Final Results

PHSC PLC Preliminary Results 2005/06 ________________________________________________ MANAGING DIRECTOR'S STATEMENT for the year ended 31 March 2006 Highlights: â€¢ Largest acquisition to date completed â€¢ Successful AIM flotation â€¢ Group revenues increased to Â£3.7m from Â£2.2m â€¢ 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 Â£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 Â£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 Â£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 Â£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 Â£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 Â£1.31 million in cash plus Â£100,000 in ordinary shares of PHSC plc at 62.5p. Further instalments of Â£125,000 and Â£100,000 cash are payable on the first and second anniversaries of the purchase respectively. The purchase price included net assets of around Â£440,000 of which Â£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 Â£75,000 into HSCL for working capital purposes, and have also made a payment of Â£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 Â£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 Â£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 Â£3.7 million (2005: Â£2.2 million). Pre-tax profits before adjustments for the effect of goodwill were Â£ 571,000. After allowing Â£160,000 for charges against the value of goodwill, the pre-tax profits were Â£411,000 (2005: Â£476,000). It is worth noting that the reduction in goodwill value was Â£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 Â£ 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 Â£1.22 million, yielding a profit of Â£337,000. In the previous year there were sales of Â£1.36 million and a profit of Â£ 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 Â£788,000 yielding a profit of Â£110,000. In the previous year there were sales of Â£854,000 and a profit of Â£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 Â£2.06 million with a profit of Â£314,000 before management charges. Sales in the 9Â½ months post-acquisition (17.6.05) were Â£1.6 million, yielding a profit of Â£ 283,000. The Group inherited a factoring agreement that, together with bank interest, cost Â£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 Â£86,000, resulting in a pre-tax loss of Â£26,000. A term of the acquisition was that PHSC plc would provide up to Â£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 Â£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 Â£'000 Â£'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 Â£'000 Â£'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 Â£'000 Â£'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 Â£'000 Â£'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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