REG-PHSC Plc: Annual Financial Report
19/08/2019 07:05
19 August 2019
PHSC PLC
(the “Company” or the “Group”)
Final Results for the year ended 31 March 2019 and Notice of Annual General
Meeting
Financial Highlights
• EBITDA* of £0.116m excluding exceptional gain
on property sale of ££0.17m, down from £0.14m last year
• Profit after tax of £0.001m compared with a
loss of £0.16m last year
• Group revenue of £5.2m compared with £7.0m
last year
• Cash reserves of £0.64m at year end compared
to £0.24m last year
• Write-down of £0.20m due to impaired
goodwill, the same as last year
• Group net assets at £5.14m after goodwill
impairment compared to £5.29m last year
• Profit per share of 0.005p compared to a loss
per share of 1.095p last year
• Final dividend of 0.5p proposed, making a
total of 1.0p for the year, matching the 1.0p paid last year1
31.3.19 31.3.18
£ £
Profit/(loss) before tax 42,494 (145,861)
Less: interest received (303) (3)
Add: interest paid 1,514 3,778
Add: depreciation 38,179 34,590
Add: impairment B2BSG Solutions Limited goodwill 200,000 200,000
Less: net gain on sale of property (166,270) -
Add: redundancy costs re closure of Adamson’s Laboratory Services Limited 47,000
Underlying EBITDA* 115,614 139,504
*Underlying EBITDA is calculated as earnings before interest, tax,
depreciation, impairment charges and non-recurring costs. This is used by
the board as a measure of underlying trading and has been provided to assist
shareholders in understanding the Group’s trading activities.
Operational highlights
• Completion of the integration process of the
two security businesses.
• Consolidation of operational sites within the
safety division, with Northleach office vacated at end of lease.
• Refurbishment of existing Cumbernauld premises
and additional lease taken on adjoining office space.
• Disposal of freehold property previously used
by discontinued asbestos consultancy business.
Annual General Meeting
This year’s annual general meeting (“AGM”) will be held at 10.00am on
Monday 30 September 2019 at The Old Church, 31 Rochester Road, Aylesford, Kent
ME20 7PR.
The report and accounts and notice of the AGM are expected to be posted to
shareholders on or around 22 August 2019 and will shortly be available to view
on the Company’s website at www.phsc.plc.uk.
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/James Bellman
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
Solutions Limited offers innovative security solutions including electronic
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
Strategic Report
On behalf of the board, I present my review of the Group’s activities and
performance during the financial year 2018-19, along with some commentary
about the Group’s plans and expectations for 2019-20.
General business review and outlook
The Group’s revenue profile continues to be dominated by its security
business, B2BSG Solutions Limited (B2BSG), which was formed at the start of
the year by the amalgamation of two separate subsidiaries operating in this
sector. It accounted for approximately 52% of income, with the safety
businesses contributing a combined 33% and our quality systems subsidiary, QCS
International Limited (QCS), making up the remaining 17%. In the prior year
the split was 60%, 23% and 11% respectively, but based on total Group revenues
that were around a third higher. This illustrates the effect on the Group of a
general downturn in the demand for security-related services in the present
retail environment.
Despite the recent difficulties at its security business caused by weak demand
from retailers, the Group’s decision to diversify away from core health and
safety services in 2012 can be shown to have been the right strategy overall.
The move into quality systems that took place at the same time has reaped
rewards with QCS accounting for circa £0.242m of profit before tax and
management charges last year. Management’s task is to improve the bottom
line at the security business whilst continuing to develop the full potential
of QCS.
During 2018, the national retailer who had been the largest client of B2BSG
encountered difficulties along with many others with a high street presence,
and temporarily suspended further investment. This had a severe impact on our
workload and meant that much of the infrastructure in place to serve the
client was no longer required, at least until further notice. In response we
had no alternative but to scale down the operation and this led to some staff
cuts and other actions with adverse financial consequences. Ultimately in Q4
the client was able to secure a company voluntary agreement with its creditors
and landlords and a slow improvement to the order book has since been
observed. There is no expectation that it will return to previous levels
although the board is optimistic that the trend will be upwards.
Given the reliance upon retail clients and the well-publicised problems across
this sector, the board decided that it was appropriate to make a provision of
£200,000 against the carrying value of the security business. Progressively
during the year we were transferring the contents of the Amesbury warehouse
into the Finchampstead facility as part of the amalgamation of our security
businesses that formed B2BSG, and this process identified certain stock
totalling £37,100 that was deemed to be slow-moving or for which there was no
current client demand. The majority of this stock, whilst written down,
remains on shelves and available for sale should the opportunity arise.
The subsidiaries that make up the health and safety division were each net
contributors to the Group and we continue to have a strong presence in sectors
such as leisure, education, healthcare and transport. At the end of calendar
year 2018 our Quality Leisure Management Limited subsidiary vacated its office
at The Old Police Station in Northleach, Gloucestershire upon expiry of the
lease and moved to Northamptonshire where it now shares the office space with
RSA Environmental Health Limited. Space had become available there following
the closure of our asbestos business which had occupied an area of the
premises.
In last year’s report we stated that QCS was proposing to take on additional
space at the Cumbernauld office park that it occupies. We negotiated a new
lease for the existing offices and took on the adjoining offices which had
been vacant for some time, doubling the space available for the delivery of
public training courses. An investment approaching £50,000 was made to
completely refurbish both units and now QCS has a modern and spacious facility
from which to continue developing its offering.
Our freehold property in Essex, was sold following the closure of our asbestos
business, and this contributed a net gain of circa £166,000. At the time of
acquisition in 2005, the Group paid for the property in line with an
independent market valuation. However, the book value at that time included an
unrealised gain from when the property was originally purchased some years
before and on which the former owners had not made a tax provision. The effect
is that the Group’s tax liability on disposal was increased to reflect tax
on the unrealised gain element as well as the appreciation in value since
2005.
Net asset value
As at 31 March 2019, the Group’s consolidated net assets stood at £5.14m.
There were 14,677,257 ordinary shares in issue at that date which equates to a
net asset value per share of 35p.
We note that the company’s ordinary shares continue to trade at a discount
to the net asset value, which we believe to be a response to the high value of
goodwill on the balance sheet. The board reviews the carrying value of
goodwill each year to ensure that the book value is fairly stated and is
within a range commensurate with good accounting practice. As has been noted
above, we resolved to reduce the carrying value of our retail-dependent
security businesses by £200,000, something that we also did in the previous
year, and this represents a reduction of approximately 4% in the consolidated
net assets of the Group. The board is satisfied that all other goodwill
valuations can presently be justified.
Outlook
The delay in resolving issues surrounding the UK’s membership of the
European Union (EU) continues to create an uncertain environment for many of
the Group’s clients. Many of those organisations we work with are cutting
back or delaying decisions until the political situation is resolved. In turn,
this causes constraints on what those organisations are prepared to invest in
the services and products that we provide. Whilst we do not generally sell
into the EU ourselves, there is a direct effect in that all the products
supplied by B2BSG are sourced abroad. The purchasing power of sterling has
deteriorated because of political uncertainty and this negatively impacts our
margins. Potentially, there may be additional costs associated with bringing
goods into the UK from the EU but these matters are not yet quantifiable.
The prospects for B2BSG are therefore hard to predict with any certainty but
we are doing all we can to contain costs and maximise income and margins.
We expect continued stability across the safety division where we have a
particularly loyal client base. We believe the cost base is where it should
be, and our focus will be on continuing to drive sales.
With refurbished premises and additional training facilities now in place at
QCS, we will look to exploit the opportunities that this gives us in terms of
higher numbers of paying delegates on public courses and the potential to hold
more than one training event at the same time.
Trading update
Unaudited management accounts for the first quarter of 2019-20 indicate that
Group revenues were £1.08m and this generated EBITDA of £84,600. This
compares with total revenues of £1.56m for the first quarter of 2018-19 and
EBITDA of £121,800. Cash at bank on 31 July 2019 was £660,700.
Pre-tax profit/(loss) per subsidiary before Group management charges
Profits before tax and management charges are reviewed by each subsidiary and
the board every month to ensure that each subsidiary trades profitably. To
31 March 2019, the Group did not adopt a policy of cross-charging between
subsidiaries with only informal account being taken of significant work done
by one subsidiary on behalf of another. With consultants increasingly
undertaking work across a number of subsidiaries, this policy has been changed
from 1 April 2019 to more accurately reflect the profits generated by each
subsidiary.
A review of the activities of each trading subsidiary is provided below. The
profit figures stated are before tax, central management charges and
impairment charges. The management charges are the individual subsidiary’s
contribution to Group overheads and are not directly attributable costs.
B2BSG Solutions Limited (B2BSG)
Note: Figures shown for 2018 are the sum of the former B to B Links Limited
and SG Systems (UK Limited).
· 2019: revenues of £2,724,000 yielding a loss of
£137,400
· 2018: revenues of £4,226,300 yielding a loss of
£17,900
It is clear from the performance outcome that there was a material reduction
in revenues in the year, and it was not possible to rapidly restructure the
business to accommodate this lower revenue. Many cost saving measures have
progressively been implemented but will take time to have full effect. As
described in the business review section above, income was reduced due to the
hiatus in orders from the largest customer, along with depressed sales
generally across the retail sector. Cost savings will largely accrue through
closure of the Amesbury offices and warehouse at the end of March 2019, and
reduced staffing.
The profit is shown after a non-cash provision has been made of £37,068 (2018
- £45,000) for slow moving stock.
Inspection Services (UK) Limited (ISL)
· 2019: revenues of £232,600 yielding a profit of
£43,500
· 2018: revenues of £215,500 yielding a profit of
£46,300
There was sales growth of around 8% compared with the previous year but there
were higher costs and this led to profits dropping overall by 6%. The
profile of the business has not changed, with ISL obtaining most work from
insurance brokers who place inspection business with the company on behalf of
their clients. The work consists of statutory examination and inspection of
lifting plant and equipment, and of pressure systems, along with ancillary
equipment.
Notable contracts during the year included conducting safety reviews of
numerous pressure systems that form part of coffee machines leased to offices
across London and the south, and the inspection of roof edge protection
systems on several buildings for a large housing provider.
Personnel Health & Safety Consultants Limited (PHSCL)
· 2019: revenues of £657,100 yielding a profit of
£278,000
· 2018: revenues of £615,700 yielding a profit of
£240,000
An increase in revenue of 6% led to a 15% rise in profitability because the
fixed cost base is relatively stable. As has been mentioned in previous
reports, this subsidiary is a net provider of consultancy time to others
within the safety division and hitherto the effect of that utilisation of
labour has not been reflected in results. This will change next year.
PHSCL’s clients tend to maintain their relationship with the business over
many years, in particular those using the company’s flagship product which
is the Appointed Safety Advisor Service.
QCS International Limited (QCS)
· 2019: revenues of £759,500 yielding a profit of
£242,300
· 2018: revenues of £767,600 yielding a profit of
£285,200
QCS continued to perform strongly, consolidating gains made in the previous
year when there had been significant uplift due to orders relating to changes
in ISO standards. Whilst demand for transition to the new quality and
environmental standards has ended, the company is now experiencing further
enquiries regarding the brand-new ISO 45001 standard for health and safety.
Sales in public training and consultancy services for the year remained
strong, both ahead of revenues for the previous year; these together normally
account for around 80% of total income. In-house training sales weakened,
and it is this area of performance that caused total sales for the year to dip
very slightly, by around 1% in total.
In the financial year the company made considerable investment in its training
facilities allowing an increase in capacity to accommodate more delegates and
to offer more than one size of training room. This has been linked to a
medium-term target to grow sales for public training and to also increase
profit. Early indications are that sales are higher, and that delegate
feedback is positive.
New services for information security management and training on the
associated ISO 27001 standard were launched in the year. This is linked to
the company’s long-term strategy to offer as wide a range of ISO standard
support for consultancy and training as practicable. The year also saw QCS
deliver work for the first time on the ISO 50001 standard for energy
management.
The UK’s potential departure from the EU has not yet had an obvious direct
effect on sales. A significant proportion of medical device work is
associated with an ability to offer services linked to EU regulation. QCS
will offer a ‘UK Responsible Person’ service in the event of a no deal
departure, which may present some opportunities with the company acting as a
UK address for manufacturers of medical devices within the EU. The weakness
of sterling has the potential to work in the company’s favour in that
scenario.
QCS continues to operate on the secure foundation of repeat business with all
outsource consultancies renewing contracts during the year and many clients
continuing to send delegates to courses based on a positive experience of
course delivery. Indications are such that current performance is expected
to continue.
Quality Leisure Management Limited (QLM)
· 2019: revenues of £437,600 yielding a profit of
£106,500
· 2018: revenues of £439,400 yielding a profit of
£111,900
Revenue was similar to the prior year although profits were down around 5% in
line with management expectations. QLM continued to operate well in key
areas of income generation including audits, training and accident
investigation. There was a noticeable trend toward leisure and culture
area-specific audits that targeted higher risk or specialist areas rather than
facility wide audits. There was however significant development which saw
quality systems consultancy and training bring in revenue of £18,000 which
was double that expected.
QLM’s value to support service clients is not always reflected in the income
recorded in this area. Clients generally appear to be placing greater
reliance on the QLM team and across a broader range of topics. Mainly, it
would appear, as a result of internal efficiency savings and cost cutting
exercises.
Sub-contractor costs were noticeably down at £27,000 against budget; better
and more efficient use of contracted staff prior to using sub-contractors led
to reduced expenditure in this area.
Further time and investment will be put into the development of QLM
Leisuresafe™ in 2019-20 as a key income generator as an audit in its own
right and as a template for bespoke health and safety reviews.
QLM’s focus in the coming year is to ensure that the high levels of client
retention are maintained, primarily though the quality and diversity of the
support offered, as well as developing in the broader leisure, culture and
hospitality industries.
RSA Environmental Health Limited (RSA)
· 2019: revenues of £404,300 yielding a profit of
£66,700
· 2018: revenues of £370,400 yielding a profit of
£75,400
.
Revenue for the year was 9% above that generated the previous year mainly due
to the inclusion of income from the Envex brand that moved to the company upon
closure of the Group’s asbestos subsidiary. The increase in revenue was
outstripped by higher costs and this led to a reduction in profits of about
11%.
The past year has seen the activity of the company evolve, with income being
spread more evenly across the reported revenue streams. Health and safety
consultancy was particularly strong for the year whereas the other income
streams were down on forecast and on the previous year. With a limited amount
of fee earning staff within the company this would be expected as consultancy
days spent on one revenue stream reduce the time available to spend on the
others.
RSA’s core offering remains the SafetyMARK service, with it still being the
largest income stream. The year saw a decline in revenue with the market being
more competitive, schools in both the state and independent sectors seeing
increases in their cost pressures due to government policy. That caused the
amount of renewals and new contracts to be down from the previous year.
Schools report that they still value our services but they are having to
justify all of their expenditure and in some circumstances may not be able to
afford them. This area continues to be a focus of activity with more effort
being made with multi academy trusts. Management will look to improve service
delivery to make the offering compelling to clients and making it more likely
they will renew.
This sector will continue to be difficult to operate in until there is a
change in government policy that will ease the school funding burden. In
addition to the above, SafetyMARK operates on a two-year cycle with renewals
in 2018-19 corresponding to contracts gained in 2016-17 which was itself a
period when fewer new schools were joining.
The company did sign up two medium sized multi academy trusts towards the end
of the year, which has generated a tranche of work for the next financial
year. Therefore, the company is to continue to focus attention on obtaining
additional trusts as our marketing strategy for the next financial year.
The key will now be to ensure that profitability is maximised by using the
economies of scale afforded by a larger client base, as well as ensuring that
costs are well controlled and standard fees are reviewed, where appropriate.
PHSC plc
· 2019: net loss of £523,700 before management charges,
exceptional costs and dividends received
· 2018: net loss of £521,700 before management charges,
exceptional costs and dividends received
The parent company incurs costs on behalf of the Group and does not generate
any income. The costs incurred by PHSC plc represent the costs of running an
AIM quoted Group and are generally consistent with the previous year.
On behalf of the board
Stephen King,
Group Chief Executive
16 August 2019
Group statement of financial position as at 31 March 2019
31.3.19 £ 31.3.18 £
Non-Current Assets
Property, plant and equipment 488,585 594,343
Goodwill 3,478,463 3,678,463
Deferred tax asset 17,627 21,105
3,984,675 4,293,911
Current Assets
Stock 316,556 389,034
Trade and other receivables 973,130 1,568,625
Cash and cash equivalents 642,466 244,290
1,932,152 2,201,949
Total Assets 5,916,827 6,495,860
Current Liabilities
Trade and other payables 675,162 1,137,094
Current corporation tax payable 54,707 16,230
729,869 1,153,324
Non-Current Liabilities
Deferred tax liabilities 46,313 55,818
46,313 55,818
Total Liabilities 776,182 1,209,142
Net Assets 5,140,645 5,286,718
Capital and reserves attributable to equity holders of the Group
Called up share capital 1,467,726 1,467,726
Share premium account 1,916,017 1,916,017
Capital redemption reserve 143,628 143,628
Merger relief reserve 133,836 133,836
Retained earnings 1,479,438 1,625,511
5,140,645 5,286,718
Group statement of comprehensive income for the year ended 31 March 2019
31.3.19 £ 31.3.18 £
Continuing operations:
Revenue 5,215,341 7,012,864
Cost of sales (2,719,724) (3,937,451)
Gross profit 2,495,617 3,075,413
Administrative expenses (2,418,182) (3,042,499)
Goodwill impairment (200,000) (200,000)
Other income 166,270 25,000
Profit/(loss) from operations 43,705 (142,086)
Finance income 303 3
Finance costs (1,514) (3,778)
Profit/(loss) before taxation 42,494 (145,861)
Corporation tax expense (41,795) (14,836)
Profit/(Loss) for the year after tax attributable to owners
of the parent 699 (160,697)
Other comprehensive income - -
Total comprehensive income attributable to owners of
the parent 699 (160,697)
Basic and diluted Earnings per Share from continuing operations 0.005p (1.095)p
Group statement of changes in equity for the year ended 31 March 2019
Share Capital Share Premium £ Merger Relief Reserve £ Capital Redemption Reserve £ Retained Earnings £ Total £
Balance at 1 April 2017 1,467,726 1,916,017 133,836 143,628 1,859,594 5,520,801
Loss for year attributable to equity holders - - - - (160,697) (160,697)
Dividends - - - - (73,386) (73,386)
Balance at 31 March 2018 1,467,726 1,916,017 133,836 143,628 1,625,511 5,286,718
Balance at 1 April 2018 1,467,726 1,916,017 133,836 143,628 1,625,511 5,286,718
Profit for year attributable to equity holders - - - - 699 699
Dividends - - - - (146,772) (146,772)
Balance at 31 March 2019 1,467,726 1,916,017 133,836 143,628 1,479,438 5,140,645
Group statement of cash flows for the year ended 31 March 2019
Note 31.3.19 £ 31.3.18 £
Cash flows from operating activities:
Cash generated from operations I 325,587 143,360
Interest paid (1,514) (3,778)
Tax paid (9,345) -
Net cash generated from operating activities 314,728 139,582
Cash flows from/(used in) investing activities
Purchase of property, plant and equipment (69,578) (19,358)
Disposal of fixed assets 299,495 15,730
Interest received 303 3
Net cash from/(used in) investing activities 230,220 (3,625)
Cash flows used in financing activities
Payment of contingent consideration - (25,000)
Dividends paid to shareholders (146,772) (73,386)
Net cash used in financing activities (146,772) (98,386)
Net increase in cash and cash equivalents 398,176 37,571
Cash and cash equivalents at beginning of year 244,290 206,719
Cash and cash equivalents at end of year 642,466 244,290
I. Cash generated from operations
31.3.19 £ 31.3.18 £
Operating profit/(loss) – continuing operations 43,705 (142,086)
Depreciation charge 38,179 34,590
Goodwill impairment 200,000 200,000
(Profit)/loss on sale of fixed assets (162,338) 919
Decrease in stock 72,478 98,333
Decrease/(increase) in trade and other receivables 595,495 (121,132)
(Decrease)/increase trade and other payables (461,932) 72,736
Cash generated from operations 325,587 143,360
Notes to the results announcement of PHSC plc
The financial information set out above does not constitute the Group's
financial statements for the years ended 31 March 2019 or 31 March 2018, but
is derived from those financial statements. Statutory financial statements
for 2018 have been delivered to the Registrar of Companies and those for 2019
have been approved by the board and will be delivered after dispatch to
shareholders. The auditors have reported on the 2018 and 2019 financial
statements which carried an unqualified audit report, did not include a
reference to any matters to which the auditor drew attention by way of
emphasis and did not contain a statement under section 498(2) or 498(3) of the
Companies Act 2006.
While the financial information included in this announcement has been
computed in accordance with International Financial Reporting Standards
(IFRS), this announcement does not in itself contain sufficient information to
comply with IFRS. The accounting policies used in preparation of this
announcement are consistent with those in the full financial statements that
have yet to be published.
Dividend
An interim dividend of £73,386 representing 0.5p per ordinary share was paid
in February 2019 in respect of the year ended 31 March 2019. The Board is
proposing a final dividend of £73,386, to be paid in October 2019, making a
total dividend for the year of 1.0p.
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