Half-yearly Report
5December 2013
PHSC PLC
("PHSC", the "Company", or the "Group")
Interim Results for the six months ended 30 September 2013
GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT
Financial Highlights
* Group turnover up 79% at £3.942m compared with £2.198m
* EBITDA up 264% to £359k versus £136k
* Basic earnings per share up 233% at 2.30p compared with 0.69p
* Net asset value (unaudited) of £5.712m
* Placing raised £480k after expenses; funds received in October 2013 thus
excluded from Interim Accounts
* Pro-forma net asset value (unaudited) per share of 49p taking into account
the Placing, compared to a current share price (mid) of 32p
* Significant contributions from both new subsidiaries acquired last year
Trading overview
Financial statistics for each of the Group's seven trading subsidiaries are
given later in this statement and it will be seen that the most recent
acquisitions have had a major positive impact.
The Board's focus has been on ensuring that the new companies, QCS
International Limited and B to B Links Limited, are absorbed within the Group
with the minimum of disruption to their normal activities, and that they are
adequately resourced. In the case of B to B Links Limited, on-going CCTV
installation work for a major department store chain continues to be the
predominant feature. A comprehensive management structure has now been put in
place to deliver this work and the activity has generated average monthly
revenues of over £140k in the period, up from £75k per month in the first six
months after acquisition.
QCS International Limited continues to trade ahead of management forecasts, and
the outlook for their quality systems auditing and training services remains
encouraging.
As we predicted, the remaining five subsidiaries which deal predominantly in
health and safety consultancy and training services, and asbestos management
have had mixed fortunes. When taken together they are broadly holding their own
in market conditions that remain challenging, further reinforcing the Board's
view that the diversification from solely health and safety activities was well
justified.
Share placing
On 27 September 2013 the Company announced that it had raised £520,000 before
expenses through a placing of 2,080,000 new Ordinary Shares at a price of 25p
per share. The placing was oversubscribed, primarily taken up by institutional
investors, and included director participation as a demonstration of our
confidence in the business. The placing shares represented approximately 16 per
cent. of the enlarged issued share capital. It is worth noting that the
combined effect on the share dilution of our two new acquisitions prior to this
placing had been just 3 per cent.
The Board felt that it was appropriate to accept significant new funding at a
time when its cash flow was under pressure as a result of acquisition payments.
Whilst these payments were made from existing cash resources, the ability to
invest in materials and equipment primarily associated with B to B Links
Limited's growing order book would have been compromised. Although our bankers
had offered to provide a level of support that would have been sufficient,
overdrafts and borrowings ultimately have to be paid back. On balance the Board
took the decision that the level of dilution occasioned by the new share issue
was justified by the increased flexibility offered by an equity financing.
The net proceeds of the placing were approximately £480k and will be used as
additional working capital to fund the continued growth of the Group.
Outlook
In our last Annual Report we speculated that EBITDA for 2013/14 could be in the
order of £700-£750k. These interim figures announced today show us on course to
achieve that outcome. In the past it has always been the case that the Group's
financial performance is better in the second half of the year. With the new
subsidiaries generating a more level monthly income profile, this effect will
be less pronounced in the current year but we do expect the pattern to be
maintained.
We stated that there would be a positive impact from our reduced reliance upon
the core business of health and safety consultancy services. This has been
borne out by the far higher revenues and earnings per share we have been able
to deliver. As we get to understand the new businesses even better, we expect
to be able to carry on enhancing shareholder value.
Dividend prospects
The Board is not declaring an interim dividend but will consider payment of an
appropriate final dividend at the end of the year. Key considerations will be
the overall performance for the year and the extent of final payments becoming
due in respect of the acquisition of QCS International Limited and B to B Links
Limited which fall due at the end of July and September 2014 respectively.
Net Asset Value
As at 30 September 2013, the Company had net assets of £5,712,400 (unaudited)
as per these interim accounts. There were 10,606,348 Ordinary Shares in issue
at that date which equates to a net asset value (NAV) per share of 54p.
Taking into account the net proceeds of the Placing, the (unaudited) pro-forma
NAV per share as at 30 September 2013 was 49p. At 32p per share, the Ordinary
Shares of the Company are currently trading at approximately a 35% discount to
the (unaudited) pro-forma NAV per share.
Cash Flow
The nature of B to B Links Limited's business means that substantial cash is
tied up in stock and work in progress. In addition, agreed settlement terms
with a major client mean that higher sales have led to an increase in trade and
other receivables which Group-wide have risen by £384k since 31 March 2013.
Although £188k net cash was generated by operating activities, cash of £361k
was paid within the period on the anniversaries of two acquisitions. A further
£80k to complete the first anniversary payments was paid on 4 October 2013. Our
post period cash position was substantially improved by £480k net proceeds from
the share placing. Combined with further net cash from trading activities, the
bank balance stood at £523k at the end of October 2013.
Our banking arrangements with HSBC include a formal overdraft facility of £
200k, as yet unused.
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
Invoiced sales of £1,329,700 yielding a profit of £127,400 (the equivalent
figures for the same period last year were £1,124,300 and £102,700).
Inspection Services (UK) Limited
Invoiced sales of £98,300 yielding a profit of £3,500 (the figures for the same
period last year were £100,600 and £4,900).
Personnel Health and Safety Consultants Limited
Invoiced sales of £360,500 yielding a profit of £153,300 (the figures for the
same period last year were £388,900 and £167,800).
RSA Environmental Health Limited
Invoiced sales of £237,900 resulting in a profit of £20,900 (the figures for
the same period last year were £193,200 and a loss of £6,000).
Quality Leisure Management Limited
Invoiced sales of £186,800 resulting in a loss of £27,300 (the figures for the
same period last year were £307,500 and profit of £60,900).
QCS International Limited
Invoiced sales of £253,000 yielding a profit of £79,200 (this compares with
sales of £83,700 and a profit of £28,800 for the two months since acquisition
that fell into this period last year).
B to B Links Limited
Invoiced sales of £1,475,400 yielding a profit of £198,700 (there are no
comparative figures available for last year, with the subsidiary being acquired
on 28 September 2012).
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 7796 8800
Group Statement of Comprehensive Six Six
Income months months Year
ended ended ended
30 Sept 13 30 Sept 12 31 Mar 13
Note Unaudited Unaudited
£'000 £'000 £'000
Continuing operations
Revenue 2 3,942 2,198 5,791
Cost of sales (2,332) (1,145) (3,010)
Gross profit 1,610 1,053 2,781
Other income 1 3 6
Administrative expenses (1,274) (959) (2,268)
Profit from operations 337 97 519
Finance income - 1 2
Finance costs - - (1)
Profit before taxation 337 98 520
Corporation tax expense (93) (26) (138)
Profit after taxation and total
comprehensive income
from continuing operations 2 244 72 382
Profit after taxation and total 244 72 382
comprehensive income
Attributable to:
Equity holders of the Group 244 72 382
Earnings per share for profit after tax and
total comprehensive income from continuing
operations
attributable to the equity holders of the
Group during the period
Basic 4 2.30p 0.69p 3.64p
Group Statement of Financial Position 30 Sept 13 30 Sept 12 31 Mar 13
Unaudited Unaudited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 3 702 812 713
Goodwill 4,637 4,676 4,637
Deferred tax asset 3 2 3
5,342 5,490 5,353
Current assets
Inventories 184 137 153
Trade and other receivables 2,422 1,785 2,038
Cash and cash equivalents - 391 216
2,606 2,313 2,407
Total assets 2 7,948 7,803 7,760
Current liabilities
Trade and other payables 1,480 943 1,099
Financial liabilities 7 13 13
Current corporation tax payable 264 240 175
Short term provisions 410 863 441
2,161 2,059 1,728
Non-current liabilities
Financial liabilities 6 13 6
Long-term provisions - 330 330
Deferred taxation liabilities 69 75 69
75 418 405
Total liabilities 2,236 2,477 2,133
Net assets 5,712 5,326 5,627
Capital and reserves attributable to
equity
holders of the Group
Called up share capital 1,061 1,060 1,061
Share premium account 1,555 1,568 1,555
Capital redemption reserve 144 144 144
Retained earnings 2,952 2,554 2,867
5,712 5,326 5,627
Group Statement of Changes
in Equity
Capital
Share Share Redemption Retained
Capital Premium Reserve Earnings Total
£'000 £'000 £'000 £'000 £'000
Balance at 1 April 2012 1,038 1,497 144 2,691 5,370
Profit for the period - - - 72 72
attributable to equity
holders
Dividends - - - (209) (209)
Issue of shares 22 71 - - 93
Balance at 30 September 201 1,060 1,568 144 2,554 5,326
2
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 201 1,061 1,555 144 2,952 5,712
3
Group Statement of Cash Flows Six Six
months months Year
ended ended ended
30 Sept 13 30 Sept 12 31 Mar 13
Unaudited Unaudited
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 191 76 427
Interest paid - - (1)
Tax paid (3) - (183)
Net cash generated from operating 188 76 243
activities
Cash flows used in investing activities
Purchase of property, plant and equipment (11) (15) (25)
Purchase of subsidiary companies net of (361) (365) (786)
cash acquired
Disposal proceeds fixed assets - - 88
Interest received - 1 2
Net cash used in investing activities (372) (379) (721)
Cash flows used in financing activities
Dividends paid to group shareholders (159) (209) (209)
Net cash used in financing activities (159) (209) (209)
Net decrease in cash and cash equivalents (343) (512) (687)
Cash and cash equivalents at beginning of 216 903 903
period
Cash and cash equivalents at end of period (127) 391 216
Notes to the cash flow statement
Cash generated from operations
Operating profit - continuing operations 337 97 519
Depreciation charge 22 20 45
Goodwill impairment - - 39
Profit on sale of fixed assets - - (5)
(Increase)/decrease in inventories (31) 1 (15)
(Increase)/decrease in trade and other (384) (63) (336)
receivables
Increase in trade and other payables 253 21 187
Decrease in financial liabilities (6) - (7)
Cash generated from operations 191 76 427
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 2013, prepared under IFRS have been filed with the Registrar of
Companies. The auditors' report for the 2013 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. IFRS 7 Amendments to Financial Instruments Disclosures
has been adopted from 1 April 2012. The adoption of this standard has not had a
material impact on these interim 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
IAS 27 Separate Financial Statements 01/01/2013
IAS 28 Investments in Associates and Joint Ventures 01/01/2013
IFRS 10 Consolidated Financial Statements 01/01/2013
IFRS 11 Joint Arrangements 01/01/2013
IFRS 12 Disclosures of Interests in Other Entities 01/01/2013
IFRS 13 Fair Value Measurement 01/01/2013
IFRIC 20 Stripping Costs in the Production of a Surface 01/01/2013
Mine
IFRS 1 Amendments - Government Loans 01/01/2013
Transition Guidance (Amendments to IFRS 10, 11 and 12) 01/01/2013
IFRS Standards and Interpretations issued by IASB but not yet Effective date -
EU approved accounting
period beginning
Title on/after
IFRS 9 Financial Instruments 01/01/2013
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 01/01/2014
27)
IFRIC 21 Levies 01/01/2014
IAS 36 Amendments Recoverable Amount Disclosures for 01/01/2014
non-Financial Assets
Novation of Derivatives and Continuation of Hedge Accounting 01/01/2014
(Amendments to IAS 39)
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. Liabilities of £80,000 (QCS) and £330,000 (B to B) relating to
the payments due under the sale and purchase agreements are included in short
term provisions.
(b) Impairment of goodwill
Our interim review of the value of goodwill in the balance sheet did not
highlight any conditions which would give rise to a material impairment. For
this reason the Board is to defer any decision regarding the impairment of
goodwill until the year end.
Notes to the Financial Statements
(continued)
30 Sept 13 30 Sept 12 31 Mar 13
Unaudited Unaudited
2 Segmental Reporting £'000 £'000 £'000
Revenue
PHSC plc - - -
Personnel Health & Safety 361 389 765
Consultants Ltd
RSA Environmental Health Limited 238 193 421
Adamson's Laboratory Services Ltd 1,330 1,124 2,367
Inspection Services Ltd 98 101 202
Quality Leisure Management Ltd 187 307 607
Q C S International Ltd (acquired 253 84 335
31.07.12)
B to B Links Limited (acquired 1,475 - 1,094
30.09.12)
3,942 2,198 5,791
Profit/(loss) after taxation
PHSC plc 1 2 7
Personnel Health & Safety 53 68 94
Consultants Ltd
RSA Environmental Health Limited 12 (13) (1)
Adamson's Laboratory Services Ltd 35 (32) 136
Inspection Services Ltd (3) (1) 1
Quality Leisure Management Ltd (53) 27 55
Q C S International Limited 64 21 69
(acquired 31.07.12)
B to B Links (acquired 30.09.12) 135 - 60
244 72 421
Goodwill impairment (39)
382
Total assets
PHSC plc 5,892 5,410 5,009
Personnel Health & Safety 493 745 711
Consultants Ltd
RSA Environmental Health Limited 495 526 559
Adamson's Laboratory Services Ltd 1,260 1,316 1,438
Inspection Services Ltd 44 119 116
Quality Leisure Management Ltd 65 311 338
Q C S International Ltd 118 174 200
B to B Links Ltd 1,119 706 932
9,486 9,307 9,303
Adjustment of goodwill (1,538) (1,504) (1,543)
7,948 7,803 7,760
Notes to the Financial Statements
(continued) 30 Sept 13 30 Sept 12 31 Mar 13
Unaudited Unaudited
3 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,097 1,139 1,139
Additions 11 62 25
Acquisition of subsidiary - - 47
Disposals - - (114)
Carried forward 1,108 1,201 1,097
Depreciation
Brought forward 384 369 369
Charge 22 20 45
Disposals - - (30)
Carried forward 406 389 384
Net book value 702 812 713
4 Earnings per share
The calculation of the basic earnings per share is based on the following
data:
Earnings 30 Sept 13 30 Sept 12 31 Mar 13
£'000 £'000 £'000
Unaudited Unaudited
Continuing activities 244 72 382
Number of shares 30 Sept 13 30 Sept 12 31 Mar 13
Weighted average number of shares for the
purpose
of basic earnings per share 10,606,348 10,410,473 10,606,348
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