Last checked at 30 Nov 2012 07:00
30 November 2012 PHSC PLC ("PHSC", the "Company",or the "Group") Interim Report 2012 GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT for the six months ended 30 September 2012
Financial Highlights
* Group turnover (consolidated) for the period was £2.198m compared with £ 2.135m for the same period last year * EBITDA of £136k before one-off legal costs of acquisitions, compared with £ 114k for the same period last year * Basic earnings per share at the interim stage are 0.69pence compared with 0.64pence achieved in the corresponding period last year * Net cash generated by operating activities reduced to £76k from £242k * Overall cash and cash equivalents stood at £391k at the end of the period compared with £903k at the year ended 31 March 2012. Cash of £502k was paid in connection with the goodwill element of two acquisitions. * Net asset value (unaudited) of £5.326m or 50 pence per Ordinary Share compared to a current share price (mid) of 22 pence * Encouraging progress shown by two new subsidiaries
Trading overview
Revenues from continuing operations were almost identical to those in the same period last year. With a welcome first contribution of over £84,000 from our new QCS International Limited (QCS) subsidiary, we saw an overall increase of around £63,000 in total Group revenue.
Whilst our largest subsidiary, Adamson's Laboratory Services Limited, was able to improve on its first half performance, other parts of the Group came under pressure and saw a slight deterioration in revenues and margins. Financial statistics are given for each trading subsidiary later in this statement.
Overheads of the parent company rose to £246,158 compared with £200,300 in the same period last year. The extra costs are largely attributable to the acquisitions of QCS and B to B Links Limited (B to B Links) in the period and include one-off legal fees and stamp duty of circa £30,000.
Outlook
Historically the Group's financial performance has always been better in the second half of the year. That is expected to be the case this year, and will be significantly supplemented by revenues from our new acquisitions, B to B Links and QCS.
QCS has had an encouraging start and has contributed an average of over £40,000 to revenues per month to the interim figures. We predict similar monthly revenues over the remainder of the year and expect that this will lead to generation of pre-tax profits in excess of £100,000 from this subsidiary.
The integration of B to B Links will be a longer process due to the more complex nature of the company's business and how different it is to the rest of the Group. Early indications are most encouraging and suggest that this subsidiary will add approximately £800,000 to Group revenues in the second half of the year, and pre-tax profits close to £150,000. The company has recently entered into an agreement with a major department store chain for the installation of closed circuit television systems (CCTV). To date this has led to orders with a likely sales value of around £125,000, a figure set to increase substantially as additional stores are surveyed and new installations commissioned.
The Board believes that the recent diversification away from the core activities of health and safety consultancy services, into quality management and retail security solutions, will have an immediate and positive impact on both revenues and earnings per share. These benefits will be enhanced by a number of cross-selling opportunities that will be better exploited once the new acquisitions have bedded in.
Dividend prospects
As in previous years, the Board is not recommending payment of an interim dividend, but will consider payment of an appropriate final dividend at the end of the year.
A special dividend of 1.0p, giving a total payment of 2.0p per Ordinary Share, was paid in each of the previous two years and was welcomed by the majority of investors. With £480,000 due in acquisition instalments during the first half of 2012/13 the Board's ability to declare a special dividend this year may be limited.
Net Asset Value
As at 30 September 2012, the Company had net assets of £5.326m (unaudited) as per these interim accounts. There were 10,606,348 Ordinary Shares in issue at that date which equates to a net asset value (NAV) per share of 50 pence. At 22 pence per share the Ordinary Shares of the Company are currently trading at approximately a 56% discount to the net asset value.
Cash Flow
Obligations related to the acquisition of two new businesses in the period had a predictable but major effect on the Group's cash position.
By 30 September 2012 we had paid £502,300 in connection with the two acquisitions and approximately £30,000 in legal fees and stamp duty. Since that date £160,000 has been paid towards the non-cash assets of B to B Links and a further sum of £163,000 falls due in December 2012 to complete the payment for those assets. The net cash outflow related to these transactions is around £ 855,000.
In October our B to B Links subsidiary placed substantial orders for consumables to ensure stock in the run-up to Christmas, and to gear up for the large CCTV installation contract mentioned above. The sale of our vacant property at Raunds was expected to be complete by now but has been delayed because the buyer is progressing the transaction via a pension scheme and this has introduced regulatory delays. This has coincided with a tendency for some of our larger clients to settle their accounts a little slower than they previously did.
The combined effect has been to place short-term pressure on our cash position and as a contingency we have agreed a suitable facility with our bankers, HSBC, should this be required.
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 and received, depreciation and amortisation.
Adamson's Laboratory Services Limited
Invoiced sales of £1,124,287 yielding a profit of £102,660 (the equivalent figures for the same period last year were £1,012,407 and £27,690). The comparatives include performance of The Envex Company Limited, which is now a trading division of Adamson's Laboratory Services Limited.
Inspection Services (UK) Limited
Invoiced sales of £100,646 yielding a profit of £4,913 (the figures for the same period last year were £126,111 and £10,901).
Personnel Health and Safety Consultants Limited
Invoiced sales of £388,931 yielding a profit of £167,791 (the figures for the same period last year were £392,777 and £175,102).
RSA Environmental Health Limited
Invoiced sales of £193,183 resulting in a loss of £6,023 (the figures for the same period last year were £246,057 and a profit of £11,658).
Quality Leisure Management Limited
Invoiced sales of £307,521 yielding a profit of £60,873 (the figures for the same period last year were £357,816 and £83,162).
QCS International Limited
Invoiced sales of £83,704 yielding a profit of £28,798 for the two months since acquisition. There are no equivalent figures available for last year.
B to B Links Limited
This subsidiary was acquired on 28 September 2012 and no trading took place between that date and 30 September 2012, the period to which these interim accounts relate.
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 Six YearIncome months months ended ended ended 30 Sept 30 Sept 31 Mar 12 11 12 Note Unaudited Unaudited £'000 £'000 £'000 Continuing operations Revenue 2,198 2,135 4,434 Cost of sales (1,145) (1,147) (2,256) Gross profit 1,053 988 2,178 Other income 3 2 6 Administrative expenses (959) (899) (1,786) Profit from operations 97 91 398 Finance income 1 5 9 Finance costs - - - Profit before taxation 98 96 407 Corporation tax expense (26) (29) (108) Profit after taxation and total comprehensive income from continuing operations 72 67 299 Profit after taxation and total 72 67 299comprehensive income Attributable to: Equity holders of the Group 72 67 299 Earnings per share for profit after tax and total comprehensive income from continuing operations attributable to the equity holders of the Group during the period Basic 4 0.69p 0.64p 2.91p
Group Statement of Financial Position 30 Sept 30 Sept 31 Mar
12 11 12 Unaudited Unaudited Note £'000 £'000 £'000 Non-current assets Property, plant and equipment 3 812 795 770 Goodwill 4,676 3,315 3,315 Deferred tax asset 2 1 2 5,490 4,111 4,087 Current assets Inventories 137 2 6 Trade and other receivables 1,785 1,096 1,226 Cash and cash equivalents 391 805 903 2,313 1,903 2,135 Total assets 7,803 6,014 6,222 Current liabilities Trade and other payables 943 598 667 Financial liabilities 13 - - Current corporation tax payable 240 102 112 Short term provisions 863 100 - 2,059 800 779 Non-current liabilities Financial liabilities 13 - - Long-term provisions 330 - - Deferred taxation liabilities 75 81 73 418 81 73 Total liabilities 2,477 881 852 Net assets 5,326 5,133 5,370 Capital and reserves attributable to equity holders of the Group Called up share capital 1,060 1,038 1,038 Share premium account 1,568 1,497 1,497 Capital redemption reserve 144 144 144 Retained earnings 2,554 2,454 2,691 5,326 5,133 5,370Group Statement of Changes in Equity Share Share Capital Retained Total Capital Premium Redemption Earnings Reserve £'000 £'000 £'000 £'000 £'000 Balance at 1 April 2011 1,038 1,497 144 2,594 5,273 Profit for the period - - - 67 67attributable to equity holders Dividends - - - (207) (207) Balance at 30 September 2011 1,038 1,497 144 2,454 5,133 Balance at 1 April 2012 1,038 1,497 144 2,691 5,370 Profit for the period - - - 72 72attributable to equity holders Dividends - - - (209) (209) Issue of shares 22 71 - - 93 Balance at 30 September 2012 1,060 1,568 144 2,554 5,326Group Statement of Cash Flows Six Six Year months months ended ended ended 30 Sept 30 Sept 31 Mar 12 11 12 Unaudited Unaudited £'000 £'000 £'000 Cash flows from operating activities Cash generated from operations 76 242 514 Tax refunded/(paid) - 17 (56) Net cash generated from operating 76 259 458activities Cash flows used in investing activities
Purchase of property, plant and equipment (15) (1) (6)
Purchase of subsidiary companies net of (365) - (107)cash acquired Disposal proceeds fixed assets - - 7 Interest received 1 5 9 Net cash used in investing activities (379) 4 (97) Cash flows used in financing activities Dividends paid to group shareholders (209) (207) (207) Net cash used in financing activities (209) (207) (207) Net (decrease)/increase in cash and cash (512) 56 154equivalents Cash and cash equivalents at beginning of 903 749 749year Cash and cash equivalents at end of year 391 805 903 Notes to the cash flow statement Cash generated from operations Operating profit - continuing operations 97 91 398 Depreciation charge 20 23 47 Acquisition cost - - 7 Loss on sale of fixed assets - - (1) Decrease/(increase) in stock 1 - (4) Decrease/(increase) in trade and other (63) 285 156receivables (Decrease)/increase in trade and other 21 (157) (89)payables Cash generated from operations 76 242 514
Notes to the Financial Statements
1. Basis of preparation
These condensed consolidated financial statements are presented on the basis of International Financial Reporting Standards (IFRS) as adopted by the European Union and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and have been prepared in accordance with AIM rules and the Companies Act 2006, as applicable to companies reporting under IFRS.
The financial information contained in this report, which has not been audited, does not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 March 2012, prepared under IFRS have been filed with the Registrar of Companies. The auditors' report for the 2012 financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The same accounting policies and methods of computation are followed within these interim financial statements as adopted in the most recent annual financial statements. IFRS 7 Amendments to Financial Instruments Disclosures has been adopted from 1 April 2012. The adoption of this standard has not had a material impact on these interim financial statements.
New IFRS standards and interpretations not adopted
Certain new standards, amendments and interpretations of existing standards that have been published and which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU)
* IAS 1 Amendment - Presentation of items of other comprehensive income * IAS 12 Amendments - Deferred tax: Recovery of Underlying Assets * IFRS 7 and IAS 32 Offsetting financial assets and financial liabilities * IAS 27 Separate Financial Statements * IFRS 9 Financial Instruments * IFRS 10 Consolidated Financial Statements * IFRS 11 Joint Arrangements * IFRS 12 Disclosure of Interests in Other Entities * IFRS 13 Fair Value Measurement * IAS 19 Amendment - Employee Benefits
The adoption of these standards, amendments and interpretations is not expected to 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 of information within the condensed interim financial statements.
The information presented within these interim financial statements is in compliance with IAS 34 "Interim Financial Reporting". This 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. Liabilities of £121,148 and £742,180 have been provided within short term provisions relating to the payments due in respect of the acquisition of QCS and B to B Links respectively. Long term provisions contain liabilities of £80,000 (QCS) and £250,000 (B to B) relating to the payments due on the second anniversary of acquisition.
(b) Impairment of goodwill
Our interim review of the value of goodwill in the balance sheet did not highlight any conditions which would give rise to a material impairment. For this reason the Board is to defer any decision regarding the impairment of goodwill until the year end.
Notes to the Financial Statements (continued) 30 Sept 30 Sept 31 Mar 12 12 11 Unaudited Unaudited 2 Segmental Reporting £'000 £'000 £'000 Revenue PHSC plc - - - Personnel Health & Safety 389 393 771 Consultants Ltd RSA Environmental Health Limited 193 246 474 Adamson's Laboratory Services Ltd 1,124 947 2,121 Envex Company Ltd - 65 103 Inspection Services Ltd 101 126 242 Quality Leisure Management Ltd 307 358 723 Q C S International Ltd (2 84 - - months) 2,198 2,135 4,434 Profit/(loss) after taxation PHSC plc 2 (13) (40) Personnel Health & Safety 68 77 119 Consultants Ltd RSA Environmental Health Limited (13) 4 (14) Adamson's Laboratory Services Ltd (32) (53) 112 Envex Company Ltd - 2 27 Inspection Services Ltd (1) 4 1 Quality Leisure Management Ltd 27 46 94 Q C S International Limited (2 21 - - months) 72 67 299 Total assets PHSC plc 5,410 4,334 4,867 Personnel Health & Safety 745 670 633 Consultants Ltd RSA Environmental Health Limited 526 584 555 Adamson's Laboratory Services Ltd 1,316 1,027 1,376 Envex Company Ltd - 89 15 Inspection Services Ltd 119 148 119 Quality Leisure Management Ltd 311 200 315 Q C S International Ltd 174 - - B to B Links Ltd 706 - - 9,307 7,052 7,880 Adjustment of goodwill (1,504) (1,038) (1,658) 7,803 6,014 6,222
Notes to the Financial Statements 30 Sept 12 30 Sept 11 31 Mar 12 (continued)
Unaudited Unaudited 3 Property, plant and equipment £'000 £'000 £'000 Cost or valuation Brought forward 1,139 1,158 1,158 Additions 62 1 6 Disposals - - (25) Carried forward 1,201 1,159 1,139 Depreciation Brought forward 369 341 341 Charge 20 23 47 Disposals - - (19) Carried forward 389 364 369 Net book value 812 795 770 4 Earnings per share The calculation of the basic earnings per share is based on the following data: Earnings 30 Sept 12 30 Sept 11 31 Mar 12 £'000 £'000 £'000 Unaudited Unaudited Continuing activities 72 67 299 Number of shares 30 Sept 12 30 Sept 11 31 Mar 12 Weighted average number of shares for the purpose of basic earnings per share 10,410,473 10,381,973 10,276,019
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