PHSC Phsc Plc

2 December 2019

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

Unaudited Interim Results for the six months ended 30 September 2019

GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT

Financial Highlights

• Group revenue for first half of £2.234m, down from £2.897m last year.
• EBITDA of £175k, compared with an underlying equivalent of £135k at the halfway stage last year i.e. before factoring in an exceptional gain from property disposal.
• Earnings per share of 1.01p compared with 1.47p last year.  Last year’s figure includes exceptional gain from property disposal.
• Cash of £688k compared with £583k last year.
• Net asset value (unaudited) of £5.3m compared to £5.5m last year.
• Pro-forma net asset value (unaudited) per share of 36p compared to a current share price (mid) of 11p.
• Interim dividend declared of 0.5p per ordinary share.

Operational Highlights and Business Outlook

Compared with the halfway stage last year, EBITDA from trading activities improved across the Group as a whole by £40k, aided by the Group’s lower overheads and premises related savings. This was achieved despite a decline in product sales through our security division, caused by the trading difficulties of the retail sector.

All businesses within the safety division contributed higher profits, with three out of the four safety-related subsidiaries achieving higher revenues. The forward order book is very encouraging.

Our quality systems division also reported growth in sales and increased profits. The larger space available for public training courses, following expansion into an adjacent unit, is starting to pay dividends with higher delegate numbers being achieved.

Our security division saw a reduction in sales of around 45% as the customer base, predominantly high street retailers, continued to struggle, resulting in a loss for the first half. The effect has been mitigated to an extent by careful cost control and a reduction in staffing levels through normal staff turnover. After a prolonged period of low activity, the subsidiary’s largest client has recently begun to place new business, and this gives more scope for optimism in the future. As has been previously reported, the weak Sterling exchange rate impacts greatly on gross profit margins, as all product supplied and installed are imported and paid for in US Dollars or Euros.

The fortunes of the Group as a whole are affected by the performance of the security division, which presently accounts for approximately 40% of the Group’s revenues. The business is an important player in the retail sector and has again been recognised at the annual Retail Risk Fraud Awards when it was Highly Commended for RFID solutions (products using radio frequency identification systems).

Dividend

Profitable trading and a healthy cash position have enabled the Board to declare an interim dividend of 0.5p per ordinary share, to be paid on 28 February 2020 to those on the register of members on 3 January 2020.

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 2019 stood at £688k compared with £583k at the same time last year.

Other than in the normal course of business and the proposed and any future dividends that might be declared, the Board does not currently anticipate there being any additional calls on the Company’s cash.

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, and dividends from, trading subsidiaries), interest paid and received, depreciation and amortisation.

Inspection Services (UK) Limited
Invoiced sales of £132,613 yielding a profit of £35,860 (the figures for the same period last year were £108,563 and £19,130).

Personnel Health and Safety Consultants Limited
Invoiced sales of £366,657 yielding a profit of £139,470 (the figures for the same period last year were £311,111 and £123,846).

RSA Environmental Health Limited
Invoiced sales of £207,524 resulting in a profit of £50,488 (the figures for the same period last year were £190,563 and £27,501).

Quality Leisure Management Limited
Invoiced sales of £194,295 resulting in a profit of £58,544 (the figures for the same period last year were £218,327 and £46,983).

QCS International Limited
Invoiced sales of £397,832 yielding a profit of £142,102 (the figures for the same period last year were £363,514 and £111,259).

B2BSG Systems Limited
Invoiced sales of £935,356 resulting in a loss of £56,558 (the figures for the same period last year were £1,705,080 and £65,319 profit).

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/Eric Allan

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 (“MAR”).

 

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 2019, prepared under IFRS have been filed with the Registrar of Companies.  The auditors’ report for the 2019 financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

Other than as set out below, the same accounting policies and methods of computation are followed within these interim financial statements as adopted in the most recent annual financial statements. 

The Group has applied IFRS 16 with a date of initial application of 1 April 2019 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4.  The cumulative effect of initial application is recognised in retained earnings at 1 April 2019.  The details of the change in accounting policy are disclosed below.

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4.  Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease.

On transition to IFRS 16, the Group elected to reassess whether there is a lease for all contracts in place on or after 1 April 2019.  Contracts that were not identified as leases under IAS 17 and IFRIC 4 were reassessed for whether there is a lease.  Therefore, the definition of a lease under IFRS 16 was applied to contracts in place or entered into on or after 1 April 2019.

As lessee, the Group previously classified leases as operating or finance leases based on its assessment pf whether the lease transferred significantly all of the risks and remains incidental to ownership of the underlying asset to the Group.  Under IFRS 16, the Group recognises rights-of-use assets and liabilities for most leases i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases of equipment and services.

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at a cost of capital of 5.0%.  Rights-of-use assets are measured at their carrying amount as if IFRS 16 had been applied since the commencement date, discounted at a cost of capital of 5.0%.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease.  A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• The contract involves the use of an identified assets; this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset;
• The Group has the right to obtain substantially all of the economic benefits from use of the assets throughout the period of use; and
• The Group has the right to direct the use of the asset.  The Group has this right when it has the decision-making rights that are most relevant to changing how and for what purpose the asset is used,  In rare cases where the decision about how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if the Group has the right to operate the asset.

On transition to IFRS 16, the Group recognised an additional £83,575 of right-of-use assets and the impact of discounting was considered immaterial so lease liabilities of £83,575 were also recognised. Therefore, no adjustment to equity at 1 April 2019 was made. In the period to 30 September 2019, depreciation of £6,905 was recognised in the statement of comprehensive income in relation to right of use assets.

The information presented within these interim financial statements complies 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.