PHSC Regulatory News (PHSC)

25 November 2014 PHSC PLC ("PHSC", the "Company", or the "Group") Interim Results for the six months ended 30 September 2014 GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT Financial Highlights * Group turnover for first half up 4.7% at £4.129m compared with £3.942m last year. * EBITDA up 44% to £518k before costs of acquisitions, versus £359k last year. * Basic earnings per share of 2.26p on enlarged share capital, compared with 2.30p last year. * Net asset value (unaudited) of £6.622m. * Pro-forma net asset value (unaudited) per share of 52.2p compared to a current share price (mid) of 30.0p. * Performance of both new subsidiaries exceeds expectations, increasing profits and resulting in higher earn-out payments Trading overview Our trading performance has exceeded the board's expectations and this hasresulted in increased revenue and profits. Financial statistics for eachtrading subsidiary are given later in this statement. The positive effect of our recent acquisitions continues to be felt, with thelegacy health and safety businesses also making a valuable contribution. The stand-out performance is from B to B Links Limited which has more thandoubled its profit to around £402,000. This was assisted by a one-off projectcommissioned in the second quarter by our largest client who requiredsignificant works to their high street retail property portfolio within a shortspace of time. The project presented great challenges to everybody involved inthe installation programme, and their efforts ensured that the client'sdeadlines were met. This work was in addition to the normal installationprogramme that the client engages us to deliver. The subsidiary also benefittedfrom significant new business from a national chain of builders' merchants andan accelerated programme of work from a leading high street fashion chain. The two-year earn-out period following the acquisition of QCS InternationalLimited ended on 31 July 2014 and, as subsequently announced, an agreed finalpayment of £105,285 was made to the vendors. This was funded from existing cashand brought the total cash payment for the transaction to £425,285. At the timeof acquisition an allowance of £80,000 was made for the final payment but theextra profits generated meant that this provision was exceeded by £25,285.Under IFRS rules the excess has been expressed as a charge to the GroupStatement of Comprehensive Income. In the case of B to B Links Limited, the two-year earn-out period concluded on30 September 2014. As announced today, an exceptionally strong performance inthe last quarter has resulted in an earn-out entitlement of £458,243. Of this,£250,000 was provided for at the date of acquisition so it will be necessary tocharge the excess amount of £208,243 to the Group Statement of ComprehensiveIncome. The strong results for the half-year have been assisted by a reversal offortune for Quality Leisure Management Limited which was loss-making at thisstage last year but has posted a profit of around £57,000 in the first half. Outlook In the past, the Group's financial performance has always been better in thesecond half of the year. We expect this cycle to be maintained in respect ofthe majority of our subsidiaries, but not for the Group as a whole. This isbecause the exceptional one-off contribution from B to B Links in Q2 isexpected to be balanced out by normalised revenues in the second half.Nevertheless, with each trading subsidiary having a strong forward order book,we expect to build on the impressive performance that has been delivered in thefirst half. Take-up of RSA Environmental Limited's "SafetyMARK" programme to support safetyexcellence in schools is increasing, and is on the way to compensating for thecontinued contraction in Local Authority-derived inspection work. Our Adamson'sLaboratory Service Limited subsidiary is engaged in extensive programmes ofwork for two leading Universities. Our Scottish subsidiary, QCS InternationalLimited, is gearing up to deliver training and consultancy support inconnection with pending revisions to international quality standards. Dividend prospects The Board is not declaring an interim dividend but intends to recommend anappropriate final dividend at the end of the year in line with its statedpolicy of at least maintaining the level of dividend paid. Cash Flow The bank balance stood at £138,398 as at 30 September 2104 (the date of theinterim accounting period) and £156,830 at the close of business on the lasttrading day prior to this announcement. Cash demands over the coming weeks are considerable. Large amounts are tied upin outstanding invoices associated with B to B Links Limited's exceptionalinvoicing achievements in September 2014, much of which is on agreed 90 daypayment terms. Trade and other receivables across the Group were £2.922m at 30September compared with £1.935m at 31 March 2014. Of the £458,243 final payment due in connection with the acquisition of B 2 BLinks Limited, a sum of £120,000 was advanced to the vendors in July 2014. Inexchange for part-payment earlier than it fell due, the vendors agreed to deferthe bulk of the remaining payment until 31 December 2014. By that time it isanticipated that sufficient cash will have been generated from settlement ofinvoices we issued in September to cover this liability. Our banking arrangements with HSBC include the ability to put in place anoverdraft facility of £100k upon 48 hours' notice, although as at today's datethat facility is not being called upon. 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 Revenue of £1,288,600 yielding a profit of £67,400 (the equivalent figures forthe same period last year were £1,329,700 and £127,400). The work in progresslevel at the end of September 2014 was particularly high. Inspection Services (UK) Limited Invoiced sales of £96,300 yielding a profit of £8,900 (the figures for the sameperiod last year were £98,300 and £3,500). Personnel Health and Safety Consultants Limited Invoiced sales of £390,800 yielding a profit of £191,200 (the figures for thesame period last year were £360,500 and £153,300). RSA Environmental Health Limited Invoiced sales of £198,200 resulting in a profit of £8,000 (the figures for thesame period last year were £237,900 and £20,900). Quality Leisure Management Limited Invoiced sales of £246,400 resulting in a profit of £57,000 (the figures forthe same period last year were £186,800 and a loss £27,300). QCS International Limited Invoiced sales of £254,000 yielding a profit of £58,900 (the figures for thesame period last year were £253,000 and £79,200). B to B Links Limited Invoiced sales of £1,654,300 yielding a profit of £402,000 (the figures for thesame period last year were £1,475,400 and £198,700) 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 7382 1100John Howes / Alice Lane (Broking) Group Statement of Comprehensive Income Six Six months months Year ended ended ended 30 Sept 14 30 Sept 13 31 Mar 14 Note Unaudited Unaudited £'000 £'000 £'000 Continuing operations Revenue 3 4,129 3,942 7,594 Cost of sales (2,249) (2,332) (4,356) Gross profit 1,880 1,610 3,238 Other income 1 1 Administrative expenses (1,383) (1,274) (2,583) Exceptional administrative expenses 2 (75) Profit from operations 422 337 656 Finance income - - - Finance costs - - (1) Profit before taxation 422 337 655 Corporation tax expense (136) (93) (161) Profit for the period after tax attributableto owners of parent 3 286 244 494 Total comprehensive income attributable to 286 244 494owners of the parent Attributable to: Equity holders of the Group 286 244 494 Basic and diluted Earnings per Share 5 2.26p 2.30p 4.24pfor profit after tax from continuingoperations attributable to the equityholders of the Group during theperiod Group Statement of Financial Position 30 Sept 14 30 Sept 13 31 Mar 14 Unaudited Unaudited Note £'000 £'000 £'000 Non-current assets Property, plant and equipment 4 686 702 696 Goodwill 4,560 4,637 4,609 Deferred tax asset - 3 - 5,246 5,342 5,305 Current assets Inventories 228 184 155 Trade and other receivables 2,922 2,422 1,935 Cash and cash equivalents 138 - 712 3,288 2,606 2,802 Total assets 3 8,534 7,948 8,107 Current liabilities Trade and other payables 1,475 1,480 1,135 Financial liabilities 2 7 7 Current corporation tax payable 237 264 127 Short term provisions 130 410 330 1,844 2,161 1,599 Non-current liabilities Financial liabilities - 6 - Deferred taxation liabilities 68 69 68 68 75 68 Total liabilities 1,912 2,236 1,667 Net assets 6,622 5,712 6,440 Capital and reserves attributable toequity holders of the Group Called up share capital 1,268 1,061 1,268 Share premium account 1,831 1,555 1,831 Capital redemption reserve 144 144 144 Retained earnings 3,379 2,952 3,197 6,622 5,712 6,440 Group Statement of Changes in Equity Share Share Capital Retained Total Capital Premium Redemption Earnings Reserve £'000 £'000 £'000 £'000 £'000 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 2013 1,061 1,555 144 2,952 5,712 Balance at 1 April 2014 1,268 1,831 144 3,197 6,440 Profit for the period - - - 286 286attributable to equityholders Dividends - - - (104) (104) Balance at 30 September 2014 1,268 1,831 144 3,379 6,622 Group Statement of Cash Flows Six Six months months Year ended ended ended 30 Sept 14 30 Sept 13 31 Mar 14 Unaudited Unaudited £'000 £'000 £'000 Cash flows (used by)/ generated fromoperating activities Cash generated from operations (231) 191 856 Interest paid - - (1) Tax paid (27) (3) (211) Net cash (used by)/generated from (258) 188 644operating activities Cash flows used in investing activities Purchase of property, plant and equipment (12) (11) (31) Purchase of subsidiary companies net of (200) (361) (441)cash acquired Interest received - - - Net cash used in investing activities (212) (372) (472) Cash flows (used in)/generated byfinancing activities Proceeds from placement of shares - - 483 Dividends paid to group shareholders (104) (159) (159) Net cash (used in)/generated by financing (104) (159) 324activities Net (decrease)/increase in cash and cash (574) (343) 496equivalents Cash and cash equivalents at beginning of 712 216 216period Cash and cash equivalents at end of period 138 (127) 712 Notes to the cash flow statement Cash generated from operations Operating profit - continuing operations 422 337 656 Depreciation charge 22 22 48 Goodwill impairment 49 - 28 Increase in inventories (73) (31) (1) (Increase)/decrease in trade and other (987) (384) 102receivables Increase in trade and other payables 341 253 36 Decrease in financial liabilities (5) (6) (13) Cash (used by)/generated from operations (231) 191 856 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 2014, prepared under IFRS have been filed with the Registrar ofCompanies. The auditors' report for the 2014 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. 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 IFRS 13 Fair Value Measurement 01/01/2013 IFRIC 20 Stripping Costs in the Production of a Surface Mine 01/01/2013 IFRS 1 Amendments - Government Loans 01/01/2013 Transition Guidance (Amendments to IFRS 10, 11 and 12) 01/01/2013 Novation of Derivatives and Continuation of Hedge Accounting 01/01/2014(Amendments to IAS 39) Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 01/01/201427) IAS 36 Amendments Recoverable Amount Disclosures for 01/01/2014non-Financial Assets IFRIC 21 Levies 01/01/2014 IFRS Standards and Interpretations issued by IASB but not yet Effective date -EU approved accounting period beginningTitle on/after IAS 19 Amendment - Defined Benefit Plans: Employee 01/07/2014Contributions IFRS 10 and IAS 28 Amendments: Sale or Contribution of 01/01/2016Assets between an Investor and its Associate or JointVenture IAS 27 Amendment: Equity Method in Separate Financial 01/01/2016Statements IAS 16 and IAS 41 Amendments: Agriculture Bearer Plants 01/01/2016 IFRS 14 Regulatory Deferral Accounts 01/01/2016 IAS 16 and IAS 38 Amendments: Clarification of Acceptable 01/01/2016Methods of Depreciation and Amortisation IFRS 11 Amendments: Accounting for Acquisitions of Interest 01/01/2016in Joint Operations IFRS 15 Revenue from Contracts with Customers 01/01/2017 IFRS 9 Financial Instruments 01/01/2018 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. A liability of £130,000 relating to the final payment due underthe B to B Links Limited sale and purchase agreements is included in short termprovisions. (b) Impairment of goodwill Our interim review of the value of goodwill in the balance sheet highlighted abalance within PHSC plc relating to contracts which have expired and theassociated goodwill of £49,392 has been written off in the consolidatedaccounts. The review did not highlight any further conditions which would giverise to a material impairment and for this reason the Board is to defer anydecision regarding any additional impairment of goodwill until the year end. 30 Sept 14 30 Sept 13 31 Mar 14 Unaudited Unaudited 2 Exceptional Administrative £'000 £'000 £'000 Expenses QCS International Limited: 26 - - Acquisition payment in excess of provision PHSC plc: 49 - - Goodwill impairment as detailed in (b) above 75 - - Notes to the Financial Statements(continued) 30 Sept 14 30 Sept 13 31 Mar 14 Unaudited Unaudited 3 Segmental Reporting £'000 £'000 £'000 Revenue PHSC plc - - - Personnel Health & Safety 391 361 750 Consultants Ltd RSA Environmental Health Ltd 198 238 499 Adamson's Laboratory Services Ltd 1,289 1,330 2,660 Inspection Services Ltd 96 98 195 Quality Leisure Management Ltd 246 187 464 Q C S International Ltd 254 253 516 B to B Links Ltd 1,655 1,475 2,510 4,129 3,942 7,594 Profit/(loss) after taxation PHSC plc (41) 1 (1) Personnel Health & Safety 78 53 116 Consultants Ltd RSA Environmental Health Ltd - 12 35 Adamson's Laboratory Services Ltd (45) 35 114 Inspection Services Ltd 2 (3) (1) Quality Leisure Management Ltd 24 (53) (54) Q C S International Ltd 42 64 116 B to B Links Ltd 301 135 180 361 244 505 Taxation adjustment (group loss relief - - 17 and deferred tax) Additional acquisition payment (QCS) (26) - - Goodwill impairment (49) - (28) 286 244 494 Total assets PHSC plc 5,890 5,892 5,186 Personnel Health & Safety 464 493 725 Consultants Ltd RSA Environmental Health Limited 492 495 592 Adamson's Laboratory Services Ltd 1,219 1,260 1,419 Inspection Services Ltd 54 44 96 Quality Leisure Management Ltd 111 65 245 Q C S International Ltd 88 118 272 B to B Links Ltd 1,730 1,119 1,043 10,048 9,486 9,578 Adjustment of goodwill (1,514) (1,538) (1,471) 8,534 7,948 8,107 Notes to the Financial Statements 30 Sept 14 30 Sept 13 31 Mar 14(continued) Unaudited Unaudited 4 Property, plant and equipment £'000 £'000 £'000 Cost or valuation Brought forward 1,124 1, 097 1,097 Additions 12 11 27 Acquisition of subsidiary - - Disposals - - Carried forward 1,136 1,108 1,124 Depreciation Brought forward 428 384 384 Charge 22 22 44 Disposals - - Carried forward 450 406 428 Net book value 686 702 696 5 Earnings per share The calculation of the basic earnings per share is based on the following data. 30 Sept 14 30 Sept 13 31 Mar 14 £'000 £'000 £'000 Unaudited Unaudited Earnings Continuing activities 286 244 494 Number of shares 30 Sept 14 30 Sept 13 31 Mar 14 Weighted average number of shares for the purpose of basic earnings 12,686,353 10,410,473 12,686,353 per share