PHSC Regulatory News (PHSC)

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 aregiven later in this statement and it will be seen that the most recentacquisitions have had a major positive impact. The Board's focus has been on ensuring that the new companies, QCSInternational Limited and B to B Links Limited, are absorbed within the Groupwith the minimum of disruption to their normal activities, and that they areadequately resourced. In the case of B to B Links Limited, on-going CCTVinstallation work for a major department store chain continues to be thepredominant feature. A comprehensive management structure has now been put inplace to deliver this work and the activity has generated average monthlyrevenues of over £140k in the period, up from £75k per month in the first sixmonths after acquisition. QCS International Limited continues to trade ahead of management forecasts, andthe outlook for their quality systems auditing and training services remainsencouraging. As we predicted, the remaining five subsidiaries which deal predominantly inhealth and safety consultancy and training services, and asbestos managementhave had mixed fortunes. When taken together they are broadly holding their ownin market conditions that remain challenging, further reinforcing the Board'sview that the diversification from solely health and safety activities was welljustified. Share placing On 27 September 2013 the Company announced that it had raised £520,000 beforeexpenses through a placing of 2,080,000 new Ordinary Shares at a price of 25pper share. The placing was oversubscribed, primarily taken up by institutionalinvestors, and included director participation as a demonstration of ourconfidence in the business. The placing shares represented approximately 16 percent. of the enlarged issued share capital. It is worth noting that thecombined effect on the share dilution of our two new acquisitions prior to thisplacing had been just 3 per cent. The Board felt that it was appropriate to accept significant new funding at atime when its cash flow was under pressure as a result of acquisition payments.Whilst these payments were made from existing cash resources, the ability toinvest in materials and equipment primarily associated with B to B LinksLimited's growing order book would have been compromised. Although our bankershad offered to provide a level of support that would have been sufficient,overdrafts and borrowings ultimately have to be paid back. On balance the Boardtook the decision that the level of dilution occasioned by the new share issuewas justified by the increased flexibility offered by an equity financing. The net proceeds of the placing were approximately £480k and will be used asadditional 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 theorder of £700-£750k. These interim figures announced today show us on course toachieve that outcome. In the past it has always been the case that the Group'sfinancial performance is better in the second half of the year. With the newsubsidiaries generating a more level monthly income profile, this effect willbe less pronounced in the current year but we do expect the pattern to bemaintained. We stated that there would be a positive impact from our reduced reliance uponthe core business of health and safety consultancy services. This has beenborne out by the far higher revenues and earnings per share we have been ableto deliver. As we get to understand the new businesses even better, we expectto be able to carry on enhancing shareholder value. Dividend prospects The Board is not declaring an interim dividend but will consider payment of anappropriate final dividend at the end of the year. Key considerations will bethe overall performance for the year and the extent of final payments becomingdue in respect of the acquisition of QCS International Limited and B to B LinksLimited 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 issueat 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-formaNAV per share as at 30 September 2013 was 49p. At 32p per share, the OrdinaryShares of the Company are currently trading at approximately a 35% discount tothe (unaudited) pro-forma NAV per share. Cash Flow The nature of B to B Links Limited's business means that substantial cash istied up in stock and work in progress. In addition, agreed settlement termswith a major client mean that higher sales have led to an increase in trade andother receivables which Group-wide have risen by £384k since 31 March 2013. Although £188k net cash was generated by operating activities, cash of £361kwas 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. Ourpost period cash position was substantially improved by £480k net proceeds fromthe share placing. Combined with further net cash from trading activities, thebank 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 andinter-company charges (including the costs of operating the plc which arerecovered through management charges to trading subsidiaries), interest paidand received, depreciation and amortisation. Adamson's Laboratory Services Limited Invoiced sales of £1,329,700 yielding a profit of £127,400 (the equivalentfigures 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 sameperiod 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 thesame 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 forthe 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 thesame 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 withsales of £83,700 and a profit of £28,800 for the two months since acquisitionthat 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 nocomparative figures available for last year, with the subsidiary being acquiredon 28 September 2012). Stephen King - Group Chief Executive Officer For further information please contact:PHSC plcStephen King 01622 717700www.phsc.plc.uk Northland Capital Partners Limited(Nominated Adviser and Broker)Gavin Burnell / Edward Hutton 020 7796 8800 Group Statement of Comprehensive Six SixIncome 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 totalcomprehensive income from continuing operations 2 244 72 382 Profit after taxation and total 244 72 382comprehensive income Attributable to: Equity holders of the Group 244 72 382 Earnings per share for profit after tax andtotal comprehensive income from continuingoperations attributable to the equity holders of theGroup 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 toequity 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 Changesin 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 72attributable to equityholders Dividends - - - (209) (209) Issue of shares 22 71 - - 93 Balance at 30 September 201 1,060 1,568 144 2,554 5,3262 Balance at 1 April 2013 1,061 1,555 144 2,867 5,627 Profit for the period - - - 244 244attributable to equityholders Dividends - - - (159) (159) Balance at 30 September 201 1,061 1,555 144 2,952 5,7123 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 243activities 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 903period 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 ofInternational Financial Reporting Standards (IFRS) as adopted by the EuropeanUnion and interpretations issued by the International Financial ReportingInterpretations Committee (IFRIC) and have been prepared in accordance with AIMrules and the Companies Act 2006, as applicable to companies reporting underIFRS. The financial information contained in this report, which has not been audited,does not constitute statutory accounts as defined by Section 434 of theCompanies Act 2006. The Group's statutory financial statements for the yearended 31 March 2013, prepared under IFRS have been filed with the Registrar ofCompanies. The auditors' report for the 2013 financial statements wasunqualified and did not contain a statement under Section 498 (2) or (3) of theCompanies Act 2006. The same accounting policies and methods of computation are followed withinthese interim financial statements as adopted in the most recent annualfinancial statements. IFRS 7 Amendments to Financial Instruments Disclosureshas been adopted from 1 April 2012. The adoption of this standard has not had amaterial impact on these interim financial statements. New IFRS standards and interpretations not adopted Certain new standards, amendments and interpretations of existing standardsthat have been published and which have not been applied in these financialstatements were in issue but not yet effective (and in some cases had not yetbeen adopted by the EU) IFRS standards and interpretations issued (and EU adopted) but Effective date -not yet effective accounting period beginningTitle 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 01/01/2013Mine 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 beginningTitle on/after IFRS 9 Financial Instruments 01/01/2013 Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 01/01/201427) IFRIC 21 Levies 01/01/2014 IAS 36 Amendments Recoverable Amount Disclosures for 01/01/2014non-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 expectedto 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 ofinformation within the condensed interim financial statements. The information presented within these interim financial statements is incompliance with IAS 34 "Interim Financial Reporting". This requires the use ofcertain accounting estimates and requires that management exercise judgement inthe process of applying the Group's accounting policies. The areas involving ahigh degree of judgement or complexity, or areas where the assumptions andestimates are significant to the interim financial statements are disclosedbelow: (a) Provisions The Group recognises a provision where a legal or constructive obligationexists at the balance sheet date and a reliable estimate can be made of thelikely outcome. Liabilities of £80,000 (QCS) and £330,000 (B to B) relating tothe payments due under the sale and purchase agreements are included in shortterm provisions. (b) Impairment of goodwill Our interim review of the value of goodwill in the balance sheet did nothighlight any conditions which would give rise to a material impairment. Forthis reason the Board is to defer any decision regarding the impairment ofgoodwill until the year end. Notes to the Financial Statements(continued) 30 Sept 13 30 Sept 12 31 Mar 13 Unaudited Unaudited2 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 Unaudited3 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