PHSC PLC (“PHSC”, the “Company”, or the “Group”)
Interim Results for the six months ended 30 September 2014
GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT
- Group turnover for first half up 4.7% at £4.129m compared with £3.942m last year.
- EBITDA up 44% to £518k before costs of acquisitions, versus £359k last year.
- Basic earnings per share of 2.26p on enlarged share capital, compared with 2.30p last year.
- Net asset value (unaudited) of £6.622m.
- Pro-forma net asset value (unaudited) per share of 52.2p compared to a current share price (mid) of 30.0p.
- Performance of both new subsidiaries exceeds expectations, increasing profits and resulting in higher earn-out payments
Our trading performance has exceeded the board’s expectations and this has resulted in increased revenue and profits. Financial statistics for each trading subsidiary are given later in this statement.
The positive effect of our recent acquisitions continues to be felt, with the legacy health and safety businesses also making a valuable contribution.
The stand-out performance is from B to B Links Limited which has more than doubled its profit to around £402,000. This was assisted by a one-off project commissioned in the second quarter by our largest client who required significant works to their high street retail property portfolio within a short space of time. The project presented great challenges to everybody involved in the installation programme, and their efforts ensured that the client’s deadlines were met. This work was in addition to the normal installation programme that the client engages us to deliver. The subsidiary also benefitted from significant new business from a national chain of builders’ merchants and an accelerated programme of work from a leading high street fashion chain.
The two-year earn-out period following the acquisition of QCS International Limited ended on 31 July 2014 and, as subsequently announced, an agreed final payment of £105,285 was made to the vendors. This was funded from existing cash and brought the total cash payment for the transaction to £425,285. At the time of acquisition an allowance of £80,000 was made for the final payment but the extra profits generated meant that this provision was exceeded by £25,285. Under IFRS rules the excess has been expressed as a charge to the Group Statement of Comprehensive Income.
In the case of B to B Links Limited, the two-year earn-out period concluded on 30 September 2014. As announced today, an exceptionally strong performance in the last quarter has resulted in an earn-out entitlement of £458,243. Of this, £250,000 was provided for at the date of acquisition so it will be necessary to charge the excess amount of £208,243 to the Group Statement of Comprehensive Income.
The strong results for the half-year have been assisted by a reversal of fortune for Quality Leisure Management Limited which was loss-making at this stage last year but has posted a profit of around £57,000 in the first half.
In the past, the Group’s financial performance has always been better in the second half of the year. We expect this cycle to be maintained in respect of the majority of our subsidiaries, but not for the Group as a whole. This is because the exceptional one-off contribution from B to B Links in Q2 is expected to be balanced out by normalised revenues in the second half. Nevertheless, with each trading subsidiary having a strong forward order book, we expect to build on the impressive performance that has been delivered in the first half.
Take-up of RSA Environmental Limited’s “SafetyMARK” programme to support safety excellence in schools is increasing, and is on the way to compensating for the continued contraction in Local Authority-derived inspection work. Our Adamson’s Laboratory Service Limited subsidiary is engaged in extensive programmes of work for two leading Universities. Our Scottish subsidiary, QCS International Limited, is gearing up to deliver training and consultancy support in connection with pending revisions to international quality standards
The Board is not declaring an interim dividend but intends to recommend an appropriate final dividend at the end of the year in line with its stated policy of at least maintaining the level of dividend paid.
The bank balance stood at £138,398 as at 30 September 2104 (the date of the interim accounting period) and £156,830 at the close of business on the last trading day prior to this announcement.
Cash demands over the coming weeks are considerable. Large amounts are tied up in outstanding invoices associated with B to B Links Limited’s exceptional invoicing achievements in September 2014, much of which is on agreed 90 day payment terms. Trade and other receivables across the Group were £2.922m at 30 September compared with £1.935m at 31 March 2014.
Of the £458,243 final payment due in connection with the acquisition of B 2 B Links Limited, a sum of £120,000 was advanced to the vendors in July 2014. In exchange for part-payment earlier than it fell due, the vendors agreed to defer the bulk of the remaining payment until 31 December 2014. By that time it is anticipated that sufficient cash will have been generated from settlement of invoices we issued in September to cover this liability.
Our banking arrangements with HSBC include the ability to put in place an overdraft facility of £100k upon 48 hours’ notice, although as at today’s date that facility is not being called upon.
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 £1,288,600 yielding a profit of £67,400 (the equivalent figures for the same period last year were £1,329,700 and £127,400). The work in progress level at the end of September 2014 was particularly high.
Inspection Services (UK) Limited
Invoiced sales of £96,300 yielding a profit of £8,900 (the figures for the same period last year were £98,300 and £3,500).
Personnel Health and Safety Consultants Limited
Invoiced sales of £390,800 yielding a profit of £191,200 (the figures for the same period last year were £360,500 and £153,300).
RSA Environmental Health Limited
Invoiced sales of £198,200 resulting in a profit of £8,000 (the figures for the same period last year were £237,900 and £20,900).
Quality Leisure Management Limited
Invoiced sales of £246,400 resulting in a profit of £57,000 (the figures for the same period last year were £186,800 and a loss £27,300).
QCS International Limited
Invoiced sales of £254,000 yielding a profit of £58,900 (the figures for the same period last year were £253,000 and £79,200).
B to B Links Limited
Invoiced sales of £1,654,300 yielding a profit of £402,000 (the figures for the same period last year were £1,475,400 and £198,700)
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 7382 1100 John Howes / Alice Lane (Broking)