Interim Results
CHAIRMAN'S STATEMENT
for the six months ended 30 September 2007
Financial Highlights
- Group turnover (consolidated) for the period is £2.518m compared with £2.10060m for the same period
last year, representing an increase of 22%.
- Group profit before tax provision is £364,000, a 49% increase in the figure of £244,000 for the
same period last year.
- Diluted earnings per share at the interim stage in respect of continuing activities are 2.14p
representing a 22% rise above the 1.76p achieved in the corresponding period last year.
- Net cash inflow from operating activities was £479,000 (£87,000 in the same period last year). After
payment of dividends (£93,000), repayment of borrowings (£140,000) and final payments relating to previous
acquisitions (£159,000), there was a £78,000 net increase in cash. This resulted in cash reserves rising to
£1.547m at the end of the period.
The pattern of work continues to result in an interchange of work between subsidiaries. There is a core of personnel
in the Group with the skills to undertake assignments on behalf of any trading subsidiary. Subsequently, the
contracts earned by one subsidiary may be carried out and invoiced by another member of the Group and we have
a policy of not cross-charging between subsidiaries. In consequence the individual performance of each
subsidiary may be distorted and thus the consolidated Group position is the only true measure of performance.
Corporate Review
Acquisitions
There have been no acquisitions in the period although, as previously announced, Heads of Terms have been signed
with two companies as detailed below.
Heads of Terms have been agreed with In House The Hygiene Management Company (IH), a food hygiene practice. Due
diligence is underway and completion is expected before the end of the calendar year. Turnover for IH in
the six months to 30 June 2007 was £197,000, generating pre-tax profits of £56,000 (unaudited).
IH will enter into a strategic partnership with our RSA Environmental Health subsidiary, and will be managed from
RSA's Midlands offices.
The initial consideration for IH is agreed at £200,000 with further payments each of £50,000 on the first and
second anniversaries. Each anniversary payment is subject to a self-funded bonus according to profits.
Heads of Terms have been agreed with Guardian Water Treatment Limited (Guardian), a company specialising in air and
water quality management. Due diligence is underway and completion is expected before the end of the calendar
year, but after the IH acquisition. Guardian's turnover in the year to 31 March 2007 was £2.1m, generating
pre-tax profits of £263,000 (unaudited). Management accounts indicate that Guardian is currently trading
ahead of last year's performance.
The maximum purchase price is £2.15m (including the freehold property based on current property values) and
comprises payment on completion of £900,000, a further unconditional payment of £400,000 on the first
anniversary of completion and a bonus payment on the second anniversary of completion of £200,000 on the
basis that the adjusted earnings before interest and tax (EBIT) for the trading year to 31 March 2009 reaches
a minimum of £400,000. This payment will be adjusted pound for pound by the amount that EBIT is above or
below that figure, subject to a minimum payment of £50,000 and a maximum of £400,000. The Group will purchase
the business property at fair market value within an agreed period after completion. This property is
currently valued at £450,000.
Performance by Trading Subsidiaries
Profit figures for individual subsidiaries are stated before tax and management charges.
Adamson's Laboratory Services Limited
Invoiced sales of £1,407,319, yielding a profit of £277,838 (the figures for the same period last year were
£1,099,216 and £190,069).
Envex Company Limited
Invoiced sales of £123,818, resulting in a loss of £6,874 for the period. There are no comparable figures for last
year as the company was not part of the Group at that time.
Personnel Health and Safety Consultants Limited
Invoiced sales of £508,377, yielding a profit of £255,637 (the figures for the same period last year were
£514,295 and £210,602).
RSA Environmental Health Limited
Invoiced sales of £479,266, yielding a profit of £29,091 (the figures for the same period last year were £445,866
and £29,526).
Dividend
The Board is not recommending payment of an interim dividend, but expects to propose an appropriate final dividend
at the end of the year.
Prospects
It has traditionally been the case that demand for the Group's services is higher in the second half of the year.
Despite the excellent first half performance, we believe that this trend will continue in the current
financial year. Subject to completing both acquisitions as anticipated, there will also be significant new
revenues and profits to supplement those generated by continuing operations.
Stephen King - Chairman and Managing Director
Consolidated income statement Six months Six months Year
ended ended ended
30 Sept 07 30 Sept 06 31 Mar 07
Note Unaudited Restated Restated
£'000 £'000 £'000
Revenue 2,518 2,060 4,589
Cost of sales 1,374 1,081 2,306
Gross profit 1,144 979 2,283
Other operating income 1 1 2
Administrative expenses (792) (728) (1,506)
Profit from operations 353 252 779
Finance revenue 22 5 10
Finance costs (11) (13) (29)
Profit before tax 364 244 760
Taxes (111) (68) (239)
Profit for the period from continuing operations 253 176 521
Loss for the period from discontinued operations - (26) (59)
Attributable to:
Equity holders of the Group 253 150 462
Earnings per share 3
Continuing operations 2.17p 1.79p 5.30p
Discontinued operations - (0.26)p (0.60)p
Diluted earnings per share
Continuing operations 2.14p 1.76p 5.21p
Discontined operations - (0.26)p (0.59)p
Consolidated balance sheet 30 Sept 07 30 Sept 06 31 Mar 07
Unaudited Restated Restated
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 2 823 700 818
Intangible assets 47 81 49
Goodwill 2,206 2,192 2,191
3,076 2,973 3,058
Current assets
Inventories 316 376 389
Trade and other receivables 821 786 951
Cash and cash equivalents 1,547 319 1,469
2,684 1,481 2,809
Current liabilities
Trade and other payables 410 487 648
Current tax payable 347 250 236
Borrowings 83 73 84
840 810 968
Net current assets 1,844 671 1,841
Total assets less current liabilities 4,920 3,644 4,899
Non-current liabilities
Long-term borrowings 148 270 287
Deferred taxation 91 91 91
239 361 378
4,681 3,283 4,521
Equity
Share capital and premium 2,629 1,703 2,629
Other reserves 208 205 208
Retained earnings 1,844 1,375 1,684
Total equity 4,681 3,283 4,521
Consolidated Statement of Changes in Equity
Other Reserves
Capital
Share Share Redemption Revaluation Retained Total
Capital Premium Reserve Resereve Earnings Equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2006 983 728 - 205 1,298 3,214
Profit attributable to equity holders - - - - 150 150 vidends - - - - (73) (73)
Purchase of own shares (2) (6) - - - (73)
Balance at 30 September 2006 981 722 0 205 1,375 3,283
Balance at 1 April 2007 1,166 1,463 6 202 1,684 4,521
Profit attributable to equity holders - - - - 253 253
Dividends - - - - (93) (93)
Balance at 30 September 2007 1,166 1,463 6 202 1,844 4,681
Consolidated cash flow statement Six months Six months Year
ended ended ended
30 Sept 07 30 Sept 06 31 Mar 07
Unaudited Restated Restated
£'000 £'000 £'000
Cash flows from operating activities
Cash generated from operations 490 102 661
Interest paid (11) (15) (32)
Tax paid - - (186)
Net cash generated from operating activities 479 87 443
Cash flows from investing activities
Purchase of property, plant and equipment (31) (10) (167)
Disposal of property, plant and equipment - 3 7
Purchase of subsidiary companies (159) (133) (159)
Interest received 22 5 10
Net cash used in investing activities (168) (135) (309)
Cash flows from financing activities
Proceeds from borrowings - - 95
Repayments of borrowings (140) (48) (92)
Dividends paid to group shareholders (93) (64) (73)
Proceeds from share issues - (8) 918
Net cash (used in) / from financing activities (233) (120) 848
Net increase/(decrease) in cash and cash equivalents 78 (168) 982
Cash and cash equivalents at beginning of year 1,469 487 487
Cash and cash equivalents at end of year 1,547 319 1,469
Notes to the cash flow statement
Cash generated from operations
Profit before tax 364 218 735
Finance revenue (22) (5) (10)
Finance cost 11 13 32
Depreciation 29 42 81
(Increase)/decrease in inventories 73 (80) (83)
Decrease/(increase) in trade and other receivables 129 (97) (251)
(Decrease)/increase in trade and other payables (94) 8 154
Loss on disposal of financial assets - 3 3
Cash generated from operations 490 102 661
Notes on the financial statements
1. The unaudited financial information comprises the consolidated interim balance sheets as at 30 September 2007
and 30 September 2006 and the related consolidated interim statements of income, changes in equity and cash
flows and related notes for the six months then ended (hereinafter referred to as the "financial information").
The financial information, including the comparative figures for the year ended 31 March 2007, do not
constitute statutory financial statements for the purposes of Section 240 of the Companies Act 1985. A copy
of the statutory financial statements for the year ended 31 March 2007, prepared under UK Generally
Accepted Accounting Principles ("UK GAAP"), has been delivered to the Registrar of Companies and
contained an unqualified auditors' report in accordance with Section 235 of the Companies Act 1985.
PHSC plc has adopted International Financial Reporting Standards ("IFRS") with effect from 1 April 2007,
in accordance with European Union Regulations and the London Stock Exchange AIM Rules. The first Annual Report
prepared under
IFRS will be for the year ended 31 March 2008. In compliance with IFRS 1 'First Time Adoption of
International Financial Reporting Standards', the date of transition to IFRS is 1 April 2006.
The interim financial information has been prepared in accordance with the recognition and measurement
requirements of IFRS as endorsed by the European Union. The Directors do not consider that there are any
significant changes to the Group's accounting policies (as set out in the 2007 Annual Report) other than those
resulting from the adoption of IFRS. An explanation of how transition to IFRS has affected the reported
financial position and performance of the Group is provided below.
30 Sept 07 30 Sept 06 31 Mar 07
Unaudited Restated Restated
2 Property, plant and equipment £'000 £'000 £'000
Cost or valuation
Brought forward 1,008 875 875
Additions 31 11 167
Disposals - (14) (25)
Acquisition of subsidiary - - 3
Disposal of subsidiary - - (11)
1,039 872 1,009
Depreciation
Brought forward 191 156 156
Charge 25 23 53
Eliminated on disposal - (7) (18)
216 172 191
Net book value 823 700 818
3 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Earnings 30 Sept 07 30 Sept 06 31 Mar 07
£'000 £'000 £'000
Continuing activities 253 176 521
Discontinued activities - (26) (59)
Number of shares 30 Sept 07 30 Sept 06 31 Mar 07
Weighted average number of shares for the purpose
of basic earnings per share 11,657,296 9,824,684 9,838,547
Effect of dilutive warrants 163,373 163,373 163,373
Weighted average number of shares for the purpose
of diluted earnings per share 11,820,669 9,988,057 10,001,920
Reconciliation of figures reported under UK GAAP to IFRS
RECONCILIATION OF PROFIT FOR THE HALF YEAR ENDED 30 SEPTEMBER 2006
Presentational
effects of Adjustments
on
Note UK GAAP transition to transition to IFRS
IFRS IFRS
(Note 3)
Revenue 2,103 (43) 2,060
Cost of sales (1,085) 4 (1,081)
Gross profit 1,018 (39) 979
Other operating income 1 1
I Administrative expenses (841) 63 50 (728)
Profit from operations 178 24 50 252
Finance revenue 5 5
Finance costs (15) 2 (13)
Profit before tax 168 26 50 244
Taxes (68) (68)
Profit for the period from continuing operations 100 26 50 176
Profit for the period from discontinued operations - (26) (26)
100 0 50 150
RECONCILIATION OF PROFIT FOR THE YEAR ENDED 31 MARCH 2007
Presentational
effects of Adjustments
on
transition to transition to
Note UK GAAP IFRS IFRS IFRS
(Note 3)
Revenue 4,649 (60) 4,589
Cost of sales (2,312) 6 (2,306)
Gross profit 2,337 (54) 2,283
Other operating income 2 2
I Administrative expenses (1,683) 76 101 (1,506)
Profit from operations 656 22 101 779
Finance revenue 10 10
Finance costs (32) 3 (29)
Profit before tax 634 25 101 760
Loss on sale discontinued operations (34) 34 0
Taxes (239) (239)
Profit for the period from continuing operations 361 59 101 521
Profit for the period from discontinued operations (59) (59)
361 0 101 462
RECONCILIATION OF SHAREHOLDER'S EQUITY AT 1 APRIL 2006
Adjustments
on
transition to
Note UK GAAP IFRS IFRS
Property plant and equipment 719 719
Intangible assets 2,280 2,280
Total non-current assets 2,999 2,999
Inventories 297 297
Trade and other receivables 689 689
Cash and cash equivalents 487 487
Total current assets 1,473 1,473
Trade and other payables (493) (493)
Current tax payable (182) (182)
Borrowings (74) (74)
Current liabilities (749) (749)
Long term borrowings (417) (417)
II Deferred taxation (13) (78) (91)
Non-current liabilities (430) (508)
3,293 3,215
Share capital 1,711 1,711
Fair value and other reserves 206 206
II Retained earnings 1,376 (78) 1,298
3,293 3,215
RECONCILIATION OF SHAREHOLDER'S EQUITY AT 30 SEPTEMBER 2006
Adjustments
on
transition to
Note UK GAAP IFRS IFRS
Property plant and equipment 700 700
I Intangible assets 81 81
Goodwill 2,142 50 2,192
Total non-current assets 2,923 2,973
Inventories 376 376
Trade and other receivables 786 786
Cash and cash equivalents 319 319
Total current assets 1,481 1,481
Trade and other payables (487) (487)
Current tax payable (250) (250)
Borrowings (73) (73)
Current liabilities (810) (810)
Long term borrowings (270) (270)
II Deferred taxation (13) (78) (91)
Non-current liabilities (283) (361)
3,311 3,283
Share capital 1,703 1,703
Fair value and other reserves 205 205
I&II Retained earnings 1,403 (28) 1,375
3,311 3,283
RECONCILIATION OF SHAREHOLDER'S EQUITY AT 31 MARCH 2007
Adjustments
on
transition to
Note UK GAAP IFRS IFRS
Property plant and equipment 818 818
I Intangible assets 49 49
Goodwill 2,090 101 2,191
Total non-current assets 2,957 3,058
Inventories 389 389
Trade and other receivables 951 951
Cash and cash equivalents 1,469 1,469
Total current assets 2,809 2,809
Trade and other payables (648) (648)
Current tax payable (236) (236)
Borrowings (84) (84)
Current liabilities (968) (968)
Long term borrowings (287) (287)
II Deferred taxation (13) (78) (91)
Non-current liabilities (300) (378)
4,498 4,521
Share capital 2,629 2,629
Fair value and other reserves 208 208
I&II Retained earnings 1,661 23 1,684
4,498 4,521
PRINCIPAL DIFFERENCES BETWEEN UK GAAP AND IFRS
The principal differences which give rise to changes in the Group's reported profit for the year ended 31 March 2007
and half year
ended 30 September 2006 and net assets at 1 April 2006, 30 September 2006 and 31 March 2007 are as
follows.
I Amortisation of goodwill on consolidation
The Group has availed of the exemption in IFRS1 not to apply IFRS 3 'Business Combinations' retrospectively to
business combinations that took place prior to 1 April 2006. Goodwill has been tested for impairment at the
transition date and at
each period end date. Amortisation charged since the transition date has been reversed as follows:
Period ended 30 September 2006 £50,000
Year ended 31 March 2007 £101,000
II Deferred tax
In accordance with IAS 12 'Income Taxes' a deferred tax liability has been recognised on the revaluation of the
Group's properties,
which took place prior to the date of transition. The deferred tax liability has been recognised in the Group's
revaluation reserve.
A provision for deferred tax of £78,000 has been recognised in respect of the revalued properties.
III Presentational adjustment
The amounts in respect of the Group's discontinued operations have been restated to reflect the requirements of
IFRS 5 'Non-current
Assets Held for Sale and Discontinued Operations'.
For further information contact:
PHSC plc
Stephen King 01622 717700
stephen.king@phsc.co.uk
www.phsc.plc.co.uk
Ruegg & Co Limited
Gavin Burnell / Brett Miller 020 7584 3663
gburnell@ruegg.co.uk
Hichens, Harrison & Co plc
Daniel Briggs 020 7382 7776
PHSC plc
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