PHSC Phsc Plc

5 December 2018

PHSC PLC
(“PHSC”, the “Company”, or the “Group”)

Unaudited Interim Results for the six months ended 30 September 2018

GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT

Financial Highlights

• Group turnover for first half of £2.897m, down from £3.720m last year
• EBITDA of £285k (inclusive of gain on disposal of property of £150k) compared with £197k profit at the half way stage last year
• Earnings per share of 1.47p compared with 1.08p last year
• Cash of £583k compared with £129k last year
• Net asset value (unaudited) of £5.503m
• Pro-forma net asset value (unaudited) per share of 37.5p compared to a current share price (mid) of 12.25p
• Interim dividend declared of 0.5p per ordinary share

Operational Highlights

• Acceleration of plans to bring the Group’s security businesses under one roof
• Disposal of the property formerly used by Adamson’s Laboratory Services Limited (ALS), the Group’s asbestos subsidiary which was discontinued in March 2018 generating a gain of £150k
• Investment in extended training area and office facilities for QCS International Limited (QCS)
• Two leased premises to be vacated in Q3/Q4 resulting in ongoing cost savings

Business overview

The Group achieved revenues of £2.897m in the first half, compared to £3.720m last year.  The decrease in revenues relates mainly to a reduction in revenues from the Group’s security division, as detailed below, and no revenues being generated during the period from ALS, the Group’s asbestos management business which ceased in March 2018 and which had revenues of £0.382m last year.

Having ceased its asbestos management activities, the Group disposed of its associated property in Essex for £305,000, as announced on 28 September 2018.  The book value at that date was approximately £133,000 representing a gain of approximately £166,000 after sale fees and legal costs. Charges have been incurred for ending services and leasing equipment agreements associated with the property, and disposal of contents, resulting in an overall positive contribution of approximately £150,000.

EBITDA, without the benefit of this gain, would have been £119,000 over the period, a reduction of £78,000 on last year.  The main variance relates to reduced revenues and profits at our security division, which has been impacted by reduced orders from its largest client whilst that client re-evaluates its own strategy.  A breakdown of revenues and EBITDA by subsidiary is given below.

At the start of the current financial year, we merged the Group’s security businesses, B to B Links Limited (B to B) and SG Systems (UK) Limited (SG), into a single corporate entity, B2BSG Systems Limited.  As the year has progressed, we have been taking steps to fully integrate both parts of the business.  This involves streamlining the office and accounting functions, creating a single sales team and having a combined engineering department responsible for installations and servicing.  These operations will be managed from the Finchampstead, Berkshire premises, and we have given notice to terminate our lease at the Amesbury, Wiltshire office and warehouse formerly used by SG.  In the short term, this amalgamation and streamlining process will involve some costs but longer term will give the business a lower overhead.

The lease on the office used by Quality Leisure Management Limited (QLM) in Northleach expires on 31 December 2018.  QLM will relocate to Raunds, Northamptonshire, where it will share Group-owned premises currently occupied by another subsidiary, RSA Environmental Health Limited (RSA).  This will lead to lower fixed costs going forward though there will be certain relocation and redundancy expenses borne in Q3.

Our Scottish subsidiary, QCS, has taken on additional premises adjacent to its existing unit, which has also had its lease renewed.  We have invested approximately £50,000 in refurnishing and modernising both units to improve and expand the training facility, so that larger numbers of delegates can attend courses where appropriate.  A secondary training area has also been created, providing the ability to run more than one course at the same time.

The Group continues to suffer from a general inertia and level of uncertainty in its client base ahead of clarification on the implications and impacts of Brexit.  As we have repeatedly reported, the weakness of Sterling impacts particularly on our security business, which relies upon imported equipment purchased in US Dollars and Euros.

Outlook

The majority of the Group’s revenues arise from its security division and this is heavily weighted towards the retail sector.  Our security business is highly regarded within the retail sector and recently won the Highly Commended Award in the “Vendor of the Year” category at the Retail Risk Fraud Awards.  We are well-placed to deliver security solutions to the sector and have a number of key partnerships with national accounts.

Trials and tribulations on the high street are well publicised and we are not insulated from this.  Until retailers have emerged from the Christmas period they are unlikely to consider meaningful investment in their stores, partly because of financial uncertainties but also because they do not want work going on in store during the peak period.  This means we always see a tail-off in activity as we approach the festive period and as a result of the general weakness in the sector, we have reduced visibility for the start of calendar year 2019.

Our health and safety businesses are all trading profitably and we expect this to continue for the second half of the financial year.  Levels of contract renewal at QLM, Inspection Services (UK) Limited and Personnel Health and Safety Consultants Limited remain high.  The main activity of RSA continues to be the delivery of safety-rated training and advice to the education sector and the subsidiary intends to refresh its offering over the coming months.

With the new investment in QCS’s premises and management’s steps to improve and expand the range of courses that they offer, we are confident of seeing improved results going forward.  QCS, which delivers training and consultancy in management and quality systems, is recognised as a leader in its field.

Dividend

In view of the gain arising from the sale of the property relating to the discounted asbestos operations and the resulting strengthening of our balance sheet, the board has decided to declare an interim dividend of 0.5p per ordinary share, to be paid on 28 February 2019 to those on the register of members on 4 January 2019.

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 September 2018 stood at £583k compared with £129k at the same time last year.

Given our improved cash position, we have reduced our (currently unused) banking facility from £300,000 to £150,000, as we see this as being adequate for our foreseeable needs and results in a lower facilitation fee.

Other than in the normal course of business, the board does not currently anticipate there being any additional calls on the Company’s cash.

Performance by Trading Subsidiaries

Profit/loss figures for each of the Group’s 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.

Inspection Services (UK) Limited

Invoiced sales of £108,600 yielding a profit of £19,100 (the figures for the same period last year were £108,700 and £25,200).

Personnel Health and Safety Consultants Limited

Invoiced sales of £311,100 yielding a profit of £123,800 (the figures for the same period last year were £317,600 and £123,900).

RSA Environmental Health Limited

Invoiced sales of £190,600 resulting in a profit of £27,500 (the figures for the same period last year were £174,600 and £20,900).

Quality Leisure Management Limited

Invoiced sales of £218,300 resulting in a profit of £47,000 (the figures for the same period last year were £203,000 and £52,300).

QCS International Limited

Invoiced sales of £363,500 yielding a profit of £111,300 (the figures for the same period last year were £372,100 and £145,900).

B2BSG Solutions Limited

Invoiced sales of £1,705,100 yielding a profit of £65,300 (the combined figures across B to B and SG over the same period last year were £2,260,500 and £189,100).

For further information please contact:

PHSC plc
Stephen King                                                                             01622 717 700
Stephen.king@phsc.co.uk
www.phsc.plc.uk

Strand Hanson Limited (Nominated Adviser)                   020 7409 3494
Richard Tulloch/Frederick Twist

Novum Securities Limited (Broker)                               020 7399 9427
Colin Rowbury

About PHSC

PHSC plc, through its trading subsidiaries Personnel Health & Safety Consultants Ltd, RSA Environmental Health 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. B2BSG Systems Ltd offer innovative security solutions including tagging, labelling and CCTV.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

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 the AIM Rules for Companies 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 2018, 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. IFRS 16 may have an impact on the measurement and treatment of operating leases and the related disclosures.  As at 31 March 2018 the estimated impact of the transition to IFRS 16 would be to increase tangible fixed assets and liabilities by approximately £52,000.  The impact on the statement of comprehensive income is not expected to be material to the financial statements. IFRS 9 is not expected to have a material impact on the financial statements of the group entities.

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 stable and an impairment charge in these interim accounts is not therefore considered necessary and will be reassessed at the year end.

2.       Exceptional Administrative Expenses

3.       Segmental Reporting

4.       Property, plant and equipment

5.       Earnings per share

The calculation of the basic earnings per share is based on the following data.