REG-PHSC Plc: Final Results for the year ended 31 March 2021
29/07/2021 09:05
29 July 2021
PHSC PLC
(“PHSC”, the “Company” or the “Group”)
Final Results for the year ended 31 March 2021
Availability of Annual Report and Notice of Annual General Meeting
PHSC (AIM: PHSC), a leading provider of health, safety, hygiene and
environmental consultancy services and security solutions to the public and
private sectors, announces its audited results for the financial year ended 31
March 2021.
Financial Highlights
• EBITDA of £0.505m, almost double the £0.255m achieved last year
• Statutory profit after tax of £0.087m compared with a loss of
£0.015m last year
• Group sales revenue of £3.289m compared with £4.438m last year
• Income augmented to £3.73m by £0.441m of pandemic-related
government grant funding
• Cash reserves of £1.237m at year end compared to £0.756m last year
• Write-down of £0.250m due to impaired goodwill versus a write-down
of £0.200m last year
• Group net assets declined to £4.919m compared to £4.978m last year
• Earnings per share of 0.60p compared with a loss of 0.11p per share
last year
• Successful post-year end share buyback programme completed ahead of
schedule
• Final dividend of 0.5p proposed, making a total of 1.0p for the year
matching last year’s total
31.3.21 31.3.20
£ £
Profit before tax 189,988 4,999
Less: interest received (999) (1,990)
Add: depreciation 65,619 52,194
Add: impairment B2BSG Solutions Limited goodwill 200,000 200,000
Add: impairment RSA Environmental Health Limited goodwill 50,000 -
Underlying EBITDA* 504,608 255,203
* 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.
Annual General Meeting and Availability of Annual Report
This year’s annual general meeting (AGM) will be held at 10.00 a.m. on
Thursday, 30 September 2021 at The Old Church, 31 Rochester Road, Aylesford,
Kent ME20 7PR.
The full annual report and accounts for the financial year to 31 March 2021
and notice of AGM are expected to be posted to shareholders on or around 5
August 2021 and will shortly be made available to download from the
Company’s website at: www.phsc.plc.uk.
Dividend
The Company confirms that, subject to shareholder approval at the AGM, the
final dividend of 0.5p will be payable on 15 October 2021 to shareholders on
the register on 1 October 2021.
For further information please contact:
PHSC plc
Stephen
King
Tel: 01622 717 700
Stephen.king@phsc.co.uk
www.phsc.plc.uk
Strand Hanson Limited (Nominated Adviser) Tel: 020
7409 3494
James Bellman / Matthew Chandler
Novum Securities Limited
(Broker) Tel: 020 7399
9427
Colin Rowbury
About PHSC
PHSC, 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. In addition, B2BSG
Solutions Ltd offers 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 Regulation
(EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of
the European Union (Withdrawal) Act 2018.
STRATEGIC REPORT
In a period completely dominated by the financial effects of the COVID-19
pandemic, I present my review of the Group’s activities and performance
during the financial year 2020-21 on behalf of the board, including commentary
on our successful post year-end share buyback programme, and an indication of
how the Group expects to meet the challenges as we emerge from the pandemic
over the year ahead.
GENERAL BUSINESS REVIEW, COVID-19 RESPONSES AND OUTLOOK
In the circumstances, the reduction in sales revenue by approximately a
quarter compared with 2019-20 (£3.29m versus £4.38m) was deemed a
satisfactory outcome. The level of revenue ultimately achieved exceeded
management’s initial expectations at the start of lockdown in March 2020.
The Group’s subsidiaries were affected in different ways, with some coming
to a virtual standstill whilst others were able to carry on with encouraging
levels of trading albeit in a very difficult environment. Our subsidiaries had
to look at creative ways to mitigate the effects of the pandemic by adapting
their service delivery methods as far as possible. This involved increased
levels of remote working. Full use was also made of government financial
support, consisting of small business grants for the subsidiaries worst
affected, and Coronavirus Job Retention Scheme (CJRS) subsidies towards the
costs of those personnel for whom work was not possible. The impact on each
individual subsidiary is set out later in this report.
The board elected to take a 20% reduction in salary for six-months commencing
on 1 May 2020 and is grateful that subsidiary directors elected to follow
suit. This action helped the Group to conserve its resources at a time when
the outlook was most uncertain.
With the benefit of the government support described above, a highly
satisfactory EBITDA figure of £0.505m was achieved. Despite the overall
reduction in income from all regular sources, costs across the Group were
considerably lower. Savings were achieved due to reductions in headcount,
notably in our B2BSG Solutions Limited (B2BSG) subsidiary, and in lower
general operational expenditure. Purchasing activity was lower across the
Group, and there was a positive variance in the value of sterling which
assisted our security division which imports all the electronic equipment sold
on to clients.
As has been the case for a number of years, the sales environment for B2BSG,
which predominantly serves the retail sector, is shrinking due to on-line
sales. This trend was accelerated by the pandemic and has hastened the demise
of large clients such as Peacocks, Edinburgh Woollen Mill and Debenhams.
Associated bad debts of £22,000 were recognised during the year.
Revenues in the Group’s Scottish-based systems division held up better than
anticipated, and the business remained profitable throughout the year. Even
without the welcome support from government funding, this subsidiary would
have generated a profit ahead of our initial expectations. Revenues were
supplemented by a new income stream arising as a consequence of Brexit, and
further details are provided later in this report.
Our greatest success was seen in the Group’s safety division where there are
four operational subsidiaries. Two of those businesses, Quality Leisure
Management Limited (QLM) and RSA Environmental Health Limited (RSA) which
mainly serve the leisure industry and the education sector respectively,
almost ground to a standstill for much of the year. However, excellent results
from Personnel Health and Safety Consultants Limited (PHSCL) and a steady
performance from Inspection Services (UK) Limited (ISL) more than compensated
for the leisure and education-related downturn and led to higher revenue and
profitability for this division.
With cash at bank comfortably exceeding £1.0m at the year end, and the
Group’s share price remaining stubbornly well below the Group’s net asset
value per share, the board took the decision to utilise the authority granted
by shareholders at last year’s annual general meeting (AGM) to implement a
share buyback programme. The programme was announced on 13 May 2021 and
completed on 16 June 2021. Over that period the Company’s broker was able to
repurchase a total of 1,602,197 ordinary shares on the Company’s behalf for
a total consideration of approximately £0.325m. The buyback programme was
largely funded from the surplus cash held on account following the sale of
freehold premises previously held by a former subsidiary, in late September
2018. Accordingly, the number of ordinary shares not held in treasury now
stands at 13,075,060.
The board is seeking shareholder approval for a renewed share buyback
authority at the forthcoming AGM, but it should not be taken for granted that,
if duly approved at the AGM, a further buyback programme will necessarily
follow. The board will take a view based on the Company’s available cash
balances from time to time, the relationship between the share price and net
asset value, and whether any such additional programme would be to the benefit
of shareholders. Renewing the authority provides the board with flexibility in
this regard.
Cash at bank as at the date of this report stands at £0.879m such that the
Group continues to enjoy a strong cash position and remains cash generative.
The Group’s undrawn facility with HSBC plc stands at £50,000 and falls due
for renewal in October 2021. The board plans to renew the facility but does
not currently anticipate having to call upon it.
Net asset value
Every year the board assesses the value of goodwill on the balance sheet and
takes a view on whether it remains realistic and justifiable. Despite 2020-21
being unrepresentative of any normal trading period, the board acknowledges
that the decline in prospects for our security division caused by lower retail
activity will continue. Accordingly, an impairment charge of £200,000 has
been incurred against B2BSG in line with good accounting practice. Following
careful review, the carrying value of RSA has also been reduced by £50,000.
Our RSA subsidiary has seen progressive reductions in spending on the support
services provided to environmental health officers at local authorities. Thus,
a total charge to intangible assets of £250,000 has been made for the year.
The year-end consolidated net assets of £4.919m have fallen to £4.636m
following the recent completion of our share buyback programme. However, in
light of the reduced number of ordinary shares in issue (outside treasury),
the net asset value per share has risen to 35p compared to 34p at the previous
year end.
Outlook
As the country exits from the health crisis and the economy rebounds, we
expect the Group to be well positioned to recover to income levels more in
line with 2019-20. Inevitably, there will be legacy impacts in particular on
the high street where consumers’ shopping habits have clearly shifted
towards more on-line ordering. Conversely, our systems division and the safety
division expect a rebound in activity as clients look to catch-up on projects
that were deferred or cancelled during the previous year. Our ability to
deliver services remotely as an alternative to a face-to-face offering will
also be more appealing to some customers and we will continue to offer this
alternative where appropriate in order to meet with client expectation and
preferences.
Trading update
Management accounts (unaudited) show total sales revenues and other income
across the Group of £926,000 for the first quarter of 2021-22. This amount
includes £20,500 of CJRS grants as the Group tapers its previous use of such
support. EBITDA for the first quarter was approximately £72,000. This
compares with total revenues of £820,000 and EBITDA of £108,300 for the
equivalent period last year.
Dividends
A total dividend of 1.0p per ordinary share (£146,772) was paid in respect of
the financial year ended 31 March 2020. An interim dividend of 0.5p in respect
of the financial year ended 31 March 2021 was paid in February 2020 and,
subject to shareholder approval, a final dividend of 0.5p, to be paid from
earnings from the financial year ended 31 March 2021, is proposed for payment
in October 2021, matching the total of 1.0p paid last year. Following the
share buyback programme completed in June 2021, the cost of the final dividend
will fall approximately 11% from £73,386 to £65,375.
PERFORMANCE BY TRADING SUBSIDIARY
The Group currently measures the following key performance indicators (KPIs).
Total revenues
Total revenues are reviewed each month across the Group to provide the board
with a ready measure of how well the Group and underlying businesses are
performing relative to historical data. It enables any trend to be detected,
understood and acted upon as appropriate. Consolidated Group revenues
including government grant funding for the year decreased by 16% due to the
combined effect of the pandemic and the reduction in our retail client
portfolio.
Earnings before interest, taxation, depreciation, amortisation and
non-recurring costs (underlying EBITDA)
The Group achieved an increase in EBITDA from £255,203 in 2019-20 to
£504,608 in 2020-21 due to lower overheads and premises-related savings
across the Group. In the absence of Government support, EBITDA would have
fallen to £63,483. However, this is not a true comparison because in the
absence of the CJRS grants the Group would have taken actions to significantly
reduce headcount and other costs in response to the hiatus in the economy and
trading disruption.
Staff turnover
Staff turnover is generally monitored as the key asset of each subsidiary is
its workforce. Recruiting replacement staff is an expensive task and it is not
always possible to compensate for the specialised knowledge that may be lost
when an employee departs. This KPI has been retained in 2020-21 but is less
informative than normal due to reductions in staff numbers arising from the
pandemic. In the year to 31 March 2021, the average number of staff employed
across the Group was 41, down from 49 in the previous fiscal year. The
decrease arose in part due to redundancies where it was determined that use of
the CJRS to support an unsustainable role was inappropriate. There was also a
degree of natural wastage where leavers were not replaced.
Pre-tax profit/(loss) per subsidiary before Group management charges
Profit before tax and management charges is reviewed by each subsidiary and by
the board every month. Each subsidiary director provides a commentary to
enable the board to establish whether intervention of any kind is appropriate.
A summary of the results and activities of our trading subsidiaries is set out
below. Where relevant, government grant funding is excluded from revenues, but
included in profits. Performance is based on those factors within a subsidiary
director’s control, so results are shown exclusive of management charges and
taxation and any impairment judged necessary. The Group covers its own
management costs by levying a charge on each subsidiary and derives other
income through the receipt of dividend income from its subsidiaries.
B2BSG Solutions Limited (B2BSG)
• 2021: revenues of £1,136,600 yielding a profit of £13,800
• 2020: revenues of £1,915,200 yielding a loss of £90,800
The financial year started and ended with the majority of the company’s
clients in lockdown, with only a short period of reopening during Q3.This
inevitably had a heavy impact on sales revenues. With full use made of the
CJRS and a grant from the local authority, additional income of £131,906
provided welcome support and led to a small overall pre-tax and management
charge profit.
With no expectation that the retail sector will recover to pre-pandemic
levels, given the shift to on-line purchasing, difficult decisions were taken
regarding staffing levels. Consequently, there were redundancies during the
year and these continued after the year end. The business is now operating
with around half the headcount with which it started 2020.
Management is confident that the leaner business model will enable the company
to take advantage of any upturn in fortunes in the retail environment.
Additional encouragement arises from the post-year end securing of a contract
with a national grocery chain.
As previously stated in this report, a provision of £22,000 was made for bad
debts.
Inspection Services (UK) Limited (ISL)
• 2021: revenues of £213,900 yielding a profit of £31,500
• 2020: revenues of £230,800 yielding a profit of £37,400
ISL was the only member of the Group that did not benefit from government
support by way of the CJRS or small business grants from the local authority
during the year. This was due to the enforcing authorities having notified
duty holders across the UK that the obligation to have plant and equipment
examined in line with statutory frequencies was not being relaxed during the
pandemic.
Although COVID-19 did not directly affect the obligation on employers to
arrange for their plant and equipment to be examined and certificated, the
pandemic did cause certain difficulties for ISL. These centred around clients
who were unable to arrange access due to site closure or who were reticent
about having external personnel on their premises. This made it less efficient
when designing engineers’ work rotas and resulted in some gaps in
utilisation.
Despite these difficulties, ISL achieved revenues approaching £214,000
compared with around £231,000 the year before. EBITDA before management
charges was £41,300 which was approximately 7% lower than the £44,500
achieved last year.
The company continues to work predominantly through insurance brokers, with a
small percentage of sales made directly to clients. Where work is arranged
through brokers, commissions are paid for the introduction.
Personnel Health & Safety Consultants Limited (PHSCL)
• 2021: revenues of £968,900 yielding a profit of £498,000
• 2020: revenues of £763,600 yielding a profit of £302,500
This was a successful year for PHSCL. Sales income grew from £763,600 in the
previous year to £968,900 and profit before tax and management charge
increased by approximately 65% from £302,500 to £498,000. Despite many
client sites being closed or severely restricted in allowing access, the
services on offer were adapted to enable business to continue as well as new
services to be developed to support clients during the pandemic. Active
marketing throughout the year supported the sales process and improved
PHSCL’s visibility in the health and safety compliance market.
Consultancy income from non-retained clients more than doubled to around
£225,000 with new clients opting to work on a more ad-hoc arrangement. These
new sales are turning into repeat business and regular client relationships
are being forged. In addition, revenue from training courses was up by
£20,000, following successful adaption of courses for remote delivery via
Zoom and Microsoft Teams during the pandemic. PHSCL was an early adopter of
remote learning, having already started to use Zoom before the pandemic. There
are also cost savings from this method of training delivery.
The company continues to meet the accreditation requirements for the ISO 9001
quality management standard, having held this “kitemark” for 24 years
since becoming the first organisation of its kind to achieve the standard.
Whilst COVID-19 restrictions have seriously affected many clients, the
business has managed to successfully adapt and will utilise the positive
benefits from innovation to continue its development into 2021-22. Some
projects which had been put on hold are likely to return, and several clients
are seeking assistance in developing safety systems to support hybrid working
as they emerge from their own lock-down arrangements. The challenge will be to
maintain and further develop the growth that has been achieved over the past
year, in adverse conditions.
QCS International Limited (QCS)
• 2021: revenues of £500,700 yielding a profit of £121,100
• 2020: revenues of £756,700 yielding a profit of £220,900
The restrictions placed on businesses throughout the COVID-19 pandemic had a
significant impact upon the operational activity of QCS, reducing its revenue
materially. In particular, there was a major influence upon the company’s
ability to deliver training. Despite this, the company has posted a profit for
the year, through taking advantage of some opportunities generated by the
pandemic as well as the creation of a new service for the medical device
sector relating to Brexit changes. These income streams were also supported by
the CJRS, which had the effect of ensuring that personnel remained in place
and the company was able to take advantage of the improving situation towards
the end of the financial year.
Consultancy activity for the year was at or above previous levels. The
reduction in normal demand was partly offset by the company offering services
relating to COVID-19 assessments. The second significant new source of income
arose because, late in 2020, the Brexit withdrawal agreement required medical
device manufacturers in the EU to have a UK-based representative. QCS
developed a service to meet this obligation and has been able to establish a
growing portfolio of new clients requiring this representation.
Public, face-to-face training ceased to be viable during the initial lockdown,
partly due to the restrictions placed upon the business but also due to most
delegates and their employers wishing to cancel or defer training. Training
activity did recommence in mid-2020 only to face another short hiatus at the
beginning of 2021. When training was possible, delegate numbers and thus
income was capped to ensure we met social distancing and other guidelines to
prevent the spread of COVID-19.
Whilst consultancy sales remained broadly on trend at £387,000, the
significant loss of training income resulted in an overall shortfall of
approximately £250,000 equating to around one third of expected turnover.
The most significant costs faced by the company are those associated with
payroll. To assist with maintaining business viability, salary reductions were
implemented and the CJRS scheme accessed. Other costs were strictly managed
and there were savings associated with reduced business activity.
Towards the end of the financial year there were signs of improving
performance. This was supported by the slow easing of lockdown measures along
with a return to some public training provision. The first deadline for
medical device manufacturers to register on the UK Responsible Person service,
described earlier, led to a welcome income stream. These two factors, along
with consultancy work continuing to grow in alignment with historic trends,
suggests that the company has performed well during the pandemic and is in a
strong position to take advantage of a return to more normal trading
conditions. All personnel remain in place, our position in the marketplace
remains strong and there continues to be a significant interest in the
services that QCS offers.
Quality Leisure Management Limited (QLM)
• 2021: revenues of £234,300 yielding a profit of £99,700
• 2020: revenues of £353,400 yielding a profit of £75,700
QLM made a profit before central management charges and tax of £99,700.
Excluding £54,400 received from the CJRS and business grants, the resulting
profit of £45,300 (2020: £75,700) shows the negative impact of COVID-19.
QLM’s core client base saw unprecedented restrictions throughout the
financial period and most clients were required to close for protracted
periods. Those that were able to reopen did so under controls that severely
limited their earning potential and their appetite for buying in external
services such as those provided by QLM.
Clients placed significant reliance on QLM’s health and safety support
service during 2020–21. This resulted in a high number of general enquiries
and requests for assistance in interpreting the latest government advice,
however, much of this support was under the auspices of the general adviser
service and did not result in extra income.
Auditing demand was significantly reduced for the year. Closures, legislation
and government guidance, including localised interpretation, meant that
auditing for the most part only took place during periods of lifted
restrictions.
Training was developed and revised to be run via video conferencing. After
some initial cancellations and after clarification of government funding
initiatives, training courses resumed online. QLM’s (CIMSPA endorsed) Health
and Safety Management Certificate in Leisure and Culture remains popular and a
valuable income stream.
The number of retained clients remained largely unchanged, with relatively
normal fluctuations observed as leisure trust contracts were won and lost and
new trusts came into being.
A shared part-time administrator employed by another subsidiary, was made
redundant during the year, and was not replaced.
RSA Environmental Health Limited (RSA)
• 2021: revenues of £235,100 yielding a profit of £57,400
• 2020: revenues of £418,100 yielding a profit of £83,500
Revenue for the year was down by approximately 44% to £235,100. Income
received from the CJRS and business grants of £73,600 was instrumental in
turning a potential loss into a profit of £57,400 before central management
charges and tax.
The COVID-19 pandemic had a significant effect on the revenues the company
could generate within the principal areas of the economy that it operates. For
the first five months of the financial year there was a reliance on the CJRS
and local authority grant funding to help support revenues and cover costs.
For the remaining seven months of the financial year the company did see
something of a return to more normal trading, as legal restrictions allowed
various sectors to open.
To help mitigate the reduction in revenues, the company decided to make
redundant a part-time administrator in July 2020. Another consultant decided
to resign from their position from December 2020 and this was reluctantly
accepted. Other staff and some associates were utilised to make up the
shortfall in fee-earning ability over the final quarter of the year as an
alternative to recruiting a replacement. That decision helped with
profitability for the year and enabled us to deal with the peaks and troughs
of demand at that time.
In previous years, the focus of the company has been on the SafetyMARK brand,
providing safety services to the schools sector. However, with schools closed
for much of the time, this particular financial year saw the need to bring in
revenues from wherever possible to meet the demands of clients and match the
skillsets of the available staff members. Revenues fall into four main
categories: training, health and safety consultancy, food safety consultancy
and SafetyMARK.
SafetyMARK whilst remaining the focus, saw revenues fall to around £87,000.
This was due to no new audits being conducted in the first quarter because
schools were effectively closed to external visitors. For the remainder of the
year, revenues were on a par with previous years and there remains a strong
demand for our services.
Training income saw a reduction due to a decrease in the numbers of courses
being requested by clients. A change in delivery methods has helped to
alleviate the loss of face-to-face training. Virtual courses remain popular
and will form part of our offering into the future due to the reduction in
associated costs and an appetite by clients.
Health and safety consultancy and advisory services saw the biggest change in
demand for the year 2020-21 due to the cessation of a large contract in the
hospitality sector. Some consultancy work had to be postponed until later in
the year, but this was replaced with other works that could be completed
during the pandemic. Some work has been undertaken to promote various services
to utilise the skills of the consultants present within the company.
Food safety consultancy has seen a significant reduction in demand in the past
year and remains challenging in some hospitality sectors. The contracts with
schools have continued but those with commercial companies had to be
renegotiated as many clients indicated that they were re-opening on a very
limited basis.
PHSC plc
• 2021: net loss of £382,400 before management charges, exceptional
costs, interest and dividends received
• 2020: net loss of £424,100 before management charges, exceptional
costs, interest and dividends received
The Company incurs costs on behalf of the Group and does not generate any
income. The costs incurred by the Company represent the costs of running an
AIM quoted Group. The reduction in costs is due to changes in staffing
arrangements between the Company and its subsidiaries and the 20% reduction in
salaries accepted by the directors during the height of the pandemic.
PRINCIPAL RISKS AND UNCERTAINITIES
Pandemic
The full financial impact of the coronavirus pandemic involving the spread of
COVID-19 was felt in 2020-21.
As government guidance evolved, the plan for each subsidiary was developed and
updated by the directors to minimise the risk to staff, customers and business
continuity. This was circulated to all staff and contained measures to
maintain business productivity whilst protecting the health of employees,
customers, and other stakeholders. The plan was monitored and revised in
response to new information published by Public Health England. Guidance was
also published on the website for staff, customers, and prospects to access.
Initially, the risk of employees contracting the virus, resulting in loss of
key staff to illness was mitigated by working from home being encouraged
wherever appropriate. Vulnerable workers were identified and asked to shield,
and employees contacted regularly to monitor welfare. A skeleton staff
remained in the head office to minimise numbers present whilst at the same
time maintaining business continuity. Social distancing was exercised, and
hand sanitiser provided. As lockdown restrictions eased, staff adopted a more
flexible approach, working from home, the office or clients’ premises as
deemed appropriate. A key focus involved protecting PHSC’s reputational risk
by ensuring staff adhered to government guidelines.
The use of Microsoft Teams and Zoom to keep in touch with staff and clients
was swiftly adopted with training offered where necessary. Materials for
training courses were updated and adapted to enable on-line training to be
delivered wherever possible. The operational directors regularly met via Zoom
for a business update and to share knowledge and best practice. Board meetings
were also undertaken as scheduled via Zoom.
Initially income from the CJRS and business grants played a key role in
maintaining cash flow, though as the businesses adapted, this reliance became
less and is now at a minimal level.
In terms of liquidity risk, the Group had a strong cash position at the outset
of the year and with monies from government schemes and good credit control,
the Group has remained cash generative. The expectation for 2021-22 is that
the Group will return to profitability, before grant income.
As the country exits from the health crisis and the economy rebounds, it is
expected that the Group will be well positioned to recover to income levels
more in line with 2019-20. Inevitably, there will be legacy impacts in
particular on the high street where consumers’ shopping habits have shifted
towards on-line ordering. Conversely, the systems division and the safety
division expect a rebound in activity as clients look to catch-up on projects
that were deferred or cancelled in the previous year. The Group’s ability to
deliver services remotely as an alternative to a face-to-face offering will be
more appealing to some customers and this alternative will continue to be
offered where appropriate.
Regulatory/Marketplace
Approximately 50% of the Group’s work involves assisting organisations with
the implementation of measures to meet regulatory requirements relating to
health and safety at work. If the regulatory burden was to be substantially
lightened, for example if the government embarked upon a programme of radical
deregulation, there could be less demand for the Group’s services. Changes
to the operation of the employer’s liability insurance system, as proposed
in some quarters, could reduce the incentive for organisations to buy in
claims-preventive services such as health and safety advice. In mitigation of
these risks, the board has diversified the Group’s range of offerings, for
example, through investing in its security businesses and is exploring
non-regulatory areas of environmental work to add to the current portfolio of
services.
The Group’s security division has updated its operating procedures to ensure
compliance with relevant Brexit related legislation. Professional advice has
been sought as needed. Matters outside the Group’s control include delays
caused at customs if administrative demands on border officials are suddenly
increased, resulting in slower clearance times for imported goods.
In terms of the risk that the value of sterling deteriorates, the Group can
take reasonable steps to hedge against the effects of a weaker pound, with
customers being advised to consider pre-ordering and/or increasing their stock
levels in respect of those products supplied by the Group’s security
division which they see as being critical to their business. Higher stock
levels would have the double benefit of reducing the risk of an interruption
to supply and mitigating the impact of price rises that would ultimately work
their way through to all imported goods if there is a materially weaker
exchange rate. The warehouse at B2BSG has the capacity for storage of
additional products and close partnership with logistics providers will allow
access to further warehousing space should that prove necessary.
The Group’s security division works almost exclusively in the retail sector
and this has continued to suffer as a result of weak consumer demand on the
high street and the move towards on-line purchasing which has accelerated
during the COVID-19 pandemic. Any further material deterioration in the retail
sector and specifically in B2BSG’s client base may have a significant
negative effect on the company’s and hence the Group’s prospects.
Technological
The Group’s website is a primary source of new business. If the website
became inaccessible for protracted periods, or was subject to “hacking”,
this may prejudice the opportunity to obtain new business. Additionally, the
increase in the use of the internet for satisfying business requirements may
lead to a reduction in demand for face-to-face consultancy services and the
number of training courses commissioned may be affected by moves towards
screen-based interactive learning. The subject of IT security is regularly
reviewed by the board to ensure that appropriate strategies are in place.
Personnel
Generally, there is an excess of demand over supply for health and safety
professionals. Those with sufficient qualifications and experience to be
suitable for consultancy roles are in the minority. This has the combined
effect of making it difficult for the Group to source suitable personnel and
having to offer higher remuneration packages to attract them. The Group is
dependent upon its current executive management team. Whilst it has entered
into contractual arrangements with the aim of securing the services of these
personnel, the retention of their services cannot be guaranteed. Accordingly,
the loss of any key member of management of the Group may have an adverse
effect on the future of the Group’s business. The Group and each subsidiary
have contingency plans in place in the event of incapacity of key personnel.
Geographical
The Group offers a nationwide service, but a number of organisations see
benefit in using consultancies that are local to them and internet search
engines favour local providers. With offices in Kent, Berkshire,
Northamptonshire and Scotland, the Group has a good geographical spread.
Licences
The Group is reliant on licences and accreditations to be able to carry on its
business. The temporary loss of, or failure to maintain, any single licence or
accreditation would be unlikely to be materially detrimental to the Group, as
the directors believe that this could be remedied. However, if the Group fails
to remedy any loss of, or does not maintain, any licence or accreditation,
this will have a material adverse effect on the business of the Group. The
Group has internal processes in place to ensure that the licences and
accreditations are maintained.
SECTION 172 STATEMENT
The Companies (Miscellaneous Reporting) Regulations require large companies to
publish a statement describing how the directors have had regard to the
matters set out in section 172 (1) (a) to (f) of the Companies Act 2006.These
sections require directors to act in a way most likely to promote the success
of the Group for the benefit of its stakeholders and with regard to the
following matters.
The likely consequences of any decision in the long-term
The board receives an annual business plan from the managing director of each
subsidiary company, which forms the basis of the Group’s strategic plan. The
board requires that the plans include financial forecasts, KPIs, marketing
strategy and an analysis of strengths, weaknesses, opportunities, and threats.
Subsidiary directors, via the Group’s operational board of which they are
members, consider the implications of their own plans in the context of what
others within the Group are intending to do and the opportunities for
synergies are explored. Any proposed actions that may adversely affect another
subsidiary are flagged at operational board level and are resolved. Subsidiary
directors are challenged on the content of their plans and the assumptions
they have made, to ensure that the plans are realistic and achievable. Once
agreed by the board, this plan, at Group and subsidiary level, is used as the
benchmark against which to assess performance.
The interests of the Group’s employees
As the Group is mainly involved in the supply of services, the board considers
its staff to be the greatest asset and the interests of employees are taken
into consideration in all decisions made. Each subsidiary company within the
Group has in place the necessary structures to ensure effective communication
with its employees. The subsidiary directors meet once a quarter and relevant
information is shared with employees via team meetings held at subsidiary
level. The views of employees are heard in a similar fashion, initially at
team meetings, and escalated to the operational board and the main board if
appropriate. Each subsidiary has its own bonus scheme, based on results for
the financial year and/or tailor-made targets. There is an annual budget for
staff training in recognition that the performance of the Group can be
improved by the development of its employees.
The Group is committed to equality of employment and its policies reflect a
disregard of factors such as disability in the selection and development of
employees. A review has been conducted to identify any gender-related pay
anomalies across the Group and found there to be no such anomalies.
The need to foster the Group’s business relationships with suppliers,
customers, and others
The Group seeks to treat suppliers fairly and adhere to contractual payment
terms. The Group works with its suppliers to help drive change through
innovation, promoting new ideas and ways of working. The Group has
zero-tolerance to modern slavery and is committed to acting ethically and with
integrity in all business dealings and relationships. The Group policy for
Modern Slavery and Human Trafficking contains systems and controls to ensure
that these activities are not taking place anywhere in the subsidiaries or
throughout the Group’s supply chains and can be viewed on our website
(www.phsc.plc.uk).
The Group also has zero-tolerance with regards to bribery, made explicit
through its Anti-Bribery and Corruption Policy. This covers the acceptance of
gifts and hospitality and any form of unethical inducement or payment
including facilitation payments and “kickbacks”. The policy sets out the
responsibilities of directors, employees and contractors and details the
procedures in place to prevent bribery and corruption. This policy is also
available on our website.
Each subsidiary is focussed on its customers. Communication takes many forms
and is structured according to how each subsidiary interacts with its client
base. Channels of communication include quarterly newsletters in hard copy
and/or sent electronically, customer roadshows, interaction via various social
media platforms (such as Twitter, LinkedIn and Facebook) and regular client
meetings. An ongoing dialogue is held electronically, with most clients
subscribing to email updates that are sent out periodically.
Stephen King is the principal contact between the Company and its investors,
with whom he maintains a regular dialogue. The Company is committed to
listening to and communicating openly with its shareholders to ensure that its
business model and performance are understood. Regular announcements are made
to the market and the AGM provides a forum for information dissemination,
discussion, and feedback.
The impact of the Group’s operations on the community and the environment
The board’s intention is to behave responsibly and ensure that management
operates the business in a responsible manner, complying with high standards
of business conduct and good governance. The Group has a long tradition of
supporting local causes through sponsorship and community involvement, details
of which can be found on our website. The directors are aware of the impact of
the Group’s business on the environment but believe this to be minimal due
to the nature of its operations.
GOING CONCERN
Company law requires the directors to consider the appropriateness of the
going concern basis when preparing the financial statements. For most of
2020-21 the COVID-19 pandemic and the consequent Government-imposed lockdowns
and restrictions severely impacted upon our activities. Perhaps
counter-intuitively, the outcome of the severely disrupted trading year was a
higher profit than in the prior year. The board’s expectations were
exceeded, with the initial dire predictions having proved to be overly
cautious and the agility of our subsidiaries enabling us to retain more work
than first expected. Cash reserves ended the year at a high level and remain
strong after the recent successful share buyback programme. The board is
satisfied that this, along with the Group’s cash-generative trading position
and (unused) banking facility will ensure that there are sufficient resources
to continue in operational existence for the foreseeable future.The directors
therefore continue to adopt the going concern basis of accounting in preparing
the annual financial statements.
On behalf of the board, I must thank all our shareholders for their ongoing
loyalty and support. This year more than ever the board is grateful for the
way in which each employee has met the challenges they have had to face. This
includes new ways of working and having to show a high degree of flexibility.
Whether on furlough, working from home, or carrying on with client-facing
activity, the spirit of teamwork and mutual support has greatly assisted in
bringing the Group through a very difficult period.
On behalf of the board
Stephen King
Group Chief Executive
29 July 2021
GROUP STATEMENT OF FINANCIAL POSITION
as at 31 March 2021
31.3.21 31.3.20
£ £
Non-Current Assets
Property, plant and equipment 529,413 592,539
Goodwill 3,028,463 3,278,463
Deferred tax asset 2,017 19,582
3,559,893 3,890,584
Current Assets
Stock 259,760 264,301
Trade and other receivables 590,128 885,947
Cash and cash equivalents 1,237,483 755,919
2,087,371 1,906,167
Total Assets 5,647,264 5,796,751
Current Liabilities
Trade and other payables 518,245 622,938
Right of use lease liabilities 31,856 34,071
Current corporation tax payable 88,011 40,250
638,112 697,259
Non-Current Liabilities
Right of use lease liabilities 38,865 69,912
Deferred tax liabilities 50,988 51,256
89,853 121,168
Total Liabilities 727,965 818,427
Net Assets 4,919,299 4,978,324
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 1,258,092 1,317,117
4,919,299 4,978,324
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2021
31.3.21 31.3.20
£ £
Continuing operations:
Revenue 3,289,462 4,437,922
Cost of sales (1,764,915) (2,251,867)
Gross profit 1,524,547 2,186,055
Administrative expenses (1,528,160) (1,983,046)
Goodwill impairment (250,000) (200,000)
Government grants 441,125 –
Other income 1,477 –
Profit from operations 188,989 3,009
Finance income 999 1,990
Profit before taxation 189,988 4,999
Corporation tax expense (102,241) (20,548)
Profit/(loss) for the year after tax attributable to owners of the parent 87,747 (15,549)
Other comprehensive income – --
Total comprehensive income/(loss) attributable to owners of the parent 87,747 (15,549)
Basic and diluted earnings/(loss) per share from continuing operations 0.60p (0.11)p
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2021
Merger Capital
Share Share Relief Redemption Retained
Capital Premium Reserve Reserve Earnings Total
£ £ £ £ £ £
Balance at 1 April 2019 1,467,726 1,916,017 133,836 143,628 1,479,438 5,140,645
Loss for year attributable to equity holders – – – – (15,549) (15,549)
Dividends – – – – (146,772) (146,772)
Balance at 31 March 2020
1,467,726 1,916,017 133,836 143,628 1,317,117 4,978,324
Balance at 1 April 2020
1,467,726 1,916,017 133,836 143,628 1,317,117 4,978,324
Profit for year attributable to equity holders – – – – 87,747 87,747
Dividends – – – – (146,772) (146,772)
Balance at 31 March 2021 1,467,726 1,916,017 133,836 143,628 1,258,092 4,919,299
GROUP STATEMENT OF CASH FLOWS
for the year ended 31 March 2021
31.3.21 31.3.20
£ £
Cash flows from operating activities:
Cash generated from operations 702,188 346,847
Tax paid (37,183) (32,017)
Net cash generated from operating activities 665,005 314,830
Cash flows used in investing activities
Purchase of property, plant and equipment (8,739) (39,529)
Disposal of fixed assets 4,333 2,250
Interest received 999 1,990
Net cash used in investing activities (3,407) (35,289)
Cash flows used in financing activities
Payments on right of use assets (33,262) (19,316 )
Dividends paid to shareholders (146,772) (146,772)
Net cash used in financing activities (180,034) (166,088)
Net increase in cash and cash equivalents 481,564 113,453
Cash and cash equivalents at beginning of year 755,919 642,466
Cash and cash equivalents at end of year 1,237,483 755,919
All changes in liabilities arising from financing relate entirely to cash movements.
NOTES TO THE GROUP STATEMENT OF CASH FLOWS
for the year ended 31 March 2021
31.3.21 31.3.20
£ £
I. CASH GENERATED FROM OPERATIONS
Profit from operations 188,989 3,009
Depreciation charge 65,619 52,194
Goodwill impairment 250,000 200,000
Loss on sale of fixed assets 1,913 4,430
Decrease in stock 4,541 52,255
Decrease in trade and other receivables 295,819 87,183
Decrease in trade and other payables (104,693) (52,224)
Cash generated from operations 702,188 346,847
Notes
The financial information set out above does not constitute the Group’s
financial statements for the years ended 31 March 2021 or 31 March 2020 but is
derived from those financial statements. Statutory financial statements for
2020 have been delivered to the Registrar of Companies and those for 2021 have
been approved by the board and will be delivered after dispatch to
shareholders. The auditors have reported on the 2020 and 2021 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
compiled 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 the preparation of this
announcement are consistent with those in the full financial statements.
Dividends
A total dividend of 1.0p per ordinary share (£146,772) was paid in respect of
the year ended 31 March 2020; half was paid in February 2020 and the balance
in October 2020. An interim dividend of 0.5p in respect of the year ended 31
March 2021 was paid in February 2021 and a final dividend of 0.5p is proposed,
subject to shareholder approval, for payment in October 2021, matching the
total of 1.0p paid last year.
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