the accepted
standards of corporate governance for an AIM-listed company.
Two very different acquisitions were made, each filling a gap in the range of
consultancy and advisory services offered by the Group. The full benefits to
the Group arising from these acquisitions will take time to feed through, and
involve cost savings as well as cross-selling opportunities.
As I explained in my interim report, the Group now has in place a robust
corporate framework. Our trading subsidiaries are well-placed to exploit
opportunities for the provision of health, safety and environmental solutions
across the UK.
Following the acquisition by PHSC plc of Adamson's Laboratory Services Ltd
(ALS), we were pleased to announce its biggest contract received to date, from
London Borough of Lewisham for a minimum of £332,000 over three years. Our
subsidiary Personnel Health & Safety Consultants Ltd entered into a new and
improved contract with The Go-Ahead Group plc worth a minimum of £345,000 over
a three-year period and to be supplemented with other ad hoc services as
required. In April, ALS was awarded a contract worth £100,000 by the London
Borough of Southwark and was appointed by telent plc to commence a programme of
asbestos assessment surveys on East Midlands motorways and associated assets.
The total value of this contract could exceed £350,000.
Further information on the activities of each operating subsidiary will be
contained within the Annual Report and Accounts to be sent to shareholders in
due course and which will be available during normal working hours from the
offices of Ruegg & Co Limited, 39 Cheval Place, London SW7 1EW.
Costs of AIM
One-off costs of the transition to AIM, including costs in respect of the share
issue were £185,000, which have been offset against the share premium account.
This has of course resulted in a corresponding reduction in net assets.
Acquisitions
The Group now comprises four trading companies.
The Group acquired Adamson's Laboratory Services Limited (ALS) in June 2005,
shortly before the move to AIM. This represents our largest acquisition to
date, and was funded by £1.31 million in cash plus £100,000 in ordinary shares
of PHSC plc at 62.5p. Further instalments of £125,000 and £100,000 cash are
payable on the first and second anniversaries of the purchase respectively. The
purchase price included net assets of around £440,000 of which £175,000 is the
value of the freehold premises as at the date of acquisition.
ALS provides mainly asbestos management services to a number of institutions,
local authorities and private sector organisations. Clients include housing
associations, universities and oil companies.
In August 2005 we acquired Health & Safety Click Ltd (HSCL). HSCL delivers a
low cost health and safety protection and advisory service via a web based
system in order for smaller organisations to become compliant with health and
safety standards. This is a more speculative venture for PHSC plc in an area of
business where the Group had no representation. We are committed to make an
injection of up to £75,000 into HSCL for working capital purposes, and have
also made a payment of £50,000 to eliminate the directors' loan account. Former
shareholders of HSCL are entitled to 50% of any net profits of HSCL for the
three years ending 31 March 2008.
Institutional Investment
In June 2005 we raised £650,000 before expenses by placing 1,250,000 new
ordinary shares at 52p per share with clients of M.D. Barnard & Co Ltd.
Financial Review
There was a net cash outflow of £321,000 in the year, fully accounted for by
the costs of acquisitions and the underlying business continues to be
cash-generative overall.
Group turnover (consolidated) for the period is £3.7 million (2005: £2.2
million). Pre-tax profits before adjustments for the effect of goodwill were £
571,000. After allowing £160,000 for charges against the value of goodwill, the
pre-tax profits were £411,000 (2005: £476,000). It is worth noting that the
reduction in goodwill value was £100,000 higher in 2005/06, thus the underlying
profitability remains strong.
As stated in the interim report, Group profit before tax and provisions was £
137,000 in the first half of the year. The second half saw considerable
progress, with a doubling of profit before tax and provisions. Post-tax
earnings per ordinary share rose from 0.79p at the interim stage to 2.6p for
the year. The number of ordinary shares in issue (weighted average) was
9,561,614 (2005: 7,783,784).
Corporate Structure
During the year, the Group welcomed Mike Miller to the Board as a non-executive
director. Mike is chair of the Audit Committee. His fellow non-executive
director, Graham Webb MBE chairs the Remuneration Committee.
A Chartered Secretary, Lorraine Young, supports the Board and its committees.
The corporate resource has been further strengthened by the appointment of a
Chartered Accountant, Candy Wilton, as Group Accountant.
Performance by Trading Subsidiaries
Profit figures below are stated before tax, PLC charges and the write-down of
goodwill.
Personnel Health and Safety Consultants Limited
Sales of £1.22 million, yielding a profit of £337,000.
In the previous year there were sales of £1.36 million and a profit of £
443,000. Note that the previous year included revenue and profit associated
with asbestos surveying and all such work has been referred to ALS since the
date of acquisition. Some general health and safety training and consultancy
assignments have also been passed to ALS.
RSA Environmental Health Limited
Sales of £788,000 yielding a profit of £110,000.
In the previous year there were sales of £854,000 and a profit of £119,000.
Note that the previous year included revenue and profit associated with
asbestos surveying and all such work has been referred to ALS since the date of
acquisition.
Adamson's Laboratory Services Limited
Published accounts will show sales for the period 1.3.05 - 31.3.06 as £2.06
million with a profit of £314,000 before management charges. Sales in the 9½
months post-acquisition (17.6.05) were £1.6 million, yielding a profit of £
283,000.
The Group inherited a factoring agreement that, together with bank interest,
cost £41,000 in the year. With Group assistance the company terminated the
factoring arrangement and repaid its loan before the year end. This will
obviously result in cost savings in the current financial year.
Health & Safety Click Limited
Invoiced sales post acquisition (since 17.8.05) were £86,000, resulting in a
pre-tax loss of £26,000. A term of the acquisition was that PHSC plc would
provide up to £75,000 of funding. Two-thirds of the available resource was not
drawn down by HSCL in the period.
Dividend
The Board is proposing a final dividend of 0.75p per ordinary share to be paid
on 22 September 2006 to shareholders on the register as at 25 August 2006.
Prospects
The Board is confident that the benefits of recent acquisitions will begin to
be seen in 2006/07. Although the coming year is seen as a time for
consolidation, opportunities for additional suitable acquisitions will be
assessed as and when they present themselves. We will work hard to maximise
revenues and earnings from the existing trading subsidiaries and will explore
ways to accelerate the growth and profile of the Group in a logical and
consistent way.
Trading has commenced well in the first two months of 2006/07, with Group
revenues of £698,000 in the period.
The Annual General Meeting will be held on 12 September 2006 at The Old Church,
31 Rochester Road, Aylesford, Kent ME20 7PR at 11.00am.
Stephen King
Managing Director
3 July 2006
Group profit and loss account
for the year ended 31st March 2006
2006 2005
£'000 £'000
Turnover
Continuing operations 2,012 1,362
Acquisitions 1,692 855
3,704 2,217
Cost of sales
Continuing operations 1,010 458
Acquisitions 784 579
1,794 1,037
Gross profit 1,910 1,180
Administrative expenses (1,515) (718)
Other operating income 30 -
(1,485) (718)
Operating profit
Continuing operations 259 343
Acquisitions 166 119
425 462
Interest receivable 21 14
Interest payable (35) -
Profit on ordinary activities 411 476
before taxation
Tax charge on profit on ordinary (163) (160)
activities
Retained profit on ordinary 248 316
activities
after taxation for the financial
period
Earnings per ordinary share 2.60p 4.06p
Diluted earnings per ordinary share 2.56p 4.05p
Group balance sheet
for the year ended 31st March 2006
2006 2005
£'000 £'000
Fixed assets
Intangible assets 2,280 1,104
Tangible assets 720 389
Total fixed assets 3,000 1,493
Current assets
Stocks 297 -
Debtors 689 407
Cash at bank and in hand 487 808
1,473 1,215
Creditors:
Amounts falling due within one year (750) (359)
Net current assets 723 856
Total assets less current 3,723 2,349
liabilities
Creditors:
Amounts falling due after more than (417) -
one year
Provisions for liabilities and
charges:
Deferred taxation (13) -
Net assets 3,293 2,349
Capital and reserves
Called up share capital 983 837
Share premium accounts 728 284
Revaluation reserve 206 103
Profit and loss account 1,376 1,125
Total equity shareholders' funds 3,293 2,349
Group Statement of Total Recognised Gains and Losses
for the year ended 31st March 2006
2006 2005
£'000 £'000
Profit for the financial year - attributable to
the
shareholders of the parent company 248 316
Unrealised surplus on revaluation of properties 105 -
Total gain recognised since 31st March 2005 353 316
Group cash flow statement
For the year ended 31st March 2006
2006 2005
£'000 £'000
Net cash inflow from operating 631 574
activities
Returns on investments and servicing of (13) 14
finance
Taxation (222) (76)
Capital expenditure (2) (68)
Acquisitions (1,345) (303)
Equity dividends paid - (76)
Net cash (outflow)/inflow before (951) 65
financing
Financing 630 289
(Decrease)/increase in cash in period (321) 354
Reconciliation of net cash flow to movement in net
funds
(Decrease)/increase in cash in the (321) 354
period
Cash (inflow)/outflow from (increase)/ (285) 3
decrease in debt
Loans acquired with subsidiaries (125) -
Change in net debt resulting from cash (731) 357
flows
Net funds at beginning of period 806 449
Net funds at end of period 75 806
Reconciliation of operating profit to operating cash
flow
Operating profit/(loss) 425 462
Depreciation/amortisation 216 91
Loss on disposal fixed assets - 2
(Increase)/decrease in stock and WIP (95) -
(Increase)/decrease in debtors 93 51
Increase/(decrease) in creditors (8) (32)
Net cash (outflow)/inflow from operating 631 574
activities
Reconciliation of net cash flow to movement in net
debt
(Decrease)/Increase in cash in period (321) 354
Net cash inflow from bank overdrafts (1) -
Net cash inflow from bank loans (349) -
Net cash inflow from other loans (62) -
Cash outflow in respect of hire 2 3
purchase
Change in net debt (731) 357
For further information please contact:
PHSC plc
Stephen King 01622 717700
www.phsc.plc.co.uk
Ruegg & Co Limited
Gavin Burnell 020 7584 3663
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