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PHSC Plc  -  PHSC   

Half-year Report

Released 07:00 05-Dec-2017

Half-year Report

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

Operational Highlights

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 30th 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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