Half-year Report

2 December 2019

PHSC PLC
(“PHSC”, the “Company”, or the “Group”)

Unaudited Interim Results for the six months ended 30 September 2019

GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT

Financial Highlights

• Group revenue for first half of £2.234m, down from £2.897m last year.
• EBITDA of £175k, compared with an underlying equivalent of £135k at the halfway stage last year i.e. before factoring in an exceptional gain from property disposal.
• Earnings per share of 1.01p compared with 1.47p last year.  Last year’s figure includes exceptional gain from property disposal.
• Cash of £688k compared with £583k last year.
• Net asset value (unaudited) of £5.3m compared to £5.5m last year.
• Pro-forma net asset value (unaudited) per share of 36p compared to a current share price (mid) of 11p.
• Interim dividend declared of 0.5p per ordinary share.

Operational Highlights and Business Outlook

Compared with the halfway stage last year, EBITDA from trading activities improved across the Group as a whole by £40k, aided by the Group’s lower overheads and premises related savings. This was achieved despite a decline in product sales through our security division, caused by the trading difficulties of the retail sector.

All businesses within the safety division contributed higher profits, with three out of the four safety-related subsidiaries achieving higher revenues. The forward order book is very encouraging.

Our quality systems division also reported growth in sales and increased profits. The larger space available for public training courses, following expansion into an adjacent unit, is starting to pay dividends with higher delegate numbers being achieved.

Our security division saw a reduction in sales of around 45% as the customer base, predominantly high street retailers, continued to struggle, resulting in a loss for the first half. The effect has been mitigated to an extent by careful cost control and a reduction in staffing levels through normal staff turnover. After a prolonged period of low activity, the subsidiary’s largest client has recently begun to place new business, and this gives more scope for optimism in the future. As has been previously reported, the weak Sterling exchange rate impacts greatly on gross profit margins, as all product supplied and installed are imported and paid for in US Dollars or Euros.

The fortunes of the Group as a whole are affected by the performance of the security division, which presently accounts for approximately 40% of the Group’s revenues. The business is an important player in the retail sector and has again been recognised at the annual Retail Risk Fraud Awards when it was Highly Commended for RFID solutions (products using radio frequency identification systems).

Dividend

Profitable trading and a healthy cash position have enabled the Board to declare an interim dividend of 0.5p per ordinary share, to be paid on 28 February 2020 to those on the register of members on 3 January 2020.

The recommendation by the Board of any final dividend for the current financial year will be subject to the Group’s full year performance.

Cash Flow

Cash at bank on 30 September 2019 stood at £688k compared with £583k at the same time last year.

Other than in the normal course of business and the proposed and any future dividends that might be declared, the Board does not currently anticipate there being any additional calls on the Company’s cash.

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, and dividends from, trading subsidiaries), interest paid and received, depreciation and amortisation.

Inspection Services (UK) Limited
Invoiced sales of £132,613 yielding a profit of £35,860 (the figures for the same period last year were £108,563 and £19,130).

Personnel Health and Safety Consultants Limited
Invoiced sales of £366,657 yielding a profit of £139,470 (the figures for the same period last year were £311,111 and £123,846).

RSA Environmental Health Limited
Invoiced sales of £207,524 resulting in a profit of £50,488 (the figures for the same period last year were £190,563 and £27,501).

Quality Leisure Management Limited
Invoiced sales of £194,295 resulting in a profit of £58,544 (the figures for the same period last year were £218,327 and £46,983).

QCS International Limited
Invoiced sales of £397,832 yielding a profit of £142,102 (the figures for the same period last year were £363,514 and £111,259).

B2BSG Systems Limited
Invoiced sales of £935,356 resulting in a loss of £56,558 (the figures for the same period last year were £1,705,080 and £65,319 profit).

For further information please contact:

PHSC plc

Stephen King                                                                01622 717 700
[e-mail]
www.phsc.plc.uk

Strand Hanson Limited (Nominated Adviser)                       020 7409 3494
Richard Tulloch/Eric Allan

Novum Securities Limited (Broker)                          020 7399 9427
Colin Rowbury

About PHSC

PHSC plc, through its trading subsidiaries Personnel Health & Safety Consultants Ltd, RSA Environmental Health Ltd, QCS International Ltd, Inspection Services (UK) Ltd and Quality Leisure Management Ltd, provides a range of health, safety, hygiene, environmental and quality systems consultancy and training services to organisations across the UK. B2BSG Systems Ltd offer innovative security solutions including tagging, labelling and CCTV.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (“MAR”).

 

Group Statement of Comprehensive Income					Six months ended				Six months ended				Year ended
					30 Sept 19				30 Sept 18				31 Mar 19
	Note				Unaudited				Unaudited				Audited
					£’000				£’000				£’000
Continuing operations
Revenue	3				2,234				2,897				5,215
Cost of sales					(1,101)				(1,494)				(2,719)
Gross profit					1,133				1,403				2,496
Administrative expenses					(979)				(1,298)				(2,418)
Goodwill impairment	2				-				-				(200)
Profit on disposal of fixed assets					-				166				166
Profit from operations					154				271				44
Finance income/(costs)					1				(1)				(1)
Profit before taxation					155				270				43
Corporation tax expense					(7)				(54)				(42)
Profit for the period after tax attributable
to owners of parent	3				148				216				1
Total comprehensive income attributable to owners of the parent				148				216				1
Basic and diluted Earnings per Share for profit after tax from continuing operations attributable to the equity holders of the Group during the period	5				1.01p				1.47p				0.005p

Group Statement of Financial Position			30 Sept 19		30 Sept 18		31 Mar 19
			Unaudited		Unaudited		Audited
	Note		£’000		£’000		£’000
Non-current assets
Property, plant and equipment	4		561		453		489
Goodwill			3,478		3,678		3,478
Deferred tax asset			18		22		18
			4,057		4,153		3,985
Current assets
Inventories			307		379		317
Trade and other receivables			1,069		1,404		973
Cash and cash equivalents			688		583		642
			2,064		2,366		1,932
Total assets	3		6,121		6,519		5,917
Current liabilities
Trade and other payables			647		889		675
Right of use lease liability			23		-		-
Current corporation tax payable			62		71		55
			732		960		730
Non-current liabilities
Right of use lease liability			54		-		-
Deferred taxation liabilities			46		56		46
			100		56		46
Total liabilities			832		1,016		776
Net assets			5,289		5,503		5,141
Capital and reserves attributable to equity
holders of the Group
Called up share capital			1,468		1,468		1,468
Share premium account			1,916		1,916		1,916
Capital redemption reserve			144		144		144
Merger relief reserve			134		134		134
Retained earnings			1,627		1,841		1,479
			5,289		5,503		5,141

Group Statement of Changes in Equity
	Share Capital	Share Premium	Capital Redemption Reserve	Merger Relief Reserve	Retained Earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Balance at 1 April 2019	1,468	1,916	144	134	1,479	5,141
Profit for the period attributable to equity holders	-	-	-	-	148	148
Balance at 30 September 2019	1,468	1,916	144	134	1,627	5,289
Balance at 1 April 2018	1,468	1,916	144	134	1,625	5,287
Profit for the period attributable to equity holders	-	-	-	-	216	216
Balance at 30 September 2018	1,468	1,916	144	134	1,841	5,503

Group Statement of Cash Flows		Six months		Six months		Year
		ended		ended		ended
		30 Sept 19		30 Sept 18		31 Mar 19
		Unaudited		Unaudited		Audited
		£’000		£’000		£’000
Cash flows generated from operating activities
Cash generated from operations		57		48		326
Interest paid		-		(1)		(2)
Tax paid		-		-		(9)
Net cash generated from operating activities		57		47		315
Cash flows (used in)/from investing activities
Purchase of property, plant and equipment		(14)		(8)		(69)
Disposal of fixed assets (net of disposal costs)		2		300		299
Interest received		1		-		-
Net cash (used in)/from investing activities		(11)		292		230
Cash flows used in financing activities
Dividends paid to group shareholders		-		-		(147)
Net cash used in financing activities		-		-		(147)
Net increase in cash and cash equivalents		46		339		398
Cash and cash equivalents at beginning of period		642		244		244
Cash and cash equivalents at end of period		688		583		642
Notes to the cash flow statement
Cash generated from operations
Operating profit - continuing operations		154		271		44
Depreciation charge		21		13		38
Goodwill impairment		-		-		200
Profit on sale of property		-		(166)		(162)
Loss on sale of other fixed assets		3		3		-
Decrease in inventories		10		10		73
(Increase)/decrease in trade and other receivables		(96)		165		595
(Decrease)/increase in trade and other payables		(35)		(248)		(462)
Cash generated from operations		57		48		326

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 the AIM Rules for Companies 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 2019, prepared under IFRS have been filed with the Registrar of Companies.  The auditors’ report for the 2019 financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Other than as set out below, the same accounting policies and methods of computation are followed within these interim financial statements as adopted in the most recent annual financial statements. 

The Group has applied IFRS 16 with a date of initial application of 1 April 2019 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4.  The cumulative effect of initial application is recognised in retained earnings at 1 April 2019.  The details of the change in accounting policy are disclosed below.

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4.  Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease.

On transition to IFRS 16, the Group elected to reassess whether there is a lease for all contracts in place on or after 1 April 2019.  Contracts that were not identified as leases under IAS 17 and IFRIC 4 were reassessed for whether there is a lease.  Therefore, the definition of a lease under IFRS 16 was applied to contracts in place or entered into on or after 1 April 2019.

As lessee, the Group previously classified leases as operating or finance leases based on its assessment pf whether the lease transferred significantly all of the risks and remains incidental to ownership of the underlying asset to the Group.  Under IFRS 16, the Group recognises rights-of-use assets and liabilities for most leases i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of equipment and services.

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at a cost of capital of 5.0%.  Rights-of-use assets are measured at their carrying amount as if IFRS 16 had been applied since the commencement date, discounted at a cost of capital of 5.0%.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease.  A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• The contract involves the use of an identified assets; this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset;
• The Group has the right to obtain substantially all of the economic benefits from use of the assets throughout the period of use; and
• The Group has the right to direct the use of the asset.  The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used,  In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if the Group has the right to operate the asset.

On transition to IFRS 16, the Group recognised an additional £83,575 of right-of-use assets and the impact of discounting was considered immaterial so lease liabilities of £83,575 were also recognised. Therefore, no adjustment to equity at 1 April 2019 was made. In the period to 30 September 2019, depreciation of £6,905 was recognised in the statement of comprehensive income in relation to right of use assets.

The information presented within these interim financial statements complies 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:

Impairment of goodwill

The Board has considered the carrying value of goodwill and although there have been losses in certain subsidiaries in the interim period, the longer term outlook remains stable and an impairment charge in these interim accounts is not therefore considered necessary and will be reassessed at the year end.

2.       Exceptional Administrative Expenses

		30 Sept 19		30 Sept 18		31 Mar 19
		Unaudited		Unaudited		Audited
		£’000		£’000		£’000
Impairment of PHSC plc’s investment in B2B Links Limited		-		-		200

3.       Segmental Reporting

	30 Sept 19		30 Sept 18		31 Mar 19
	Unaudited		Unaudited		Audited
Revenue	£’000		£’000		£’000
Security division: B2BSG Solutions Ltd	935		1,705		2,724
	935		1,705		2,724
Health & safety division
Inspection Services (UK) Ltd	133		109		233
Personnel Health & Safety Consultants Ltd	367		311		657
Quality Leisure Management Ltd	194		218		438
RSA Environmental Health Ltd	207		191		404
	901		829		1,732
Quality systems division:  QCS International Ltd	398		363		759
Total revenue	2,234		2,897		5,215

	30 Sept 19		30 Sept 18		31 Mar 19
	Unaudited		Unaudited		Audited
Profit/(loss) after taxation, before management charge	£’000		£’000		£’000
Security division
B2BSG Solutions Ltd	(42)		62		(31)
	(42)		62		(31)
Health & safety division
Inspection Services (UK) Ltd	30		17		38
Personnel Health & Safety Consultants Ltd	137		114		249
Quality Leisure Management Ltd	49		41		93
RSA Environmental Health Ltd	43		26		61
	259		198		441
Quality systems division: QCS International Ltd	115		100		159
Holding company: PHSC plc	(184)		(156)		(368)
	148		204		201
Taxation adjustment (group loss relief and deferred tax)	-		12		-
Goodwill impairment	-		-		(200)
Total Group profit after taxation	148		216		1

	30 Sept 19		30 Sept 18		31 Mar 19
	Unaudited		Unaudited		Audited
Total assets	£’000		£’000		£’000
Security division
B2BSG Systems Ltd	602		1,112		553
	602		1,112		553
Safety division
Inspection Services (UK) Ltd	218		233		193
Personnel Health & Safety Consultants Ltd	1,057		689		950
Quality Leisure Management Ltd	320		258		326
RSA Environmental Health Limited	684		619		636
	2,279		1,799		2,105
Quality division: QCS International Ltd	765		568		667
Discontinued: Adamson’s Laboratory Services Ltd	-		18		-
Holding company: PHSC plc	3,249		4,146		3,366
	6,895		7,643		6,691
Adjustment of goodwill	(774)		(1,124)		(774)
Total assets	6,121		6,519		5,917

4.       Property, plant and equipment

		30 Sept 19		30 Sept 18		31 Mar 19
		Unaudited		Unaudited		Audited
		£’000		£’000		£’000
Cost or valuation
Brought forward (as restated)		907		934		935
Additions		14		8		69
Disposals		(37)		(163)		(181)
Carried forward		884		779		823
Depreciation
Brought forward		334		340		340
Charge		21		13		38
Disposals		(32)		(27)		(44)
Carried forward		323		326		334
Net book value		561		453		489

5.       Earnings per share

The calculation of the basic earnings per share is based on the following data.

		30 Sept 19		30 Sept 18		31 Mar 19
		£’000		£’000		£’000
		Unaudited		Unaudited
Earnings
Continuing activities		148		216		1
Number of shares		30 Sept 19		30 Sept 18		31 Mar 19
Weighted average number of shares for the purpose of basic earnings per share		14,667,257		14,667,257		14,667,257