Half-yearly Report
26 November 2010
PHSC PLC ("PHSC", "the Company" or "Group")
Interim Report 2010
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
for the six months ended 30 September 2010
Financial Highlights
- Group turnover (consolidated) for the period at £2.386m up 8% compared with £
2.208m for the same period last year.
- EBITDA of £106,300, compared with £210,900 for the same period last year.
- Basic earnings per share at the interim stage are 0.61p compared with 1.08p
achieved in the corresponding period last year.
- Net cash used by operating activities was £26,000 (£297,000 generated in the
same period last year).
- Overall cash and cash equivalents stood at £587,000 at the end of the period
compared with £710,000 at the year ended 31 March 2010. £93,400 is accounted
for by dividend payments.
- Significant recent contract wins, notably for asbestos management services.
- Net asset value (unaudited) of £5.097m or 49 pence per Ordinary Share compared
to a current share price (mid) of 17 pence.
Trading overview
The financial statistics above provide an ample illustration of the very
difficult trading conditions that have been encountered by Group subsidiaries
in the period. Turnover and profit figures for each company are given later in
this statement, but it is necessary to put those into some sort of context. In
addition, investors should take encouragement from a number of recent contract
awards. This indicates that the second half of the year should see an
improvement in Company fortunes.
Adamson's Laboratory Services Limited (ALS), which accounts for around half of
Group revenues, recorded a loss of £25,000 in the first quarter of 2010. This
was, in part, a result of exceptional efforts to complete a series of contracts
during the previous quarter to fit in with clients' budgetary requirements.
Whilst the effect was to achieve a good end to the last financial year, it left
a shortfall of work-in-progress with which to start the current year. In
addition, some work relating to social housing contracts undertaken in the
period incurred unexpected costs associated with obtaining access to numerous
residential premises. That situation has now been largely resolved, and the
performance figures below show that April's loss was eliminated and ALS were
back into positive territory at the interim stage. Local management are
acutely aware of the need to perform, and of the significance of their
contribution towards Group results.
In November 2010, ALS received confirmation from London Borough of Lewisham
that it had won new business valued at a minimum of £400,000 over three years,
including an order worth £62,500 for asbestos surveys in low-rise blocks. The
remainder of the work involves asbestos risk assessments, annual monitoring
inspections and management support. There is an option for the client to extend
the term by a further two years, which would result in additional revenues of £
200k over the period.
Two large contracts have been won by our Personnel Health & Safety Consultants
Limited subsidiary. One involves the company being appointed as advisors to a
medical services consortium and the other will see it delivering a range of
around 40 different training courses to a housing provider. The total value of
these two-year contracts is estimated as being £175,000 over the term.
Quality Leisure Management Limited, acquired in December 2009 and contributing
for the first time in an interim period, accounted for £62,000 of profit. Most
of the company's contracts come up for renewal at the end of the calendar year
and early indications suggest that there will be a very high renewal rate. The
company's contract with the Institute of Qualified Lifeguards generates a
six-figure income each year and has been extended until the end of 2011.
Costs of running the parent company increased by around £7,400 to £223,200.
The Board is looking to see where savings can be made, but recognises many of
the costs relate to the AIM listing and necessary associated disciplines.
Resolution of dispute relating to Inspection Services (UK) Limited
We previously stated our belief that the net assets of Inspection Services (UK)
Limited, purchased in October 2008, were overvalued by the seller. Following
the commencement of legal proceedings, an out-of-court settlement was reached.
The Company accepted £31,000 including a cash sum of £20,000 and forfeiture of
£11,000 held to the seller's account. After legal costs the net benefit was £
17,000. We have also released the provision for a profit-related payment of £
25,000 to the seller as targets were not met, and each party has agreed that
the matter is now concluded.
Regulatory review
In October 2010, Lord Young delivered a report entitled "Common sense - Common
safety" in which he considered measures to counter the "compensation culture"
and reduce the burdens associated with safety compliance on business. One
recommendation amongst many was that safety consultants should be accredited,
and we welcome that suggestion. Indeed, the profession has been working towards
a formal scheme for some time and expects one to be in place early in 2011.
This should give more status to qualified practitioners such as those employed
by Group subsidiaries.
Outlook
The effect of the Public Spending Review on PHSC plc's fortunes will inevitably
be a negative one in direct financial terms. There will be reductions in work
that we do directly for public sector organisations, but less easy to evaluate
is how our private sector clients who themselves rely upon public funding may
be impacted.
Of necessity, compliance-related business must continue to be placed to a large
extent. Clients will however be working to tighter budgets and will seek to
squeeze suppliers' profits. In this competitive marketplace, the ability to
perform effectively and efficiently is paramount.
Dividend prospects
The Board is not recommending payment of an interim dividend (same as last
year), but expects to propose an appropriate final dividend at the end of the
year.
A major strength is our substantial cash reserve. Despite our relatively weak
start to the current year, we expect the improvements we have recently seen to
carry over to the second half. Our aim is to complete the year with as strong a
performance as we can. We look to our investors to continue to support us in
the knowledge that we are committed to a progressive dividend policy, and in
the belief that our shares are generally undervalued in the marketplace.
Net Asset Value
As at 30 September 2010, the Company had net assets of £5.097m (unaudited) as
per these interim accounts. There were 10,381,973 Ordinary Shares in issue at
that date which equates to a net asset value (NAV) per share of 49.09p. At 17
pence per share the Ordinary Shares of the Company are currently trading at
approximately a 65% discount to the net asset value.
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,
interest received, depreciation and amortisation.
Adamson's Laboratory Services Limited
Invoiced sales of £978,607 yielding a profit of £7,206 (the figures for the
same period last year were £1,081,905 and £164,798).
Envex Company Limited
Invoiced sales of £85,336 yielding a profit of £27,420 for the period (the
figures for the same period last year were £102,599 and £13,007).
Inspection Services (UK) Limited
Invoiced sales of £123,272 yielding a profit of £12,359 (the figures for the
same period last year were £139,014 and £11,905).
Personnel Health and Safety Consultants Limited
Invoiced sales of £462,650 yielding a profit of £202,706 (the figures for the
same period last year were £492,226 and £220,795).
RSA Environmental Health Limited
Invoiced sales of £367,847 yielding a profit of £16,306. This is the first
period following the merger of the business activities of RSA and In-House The
Hygiene Management Company Limited. In the same period last year, their
combined sales of £392,887 resulted in a consolidated profit of £15,250.
Quality Leisure Management Limited
Invoiced sales of £369,239 yielding a profit of £62,104. There are no
comparable figures for last year
as the company was not part of the Group at that time.
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 Gavin Burnell/Rod Venables 020 7492 4750
(Nominated Adviser and Broker)
Group Statement of Six months Six months Year
Comprehensive Income ended ended ended
30 Sept 10 30 Sept 09 31 Mar 10
Note Unaudited
£'000 £'000 £'000
Continuing operations
Revenue 2,387 2,208 4,922
Cost of sales 1,324 1,135 2,583
-------- -------- --------
Gross profit 1,063 1,073 2,339
Other income 4 1 2
Administrative expenses (987) (901) (1,840)
-------- -------- --------
Profit from operations 80 173 501
Finance income 1 - -
Finance costs - (1) (1)
-------- -------- --------
Profit before taxation 81 172 500
Corporation tax expense (19) (55) (158)
Profit after taxation and total comprehensive income
-------- -------- --------
from continuing operations 62 117 342
-------- -------- --------
Profit after taxation and total comprehensive income 62 117 342
======== ======== ========
Attributable to:
Equity holders of the Group 62 117 342
-------- -------- --------
Earnings per share for profit from continuing 4
operations attributable to the equity holders
of the Group during the period
Basic 0.61p 1.08p 3.21p
Diluted 0.61p 1.06p 3.16p
Group Statement of Financial Position 30 Sept 10 30 Sept 09 31 Mar 10
Unaudited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 3 829 830 839
Goodwill 3,313 2,718 3,258
Deferred tax asset 5 - 5
-------- -------- --------
4,147 3,548 4,102
-------- -------- --------
Current assets
Inventories 2 2 2
Trade and other receivables 1,481 1,329 1,781
Cash and cash equivalents 587 911 710
-------- -------- --------
2,070 2,242 2,493
-------- -------- --------
Total assets 6,217 5,790 6,595
Current liabilities
Trade and other payables 643 619 863
Financial liabilities - 2 -
Current corporation tax payable 47 51 174
Short term provisions 250 75 250
-------- -------- --------
940 747 1,287
-------- -------- --------
Non-current liabilities
Financial liabilities - 37 -
Long-term provisions 100 - 100
Deferred taxation liabilities 80 74 80
-------- -------- --------
180 111 180
-------- -------- --------
Total liabilities 1,120 858 1,467
-------- -------- --------
Net assets 5,097 4,932 5,128
======== ======== ========
Capital and reserves attributable to equity
holders of the Group
Called up share capital 1,038 1,058 1,038
Share premium account 1,497 1,488 1,497
Revaluation reserve 195 114 195
Capital redemption reserve 144 197 144
Retained earnings 2,223 2,075 2,254
-------- -------- --------
5,097 4,932 5,128
======== ======== ========
Group Statement of Changes in Equity
Capital
Share Share Redemption Revaluation Retained Total
Capital Premium Reserve Reserve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2009 1,108 1,488 64 197 2,140 4,997
Profit for the period attributable to equity holders - - - - 342 342
Dividends - - - - (90) (90)
Issue of shares 10 9 - - - 19
Purchase of own shares (80) - 80 - (140) (140)
Depreciation on revalued assets - - - (2) 2 -
-------- -------- -------- -------- -------- --------
Balance at 31 March 2010 1,038 1,497 144 195 2,254 5,128
-------- -------- -------- -------- -------- --------
Balance at 1 April 2010 1,038 1,497 144 195 2,254 5,128
Profit for the period attributable to equity holders - - - - 62 62
Dividends - - - - (93) (93)
-------- -------- -------- -------- -------- --------
Balance at 30 September 2010 1,038 1,497 144 195 2,223 5,097
-------- -------- -------- -------- -------- --------
Consolidated cash flow statement Six months Six months Year
ended ended ended
30 Sept 10 30 Sept 09 31 Mar 10
Unaudited
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 120 333 554
Interest paid - (1) (1)
Tax paid (146) (35) (61)
-------- -------- --------
Net cash (used by)/generated from operating activities (26) 297 492
-------- -------- --------
Cash flows used in investing activities
Purchase of property, plant and equipment (17) (7) (11)
Purchase of subsidiary companies 11 - (320)
Disposal proceeds fixed assets 1 2 -
Interest received 1 - -
-------- -------- --------
Net cash used in investing activities (4) (5) (331)
-------- -------- --------
Cash flows used in financing activities
Repayments of borrowings - (44) (84)
Dividends paid to group shareholders (93) (90) (90)
Shares issued - - 20
Purchase of own shares - (90) (140)
-------- -------- --------
Net cash used in financing activities (93) (224) (294)
-------- -------- --------
Net (decrease)/increase in cash and cash equivalents (123) 68 (133)
Cash and cash equivalents at beginning of year 710 843 843
-------- -------- --------
Cash and cash equivalents at end of year 587 911 710
======== ======== ========
Notes to the cash flow statement
Cash generated from operations
Operating profit - continuing operations 80 173 501
Depreciation and amortisation 25 38 82
Loss on sale of fixed assets 1 - 1
Decrease in inventories - (2) (2)
Decrease/(increase) in trade and other receivables 235 178 (37)
(Decrease)/increase in trade and other payables (221) (54) 9
-------- -------- --------
Cash generated from operations 120 333 554
======== ======== ========
These interim financial statements for the period ended 30 September 2010 have
been prepared in accordance with International Financial Reporting Standards
(IFRSs). The Group financial statements consolidate the financial statements of
PHSC plc and all its subsidiary undertakings made up to 30 September 2010.
All companies in the Group use sterling as presentational and functional
currency.
The information presented within these interim financial statements is in
compliance with IAS 34
"Interim Financial Reporting". The 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 £100,000 liability has been provided within long term
provisions relating to the payment due on the second anniversary of the
acquisition of Quality Leisure Management.
(b) Impairment of goodwill
The Group Chief Executive Officer's Statement refers to the difficulty in
evaluating future trading volumes and profitability in respect of each
subsidiary company in the current economic climate. For this reason the Board
is to defer any decision regarding the impairment of goodwill until the year
end.
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 2010, prepared under IFRS have been filed with the Registrar of
Companies. The auditors' report for the 2010 financial statements was
unqualified and did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006.
Notes to the financial statements
30 Sept 10 30 Sept 09 31 Mar 10
Unaudited Audited
2 Segmental Reporting Note: £'000 £'000 £'000
Revenue
PHSC plc - - -
Personnel Health & Safety Consultants Ltd 463 492 979
RSA Environmental Health Limited i 368 392 825
Adamson's Laboratory Services Ltd 979 1,082 2,455
Envex Company Ltd 85 103 190
Inspection Services Ltd 123 139 270
Quality Leisure Management Ltd ii 369 - 203
-------- -------- --------
2,387 2,208 4,922
-------- -------- --------
Profit/(loss) after taxation
PHSC plc - - 9
Personnel Health & Safety Consultants Ltd 95 83 158
RSA Environmental Health Limited 6 2 21
Adamson's Laboratory Services Ltd (89) 38 141
Envex Company Ltd 16 5 13
Inspection Services Ltd 4 5 7
Quality Leisure Management Ltd 30 - 28
-------- -------- --------
62 133 377
Less: goodwill impairment - (16) (35)
-------- -------- --------
62 117 342
-------- -------- --------
Total assets
PHSC plc 4,280 4,147 4,410
Personnel Health & Safety Consultants Ltd 697 872 635
RSA Environmental Health Limited 605 158 600
Adamson's Laboratory Services Ltd 1,237 1,249 1,474
Envex Company Ltd 93 68 71
Inspection Services Ltd 161 233 162
Quality Leisure Management Ltd 186 - 298
-------- -------- --------
7,259 6,727 7,650
Adjustment of goodwill (1,042) (1,002) (1,120)
Net asset adjustment on purchase Inspection Services Ltd - 65 65
-------- -------- --------
6,217 5,790 6,595
-------- -------- --------
Notes:
(i) In House The Hygiene Company Ltd became a trading division of RSA
Environmental Health Ltd
on 1 April 2010; their analysis has been amalgamated.
(ii) Represents three months of trading as Quality Leisure Management Limited
was purchased on 31 December 2009.
30 Sept 10 30 Sept 09 31 Mar 10
Unaudited Audited
3 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,159 1,130 1,130
Additions 17 7 11
Disposals (11) (12) (12)
Acquisition of subsidiary - - 30
-------- -------- --------
Carried forward 1,165 1,125 1,159
-------- -------- --------
Depreciation
Brought forward 320 283 283
Charge 25 22 47
Disposals (9) (10) (10)
-------- -------- --------
Carried forward 336 295 320
-------- -------- --------
Net book value 829 830 839
4 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Earnings 30 Sept 10 30 Sept 09 31 Mar 10
£'000 £'000 £'000
unaudited
Continuing activities 62 117 342
Number of shares 30 Sept 10 30 Sept 09 31 Mar 10
Weighted average number of shares for the purpose
of basic earnings per share 10,276,019 10,890,227 10,676,841
Effect of dilutive warrants 29,949 163,373 137,707
Weighted average number of shares for the purpose
of diluted earnings per share 10,305,968 11,053,600 10,814,548
-------- -------- --------
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