REG-PHSC Plc: Half-year Report <Origin Href="QuoteRef">PHSC.L</Origin>
05/12/2017 07:10
5 December 2017
PHSC PLC
(“PHSC”, the “Company”, or the “Group”)
Unaudited Interim Results for the six months ended 30 September 2017
GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT
Financial Highlights
* Group turnover for first half up 3.7% at £3.720m compared with £3.587m
last year.
* EBITDA of £197k, versus a loss of £93k at the half way stage last year.
* Earnings per share of 1.08p compared with a loss of 0.85p last year.
* Cash of £129k compared with £301k last year.
* Net asset value (unaudited) of £5.680m.
* Pro-forma net asset value (unaudited) per share of 38.7p compared to a
current share price (mid) of 11p.
* Interim dividend declared of 0.5p per Ordinary Share.
Operational Highlights
* 61% of revenues in security related technology services compared with 55%
last year.
* On-going rationalisation and cost reduction programme.
Trading overview
The board is pleased to be able to report a return to profitability. Our
EBITDA of £197,000 compares with a loss of £93,000 for the corresponding
period last year, meaning an improvement in performance of £290,000. This
turnaround has been achieved through a combination of factors: improved
performance in our security technology businesses, strong revenues from
quality systems management and training, steady income from general health and
safety services, and reduced losses from asbestos consultancy.
QCS International Limited (QCS) has enjoyed an excellent first half to the
financial year. Revenues have been extremely strong as the company benefited
from an increased demand for management systems training.
Total income from the security related businesses, B to B Links Limited (B to
B) and SG Systems Limited (SG), was £2.26m and generated EBITDA of £149,700
before management charges. The corresponding figures last year were £1.98m
and £19,200. B to B finished the first half strongly, despite continuing to
suffer the effects of the weak exchange rate. The company imports the vast
majority of its electronic components from Europe or Asia with payment having
to be made in USD or Euros. The second half of the year is traditionally
unpredictable, with retail clients tending to defer projects that may prove
disruptive to their sales over the Christmas period. Q3 is therefore seen as
being quieter, with a focus on completion of those installations currently
underway before the go-ahead is given for new installations and further
upgrade work.
The first half cumulative loss for SG resulted from additional costs
associated with external accounting support and other costs associated with
changing the company’s accounts manager. The hybrid accounting system
inherited at the time of acquisition is in the process of being replaced by
one that is compatible with that used by B to B, as those companies move
closer towards integration. Without these costs the company would have turned
a small profit for the first half despite the negative effect of the weakness
of Sterling. The new business pipeline continues to be encouraging, with very
good feedback and interest at the recent Retail Fraud Show where one of the
company’s products was shortlisted in the Most Innovative In-Store Solution
category. The volume potential from new products is significant, but it will
take time for product trials with national retailers to convert to regular
sales.
Outlook
Whilst we will look to consolidate the progress made in the year to date,
there are a number of uncertainties that may impact on the second half of the
year. With an increasing reliance upon security systems and related
technology, our success is fairly closely aligned to the fortunes of the
retail environment and this is an unpredictable marketplace. We continue to
strengthen relationships with existing clients and seek to form new
partnerships with others, as well as extending our offering to non-retail
sectors.
The board has come to the view that falling revenues and lower margins at our
loss-making Adamson’s Laboratory Services Limited (ALS) subsidiary cannot be
eliminated if we follow the current operating model. Despite cost-cutting that
enabled the company to reduce its losses by 30% in the period, local
management has been unable to identify a plan of action that would see a
stabilisation of the company. It is planned that asbestos management services
are procured externally, with ALS acting as an intermediary. This will result
in the majority of remaining posts becoming redundant at the end of Q3. The
company trades from Group-owned premises in Essex and Northamptonshire. It is
likely that the Essex premises will be disposed of in due course. Costs will
be associated with the restructuring and will mostly be borne in the second
half of the year.
The remaining health and safety businesses are expected to remain profitable
in the second half. There are high expectations that QCS will continue to
exceed targets for sales and profits in the delivery of quality management
consultancy and training services. Sales are already looking promising with
high levels of training already secured, and additional income expected from
new consultancy projects recently won.
Dividend
The board has declared an interim dividend of 0.5p per ordinary share, to be
paid on 28 February 2018 to those on the register of members on 5 January
2018.
The recommendation by the board of any final dividend for the current
financial year will be subject to the Group’s full year performance.
Cash Flow
Cash at bank on 30(th) September 2017 stood at £129k compared with £301k at
the same time last year.
A final payment of £25,000 will be paid on 11 December 2017 to the sellers of
SG in settlement of the acquisition terms.
Other than in the normal course of business and as outlined above, there are
no future calls on the Company’s cash.
The Company retains its £300,000 overdraft facility with HSBC.
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 £283,400 resulting in a loss of £62,700 before redundancy costs
of £8,800 (the equivalent figures for the same period last year were
£509,800 and a loss of £101,400).
Inspection Services (UK) Limited
Invoiced sales of £108,700 yielding a profit of £25,200 (the figures for the
same period last year were £111,200 and £23,000).
Personnel Health and Safety Consultants Limited
Invoiced sales of £317,600 yielding a profit of £123,900 (the figures for
the same period last year were £340,300 and £108,100).
RSA Environmental Health Limited
Invoiced sales of £174,600 resulting in a profit of £20,900 (the figures for
the same period last year were £189,200 and £34,600).
Quality Leisure Management Limited
Invoiced sales of £203,000 resulting in a profit of £52,300 (the figures for
the same period last year were £196,400 and £6,400).
QCS International Limited
Invoiced sales of £372,100 yielding a profit of £145,900 (the figures for
the same period last year were £258,600 and £67,300).
B to B Links Limited
Invoiced sales of £1,521,800 yielding a profit of £169,400 (the figures for
the same period last year were £1,237,900 and £38,000).
SG Systems (UK) Limited
Invoiced sales of £738,700 resulting in a loss of £19,700 (the figures for
the same period last year were £743,700 and a loss of £18,800).
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 provides innovative security tagging, product protection,
CCTV and labelling solutions to national and independent retailers. SG Systems
UK is a market leading provider of anti-theft solutions for retail loss
prevention, and customer activity marketing data.
Group Statement of Comprehensive Income Six months ended Six months ended Year ended
30 Sept 17 30 Sept 16 31 Mar 17
Note Unaudited Unaudited Audited
£'000 £'000 £'000
Continuing operations
Revenue 3 3,720 3,587 7,162
Cost of sales (1,994) (1,990) (3,988)
Gross profit 1,726 1,597 3,174
Administrative expenses (1,546) (1,713) (3,319)
Goodwill impairment 2 - - (625)
Other income - 1 1
Profit/(loss) from operations 180 (115) (769)
Fair value movement on contingent consideration - - 50
Finance income - 1 1
Finance costs (2) - (2)
Profit/(loss) before taxation 178 (114) (720)
Corporation tax expense (19) - 29
Profit/(loss) for the period after tax attributable
to owners of parent 3 159 (114) (691)
Total comprehensive income attributable to owners of the parent 159 (114) (691)
Basic and diluted Earnings per Share for profit/(loss) after tax from continuing operations attributable to the equity holders of the Group during the period 5 1.08p (0.85)p (4.92p)
Group Statement of Financial Position 30 Sept 17 30 Sept 16 31 Mar 17
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 4 620 653 626
Goodwill 3,878 4,504 3,878
Deferred tax asset 22 1 22
4,520 5,158 4,526
Current assets
Inventories 492 493 487
Trade and other receivables 1,880 1,697 1,448
Cash and cash equivalents 129 301 207
2,501 2,491 2,142
Total assets 3 7,021 7,649 6,668
Current liabilities
Trade and other payables 1,239 1,129 1,064
Current corporation tax payable 19 84 -
Deferred consideration - 200 -
Contingent consideration 25 - 25
1,283 1,413 1,089
Non-current liabilities
Deferred taxation liabilities 58 63 58
Contingent consideration - 75 -
58 138 58
Total liabilities 1,341 1,551 1,147
Net assets 5,680 6,098 5,521
Capital and reserves attributable to equity
holders of the Group
Called up share capital 1,468 1,468 1,468
Share premium account 1,916 1,915 1,916
Capital redemption reserve 144 144 144
Merger relief reserve 134 134 134
Retained earnings 2,018 2,437 1,859
5,680 6,098 5,521
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 2017 1,468 1,916 144 134 1,859 5,521
Profit for the period attributable to equity holders - - - - 159 159
Balance at 30 September 2017 1,468 1,916 144 134 2,018 5,680
Balance at 1 April 2016 1,309 1,751 144 134 2,747 6,085
Profit 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
Group Statement of Cash Flows Six months Six months Year
ended ended ended
30 Sept 17 30 Sept 16 31 Mar 17
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows (used by)/generated from operating activities
Cash (used by)/generated from operations (66) (64) 125
Interest paid (2) - (2)
Tax paid - (19) (100)
Net cash (used by)/generated from operating activities (68) (83) 23
Cash flows (used in)/from investing activities
Purchase of property, plant and equipment (10) - (2)
Disposal of fixed assets - - 2
Interest received - 1 1
Net cash (used in)/from investing activities (10) 1 1
Cash flows from/(used in) financing activities
Payment of deferred consideration - - (200)
Dividends paid to group shareholders - (196) (196)
Proceeds from share placement - 323 323
Net cash from/(used in) financing activities - 127 (73)
Net (decrease)/increase in cash and cash equivalents (78) 45 (49)
Cash and cash equivalents at beginning of period 207 256 256
Cash and cash equivalents at end of period 129 301 207
Notes to the cash flow statement
Cash (used by)/generated from operations
Operating profit/(loss) - continuing operations 180 (114) (719)
Depreciation charge 16 21 44
Goodwill impairment - - 625
Fair value movement contingent consideration - (50)
Loss on sale of fixed assets - - 6
Increase in inventories (4) (77) (71)
(Increase)/decrease in trade and other receivables (433) 198 447
Increase/(decrease) in trade and other payables 175 (92) (157)
Cash (used by)/generated from operations (66) (64) 125
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 2017, prepared under IFRS have been filed with the
Registrar of Companies. The auditors' report for the 2017 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 have assessed the potential impact of
IFRS 15 and do not expect that the adoption of this standard will have a
material impact on the financial statements of the Group in future periods.
IFRS 16 may have an impact on the measurement and treatment of operating
leases and related disclosures. As at 31 March 2017 the estimated impact of
the transition to IFRS 16 would be to increase tangible fixed assets and
liabilities by approximately £130,000. The impact on the statement of
comprehensive income is not expected to be material to the 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:
Impairment of goodwill
The Board has considered the carrying value of goodwill and although there
have been losses in certain subsidiaries 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 17 30 Sept 16 31 Mar 17
Unaudited Unaudited Audited
2 Exceptional Administrative Expenses £'000 £'000 £'000
Impairment of PHSC plc’s investment in Adamson’s Laboratory Services Limited - - 625
30 Sept 17 30 Sept 16 31 Mar 17
3 Segmental Reporting Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue
PHSC plc - - -
Personnel Health & Safety Consultants Ltd 318 340 667
RSA Environmental Health Ltd 175 189 374
Adamson's Laboratory Services Ltd 283 510 823
Inspection Services Ltd 109 111 228
Quality Leisure Management Ltd 203 196 437
Q C S International Ltd 372 259 624
B to B Links Ltd 1,522 1,238 2,595
SG Systems (UK) Ltd 738 744 1,414
3,720 3,587 7,162
Profit/(loss) after taxation, before management charge
PHSC plc (257) (259) (536)
Personnel Health & Safety Consultants Ltd 114 90 255
RSA Environmental Health Ltd 21 30 65
Adamson's Laboratory Services Ltd (75) (105) (195)
Inspection Services Ltd 22 19 44
Quality Leisure Management Ltd 45 5 75
Q C S International Ltd 122 58 210
B to B Links Ltd 166 33 75
SG Systems (UK) Ltd (21) (20) (109)
137 (149) (116)
Taxation adjustment (group loss relief and deferred tax) 22 35 -
Fair value movement on contingent consideration - - 50
Goodwill impairment - - (625)
159 (114) (691)
Total assets
PHSC plc 4,005 4,037 3,955
Personnel Health & Safety Consultants Ltd 776 951 863
RSA Environmental Health Limited 589 612 593
Adamson's Laboratory Services Ltd 271 954 364
Inspection Services Ltd 196 189 164
Quality Leisure Management Ltd 250 205 263
Q C S International Ltd 539 426 420
B to B Links Ltd 1,385 1,170 1,175
SG Systems (UK) Ltd 346 404 207
8,357 8,948 8,004
Adjustment of goodwill (1,336) (1,299) (1,336)
7,021 7,649 6,668
30 Sept 17 30 Sept 16 31 Mar 17
Unaudited Unaudited Audited
4 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,066 1,079 1,083
Additions 10 - 2
Disposals (7) - (19)
Carried forward 1,069 1,079 1,066
Depreciation
Brought forward 440 404 408
Charge 16 22 44
Disposals (7) - (12)
Carried forward 449 426 440
Net book value 620 653 626
5 Earnings per share
The calculation of the basic earnings per share is based on the following data.
30 Sept 17 30 Sept 16 31 Mar 17
£'000 £'000 £'000
Unaudited Unaudited Final
Earnings
Continuing activities 159 (114) (691)
Number of shares 30 Sept 17 30 Sept 16 31 Mar 17
Weighted average number of shares for
the purpose of basic earnings per share 14,677,257 13,451,480 14,062,687
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