Preliminary Results

13 June 2011 PHSC PLC Preliminary Announcement of Results for the year ended 31 March 2011 Highlights: * EBITDA of £0.378m, down from £0.583m * Group revenues at £4.874m compared with £4.922m last year * Cash reserves rise to £0.749m * Group net assets rise to £5.27m from £5.13m * Basic earnings per share of 2.33p down from 3.21p * Proposed final dividend of 2.00p comprising of ordinary dividend of 1.00p and a special dividend of 1.00p per share (2010: 0.90p) Group Chief Executive's Review At the conclusion of what has been a difficult year for the Group, I am pleased to present my review of our financial performance and what we are doing to preserve shareholder value. The contribution of each subsidiary is outlined, along with details of the more significant activities that we have been involved in. The final part of this review is concerned with our future expectations and the difficulty of forecasting revenues in the current economic environment. General Overview Revenue and profit Overall Group revenues saw a reduction of around £48,000 over the period, generating EBITDA of £378,400. With that figure standing at £106,300 at the time of the interims, a strong second half performance saw annual earnings of more than three times that amount. This improvement in fortunes is partly caused by a high volume of invoices traditionally being raised in February and March each year, curbing work in progress and meeting customers' budgetary needs. Costs Management at all subsidiaries continues to look at all opportunities to reduce costs, where this can be accomplished without detriment to quality or performance. After offsetting savings made across the Group, costs for the year rose by a net £130,000. This reflects a full year's ownership of Quality Leisure Management Limited (QLM), purchased on 31 December 2009. Having frozen staff salaries across the Group in 2009/10, a decision was taken to award a general 2% cost-of-living increase in July 2010 to all employees below director level at each subsidiary. Mindful of the overhead associated with running the parent company, my fellow board directors and I elected to freeze our own pay. Further, we have all agreed to reduce our remuneration in 2011/12 such that there will be an overall saving of £12,000 from main board salaries. In particular I must thank our non-executive directors for their understanding and wholehearted co-operation with this initiative. Recent and Proposed Acquisitions In accordance with our obligation under the share purchase agreement, a stage payment of £250,000 was made to the former owners of QLM on 31 December 2010, being the first anniversary of the acquisition. This was funded from our existing cash resources. The agreement provides for a final payment of £100,000 to be made on 31 December 2011. The final payment will be adjusted, £ for £ up or down according to a performance formula, and we expect the eventual figure to be lower than that provided for. Following a dispute about asset values with the former owner of Inspection Services (UK) Limited, purchased in October 2008, we commenced legal proceedings. This led to an out-of-court settlement whereby the board 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. The Group is not actively seeking further acquisitions, but responds to opportunities as they arise. Two potential targets have been evaluated to date in 2011 but no formal offers were made due to unrealistic vendor expectations in one case and an insufficiently robust order book in the other. Corporate Structure There has been no change to the structure. In addition to myself, Nicola Coote is an executive director. Our two non-executive directors are Mike Miller, who chairs the audit committee, and Graham Webb MBE who chairs the remuneration committee. The contracts of both non-executives have been extended until 31 March 2012. Our chartered secretary, Lorraine Young, supports the board and its committees. The corporate resource is strengthened by the presence of our group accountant, Candy Wilton. In my Interim Statement, I explained that the corporate overhead had increased and the board was looking to see where savings could be made. I stated that certain costs are an inevitable result of our AIM listing and of the infrastructure necessary to meet our compliance obligations. Some shareholders subsequently questioned whether this statement was a precursor to leaving AIM, with mixed opinions as to how they would regard such a move. For the avoidance of doubt, the board is presently comfortable with the existing trading platform. Whilst we note that our shares trade well below what we deem to be a more appropriate value, we do not anticipate any changes in the short term and remain committed to our AIM listing. We continue to look at measures to reduce costs, as evidenced by the cut to directors' pay mentioned earlier, and will continue to review each area of expense including registrar services. Employees The board is grateful for the support of workers at all subsidiaries, especially those directly affected by cost-saving measures. A small number of employees have seen reductions in their working week, or workloads rising as a result of non-replacement of leavers. The board is committed to do whatever it reasonably can to preserve and protect the livelihoods of those it employs, recognising that they are the lifeblood of the company. Regulatory review A Government-commissioned report produced by Lord Young in October 2010 was entitled "Common sense - Common safety". It was intended to reduce the burdens associated with safety compliance on business, and to address the compensation culture. One recommendation led to the setting up of the Occupational Safety and Health Consultants Register. This is designed to make it easier for clients to source competent advisors, and to give more status to qualified practitioners such as those employed by Group subsidiaries. The majority of relevant personnel within the Group are now registered. Performance by Trading Subsidiaries Profit figures below are stated before tax and Group management charges. Note that revenues for safety training courses and general consultancy assignments are usually credited to the company generating the sale. It is sometimes the case that the consultant delivering the work is not from the same subsidiary and Group policy is not to cross-charge for such services. For example, a £ 22,000 sale by Envex was delivered by Adamson's Laboratory Services at a cost of around £17,000. For that reason, reference should be made to the Group's overall performance rather than attempting to make direct comparisons at subsidiary level. Personnel Health and Safety Consultants Limited Sales of £927,500, yielding a profit of £379,000. In the previous year there were sales of £978,500 and a profit of £418,000. RSA Environmental Health Limited Sales of £661,500, yielding a profit of £16,500. In the previous year there were combined sales of £840,000 for RSA and In-House The Hygiene Management Company (now a division of RSA), and a combined profit of £51,500. Adamson's Laboratory Services Limited Sales of £2.09 million yielding a profit of £160,000. In the previous year there were sales of £2.45 million, yielding a profit of £ 340,500. Envex Company Limited Sales of £177,000, yielding a profit of £53,500. In the previous year there were sales of £190,000 and a profit of £28,500. Inspection Services (UK) Limited Sales of £246,500, yielding a profit of £18,500. In the previous year there were sales of £272,000, yielding a profit of £ 20,000. Quality Leisure Management Limited Sales of £766,000, yielding a profit of £109,000 In the previous year, the company had sales of £203,000, yielding a profit of £ 40,000. This represented a three-month period following acquisition. Net Asset Value As at 31 March 2011, the Company had net assets of £5.273m. There were 10,381,973 Ordinary Shares in issue at that date which equates to a net asset value (NAV) per share of 50.78p. At 17.5 pence per share, the Ordinary Shares of the Company are currently trading at a discount of approximately 65% to the net asset value. Dividend The board is proposing a final dividend of 1.00p per ordinary share. The Group has a strong and increasing cash balance. This stood at around £ 749,000 at year-end. In the absence of any immediate call upon the majority of these reserves, the board also proposes a special additional dividend of 1.00p per ordinary share. Subject to approval at the Annual General Meeting, the above total dividend of 2.00p per ordinary share will be paid on 23 September 2011 to shareholders on the register as at 26 August 2011. Prospects Increasingly we are finding that some competitors are grossly underpricing work, sometimes to the extent that the quality of their service will inevitably be compromised. The current policy for buyers, particularly in the public sector, to award contracts to the lowest price bidder without considering how the provider can possibly deliver the service effectively is shortsighted and will ultimately prove counterproductive. PHSC plc has always prided itself on the amount of repeat business and new work arising from recommendation. We continue to believe that the best long-term strategy is to deliver a good quality service at a fair price. Our subsidiaries are each exploring ways of adding value to what they provide, and the development of new services. At a time when we have limited opportunity to increase revenue from traditional sources, we must focus on controlling and eliminating costs to the best of our ability. Much has been achieved in this respect but there are further steps that we will be exploring. Our subsidiaries are finding it extremely difficult to forecast future demand for their services, and this uncertainty makes it hard to plan with any degree of confidence. However, much of our business is compliance-based and to that extent there will always be a demand. The board expects that revenues for 2011/12 will be broadly similar to those for the previous year, but that concerted efforts to cut costs will bear fruit. Based on current expectations we anticipate an increase of up to 10% in annual profits. Nevertheless, we are mindful that unexpected fluctuations in demand will impact upon this projection. Our very strong cash balance, even after allowing for the enhanced dividend payment the board is recommending, gives us a substantial advantage over the majority of our competitors. This can only be a very positive factor in the long-term outlook for our company. Stephen King Group Chief Executive CONSOLIDATED STATEMENT OF FINANCIAL POSITION 31.3.11 31.3.10 AS AT 31 MARCH 2011 £'000 £'000 Non-Current Assets Property, plant and equipment 817 839 Goodwill 3,315 3,257 Deferred tax asset 1 5 4,133 4,101 Current Assets Inventories 2 2 Trade and other receivables 2,320 1,781 Cash and cash equivalents 749 710 3,071 2,493 Total Assets 7,204 6,594 Current Liabilities Trade and other payables 1,694 863 Current tax liabilities 56 174 Short term provisions 100 250 1,850 1,287 Non-Current Liabilities Long term provisions - 100 Deferred tax liabilities 81 80 81 180 Total Liabilities 1,931 1,467 Net Assets 5,273 5,127 Equity Called up share capital 1,038 1,038 Share premium account 1,497 1,497 Revaluation reserve 191 194 Capital redemption reserve 144 144 Retained earnings 2,403 2,254 5,273 5,127 STATEMENT OF COMPREHENSIVE INCOME 31.3.11 31.3.10 FOR THE YEAR ENDED 31 MARCH 2011 £'000 £'000 Revenue 4,874 4,922 Cost of sales 2,636 2,583 Gross profit 2,238 2,339 Administrative expenses 1,917 1,840 Other income 6 2 Operating profit 327 501 Interest receivable and similar income 1 - Interest payable and similar charge - 1 Profit for the year before taxation 328 500 Corporation tax expense 89 158 Profit for the financial year on 239 342 continuing operations Profit attributable to: Owners of parent 239 342 Earnings per share for profit on continuing operations attributable to the owners of the Group during the year Basic 2.33p 3.21p Diluted 2.32p 3.16p GROUP STATEMENT OF Share Share Capital Revaluation Retained Total CHANGES IN EQUITY Capital Premium Redemption Reserve Earnings Equity FOR THE YEAR ENDED £ £ Reserve £ £ £ 31 MARCH 2011 £ Balance at 1 April 2009 1,107 1,488 64 197 2,139 4,995 Total comprehensive income - - - - 342 342 for the year Dividends - - - - (90) (90) Issue of shares 11 9 - - - 20 Purchase of own shares (80) - 80 - (140) (140) Depreciation on revalued - - - (3) 3 - assets Balance at 31 March 2010 1,038 1,497 144 194 2,254 5,127 Balance at 1 April 2010 1,038 1,497 144 194 2,254 5,127 Total comprehensive income - - - - 239 239 for the year Dividends - - - - (93) (93) Depreciation on revalued - - - (3) 3 - assets Balance at 31 March 2011 1,038 1,497 144 191 2,403 5,273 GROUP CASH FLOW STATEMENT Note 31.3.11 31.3.10 FOR THE YEAR ENDED 31 MARCH 2011 £'000 £'000 Cash flows from operating activities: Cash generated from operations I 616 554 Interest paid - (1) Tax paid (203) (61) Net cash generated from operating 413 492 activities Cash flows from investing activities Purchase of property, plant and equipment (33) (11) Purchase of subsidiary companies (net of (250) (320) cash acquired) Disposal proceeds 1 - Interest received 1 - Net cash used in investing activities (281) (331) Cash flows from financing activities Repayment of borrowings - (84) Dividends paid to group shareholders (93) (90) Shares issued for cash - 20 Purchase of own shares - (140) Net cash used by financing activities (93) (294) Net decrease in cash and cash equivalents 39 (133) Cash and cash equivalents at beginning of 710 843 year Cash and cash equivalents at end of year 749 710 NOTE TO THE GROUP CASH FLOW STATEMENT 31.3.11 31.3.10 FOR THE YEAR ENDED 31 MARCH 2011 £'000 £'000 I. CASH GENERATED FROM OPERATIONS Operating profit - continuing operations 327 501 Depreciation and amortisation charges 52 82 Loss on sale of fixed assets 10 1 (Increase)/decrease in stock and work in - (2) progress (Increase)/decrease in debtors 334 (38) Increase/(decrease) in creditors (107) 10 Cash generated from operations 616 554 NOTE TO THE PRELIMINARY RESULTS ANNOUNCEMENT OF PHSC PLC FOR THE YEAR ENDED 31 MARCH 2011 The financial information set out above does not constitute the Group's financial statements for the years ended 31 March 2011 or 2010, but is derived from those financial statements. Statutory financial statements for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following their approval by the board and despatch to shareholders. The auditors have not yet reported on the 2011 financial statements. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS. The accounting policies used in preparation of this preliminary announcement are consistent with those in the full financial statements that have yet to be published. For further information please contact: PHSC plc Stephen King 01622 717700 www.phsc.plc.co.uk Northland Capital Partners Limited Gavin Burnell / Rod Venables 020 7796 8800 Katie Shelton (Broking)

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PHSC (PHSC)
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