Final Results

PHSC plc
(the “Company” or the “Group”)

Final Results for the year ended 31 March 2020 and Notice of Annual General Meeting

Financial Highlights

• EBITDA of £0.255m, an increase of approximately 120% from £0.116m last year (after adjustment for exceptional gain on property sale of £0.166m last year)

• Statutory loss after tax of £0.015m compared with a profit of £0.001m last year (which included gain on property sale of £0.166m last year)

• Group revenue of £4.438m compared with £5.215m last year

• Cash reserves of £0.756m at year end compared to £0.642m last year

• Write-down of £0.200m due to impaired goodwill, the same as last year

• Group net assets at £4.978m after goodwill impairment compared to £5.140m last year

• Loss per share of 0.11p compared to a profit per share of 0.005p last year

• Final dividend of 0.5p proposed, making a total of 1.0p for the year, matching the 1.0p paid last year

		31.3.20		31.3.19
		£		£
Profit before tax		4,999		42,494
Less: interest received		(1,990)		(303)
Add: interest paid		-		1,514
Add: depreciation		52,194		38,179
Add: impairment B2BSG Solutions Limited goodwill		200,000		200,000
Less: net gain on sale of property		-		(166,270)
Underlying EBITDA*		255,203		115,614

* 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

This year’s annual general meeting (AGM) will be held at 10am on Wednesday 30 September 2020 at the Old Church, 31 Rochester Road, Aylesford, Kent ME20 7PR.

The report and accounts and notice of AGM are expected to be posted to shareholders on or around 24 August 2020 and will shortly be available to view on 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 16 October 2020 to shareholders on the register on 2 October 2020.

For further information please contact:

PHSC plc (www.phsc.plc.uk)
Stephen King ([e-mail]) – 01622 717700

Strand Hanson Limited (Nominated Adviser)
Richard Tulloch/James Bellman – 020 7409 3494

Novum Securities Limited (Broker)
Colin Rowbury – 020 7399 9427

About PHSC

PHSC plc, through its trading subsidiaries Personnel Health & Safety Consultants Limited, RSA Environmental Health Limited, QCS International Limited, Inspection Services (UK) Limited, and Quality Leisure Management Limited, provide a range of health, safety, hygiene, environmental and quality systems consultancy and training services to organisations across the UK. B2BSG Solutions Limited offers innovative security solutions including electronic tagging, labelling and CCTV.

The information contained in this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No 596/2014.

STRATEGIC REPORT

On behalf of the board, I present my review of the Group’s activities and performance during financial year 2019-20, along with a commentary about the Group’s plans and expectations for 2020-21.

General business review and outlook

Trading for the year ended 31 March 2020 showed consolidated Group revenue of £4.438m (31 March 2019: £5.215m) and EBITDA of approximately £255,000 for the period. In the previous year, the Group recorded EBITDA of £116,000 (excluding an exceptional gain from the sale of an unused property).

Sales within B2BSG Solutions Limited, the Group’s security division which predominantly serves the high street retail sector, continued to decline during the year, as a result of the ongoing struggles within the high street retail sector impacting on the demand for our services.  Revenues in the security division fell to £1.9m (31 March 2019: £2.7m), accounting for 43% of Group revenues compared with 52% in the previous year.  As a result, the board considered the carrying value of its security division and decided that a further impairment of £0.2m (31 March 2019: £0.2m) was appropriate.

Revenues in the Group’s health, safety and management systems businesses remained stable at £2.5m (31 March 2019: £2.5m), though accounted for 57% of the Group’s overall revenue (31 March 2019: 48%).

Various actions were taken to mitigate the effect of lower sales across the Group as a whole, which led to cost savings in a number of areas. In particular, there were lower overheads and premises-related savings across the Group. The security division, whilst still loss-making, saw an improvement overall and further commentary regarding this subsidiary and the other companies within the Group appear later in this report.

Impact of COVID-19

The specific impacts of COVID-19 on each subsidiary is provided later in this report, though from a Group-wide perspective the pandemic had a marginally adverse impact on the year ended 31 March 2020. The financial consequences of COVID-19 will largely be seen in 2020-21, though are at this stage very difficult to quantify due to the uncertainty of how the UK economy will respond to the on-going COVID-19 pandemic. The trading update below provides figures for Q1 of 2020-21.

Cash at bank stood at £756,000 at year end. Due to concerns about cash flow during the COVID-19 pandemic, the Group exercised an option to defer payment of VAT due for Q4 of 2019-20 but has recently made these payments in full (£162,410) to HMRC.

The Group continues to enjoy a strong cash position and has an undrawn facility with HSBC plc, renewed in October each year and currently agreed at £50,000, having been reduced from £150,000.

Since the start of the pandemic, the Group has reviewed staffing levels and has made five posts redundant, including three at the security division.  In addition, the Group furloughed a number of staff under the Government's Job Retention Scheme.  All except one subsidiary has taken advantage of the furlough arrangements, with up to half of the Group’s staff furloughed at the peak of the crisis.

Our priority has been the health, safety and wellbeing of customers and staff, and our expertise in the field of health and safety has enabled us to continue to provide various services to existing clients.  We have also been able to acquire new clients who commissioned us to assist with enabling them to provide COVID-Secure environments so that they could return to work.

All Group directors elected to take a 20% reduction in pay from 1 May 2020 for the duration of the furlough scheme.

Net asset value

As at 31 March 2020, the Group’s consolidated net assets stood at £4.98m (2019: £5.14m). There were 14,677,257 ordinary shares in issue at that date which equates to a net asset value per share of 34p.

As we have previously stated, the Company’s ordinary shares continue to trade at a substantial discount to the net asset value.  We recognise that there is a value of goodwill on the balance sheet and we review this each year to ensure that the value is fairly stated.  In each of the past two years, the board has taken the decision to reduce the carrying value of our security division by £200,000, and we have done the same thing in 2019-20 in line with good accounting practice.  The write-down represents a reduction of approximately 4% in the consolidated net assets of the Group.  The board remains satisfied that all other goodwill valuations can presently be justified.

Outlook

Whilst the effect of COVID-19 on the economy is the greatest concern for the Group, this does not reduce the potentially negative effects of the lack of specific terms on which the UK will trade with the EU at the end of the transition period this year.  That matter was causing some clients to delay certain investment decisions, and this is exacerbated by the uncertainly brought about by the pandemic.  We may also be affected positively or negatively by future Government fiscal measures to assist the recovery of the UK economy and we will pay close attention to such decisions as they are announced.  In the context of our security division, an important general economic factor is the purchasing power of sterling as a weaker pound erodes our gross margins. The closure of many retail premises is also a critical factor as the move to online shopping accelerates.

Trading update

Unaudited management accounts for the first quarter of 2020-21 indicate that Group revenues were £0.82m and generated an EBITDA of £108,300.  This compares with total revenues of £1.08m for the first quarter of 2019-20 and an EBITDA of £84,600.

Dividends

A total dividend of 1.0p per ordinary share, (£146,772) was paid in respect of the year ended 31 March 2019.  An interim dividend of 0.5p in respect of the year ended 31 March 2020 was paid in February 2020 and, subject to shareholder approval, a final dividend of 0.5p, to be paid from earnings from the year ended 31 March 2020, is proposed for payment in October 2020, matching the total of 1.0p paid last year.

Pre-tax profit/(loss) per subsidiary before Group management charges

Profits before tax and management charges are reviewed by each subsidiary and by the board every month to establish whether each subsidiary is trading profitably and to determine whether intervention is necessary.  To provide a more accurate picture of the performance of each subsidiary, the cross-charging of consultants between subsidiaries has been introduced so that the cost of labour is met by the invoicing company rather than the subsidiary providing that labour.

A review of the activities of each trading subsidiary is provided below.  The profit figures stated are before tax, central management charges and impairment charges.  The management charges are the individual subsidiary’s contribution to Group overheads and are not directly attributable costs.

B2BSG Solutions Limited (B2BSG)

• 2020: revenues of £1,915,200 yielding a loss of £90,800
• 2019: revenues of £2,724,000 yielding a loss of £137,400

The fall in revenue reflects the reduced demand from B2BSG’s primary sphere of operation which remains the retail sector which has continued to suffer as a result of weaker consumer demand on the high street and the move towards on-line purchasing which has accelerated during the COVID-19 pandemic.  Over £165,000 was saved in lower staff salaries and associated expenditure through restructuring and non-replacement of leavers.  There were no redundancy payments necessary in this process.

There are bad debts of £18,730 provided for in the accounts. These stem mainly from a second period of administration by a large client, Debenhams, who have proposed a Company Voluntary Arrangement for their UK businesses and have closed their estate in Ireland entirely.

Selling into the retail sector remains challenging and the COVID-19 pandemic will have a large effect on our client base.  Any further material deterioration in the retail sector and specifically in B2BSG’s client base may have a significant negative effect on B2BSG’s and hence the Group’s prospects.  In the meantime, B2BSG is making use of available business grants and the Government’s Job Retention Scheme and looks forward to an increase in demand once high streets are able to recover.

Inspection Services (UK) Limited (ISL)

• 2020: revenues of £230,800 yielding a profit of £37,400
• 2019: revenues of £232,600 yielding a profit of £43,500

ISL ended the year with marginally lower sales and a slight increase in total costs compared with the prior year.  ISL offers a fairly narrow range of specialised services directly to clients and, for the most part, through insurance brokers.  The work involves the statutory examination and inspection of workplace plant and equipment where plant failure may lead to a serious risk of injury.  This includes lifting plant and equipment, pressure vessels, power presses and bailing machines. 

Early in the COVID-19 pandemic, the Health and Safety Executive (HSE) notified duty holders across the UK that the obligation to have plant and equipment examined in line with statutory frequencies was not being relaxed.  Our professional association, the Safety Assessment Federation, in consultation with the HSE, deemed us to be “key workers”.  This enabled ISL to carry on trading as normal, subject to complying with appropriate safety protocols to safeguard staff and those they may encounter in their work and as a result, demand has remained stable during since the financial year end.

Personnel Health & Safety Consultants Limited (PHSCL)

• 2020: revenues of £763,600 yielding a profit of £302,500
• 2019: revenues of £657,100 yielding a profit of £278,000

Income from PHSCL’s flagship product, the Appointed Safety Advisor Service was around 10% down year on year.  However, consultancy income from non-retained clients more than doubled to around £225,000.  In addition, revenue from training courses was up by £20,000.

Despite the reduction in revenue from the Appointed Safety Advisor Service, PHSCL derives most of its income from this product.  There was some client churn, though generally client retention is good and has not been unduly affected by the COVID-19 pandemic.

PHSCL continues to meet the accreditation requirements for the ISO 9001 quality management standard, having held this “kitemark” for 23 years since becoming the first organisation of its kind to achieve the standard.

Since the financial year-end, COVID-19 has had an effect both on PHSCL and the clients we serve.  There has been demand for consultancy advice in relation to preparing COVID-Secure workplaces and this has introduced us to a number of clients for whom we have not worked before.  Once a degree of normality returns, we would hope to build on those relationships by offering other services.

QCS International Limited (QCS)

• 2020: revenues of £756,700 yielding a profit of £220,900
• 2019: revenues of £759,500 yielding a profit of £242,300

QCS maintained a good level of both sales and profits and performed as expected over the year.  The introduction of management standard ISO 45001 (for health and safety) and work assisting clients on ISO 27001 (information security) more than offset the loss of work in the previous year relating to the transition to new quality and environmental standards.

Sales in public training and consultancy services remained strong.  Full advantage was made of the investment in new training facilities that are now able to accommodate additional delegates.  However, in-house training sales weakened, and this caused total sales for the year to end marginally below those for 2018-19.  An internal target to increase public training sales by 12% over the period was achieved.  Efforts will continue to promote in-house services and reduce the decline in that area. Consultancy sales remained consistently strong throughout the year, posting growth of 7%.  QCS continues to enjoy exceptionally high levels of repeat business and has developed a loyal customer base across many economic sectors.

Departure from the EU has not yet directly affected sales, though a significant proportion of medical device work is linked to an ability to offer services linked to EU regulation.  QCS now offers a ‘UK Responsible Person’ service in the event of a no-deal conclusion to the transition period which may present some opportunities, acting as a UK address for manufacturers of medical devices within the remaining EU.  To date there have been an encouraging number of enquiries regarding the service.  The weakness of sterling has the potential to work in QCS’s favour.

Quality Leisure Management Limited (QLM)

• 2020: revenues of £353,400 yielding a profit of £75,700
• 2019: revenues of £437,600 yielding a profit of £106,500

QLM made a profit before tax and central management charges of £75,711, compared to £106,576 in the previous year.

Retained client renewals remained largely the same in comparison to the previous period.  Small deviations are seen as contracts between local authorities and QLM clients change, or smaller clients are absorbed by larger operators though there remains a strong need for QLM’s expertise with clients placing significant reliance on its services.

Although the support service remains a stable source of income, audit income fell significantly compared to the same period last year.  Savings and cost cutting exercises across many local authorities has seen a knock-on effect to the resources of leisure trusts and other QLM clients.  In addition, auditing functions are more frequently tackled internally by clients leading to less need for external verification and auditing.  The impact of COVID-19 remains to be seen and will depend on what support is given to the sector by local authorities and central government.

Training is a core income stream and remained generally consistent with previous years.  The most popular courses were IOSH Managing Safely and QLM’s own (CIMSPA Endorsed) Health and Safety Management in Leisure and Culture Facilities.

One full-time consultant left the business in October 2019 and was not replaced which led to greater use of sub-contractors.

RSA Environmental Health Limited (RSA)

• 2020: revenues of £418,100 yielding a profit of £83,500
• 2019: revenues of £404,300 yielding a profit of £66,700

Revenue for the year was up by 3.4% to £418,100.  Costs were effectively controlled, and this led to gross profit margin of 53% (2019: 52%).

Integration of the Envex brand into RSA has brought in some much-needed skills which have aided service delivery to our existing clients, reducing the need to rely on contractors and associates. 

Whereas in previous years the focus of RSA has been on the SafetyMARK brand, providing safety services to the school’s sector, this year has seen the revenues fall into four main categories; training, health and safety consultancy, food safety consultancy and SafetyMARK. This has widened the focus and spread some of the risk, leaving RSA potentially less exposed in the future.

SafetyMARK, whilst remaining the main focus, saw revenues fall within the financial year to around £90,000.  This can be partially accounted for by a number of postponed audits at short notice within the last quarter. This happened due to a combination of staffing changes at key schools and the start of the COVID-19 pandemic. There was also an impact on this sector by RSA diverting its attention to fulfilling a large contract in the hospitality sector.  However, demand for safety services in schools remains strong and is expected to pick up when schools are fully open in September 2020.

Training has seen an increase due to the numbers of courses being provided to clients compared to the previous year.  There continues to be demand for some of our public courses within the schools’ sector and for our IOSH accredited school courses. Training was not unduly affected by COVID-19 in March, with only a couple of courses having to be postponed to the next financial year

Health and safety consultancy saw the biggest change in demand for the year 2019-20 as a result of the large contract in the hospitality sector previously mentioned.  This generated significant revenues for RSA but was very heavy in administrative terms.

Food safety consultancy saw strong demand, but the impact of COVID-19 saw an end to the ability to continue with auditing of our regular clients. All clients have stated that they will restore the audit programmes as soon as the various sectors are allowed to open.

PHSC plc

• 2020: net loss of £424,100 before management charges, exceptional costs and dividends received
• 2019: net loss of £523,700 before management charges, exceptional costs 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 the subsidiaries. Costs in all other respects are consistent with the previous year.

PRINCIPAL RISKS AND UNCERTAINITIES

Pandemic

The coronavirus pandemic involving the spread of COVID-19 has presented several different risks to the business. The spread was rapid and the global repercussions unprecedented.

As Government guidance evolved, a comprehensive plan 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.

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.

Where consultants were required to visit clients’ premises, mainly to advise on COVID-19 related topics, face masks and disposable gloves were issued. Consultants were asked to use their own vehicles to commute rather than take public transport. A focus was to protect PHSC’s reputational risk by ensuring staff adhered to government guidelines. In the short term, all classroom training was ceased.

The risk of poor communication during the pandemic was mitigated using Microsoft Teams and Zoom to keep in touch with staff and clients. The operational directors met via Zoom each week for a business update and to share knowledge and best practice. Board meetings were also undertaken as scheduled via Zoom.

In terms of lost revenue and profit, the impact in the year ended 31 March 2020 was immaterial though the full effect will be felt in the new financial year. The UK lockdown has inevitably led to a loss of business and revenue, as schools, leisure facilities, shops and pubs/restaurants make up a significant portion of the Group’s customer base. An exception to this is ISL, where the Health and Safety Executive did not relax the obligation to have plant and equipment examined in line with statutory frequencies. The engineers were deemed key workers and ISL was able to carry on trading as normal, subject to complying with appropriate safety protocols to safeguard staff. Another mitigating factor is the uninterrupted subscription income received by some of the subsidiaries which provides a base of ongoing revenue. It is also fortunate that the expertise within the Group in the field of health and safety has enabled various services to continue to be provided to existing clients and new clients have been secured who commissioned assistance with the provision of COVID-Secure environments. Income from the Government Job Retention Scheme and Business Grants have also played a key role in maintaining cash flow.

In terms of liquidity risk, the Group had a strong cash position at the year end and the start of lockdown. Good credit control has been maintained by the head office staff and with the income from the Government’s schemes, the Group has remained cash generative. Payment of VAT for Q4 was initially delayed in line with an HMRC concession but was subsequently settled in full.

Although the economic outlook remains uncertain, the discipline of forecasting has been maintained, though initially with a reduced horizon.  Expectations for first half of 2020-21 are that with the continued use of Government funding assistance, the Group should do no worse than break even and will maintain a strong cash position.

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.

In the event of a “no deal” end to the post-Brexit transition period, the Group’s security division will take appropriate steps to ensure that sufficient supplies are held of relevant products to meet the predicted needs of customers.  In doing so, customers can expect more frequent requests to forecast their likely requirements over longer time horizons than usual.  The security division is already dealing extensively with a wide range of imported goods, some from within the EU and others from countries beyond the EU.  It is therefore well-versed in customs processes and expects to be able to apply the same or similar processes to imports from within the EU (albeit at potentially different tariff rates) should that prove necessary under a “no deal” Brexit.  Matters outside the Group’s control would include delays caused at customs if administrative demands on border officials are suddenly increased, resulting in slower clearance times for imported goods.

There are predictions by economists that the value of sterling may deteriorate if the UK and EU cannot reach a trade deal by the end of the transition period.  Whilst the Group will take reasonable steps to hedge against the effects of a weaker pound, customers are being advised to consider pre-ordering and/or increasing their stock levels of those products supplied by the Group’s security division which they see as 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 weaker 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 director of each subsidiary company, which forms the basis of the Group’s strategic plan. The board requires that the plans include financial forecasts, KPI’s, marketing strategy and an analysis of strengths, weaknesses, opportunities, and threats. Subsidiary directors, via the Groups 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 the 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 ascending 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. During the year, a review was conducted to identify any gender-related pay anomalies across the Group and as at the date of this report, there are no known anomalies in any subsidiary that would fall into this category. 

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 Groups supply chains.

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.

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, various social media platforms and regular client meetings. An ongoing dialogue is held electronically, with most clients subscribing to email updates that are sent out periodically. There is also interaction through social media platforms such as Twitter, LinkedIn and Facebook where appropriate.

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 the PHSC plc website (www.phsc.plc.uk). 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 require the directors to consider the appropriateness of the going concern basis when preparing the financial statements. COVID-19 and the Government-imposed lockdowns and restrictions are inevitably having an impact on the Group’s ability to trade normally. In terms of lost profit, a relatively small impact was felt in the year ended 31 March 2020 though the board’s expectations for the new financial year have had to be significantly revised. Mitigating factors are the strong cash position at the start of lockdown, income from statutory examination of equipment (a requirement not relaxed during the pandemic), continuation of subscription income, demand for COVID-19 Secure risk assessments, and income from the Government job retention and business grant schemes. The Group’s expectations and current banking facilities indicate that the Group has adequate resources to continue in operational existence for the foreseeable future. Consequently, the directors continue to adopt the going concern basis of accounting in preparing the annual financial statements.

In closing, I would like to extend thanks to all our shareholders for their continued support and to everyone employed across the Group for their hard work and effort during these unprecedented times. The board acknowledges the valuable work carried out by every employee and recognises that it is reliant upon each individual member of staff and management if it is to succeed and prosper.

On behalf of the board

Stephen King,
Group Chief Executive
19 August 2020

GROUP STATEMENT OF FINANCIAL POSITION
as at 31 March 2020

			31.3.20 £		31.3.19 £
Non-Current Assets
Property, plant and equipment			592,539		488,585
Goodwill			3,278,463		3,478,463
Deferred tax asset			19,582		17,627
			3,890,584		3,984,675
Current Assets
Stock			264,301		316,556
Trade and other receivables			885,947		973,130
Cash and cash equivalents			755,919		642,466
			1,906,167		1,932,152
Total Assets			5,796,751		5,916,827
Current Liabilities
Trade and other payables			622,938		675,162
Right of use liabilities			34,071		-
Current corporation tax payable			40,250		54,707
			697,259		729,869
Non-Current Liabilities
Right of use liabilities			69,912		-
Deferred tax liabilities			51,256		46,313
			121,168		46,313
Total Liabilities			818,427		776,182
Net Assets			4,978,324		5,140,645
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			1,317,117		1,479,438
			4,978,324		5,140,645

GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2020

			31.3.20 £		31.3.19 £
Continuing operations:
Revenue			4,437,922		5,215,341
Cost of sales			(2,251,867)		(2,719,724)
Gross profit			2,186,055		2,495,617
Administrative expenses			(1,983,046)		(2,418,182)
Goodwill impairment			(200,000)		(200,000)
Other income			-		166,270
Profit/ from operations			3,009		43,705
Finance income			1,990		303
Finance costs			-		(1,514)
Profit before taxation			4,999		42,494
Corporation tax expense			(20,548)		(41,795)
(Loss)/profit for the year after tax attributable to owners
of the parent			(15,549)		699
Other comprehensive income			-		-
Total comprehensive (loss)/income attributable to owners
of the parent			(15,549)		699
Basic and diluted (loss)/earnings per share from continuing operations			(0.11)p		0.005p

GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020

	Share Capital £	Share Premium £	Merger Relief Reserve £	Capital Redemption Reserve £	Retained Earnings £	Total £
Balance at 1 April 2018	1,467,726	1,916,017	133,836	143,628	1,625,511	5,286,718
Profit for year attributable to equity holders	-	-	-	-	699	699
Dividends	-	-	-	-	(146,772)	(146,772)
Balance at 31 March 2019	1,467,726	1,916,017	133,836	143,628	1,479,438	5,140,645
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

GROUP STATEMENT OF CASH FLOWS
for the year ended 31 March 2020

	Note		31.3.20 £		31.3.19 £
Cash flows from operating activities:
Cash generated from operations	I		346,847		325,587
Interest paid			-		(1,514)
Tax paid			(32,017)		(9,345)
Net cash generated from operating activities			314,830		314,728
Cash flows (used in)/from investing activities
Purchase of property, plant and equipment			(39,529)		(69,578)
Disposal of fixed assets			2,250		299,495
Interest received			1,990		303
Net cash (used in)/from investing activities			(35,289)		230,220
Cash flows used in financing activities
Payments on right of use assets			(19,316)		-
Dividends paid to shareholders			(146,772)		(146,772)
Net cash used in financing activities			(166,088)		(146,772)
Net increase in cash and cash equivalents			113,453		398,176
Cash and cash equivalents at beginning of year			642,466		244,290
Cash and cash equivalents at end of year			755,919		642,466

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 2020

			31.3.20 £		31.3.19 £
I. CASH GENERATED FROM OPERATIONS
Operating profit – continuing operations			3,009		43,705
Depreciation charge			52,194		38,179
Goodwill impairment			200,000		200,000
Loss/(profit) on sale of fixed assets			4,430		(162,338)
Decrease in stock			52,255		72,478
Decrease/(increase) in trade and other receivables			87,183		595,495
(Decrease)/increase trade and other payables			(52,224)		(461,932)
Cash generated from operations			346,847		325,587

Notes to the results announcement of PHSC plc

The financial information set out above does not constitute the Group’s financial statements for the years ended 31 March 2020 or 31 March 2019 but is derived from those financial statements. Statutory financial statements for 2019 have been delivered to the Registrar of Companies and those for 2020 have been approved by the board and will be delivered after dispatch to shareholders. The auditors have reported on the 2019 and 2020 financial statements which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

While the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS. The accounting policies used in preparation of this announcement are consistent with those in the full financial statements that have yet to be published.

Dividend

An interim dividend of £73,368 representing 0.5p per ordinary share was paid in February 2020 in respect of the year ended 31 March 2020. The board is proposing, subject to shareholder approval at the AGM, a final dividend of £73,386, representing 0.5p per ordinary share, to be paid on 16 October 2020, making a total dividend for the year of 1.0p.