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.