Last checked at 26 Nov 2010 07:00
26 November 2010 PHSC PLC ("PHSC", "the Company" or "Group") Interim Report 2010GROUP CHIEF EXECUTIVE OFFICER'S STATEMENTfor the six months ended 30 September 2010
Financial Highlights
- Group turnover (consolidated) for the period at £2.386m up 8% compared with £
2.208m for the same period last year.
- EBITDA of £106,300, compared with £210,900 for the same period last year.
- Basic earnings per share at the interim stage are 0.61p compared with 1.08p
achieved in the corresponding period last year.
- Net cash used by operating activities was £26,000 (£297,000 generated in the
same period last year).
- Overall cash and cash equivalents stood at £587,000 at the end of the period
compared with £710,000 at the year ended 31 March 2010. £93,400 is accounted
for by dividend payments.
- Significant recent contract wins, notably for asbestos management services.
- Net asset value (unaudited) of £5.097m or 49 pence per Ordinary Share compared
to a current share price (mid) of 17 pence.
Trading overview
The financial statistics above provide an ample illustration of the verydifficult trading conditions that have been encountered by Group subsidiariesin the period. Turnover and profit figures for each company are given later inthis statement, but it is necessary to put those into some sort of context. Inaddition, investors should take encouragement from a number of recent contractawards. This indicates that the second half of the year should see animprovement in Company fortunes. Adamson's Laboratory Services Limited (ALS), which accounts for around half ofGroup revenues, recorded a loss of £25,000 in the first quarter of 2010. Thiswas, in part, a result of exceptional efforts to complete a series of contractsduring the previous quarter to fit in with clients' budgetary requirements.Whilst the effect was to achieve a good end to the last financial year, it lefta shortfall of work-in-progress with which to start the current year. Inaddition, some work relating to social housing contracts undertaken in theperiod incurred unexpected costs associated with obtaining access to numerousresidential premises. That situation has now been largely resolved, and theperformance figures below show that April's loss was eliminated and ALS wereback into positive territory at the interim stage. Local management areacutely aware of the need to perform, and of the significance of theircontribution towards Group results.In November 2010, ALS received confirmation from London Borough of Lewishamthat it had won new business valued at a minimum of £400,000 over three years,including an order worth £62,500 for asbestos surveys in low-rise blocks. Theremainder of the work involves asbestos risk assessments, annual monitoringinspections and management support. There is an option for the client to extendthe term by a further two years, which would result in additional revenues of £200k over the period.Two large contracts have been won by our Personnel Health & Safety ConsultantsLimited subsidiary. One involves the company being appointed as advisors to amedical services consortium and the other will see it delivering a range ofaround 40 different training courses to a housing provider. The total value ofthese two-year contracts is estimated as being £175,000 over the term.Quality Leisure Management Limited, acquired in December 2009 and contributingfor the first time in an interim period, accounted for £62,000 of profit. Mostof the company's contracts come up for renewal at the end of the calendar yearand early indications suggest that there will be a very high renewal rate. Thecompany's contract with the Institute of Qualified Lifeguards generates asix-figure income each year and has been extended until the end of 2011.Costs of running the parent company increased by around £7,400 to £223,200. The Board is looking to see where savings can be made, but recognises many ofthe costs relate to the AIM listing and necessary associated disciplines.
Resolution of dispute relating to Inspection Services (UK) Limited
We previously stated our belief that the net assets of Inspection Services (UK)Limited, purchased in October 2008, were overvalued by the seller. Followingthe commencement of legal proceedings, an out-of-court settlement was reached.The Company 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 thatthe matter is now concluded.Regulatory reviewIn October 2010, Lord Young delivered a report entitled "Common sense - Commonsafety" in which he considered measures to counter the "compensation culture"and reduce the burdens associated with safety compliance on business. Onerecommendation amongst many was that safety consultants should be accredited,and we welcome that suggestion. Indeed, the profession has been working towardsa formal scheme for some time and expects one to be in place early in 2011.This should give more status to qualified practitioners such as those employedby Group subsidiaries.OutlookThe effect of the Public Spending Review on PHSC plc's fortunes will inevitablybe a negative one in direct financial terms. There will be reductions in workthat we do directly for public sector organisations, but less easy to evaluateis how our private sector clients who themselves rely upon public funding maybe impacted.
Of necessity, compliance-related business must continue to be placed to a large extent. Clients will however be working to tighter budgets and will seek to squeeze suppliers' profits. In this competitive marketplace, the ability to perform effectively and efficiently is paramount.
Dividend prospects
The Board is not recommending payment of an interim dividend (same as last year), but expects to propose an appropriate final dividend at the end of the year.
A major strength is our substantial cash reserve. Despite our relatively weakstart to the current year, we expect the improvements we have recently seen tocarry over to the second half. Our aim is to complete the year with as strong aperformance as we can. We look to our investors to continue to support us inthe knowledge that we are committed to a progressive dividend policy, and inthe belief that our shares are generally undervalued in the marketplace.
Net Asset Value
As at 30 September 2010, the Company had net assets of £5.097m (unaudited) asper these interim accounts. There were 10,381,973 Ordinary Shares in issue atthat date which equates to a net asset value (NAV) per share of 49.09p. At 17pence per share the Ordinary Shares of the Company are currently trading atapproximately a 65% discount to the net asset value.
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, interest received, depreciation and amortisation.
Adamson's Laboratory Services Limited
Invoiced sales of £978,607 yielding a profit of £7,206 (the figures for the same period last year were £1,081,905 and £164,798).
Envex Company Limited
Invoiced sales of £85,336 yielding a profit of £27,420 for the period (the figures for the same period last year were £102,599 and £13,007).
Inspection Services (UK) Limited
Invoiced sales of £123,272 yielding a profit of £12,359 (the figures for the same period last year were £139,014 and £11,905).
Personnel Health and Safety Consultants Limited
Invoiced sales of £462,650 yielding a profit of £202,706 (the figures for the same period last year were £492,226 and £220,795).
RSA Environmental Health Limited
Invoiced sales of £367,847 yielding a profit of £16,306. This is the firstperiod following the merger of the business activities of RSA and In-House TheHygiene Management Company Limited. In the same period last year, theircombined sales of £392,887 resulted in a consolidated profit of £15,250.
Quality Leisure Management Limited
Invoiced sales of £369,239 yielding a profit of £62,104. There are no comparable figures for last year
as the company was not part of the Group at that time.
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 Gavin Burnell/Rod Venables 020 7492 4750 (Nominated Adviser and Broker)
Group Statement of Six months Six months YearComprehensive Income ended ended ended 30 Sept 10 30 Sept 09 31 Mar 10 Note Unaudited £'000 £'000 £'000 Continuing operations Revenue 2,387 2,208 4,922 Cost of sales 1,324 1,135 2,583 -------- -------- --------Gross profit 1,063 1,073 2,339 Other income 4 1 2 Administrative expenses (987) (901) (1,840) -------- -------- --------Profit from operations 80 173 501 Finance income 1 - -Finance costs - (1) (1) -------- -------- --------Profit before taxation 81 172 500 Corporation tax expense (19) (55) (158)
Profit after taxation and total comprehensive income
-------- -------- --------from continuing operations 62 117 342 -------- -------- --------
Profit after taxation and total comprehensive income 62
117 342 ======== ======== ======== Attributable to: Equity holders of the Group 62 117 342 -------- -------- --------
Earnings per share for profit from continuing 4 operations attributable to the equity holders of the Group during the period
Basic 0.61p 1.08p 3.21pDiluted 0.61p 1.06p 3.16p
Group Statement of Financial Position 30 Sept 10 30 Sept 09
31 Mar 10 Unaudited Note £'000 £'000 £'000 Non-current assets Property, plant and equipment 3 829 830 839Goodwill 3,313 2,718 3,258Deferred tax asset 5 - 5 -------- -------- -------- 4,147 3,548 4,102 -------- -------- --------Current assets Inventories 2 2 2Trade and other receivables 1,481 1,329 1,781Cash and cash equivalents 587 911 710 -------- -------- -------- 2,070 2,242 2,493 -------- -------- -------- Total assets 6,217 5,790 6,595 Current liabilities Trade and other payables 643 619 863Financial liabilities - 2 -
Current corporation tax payable 47 51
174Short term provisions 250 75 250 -------- -------- -------- 940 747 1,287 -------- -------- --------Non-current liabilitiesFinancial liabilities - 37 -Long-term provisions 100 - 100Deferred taxation liabilities 80 74 80 -------- -------- -------- 180 111 180 -------- -------- -------- Total liabilities 1,120 858 1,467 -------- -------- --------Net assets 5,097 4,932 5,128 ======== ======== ========
Capital and reserves attributable to equity
holders of the Group Called up share capital 1,038 1,058 1,038Share premium account 1,497 1,488 1,497Revaluation reserve 195 114 195Capital redemption reserve 144 197 144Retained earnings 2,223 2,075 2,254 -------- -------- -------- 5,097 4,932 5,128 ======== ======== ========
Group Statement of Changes in Equity
Capital Share Share Redemption Revaluation Retained Total Capital Premium
Reserve Reserve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2009 1,108 1,488 64 197 2,140 4,997
Profit for the period attributable to equity holders - -
- - 342 342Dividends - - - - (90) (90)Issue of shares 10 9 - - - 19Purchase of own shares (80) - 80 - (140) (140)
Depreciation on revalued assets - -
- (2) 2 - -------- -------- -------- -------- -------- --------
Balance at 31 March 2010 1,038 1,497
144 195 2,254 5,128 -------- -------- -------- -------- -------- -------- Balance at 1 April 2010 1,038 1,497 144 195 2,254 5,128Profit for the period attributable to equity holders - -
- - 62 62Dividends - - - - (93) (93) -------- -------- -------- -------- -------- --------
Balance at 30 September 2010 1,038 1,497
144 195 2,223 5,097 -------- -------- -------- -------- -------- -------- Consolidated cash flow statement Six months Six months Year ended ended ended 30 Sept 10 30 Sept 09 31 Mar 10 Unaudited £'000 £'000 £'000
Cash flows from operating activities Cash generated from operations 120
333 554Interest paid - (1) (1)Tax paid (146) (35) (61) -------- -------- --------
Net cash (used by)/generated from operating activities (26)
297 492 -------- -------- --------
Cash flows used in investing activities Purchase of property, plant and equipment (17) (7) (11)Purchase of subsidiary companies 11 - (320)Disposal proceeds fixed assets 1
2 -Interest received 1 - - -------- -------- --------
Net cash used in investing activities (4)
(5) (331) -------- -------- --------
Cash flows used in financing activities Repayments of borrowings - (44) (84)Dividends paid to group shareholders (93)
(90) (90)Shares issued - - 20Purchase of own shares - (90) (140) -------- -------- --------
Net cash used in financing activities (93)
(224) (294) -------- -------- --------
Net (decrease)/increase in cash and cash equivalents (123) 68 (133)Cash and cash equivalents at beginning of year 710
843 843
-------- -------- --------Cash and cash equivalents at end of year 587
911 710 ======== ======== ========
Notes to the cash flow statement
Cash generated from operations Operating profit - continuing operations 80 173 501Depreciation and amortisation 25 38 82Loss on sale of fixed assets 1 - 1Decrease in inventories - (2) (2)Decrease/(increase) in trade and other receivables 235 178 (37)(Decrease)/increase in trade and other payables (221) (54) 9 -------- -------- --------Cash generated from operations 120
333 554 ======== ======== ======== These interim financial statements for the period ended 30 September 2010 havebeen prepared in accordance with International Financial Reporting Standards(IFRSs). The Group financial statements consolidate the financial statements ofPHSC plc and all its subsidiary undertakings made up to 30 September 2010.
All companies in the Group use sterling as presentational and functional currency.
The information presented within these interim financial statements is in compliance with IAS 34
"Interim Financial Reporting". The 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. A £100,000 liability has been provided within long term provisions relating to the payment due on the second anniversary of the acquisition of Quality Leisure Management.
(b) Impairment of goodwill
The Group Chief Executive Officer's Statement refers to the difficulty inevaluating future trading volumes and profitability in respect of eachsubsidiary company in the current economic climate. For this reason the Boardis to defer any decision regarding the impairment of goodwill until the yearend.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 2010, prepared under IFRS have been filed with the Registrar ofCompanies. The auditors' report for the 2010 financial statements wasunqualified and did not contain a statement under Section 498 (2) or (3) of theCompanies Act 2006.
Notes to the financial statements
30 Sept 10 30 Sept 09 31 Mar 10 Unaudited Audited2 Segmental Reporting Note: £'000 £'000 £'000 Revenue PHSC plc - - - Personnel Health & Safety Consultants Ltd 463 492 979 RSA Environmental Health Limited i 368 392 825 Adamson's Laboratory Services Ltd
979 1,082 2,455
Envex Company Ltd 85 103 190 Inspection Services Ltd 123 139 270 Quality Leisure Management Ltd ii 369 - 203 -------- -------- -------- 2,387 2,208 4,922 -------- -------- -------- Profit/(loss) after taxation PHSC plc - - 9 Personnel Health & Safety Consultants Ltd 95 83 158 RSA Environmental Health Limited 6 2 21 Adamson's Laboratory Services Ltd (89) 38 141 Envex Company Ltd 16 5 13 Inspection Services Ltd 4 5 7 Quality Leisure Management Ltd 30 - 28 -------- -------- -------- 62 133 377 Less: goodwill impairment - (16) (35) -------- -------- -------- 62 117 342 -------- -------- -------- Total assets PHSC plc 4,280 4,147 4,410 Personnel Health & Safety Consultants Ltd 697 872 635 RSA Environmental Health Limited 605 158 600 Adamson's Laboratory Services Ltd
1,237 1,249 1,474
Envex Company Ltd 93 68 71 Inspection Services Ltd 161 233 162 Quality Leisure Management Ltd 186 - 298 -------- -------- -------- 7,259 6,727 7,650
Adjustment of goodwill
(1,042) (1,002) (1,120)
Net asset adjustment on purchase Inspection Services Ltd - 65 65 -------- -------- -------- 6,217 5,790 6,595 -------- -------- -------- Notes: (i) In House The Hygiene Company Ltd became a trading division of RSA Environmental Health Ltd on 1 April 2010; their analysis has been amalgamated.
(ii) Represents three months of trading as Quality Leisure Management Limited
was purchased on 31 December 2009. 30 Sept 10 30 Sept 09 31 Mar 10 Unaudited Audited3 Property, plant and equipment £'000 £'000 £'000 Cost or valuation Brought forward 1,159 1,130 1,130 Additions 17 7 11 Disposals (11) (12) (12) Acquisition of subsidiary - - 30 -------- -------- -------- Carried forward 1,165 1,125 1,159 -------- -------- -------- Depreciation Brought forward 320 283 283 Charge 25 22 47 Disposals (9) (10) (10) -------- -------- -------- Carried forward 336 295 320 -------- -------- -------- Net book value 829 830 839 4 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: Earnings 30 Sept 10 30 Sept 09 31 Mar 10 £'000 £'000 £'000 unaudited Continuing activities 62 117 342 Number of shares 30 Sept 10 30 Sept 09 31 Mar 10 Weighted average number of shares for the purpose of basic earnings per share 10,276,019 10,890,227 10,676,841 Effect of dilutive warrants 29,949 163,373 137,707 Weighted average number of shares for the purpose of diluted earnings per share 10,305,968
11,053,600 10,814,548
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