Last checked at 25 Jun 2008 11:57
PHSC PLC Final Results 2007/08
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Group Chief Executive's Statement
for the year ended 31 March 2008
Highlights:
! Group revenues increased to GBP5.08m from GBP4.59m
! Profit from continuing operations maintained and disposal of loss-making subsidiary helped profit for financial year increase from GBP462,000 to GBP521,000
! Borrowings reduced by GBP280,000
! Net Group assets rise to GBP4.89m from GBP4.52m
! Basic earnings per share (net of discontinued operations) reduced from 4.70p to 4.48p due
to full effect of dilution
! Proposed dividend raised to 0.85p per Ordinary Share (2007: 0.80p)
! One subsidiary acquired and two further acquisitions in pipe-line
I am pleased to present my review of how the Group has performed financially over the year, and to outline some of the activities that have taken place. In addition, I look forward to our prospects and opportunities for the year ahead.
Although it was disappointing that we were ultimately unable to conclude our planned acquisition of a water treatment business due to the seller withdrawing from the transaction, we did successfully complete the purchase of In House the Hygiene Management Company Limited (In House) on 30 November 2007. Thus the Group presently consists of the parent company along with five active subsidiaries. It is expected that this number will increase in the current year. Reference to the In House transaction and other planned additions is made in the section headed "Recent and Proposed Acquisitions" below.
As a result of being unable to proceed with the acquisition opportunity mentioned above, a higher than anticipated level of cash was held throughout the period. This cash arose from the GBP1m placing that occurred in March 2007. In addition, given that the company is cash-generative, a decision was made to reduce borrowings. In consequence, bank loans secured against Group-owned properties had reduced from around GBP370,000 at the start of the year to around GBP90,000 at the year end.
In line with the Board's stated policy of buying back shares where the price is attractive and where cash flow allows, a total of 136,277 ordinary shares were purchased during the year and subsequently cancelled. This included the remaining holding of 86,277 shares originally issued to the seller as part of the consideration for RSA Environmental Health Limited (RSA) in 2004.
In last year's statement I reported that we had purchased additional premises for Adamson's Laboratory Service Limited (ALS) at Raunds in Northamptonshire, adjacent to the existing offices leased by RSA. We have now agreed to acquire the virtual freehold of the RSA premises themselves for a fee of GBP73,500 and that purchase is currently in progress. This will be funded from existing cash resources.
Recent and Proposed Acquisitions
The Group acquired In House the Hygiene Management Company Limited (In House) on 30 November 2007 for an initial consideration of GBP200,000 paid for out of existing cash resources. Further payments of GBP50,000 become due on each of the first and second anniversaries. Both anniversary payments are subject to an uplift equal to 50% of any pre-tax profit that exceeds GBP100,000 in the preceding year. In House is a well-respected and established food safety and hygiene consultancy, with hospitals, schools and hotels among its client base. The company also offers general health and safety consultancy and training. Please refer to the section of my report headed Performance by Trading Subsidiaries for information on post-acquisition performance.
Since the year end, Heads of Terms have been signed for the acquisition of two companies that will each bring significant new benefits and opportunities to the Group. Both proposed transactions are subject to a due diligence process currently in progress. Details of the intended acquisitions are outlined below.
The first company is an independent specialist in the examination and certification of plant and equipment, offering an inspection service for all statutory and non-statutory requirements throughout the UK. Originally formed in 1992, the company derives much of its work from a network of insurance brokers and enjoys a high level of repeat business. The agreed price is GBP 180,000 payable in cash on completion, plus assets at book value. An additional GBP25,000 becomes due on the first anniversary subject to pre-tax profits of not less than GBP60,000 accruing in the period. In the last financial year, the company recorded pre-tax profits of GBP40,000 on revenues of GBP221,000.
The second company was originally formed in 1989 and provides specialist scientific, process and engineering services to the water industry. Projects are undertaken in the potable water, waste water, fresh water and marine water environments. The business is ideally placed to benefit from increasing regulatory attention being paid to the sector. In particular, the company assists clients to meet EU-driven environmental legislation, and the Asset Maintenance Planning (AMP) programmes that water companies must agree with Ofwat, the regulatory body. The purchase price has been agreed at GBP500,000 inclusive of net assets of approximately GBP335,000. An initial sum of GBP350,000 becomes payable on completion, GBP100,000 six-months thereafter, and the balance on the first anniversary of completion. All these payments will be made from currently existing cash resources. Management accounts for the nine-months to end of March 2008 indicate that the company had revenues of GBP316,000 for that period and pre-tax profits of GBP124,000 before director's earnings.
Corporate Structure
In addition to myself, Nicola Coote is an executive director. There are two non-executive directors on the Board: Mike Miller, who chairs the Audit Committee, and Graham Webb MBE who chairs the Remuneration Committee.
A Chartered Secretary, Lorraine Young, supports the Board and its committees. The corporate resource is strengthened by the presence of our Group Accountant, Candy Wilton.
Performance by Trading Subsidiaries
Profit figures below are stated before tax and Group management charges. Note that several general health and safety training and consultancy assignments carried out by particular trading subsidiaries will have been invoiced by other Group companies as in previous years, thus it is inappropriate to make direct performance comparisons at subsidiary company level. Reference should be made to the Group's overall performance.
Personnel Health and Safety Consultants Limited
Sales of GBP1.05 million, yielding a profit of GBP561,000.
In the previous year there were sales of GBP1.12 million and a profit of GBP 528,000.
RSA Environmental Health Limited
Sales of GBP971,000, yielding a profit of GBP70,000.
In the previous year there were sales of GBP966,000 and a profit of GBP68,000.
Adamson's Laboratory Services Limited
Sales of GBP2.73m yielding a profit of GBP490,000.
In the previous year there were sales of GBP2.44m, yielding a profit of GBP542,000 after adjusting to include unbilled revenues at the year end of GBP119,000.
Envex Company Limited
Sales of GBP224,000, yielding a profit of GBP15,000.
By comparison, invoiced sales for the four months after acquisition were GBP 55,000, resulting in a profit of GBP3,000.
Dividend
The Board is proposing a final dividend of 0.85p per ordinary share to be paid on 19 September 2008 to shareholders on the register as at 22 August 2008.
Prospects
We are finding that the pricing of health and safety consultancy services is becoming more competitive, and margins are under pressure. Despite this tougher economic environment, the Board takes the view that PHSC plc can look forward to revenue growth and a good performance in the forthcoming year. Whilst much of the growth is dependent on the successful conclusion of the proposed acquisitions outlined above, the marketplace for the current subsidiaries' services is still strong. We feel that we are better placed than the majority of our competitors to withstand the effects of any downturn. Our confidence arises from the fact that we have a very diverse client portfolio and there are many ongoing contracts that will underpin revenues.
Trading in the first two months of 2008/09 generated Group revenues of GBP810,000 (2007/08: GBP725,000).
AGM
The Annual General Meeting will be held on Friday 12 September 2008 at The Old Church, 31 Rochester Road, Aylesford, Kent ME20 7PR at 10:00am.
Stephen KingGroup Chief ExecutiveGROUP BALANCE SHEET 31.3.08 31.3.07 Restated AS AT 31 MARCH 2008 GBP'000 GBP'000 Non-Current Assets Property, plant and equipment 807 818 Goodwill 2,585 2,240 3,392 3,058 Current Assets Inventories 263 389 Trade and other receivables 1,026 951 Cash and cash equivalents 1,303 1,469 2,592 2,809 Total Assets 5,984 5,867 Current Liabilities Trade and other payables 551 504 Financial liabilities 4 84 Current corporation tax payable 238 236 Short term provisions 80 144 873 968 Non-Current Liabilities Financial liabilities 85 287 Long term provisions 50 - Deferred tax liabilities 83 91 218 378 Total Liabilities 1,091 1,346 Net Assets 4,893 4,521 Capital and Reserves attributable to Equity holders of the Group Called up share capital 1,152 1,166 Share premium account 1,488 1,488 Revaluation reserve 200 202 Capital redemption reserve 19 5 Retained earnings 2,034 1,660 4,893 4,521 GROUP INCOME STATEMENT 31.3.08 31.3.07 Restated FOR THE YEAR ENDED 31 MARCH 2008 GBP'000 GBP'000 Continuing operations: Revenue 5,078 4,589 Cost of sales 2,721 2,306 Gross Profit 2,357 2,283 Administrative expenses 1,637 1,504 Other income 1 1 Operating Profit 721 780 Finance income 56 9 Finance costs 20 28 Profit before taxation 757 761 Corporation tax expense 236 239 Profit for the Financial Year on 521 522 Continuing Operations Loss for the Financial Year on - 60 Discontinued Operations Profit for the Financial Year 521 462 Attributable to: Equity holders of the Group 521,162 462,401 Earnings per Share for Profit from Continuing Operations attributable to the Equity Holders of the Group during the year Basic 4.48p 5.31p Diluted 4.42p 5.22p Earnings per Share for Profit from Discontinued Operations attributable to the Equity Holders of the Group during the year Basic - (0.61)p Diluted - (0.60)p GROUP STATEMENT OF Share Share Capital Revaluation Retained Total CHANGES IN EQUITY Capital Premium Redemption Reserve Earnings Reserve FOR THE YEAR ENDED GBP GBP GBP GBP GBP GBP 31 MARCH 2008
Balance at 1 April 2006 983 728 - 205 1,298 3,214
Profit for year - - - - 462 462 attributable to equity holder Dividends - - - - (74) (74) Issue of ordinary shares 188 812 - - - 1,000 Costs of placing new - (52) - - - (52) shares issued Purchase of own shares (5) - 5 - (29) (29) Depreciation on revalued - - - (3) 3 - assets
Balance at 31 March 2007 1,166 1,488 5 202 1,660 4,521
Balance at 1 April 2007 1,166 1,488 5 202 1,660 4,521
Profit for year - - - - 521 521 attributable to equity holder Dividends - - - - (92) (92) Purchase of own shares (14) - 14 - (57) (57) Depreciation on revalued - - - (2) 2 - assets Balance at 31 March 2008 1,152 1,488 19 200 2,034 4,893 GROUP CASH FLOW STATEMENT 31.3.08 31.3.07 Restated FOR THE YEAR ENDED 31 MARCH 2008 GBP'000 GBP'000 Cash flows from operating activities: Cash generated from operations 897 658 Interest paid (20) (28) Tax paid (245) (186) Net cash generated from operating 632 444 activities Cash flows from investing activities Purchase of property, plant and (42) (166) equipment Proceeds from sale of property, plant - 7 and equipment
Purchase of subsidiary companies (net of (382) (160) cash acquired)
Interest received 56 9 Net cash used in investing activities (368) (310) Cash flows from financing activities Proceeds from borrowings - 93 Repayment of borrowings (281) (90) Dividends paid to group shareholders (92) (74) Proceeds of share issues - 948 Purchase of own shares (57) (29) Net cash (used by)/generated from (430) 848 financing activities Net (decrease)/increase in cash and cash (166) 982 equivalents Cash and cash equivalents at beginning 1,469 487 of year
Cash and cash equivalents at end of year 1,303 1,469
NOTE TO THE GROUP CASH FLOW STATEMENT 31.3.08 31.3.07 Restated FOR THE YEAR ENDED 31 MARCH 2008 GBP'000 GBP'000 I. CASH GENERATED FROM OPERATIONS Operating profit - continuing operations 721 780 Profit for financial year - discontinued - (60) operations Depreciation and amortisation charges 54 81 Loss on sale of discontinued operations - 34 Loss on sale of fixed assets - 3 Decrease/(increase) in stock and work in 126 (83) progress Decrease/(increase) in debtors 10 (251) (Decrease)/increase in creditors (14) 154 Cash generated from operations 897 658
For further information please contact:
PHSC plcStephen King 01622 717700www.phsc.plc.co.ukRuegg & Co LimitedGavin Burnell 020 7584 3663Hichens, Harrison & Co. plcDaniel Briggs 020 7382 7776
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