PHSC PLC (“PHSC”, the “Company”, or the “Group”)
Interim Results for the six months ended 30 September 2013
GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT
- Group turnover up 79% at £3.942m compared with £2.198m
- EBITDA up 264% to £359k versus £136k
- Basic earnings per share up 233% at 2.30p compared with 0.69p
- Net asset value (unaudited) of £5.712m
- Placing raised £480k after expenses; funds received in October 2013 thus excluded from Interim Accounts
- Pro-forma net asset value (unaudited) per share of 49p taking into account the Placing, compared to a current share price (mid) of 32p
- Significant contributions from both new subsidiaries acquired last year
Financial statistics for each of the Group’s seven trading subsidiaries are given later in this statement and it will be seen that the most recent acquisitions have had a major positive impact.
The Board’s focus has been on ensuring that the new companies, QCS International Limited and B to B Links Limited, are absorbed within the Group with the minimum of disruption to their normal activities, and that they are adequately resourced. In the case of B to B Links Limited, on-going CCTV installation work for a major department store chain continues to be the predominant feature. A comprehensive management structure has now been put in place to deliver this work and the activity has generated average monthly revenues of over £140k in the period, up from £75k per month in the first six months after acquisition.
QCS International Limited continues to trade ahead of management forecasts, and the outlook for their quality systems auditing and training services remains encouraging.
As we predicted, the remaining five subsidiaries which deal predominantly in health and safety consultancy and training services, and asbestos management have had mixed fortunes. When taken together they are broadly holding their own in market conditions that remain challenging, further reinforcing the Board’s view that the diversification from solely health and safety activities was well justified.
On 27 September 2013 the Company announced that it had raised £520,000 before expenses through a placing of 2,080,000 new Ordinary Shares at a price of 25p per share. The placing was oversubscribed, primarily taken up by institutional investors, and included director participation as a demonstration of our confidence in the business. The placing shares represented approximately 16 per cent. of the enlarged issued share capital. It is worth noting that the combined effect on the share dilution of our two new acquisitions prior to this placing had been just 3 per cent.
The Board felt that it was appropriate to accept significant new funding at a time when its cash flow was under pressure as a result of acquisition payments. Whilst these payments were made from existing cash resources, the ability to invest in materials and equipment primarily associated with B to B Links Limited’s growing order book would have been compromised. Although our bankers had offered to provide a level of support that would have been sufficient, overdrafts and borrowings ultimately have to be paid back. On balance the Board took the decision that the level of dilution occasioned by the new share issue was justified by the increased flexibility offered by an equity financing.
The net proceeds of the placing were approximately £480k and will be used as additional working capital to fund the continued growth of the Group.
In our last Annual Report we speculated that EBITDA for 2013/14 could be in the order of £700-£750k. These interim figures announced today show us on course to achieve that outcome. In the past it has always been the case that the Group’s financial performance is better in the second half of the year. With the new subsidiaries generating a more level monthly income profile, this effect will be less pronounced in the current year but we do expect the pattern to be maintained.
We stated that there would be a positive impact from our reduced reliance upon the core business of health and safety consultancy services. This has been borne out by the far higher revenues and earnings per share we have been able to deliver. As we get to understand the new businesses even better, we expect to be able to carry on enhancing shareholder value.
The Board is not declaring an interim dividend but will consider payment of an appropriate final dividend at the end of the year. Key considerations will be the overall performance for the year and the extent of final payments becoming due in respect of the acquisition of QCS International Limited and B to B Links Limited which fall due at the end of July and September 2014 respectively.
Net Asset Value
As at 30 September 2013, the Company had net assets of £5,712,400 (unaudited) as per these interim accounts. There were 10,606,348 Ordinary Shares in issue at that date which equates to a net asset value (NAV) per share of 54p.
Taking into account the net proceeds of the Placing, the (unaudited) pro-forma NAV per share as at 30 September 2013 was 49p. At 32p per share, the Ordinary Shares of the Company are currently trading at approximately a 35% discount to the (unaudited) pro-forma NAV per share.
The nature of B to B Links Limited’s business means that substantial cash is tied up in stock and work in progress. In addition, agreed settlement terms with a major client mean that higher sales have led to an increase in trade and other receivables which Group-wide have risen by £384k since 31 March 2013.
Although £188k net cash was generated by operating activities, cash of £361k was paid within the period on the anniversaries of two acquisitions. A further £80k to complete the first anniversary payments was paid on 4 October 2013. Our post period cash position was substantially improved by £480k net proceeds from the share placing. Combined with further net cash from trading activities, the bank balance stood at £523k at the end of October 2013.
Our banking arrangements with HSBC include a formal overdraft facility of £200k, as yet unused. osition and as a contingency we have agreed a suitable facility with our bankers, HSBC, should this be required.
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
Invoiced sales of £1,329,700 yielding a profit of £127,400 (the equivalent figures for the same period last year were £1,124,300 and £102,700).
Inspection Services (UK) Limited
Invoiced sales of £98,300 yielding a profit of £3,500 (the figures for the same period last year were £100,600 and £4,900).
Personnel Health and Safety Consultants Limited
Invoiced sales of £360,500 yielding a profit of £153,300 (the figures for the same period last year were £388,900 and £167,800).
RSA Environmental Health Limited
Invoiced sales of £237,900 resulting in a profit of £20,900 (the figures for the same period last year were £193,200 and a loss of £6,000).
Quality Leisure Management Limited
Invoiced sales of £186,800 resulting in a loss of £27,300 (the figures for the same period last year were £307,500 and profit of £60,900).
QCS International Limited
Invoiced sales of £253,000 yielding a profit of £79,200 (this compares with sales of £83,700 and a profit of £28,800 for the two months since acquisition that fell into this period last year).
B to B Links Limited
Invoiced sales of £1,475,400 yielding a profit of £198,700 (there are no comparative figures available for last year, with the subsidiary being acquired on 28 September 2012).
Stephen King – Group Chief Executive Officer
For further information please contact:
Stephen King 01622 717700
Northland Capital Partners Limited (Nominated Adviser and Broker) Gavin Burnell / Edward Hutton 020 7796 8800