REG-PHSC Plc: Half-year Report <Origin Href="QuoteRef">PHSC.L</Origin>
01/12/2016 07:20
01 December 2016
PHSC PLC
(“PHSC”, the “Company”, or the “Group”)
Unaudited Interim Results for the six months ended 30 September 2016
GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT
Financial Highlights
* Group turnover for first half up 7% at £3.587m compared with £3.354m last
year.
* Loss of £93k measured as EBITDA after bad debt provision, versus £229k
profit last year.
* Loss per share of 0.85p compared with 1.23p per share profit last year.
* Cash balance of £301k at period end compared with £611k last year.
* Net asset value of £6.098m
* Pro-forma net asset value per share of 41.5p compared to a current share
price (mid) of 18p.
* Q2 saw a return to profitable trading, but results impacted by £44k bad
debt provision.
Trading Overview
In the trading update preceding our AGM, we reported a consolidated EBITDA
loss of around £94k on sales of £2.3m for the first four months of the year.
We indicated that improvements would take place by the time of our Interim
results. Were it not for a loss of circa £40k caused by one client going into
administration and an additional £4k provision for other potential bad debts,
the last two months would have delivered EBITDA of £45k.
The board is confident of improvement in the second half of the year and we do
not currently anticipate any additional provisions for bad debts. The Group
returned to profitable trading in the month of October, achieving EBITDA of
£25.6k and reducing the cumulative loss to £67.4k.
There is an analysis of performance by individual subsidiary later in this
statement. The performances which have the most impact on the Group’s
profitability are those of Adamson’s Laboratory Services Ltd (ALS) and SG
Systems (UK) Ltd (SG). In the case of ALS, the ongoing loss-making situation
is largely brought about by a continuing erosion of the prices at which work
can be obtained, and a general reduction in revenues against a background of a
predominantly fixed cost base. Management are taking steps to address this
situation and several options are being considered. In the short term, there
have unfortunately had to be a number of redundancies at the company, the
costs of which are not reflected in the results for the first half.
The prognosis for SG is entirely different to that of ALS. This company, which
was acquired in December 2015, has invested heavily in developing solutions to
protect property using radio frequency identification technology (RFID). A
number of significant trials and pilot schemes are underway with private and
public sector clients and the company is hopeful of generating some
significant revenues in the months to come. The cost of investment in
technological solutions has affected the financial performance. In addition,
there was reduced income from routine sales and servicing, both of which have
been affected by a hiatus in orders from a major customer. However, SG
returned to profit in September and October.
The inclusion of SG’s revenues and costs in the consolidated accounts has
resulted in higher administrative expenses compared with last year.
B to B Links Limited (B to B), which is a sister company to SG, continues to
work with national accounts in the retail sector and has been successful in
maintaining a strong order book that will see it through the remainder of the
financial year. A negative factor is that the decline in the value of Sterling
following the UK’s referendum on EU membership has impacted on both B to B
and SG. Both companies import the vast majority of their electronic components
from Europe or Asia with payment having to be made in USD or Euros.
Training and consultancy relating to new ISO standards that took effect a
year ago have enabled our QCS International Limited subsidiary to increase
revenue and profit, and management are optimistic that this trend can continue
over then next year and beyond. A new standard on health and safety, ISO
45001, is expected to be approved in 2017 and this will present further
potential demand for the company’s services.
Quality Leisure Management Limited has seen a fall in revenue and profits.
This is attributable to reduced local authority funding of many leisure
trusts, and some consolidation in the sector.
Health and safety consultancy and training activity delivered by other group
companies is largely unchanged but it has not been possible to increase income
in line with the rising cost of delivery.
Outlook
The Group expects to trade profitably in the second half of the financial
year, and will be concentrating its efforts on addressing some of the issues
highlighted above. There are likely to be some restructuring costs
associated with our ALS subsidiary as management seek to align costs with the
lower revenues being currently generated. Following an approach by a third
party, discussions were held which could have resulted in ALS leaving the
Group. On this occasion we did not find the proposed terms to be suitable,
but we remain open to future approaches that can be shown to be in
shareholders’ best interests.
Dividend Prospects
The Board is not declaring an interim dividend but will consider an
appropriate level of final dividend at the relevant time. Despite the current
performance, the Group has a reasonably strong balance sheet that includes
retained earnings from previous years. However, if the Group does not generate
a profit for the year, it may recommend a lower distribution or elect to
forego a dividend entirely on this occasion.
Cash Flow
The bank balance stood at £301k as at the date of the interim accounts,
compared with £611k at the interim stage last year. The reduction is
primarily due to the acquisition payments totalling £400k made in December
2015. In addition, the Company raised £350k before costs from a share
placing, as announced on 19 August 2016.
The £200k overdraft facility in place with our bankers, HSBC, has been
subject to annual review. In view of the trading losses to date it was felt
prudent to increase this facility to £300k to give sufficient support.
The bank balance as at 30 November was £356,017.
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
Revenue of £509,800 resulting in a loss of £101,400 (the equivalent figures
for the same period last year were £1,105,100 and a profit of £102,900).
Inspection Services (UK) Limited
Invoiced sales of £111,200 yielding a profit of £23,000 (the figures for the
same period last year were £96,300 and £8,900).
Personnel Health and Safety Consultants Limited
Invoiced sales of £340,300 yielding a profit of £108,100 (the figures for
the same period last year were £328,300 and £132,000).
RSA Environmental Health Limited
Invoiced sales of £189,200 resulting in a profit of £34,600 (the figures for
the same period last year were £209,700 and £21,000).
Quality Leisure Management Limited
Invoiced sales of £196,400 resulting in a profit of £6,400 (the figures for
the same period last year were £239,600 and £34,900).
QCS International Limited
Invoiced sales of £258,600 yielding a profit of £67,300 (the figures for the
same period last year were £245,000 and £58,000).
B to B Links Limited
Invoiced sales of £1,237,900 yielding a profit of £38,000 (the figures for
the same period last year were £1,120,100 and £58,900). The profit for the
period ended 30 September 2016 is shown after deduction of circa £40,000
which proved unrecoverable after a client fell into administration.
SG Systems (UK) Limited
Invoiced sales of £743,673 resulting in a loss of £18,800 (there are no
comparative figures for last year as the business was acquired in December
2015).
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014.
For further information please contact:
PHSC plc Stephen King Stephen.king@phsc.co.uk www.phsc.plc.uk 01622 717700
Northland Capital Partners Limited (Nominated Adviser) Edward Hutton/David Hignell 0203 861 6625
Beaufort Securities Limited (Broker) Elliot Hance 020 7382 8300
About PHSC
PHSC plc, through its trading subsidiaries Personnel Health & Safety
Consultants Ltd, RSA Environmental Health Ltd, Adamson's Laboratory Services
Ltd, QCS International Ltd, Inspection Services (UK) Ltd and Quality Leisure
Management Ltd, provides a range of health, safety, hygiene, environmental and
quality systems consultancy and training services to organisations across the
UK. B to B Links Ltd and SG Systems (UK) Ltd offer innovative retail security
solutions including tagging, labelling and CCTV.
Group Statement of Comprehensive Income Six months ended Six months ended Year ended
30 Sept 16 30 Sept 15 31 Mar 16
Note Unaudited Unaudited
£'000 £'000 £'000
Continuing operations
Revenue 3 3,587 3,354 7,004
Cost of sales (1,990) (1,804) (3,803)
Gross profit 1,597 1,550 3,201
Administrative expenses (1,713) (1,345) (2,931)
Administrative expenses - exceptional 2 - - (609)
Other income 1 - -
(Loss)/profit from operations (115) 205 (339)
Finance income 1 - 1
Finance costs - - -
(Loss)/profit before taxation (114) 205 (338)
Corporation tax expense - (49) (76)
(Loss)/profit for the period after tax attributable
to owners of parent 3 (114) 156 (414)
Total comprehensive income attributable to owners of the parent (114) 156 (414)
Attributable to:
Equity holders of the Group (114) 156 (414)
Basic and diluted Earnings per Share for (loss)/profit after tax from continuing operations attributable to the equity holders of the Group during the period 5 (0.85p) 1.23p (3.23p)
Group Statement of Financial Position 30 Sept 16 30 Sept 15 31 Mar 16
Unaudited Unaudited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 4 653 684 675
Goodwill 4,504 4,580 4,504
Deferred tax asset 1 - 1
5,158 5,264 5,180
Current assets
Inventories 493 224 416
Trade and other receivables 1,697 1,864 1,895
Cash and cash equivalents 301 611 256
2,491 2,699 2,567
Total assets 3 7,649 7,963 7,747
Current liabilities
Trade and other payables 1,129 1,126 1,222
Current corporation tax payable 84 134 103
Deferred consideration 200 - 200
1,413 1,260 1,525
Non-current liabilities
Deferred taxation liabilities 63 68 63
Contingent consideration 75 - 75
138 68 138
Total liabilities 1,551 1,328 1,663
Net assets 6,098 6,635 6,084
Capital and reserves attributable to equity
holders of the Group
Called up share capital 1,468 1,268 1,308
Share premium account 1,915 1,751 1,751
Capital redemption reserve 144 144 144
Merger relief reserve 134 80 134
Retained earnings 2,437 3,392 2,747
6,098 6,635 6,084
Group Statement of Changes in Equity
Share Capital Share Premium Capital Redemption Reserve Merger Relief Reserve Retained Earnings Total
£'000 £'000 £'000 £’000 £'000 £'000
Balance at 1 April 2016 1,309 1,751 144 134 2,747 6,085
Loss for the period attributable to equity holders - - - - (114) (114)
Share issue 159 164 - - - 323
Dividends - - - - (196) (196)
Balance at 30 September 2016 1,468 1,915 144 134 2,437 6,098
Balance at 1 April 2015 1,268 1,751 144 80 3,355 6,598
Profit for the period attributable to equity holders - - - - 156 156
Dividends - - - - (119) (119)
Balance at 30 September 2015 1,268 1,751 144 80 3,392 6,635
Group Statement of Cash Flows Six months Six months Year
ended ended ended
30 Sept 16 30 Sept 15 31 Mar 16
Unaudited Unaudited
£'000 £'000 £'000
Cash flows (used by)/generated from operating activities
Cash (used by)/generated from operations (64) 306 414
Interest paid - - -
Tax paid (19) (20) (83)
Net cash (used by)/generated from operating activities (83) 286 331
Cash flows from/(used in) investing activities
Purchase of property, plant and equipment - (18) (36)
Purchase of subsidiary companies net of cash acquired - - (263)
Disposal of fixed assets - - 1
Interest received 1 - 1
Net cash from/(used in) investing activities 1 (18) (297)
Cash flows from/(used in) financing activities
Payment of deferred consideration - - (50)
Dividends paid to group shareholders (196) (119) (190)
Proceeds from share placement 323 - -
Net cash from/(used in) financing activities 127 (119) (240)
Net increase/(decrease) in cash and cash equivalents 45 149 (206)
Cash and cash equivalents at beginning of period 256 462 462
Cash and cash equivalents at end of period 301 611 256
Notes to the cash flow statement
Cash (used by)/generated from operations
Operating (loss)/profit - continuing operations (114) 205 (339)
Depreciation charge 21 24 47
Goodwill impairment - - 609
Loss on sale of fixed assets - - 2
Increase in inventories (77) (8) (28)
Decrease in trade and other receivables 198 115 382
Decrease in trade and other payables (92) (30) (259)
Cash (used by)/generated from operations (64) 306 414
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 2016, prepared under IFRS have been filed with the
Registrar of Companies. The auditors' report for the 2016 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.
New IFRS standards and interpretations not adopted
A number of new standards and amendments to standards and interpretations have
been issued but are not yet effective and in some cases have not been adopted
by the European Union. The directors do not expect the adoption of these
standards will have a material impact on the financial statements of the Group
in future periods, except IFRS 15 may have an impact on revenue recognition
and related disclosures and IFRS 16 may have an impact on the measurement and
treatment of operating leases and related disclosures. At this point it is not
practicable for the directors to provide a reasonable estimate of the effect
of IFRS 15 and IFRS 16 as their detailed review of these standards is still
ongoing.
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:
Impairment of goodwill
The Board has considered the carrying value of goodwill and although there
have been losses in the interim period the longer term outlook remains
positive and an impairment charge in these interim accounts is not therefore
considered necessary and will be reassessed at the year end.
30 Sept 16 30 Sept 15 31 Mar 16
Unaudited Unaudited
2 Exceptional Administrative Expenses £'000 £'000 £'000
Impairment of PHSC plc’s investment in Adamson’s Laboratory Services Limited - - 609
Notes to the Financial Statements (continued)
30 Sept 16 30 Sept 15 31 Mar 16
3 Segmental Reporting Unaudited Unaudited
£'000 £'000 £'000
Revenue
PHSC plc - - -
Personnel Health & Safety Consultants Ltd 340 328 703
RSA Environmental Health Ltd 189 210 413
Adamson's Laboratory Services Ltd 510 1,105 1,827
Inspection Services Ltd 111 106 219
Quality Leisure Management Ltd 196 240 506
Q C S International Ltd 259 245 528
B to B Links Ltd 1,238 1,120 2,552
SG Systems (UK) Ltd 744 - 256
3,587 3,354 7,004
Profit/(loss) after taxation, before management charge
PHSC plc (259) (205) (495)
Personnel Health & Safety Consultants Ltd 90 108 238
RSA Environmental Health Ltd 30 19 64
Adamson's Laboratory Services Ltd (105) 89 87
Inspection Services Ltd 19 15 33
Quality Leisure Management Ltd 5 29 83
Q C S International Ltd 58 49 105
B to B Links Ltd 33 52 133
SG Systems (UK) Ltd (20) - (70)
(149) 156 178
Taxation adjustment (group loss relief and deferred tax) 35 - 17
Goodwill impairment - - (609)
(114) 156 (414)
Total assets
PHSC plc 4,037 6,337 3,963
Personnel Health & Safety Consultants Ltd 951 422 864
RSA Environmental Health Limited 612 476 610
Adamson's Laboratory Services Ltd 954 815 1,034
Inspection Services Ltd 189 57 144
Quality Leisure Management Ltd 205 98 249
Q C S International Ltd 426 103 352
B to B Links Ltd 1,170 1,126 1,443
SG Systems (UK) Ltd 404 - 387
8,948 9,434 9,046
Adjustment of goodwill (1,299) (1,471) (1,299)
7,649 7,963 7,747
Notes to the Financial Statements (continued) 30 Sept 16 30 Sept 15 31 Mar 16
Unaudited Unaudited
4 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,079 1,055 1,055
Additions - 18 26
Disposals - - (7)
Acquisition of subsidiary - - 9
Carried forward 1,079 1,073 1,083
Depreciation
Brought forward 404 365 365
Charge 22 24 47
Disposals - - (4)
Carried forward 426 389 408
Net book value 653 684 675
5 Earnings per share
The calculation of the basic earnings per share is based on the following data.
30 Sept 16 30 Sept 15 31 Mar 16
£'000 £'000 £'000
Unaudited Unaudited
Earnings
Continuing activities (114) 156 (414)
Number of shares 30 Sept 16 30 Sept 15 31 Mar 16
Weighted average number of shares for
the purpose of basic earnings per share 13,451,480 12,686,353 12,806,901
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