22630 PHSC Annual Report 2015_Cover_22630 PHSC Annual Report 2015_Cover 30/07/2015 11:06 Page 1 Annual Report 2015 Adamson’s Laboratory Services B to B Links In House The Hygiene Management Company Inspection Services (U.K.) Limited Ltd RSA Environmental Health Job No.: 22630 Customer: PHSC Proof Event: 3 Project Title: Annual Report 2015 Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:20 Page 1 P H S C p l c CONTENTS OF THE ANNUAL REPORT for the year ended 31 March 2015 Company Information Strategic Report Report of the Directors Statement of Directors’ Responsibilities Corporate Governance Statement Independent Auditor’s Report Group Statement of Financial Position Group Statement of Comprehensive Income Group Statement of Changes in Equity Group Statement of Cash Flows Accounting Policies Notes to the Financial Statements Company Financial Statements Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Notice of Annual General Meeting Form of Proxy Page 2 3 10 13 14 16 17 18 19 20 21 25 43 44 45 46 55 57 1 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:20 Page 2 P H S C p l c COMPANY INFORMATION for the year ended 31 March 2015 DIRECTORS: SECRETARY: S A King N C Coote G N Webb MBE M J L Miller L E Young REGISTERED OFFICE & BUSINESS ADDRESS: The Old Church 31 Rochester Road Aylesford Kent ME20 7PR REGISTERED NUMBER: 4121793 (England and Wales) AUDITOR: SOLICITORS: REGISTRARS: NOMINATED ADVISORS AND BROKERS: Crowe Clark Whitehill LLP Chartered Accountants & Registered Auditor 10 Palace Avenue Maidstone Kent ME15 6NF Gullands 16 Mill Street Maidstone Kent ME15 6XT Neville Registrars Limited Neville House 18 Laurel Lane Halesowen West Midlands B63 3DA Sanlam Securities UK Limited 10 King William Street London EC4N 7TW 2 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:20 Page 3 P H S C p l c STRATEGIC REPORT for the year ended 31 March 2015 HIGHLIGHTS • Underlying EBITDA* improved by 11% at £0.818m, up from £0.735m • Group revenues increased by 2% to £7.731m compared with £7.594m • Cash reserves fall to £0.462m due to final acquisition payments • Group net assets rise to £6.6m • Earnings per share after exceptional costs fall to 2.75p from 4.24p • Profit after tax and exceptional costs fell to £349k from £494k • Proposed final dividend held at 1.5p per share * Underlying EBITDA is calculated as earnings before interest, tax, depreciation, amortisation and exceptional costs. KEY DEVELOPMENTS AND OUTLOOK PHSC plc, through its trading subsidiaries is a leading provider of health, safety, hygiene and environmental consultancy services and security solutions to the public and private sectors. The majority of the Group’s revenue continues to arise from the core health and safety businesses with the major income streams being derived from activities such as asbestos management, health care training, public transport safety consultancy, and supporting the education sector. The Group also serves the leisure industry and carries out statutory examination of plant and machinery via insurance brokers or directly for clients. In order to diversify its offering, the Group took a decision to branch out from its core business of health and safety in 2012. Acquisitions made at that time have enabled us to add quality management systems consultancy and training, and innovative retail security solutions including tagging, labelling and CCTV to the activities of the Group. It is the efforts of these newer subsidiaries, QCS International Limited (QCS) and B to B Links Limited (B to B), that have enabled us to deliver improved revenues and profits. B to B reaped the benefit of a substantial one-off additional programme of work from a key client, and this contributed greatly to Group performance. The legacy businesses generated £4.599m of sales compared with £4.567m in the previous year. Our ability to retain customers through the quality and effectiveness of the service we provide is a major strength. The Group continues to benefit from a diverse number of clients, including several that have a fairly robust safety culture and who seek continuous improvement. However, a lighter regulatory approach and reduced Government funding of the enforcement authorities has led to some organisations spending less on compliance services and on general discretionary services. Acquisition payments Final payments totaling £563,528 were made in cash in respect of the acquisition of QCS and B to B acquired in July and October 2012 respectively. On the second anniversary of the purchase of QCS a final payment of £80,000 was due under the terms of the share purchase agreement, and this was subject to adjustment up or down according to performance against targets. Due to the positive performance of the company in the two years post acquisition an additional amount of £25,283 became due. This resulted in a final payment of £105,283. Similarly on the second anniversary of the purchase of B to B, a final cash payment of between £120,000 and £800,000 fell due, adjustable up or down according to performance over the two years post completion. At the time of acquisition a provision of £250,000 was made in the accounts, but the actual payment exceeded this by £208,245 due to a very strong trading finish to the two year earn out period. This brought the final payment to £458,245. The statement of comprehensive income treats the £25,283 and £208,245 additional payments for QCS and B to B respectively as exceptional expenses. This treatment is in line with IFRS requirements but has the unfortunate effect of reducing the final earnings per share. These exceptional expenses are not regarded as allowable when calculating the Company’s corporation tax liability. 3 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:20 Page 4 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 Net asset value As at 31 March 2015, the company had net assets of £6.6 million. There were 12,686,353 ordinary shares in issue at that date which equates to a net asset value per share of 52p. The ordinary shares of the company continue to trade at a discount to the net asset value. A proportion of the company’s assets consists of goodwill associated with the various acquisitions it has made. Each year the level of goodwill relating to subsidiaries is reviewed to make sure that their values on the group statement of financial position can still be justified. This year it was decided to write off £29,230 which related to the carrying value of an unincorporated business, Lindum Consulting. The contracts of Lindum were purchased by the company around ten years ago, when the founder of that business retired. None of the contracts remain current so there is no justification in maintaining a value in respect of them. The board remains comfortable with all other valuations. Outlook Whilst we remain confident that core revenues from our regular and retained clients will underpin the coming year’s performance, we recognise that it is unlikely that we shall be able to replicate the exceptionally favourable circumstances that occurred last year. We will work hard to find similar opportunities to replace revenues that ended on completion of the large one-off additional assignment fulfilled by B to B. Another high-value contract that ends in 2015-16 relates to asbestos consultancy services provided by Adamson’s Laboratory Services Limited (ALS) and we do not expect that this subsidiary will be able to win sufficient new work in the short term to fully compensate for this gap in the forward order book. Now that we have fulfilled all our obligations in respect of acquisition payments, we are in a position to begin to accumulate more comfortable cash reserves as the year progresses. At this time the Group has not committed to further acquisitions, but is prepared to pursue opportunities if the right proposition presents itself at the right price and where this is clearly seen as being in shareholders’ best interests. PERFORMANCE The board looks at the following key performance indicators. Total revenues Total revenues are reviewed each month across the Group because this information gives a ready measure of how well the Group is performing relative to historical data. It enables any trend to be detected, understood and acted upon as appropriate. Consolidated Group sales for the period rose to £7,730,900 from £7,594,300. B to B and Quality Leisure Management Limited both enjoyed strong growth in turnover in the year to 31 March 2015. Earnings before interest, taxation, depreciation, amortisation and exceptional costs (underlying EBITDA) The Group generated an 11% increase to underlying EBITDA. The figure of £818,400 EBITDA compares with £735,000 generated in the previous year. Staff turnover Staff turnover is monitored because 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. Based on a payroll head count the number of people employed rose from 89 at the start of the year to 96 as at 31 March 2015, with 19 joiners and 12 leavers across the Group. Recruitment of additional consultants within ALS was the main cause of increased staff numbers within the Group. Pre-tax profit per subsidiary before Group management charges Profits before tax and management charges are reviewed by subsidiary each month because the board is keen to ensure that each subsidiary trades profitably. Although the Group does not adopt a policy of cross-charging between subsidiaries, informal account is taken of significant work done by one subsidiary on behalf of another. 4 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 5 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 A review of the activities of each trading subsidiary is provided below. The profit figures stated are before tax and management charges. Adamson’s Laboratory Services Limited (ALS) • • 2015: sales of £2,694,500 yielding a profit of £276,300. 2014: sales of £2,660,300 yielding a profit of £312,300. The turnover of ALS increased over the period, and the gross profit margin was maintained at 39%. Asbestos-related revenues account for the majority of income. The health and safety department’s turnover decreased slightly but the integration of Envex continues to work well and the volume of occupational hygiene consultancy showed some growth. Training income was stable, with the British Occupation Hygiene Society proficiency modules and general asbestos awareness training remaining popular. The main activity of asbestos consultancy remained consistent. The company benefitted from an extension to a contract for a large university, and this included the secondment of a full-time member of staff along with the provision of full UKAS accredited laboratory services onsite. Work under this contract is scheduled to conclude at the end of the first quarter of the 2015/16 financial year. ALS continued to supply two full-time members of staff to another high-profile university, fulfilling the asbestos manager and assistant roles. Repeat business was won throughout the year, with several blue chip clients in the private sector, and with local government. ALS has successfully maintained its accreditation with UKAS ISO 17020, 17025 and ISO 9001. B to B Links Limited (B to B) • • 2015: sales of £2,604,100 yielding a profit of £357,100. 2014: sales of £2,510,300 yielding a profit of £256,200. In its second full year of trading since being acquired by PHSC plc, B to B generated revenues of £2,604,100, an increase of 4% on the previous 12 months of trading (£2,510,300). The majority of revenues during the year came from national accounts in the department store, fashion retail, grocery, electrical goods and builders’ merchant sectors. In addition independent retail customers have been, and continue to be, an important source of revenue. The company had an exceptionally strong performance during the first half of the year due to a large project for its department store customer as well as a major roll-out for a new national account in the building trade. The general outlook for retail remains positive and demand for retail security products and services remains strong as levels of customer theft have continued to rise. B to B’s security tagging and labelling offer remains competitive and the company has responded to customer demand by adding a competitive Internet Protocol CCTV product range to its CCTV offer. After a period of rapid change and growth since acquisition, priorities for 2016 are to invest in technical and sales capacity to improve installation and maintenance efficiency and grow independent sales. Inspection Services (UK) Limited (ISL) • • 2015: sales of £195,900 yielding a profit of £17,100. 2014: sales of £195,100 yielding a profit of £5,600. ISL carries out statutory examinations and inspections on behalf of a broad range of clients, either directly or via commission-based agreements with insurance brokers. 5 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 6 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 Annual revenues at £195,900 were almost identical to those seen in the previous period, but profitability improved. The main reason for the improvement was a reduction in administrative costs, with a full-time member of staff leaving during the year and being replaced by a part-timer. The majority of income continues to derive from the insurance sector, where a large amount of repeat business is enjoyed as clients tend to renew policies through their brokers. The service that ISL provides enables clients to meet obligations under requirements placed upon them by health and safety legislation. As long as ISL delivers a good service with charges maintained at or around the previous year, there is little motivation for clients to seek alternative providers. Engineers from the company have carried out work for the clients of other subsidiaries within the PHSC plc group. The costs of delivery are borne by the company, and revenues stay with the origination subsidiary, in line with group policy of not cross-charging. Personnel Health & Safety Consultants Limited (PHSCL) • • 2015: sales of £753,800 yielding a profit of £332,000. 2014: sales of £749,500 yielding a profit of £327,500. Revenues were fractionally higher at £753,800, meaning that turnover increased by just over £4,000 in the year. Much of the income arises from long-term contracts that generate recurring revenues, with this core income supplemented by a number of one-off projects ranging from assignments of one day’s duration through to more complex projects. A part-time member of the fee-earning staff retired during the year and was not replaced. Another employee reduced his working week in preparation for retirement. Some of the work previously carried out by these two employees was outsourced and some was undertaken by remaining staff. This contributed to higher profits, as did a reduced management charge from parent company PHSC plc. The reduction was a consequence of larger contributions to the parent company from its other subsidiaries. Parent company PHSC plc has a policy of subsidiaries not cross-charging for work carried out on behalf of sister companies. PHSCL is the largest net provider of consultancy and training services to clients of other members of the PHSC plc group. The company was assessed for continued accreditation to three schemes; Investors in People, Constructionline, and ISO 9001 Quality Systems. All three assessments led to renewal of the company’s approved status. QCS International Limited (QCS) • • 2015: sales of £526,800 yielding a profit of £148,100. 2014: sales of £516,200 yielding a profit of £161,800. Turnover for the year increased by 2% to £526,800 reflecting a consolidation of the considerable increase achieved the previous year. Profit before taxation decreased by 8% to £148,100 resulting from the additional costs relating to subcontractors, services of another group consultant and higher printing costs to cover the demand for training. QCS has retained 80% of its outsource clients and continues to see a steady growth of new clients to the consultancy portfolio. The latter has grown 6% in the period but there has been a reduction in the proportion relating to medical device manufacture consultancy which enjoys higher margins, hence the disproportionate impact on gross profit. Progress is being made on securing further work in this sector. The financial year ended with the introduction of new health and safety services aimed primarily at offering long-term embedded services to a new client base. Marketing of this new service began at the start of the new financial year. 6 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 7 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 QCS continues to increase income from publicly available training courses. In-house training revenues exceeded budget expectations and marketing initiatives have been put in place to ensure that growth accelerates in this part of the business in the coming year. In 2015/16 there will be significant changes to the main quality and environmental standards for which QCS offers training and consultancy services. This presents a growth opportunity, whereby QCS can promote its ability to support those companies who wish to prepare for the revised standards. In addition, greater demand is expected for health and safety services with the introduction of the new international standard ISO45001. QCS remains well placed within the market place to take advantage of these changes with both existing and new clients seeking assistance to ensure compliance. After a six month transition period, on 1 January 2015 Rosalynne Shields retired as Managing Director and was replaced by Ian Phillips, a former QCS consultant. Rosalynne Shields is now retained on a part time basis to provide advice to companies within the PHSC plc group and thus remains available to QCS in an advisory capacity. Quality Leisure Management Limited (QLM) • • 2015: sales of £533,900 resulting in a profit of £123,800. 2014: sales of £463,500 resulting in a loss of £4,500. The year ended 31 March 2015 saw QLM turn a loss of £4,500 into a profit of £123,800. This was the result of a focus on developing the company’s core consultancy business and the introduction of new product lines. The cost cutting measures implemented during 2013/14, including relocation of the office premises also had a beneficial effect on the profitability of the business. Turnover for the year ended 31 March 2015 increased by 15% to £533,900. Health and safety income exceeded expectation predominantly due to strong retained client renewals and a steady growth in audits. Income from quality management was better than anticipated due to the winning of new integrated management system (IMS) projects. The new QLM IMS encapsulates all of the organisation’s business processes under one umbrella and documents them using the ‘process approach’. This new approach shows how processes and procedures link together and details the inter-relationship between them, removing duplication of work activities across the various functions of the business. The documented system is bespoke to the organisation. Sport Aberdeen and Brio Leisure are two such organisations that have structured their IMS in line with the new approach and have already started to see tangible benefits. The LeisureShield system, developed by Real Time Leisure has been designed and tested specifically in leisure to digitise the normally paper based health and safety inspections of areas and equipment. It records the location of the equipment being inspected, identifies staff, schedules inspections, tracks faults through to completion and reports the findings. In addition, QLM Leisuresafe is integrated into the system, allowing users to ‘self-assess’ health and safety systems and procedures against the QLM Leisuresafe assessment model. This self-assessment can then be externally validated. Sales from the new Leisureshield product have grown more slowly than anticipated but new marketing initiatives to boost this income stream are planned in 2015/16. A number of new publications are due to be launched by the end of 2015 through CIMSPA. The publications will include a review, refresh and update of existing publications and three new industry specific guides available to members throughout the Institute. A new business relationship with Poseidon Technologies, further work with Leisureshield and development of core business products and services will form a key part of the 2015/16 business strategy. Poseidon is a computer vision surveillance system that recognises texture, volume and movement within a pool. Comprised of an advanced overhead and/or underwater camera network that continually surveys the pool and a specialised software system that analyses in real-time, the trajectories of swimmers, the system can alert lifeguards in the first seconds of a potential accident to the exact location of the swimmer in danger. 7 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 8 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 Originating in France, the Poseidon system has been installed in over 250 pools across the world. So far the registered activations have led directly to 30 lives being saved. Two of these were in the UK. The Poseidon system is an excellent product and QLM are acting as their UK agents to assist with its development. After a six month transition period, on 1 June 2015 Peter Mills retired as Managing Director and was replaced by Leigh Simmonds, a former QLM Principal Consultant. Peter Mills will remain available to QLM in an advisory capacity at least until the end of 2015. RSA Environmental Health Limited (RSA) • • 2015: sales of £421,900 yielding a profit of £34,900. 2014: sales of £499,400 yielding a profit of £55,900. Revenue and profit fell year on year, as the company continues its transition away from the provision of low-margin services to the public sector. The business continues to focus on supporting schools, both in the state and independent sectors, with the management of health and safety. The SafetyMARK service remains the core offering and the number of educational establishments signed up to the programme now stands at approximately 160. The halo effect of SafetyMARK means that general safety consultancy and training services are regularly upsold and, as the number of contracted schools increases, the captive market broadens and presents more opportunities. Moving forward, much focus has been placed upon promoting services that can be delivered during the school holidays, as these tend to be quiet for a business that is so focussed on school support. In 2015/16, particular emphasis has been placed upon undertaking fire risk assessments and this has proved to be a successful strategy. The intention is to continue this focus through the academic summer holidays to help avoid a traditional dip in revenue during this period. Developments within the London Borough of Redbridge led to SafetyMARK being offered as an alternative safety support service to the one that had previously been provided by the local authority. This has led to 15 schools in the Borough joining the scheme, with many more in the pipeline. This provides a regional cluster which allows public training courses to be offered to all schools in the area. Such courses run at good profit margins if they prove popular, as they have done so far. In the same vein, the school-specific training courses designed by RSA and accredited by the Institution of Occupational Safety and Health (IOSH), continued to be popular across the country and particularly when run on behalf of the National Association of School Business Management. The success of SafetyMARK means that new enquiries from prospective clients are strong and new business is gained without the need for an aggressive marketing strategy. The key will now be to ensure that probability is maximised by using the economies of scale afforded by a larger client base, as well as ensuring that costs are well controlled and standard fees are reviewed, where appropriate. PRINCIPAL RISKS AND UNCERTAINTIES Regulatory/Marketplace Much 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, by acquiring B to B and is exploring non-regulatory areas of environmental work to add to the current portfolio of services. 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. 8 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 9 P H S C p l c STRATEGIC REPORT (continued) for the year ended 31 March 2015 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. The acquisitions made, particularly QCS with an office in Scotland, have increased the geographical spread of the Group and assist in mitigating this risk. Licences The Group is reliant on licences and accreditations in order 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 would 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. GOING CONCERN Accounting standards require the directors to consider the appropriateness of the going concern basis when preparing the financial statements. The directors confirm that they consider that the going concern basis remains appropriate. The directors regard the going concern basis as remaining appropriate as the Group has adequate resources to continue in operational existence for the foreseeable future based upon the Group’s forecasts. The directors have been informed by their bankers that an overdraft facility of up to £100,000 will be provided at 48 hours notice. This can be extended if required subject to the normal caveats. Thus 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 the hard work and effort that has led to another year of successful performance. On behalf of the board Stephen King Group Chief Executive 31 July 2015 9 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 10 P H S C p l c REPORT OF THE DIRECTORS for the year ended 31 March 2015 The directors present their report with the audited financial statements of PHSC plc company and Group for the year ended 31 March 2015. DIRECTORS The directors during the year under review were: S A King N C Coote M J L Miller G N Webb MBE DIVIDENDS A dividend of £190,295 was paid during the year ended 31 March 2015 (2014: £159,095). The board is proposing a final dividend of 1.5p per ordinary share to be paid on 30 September 2015 to shareholders on the register as at 21 August 2015. PROVISION OF INFORMATION TO AUDITOR So far as each of the directors is aware at the time the report is approved: • • there is no relevant audit information of which the Group’s auditor is unaware; and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. FINANCIAL RISK MANAGEMENT The Group’s operations expose it to a variety of financial risks which are outlined in the strategic report and in Note 1 to the financial statements on page 25. SHARE BUY BACKS There were no share buy backs during the year. ENVIRONMENT AND SOCIAL AND COMMUNITY ISSUES The directors are aware of the impact of the Group’s business on the environment and social and community issues but believe these to be minimal due to the nature of the Group’s operations. EMPLOYEES Each company within the Group has in place the necessary structures to ensure effective communication with its employees. In addition, there are initiatives to ensure that staff are offered continuing professional development opportunities appropriate to their roles. The Group aims to improve the performance of the organisation through the development of its employees. Their involvement is encouraged by means of team meetings and briefings and bonuses are paid on the basis of individual performance and results at subsidiary and group level. 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. 10 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 11 P H S C p l c REPORT OF THE DIRECTORS (continued) for the year ended 31 March 2015 SUBSTANTIAL SHAREHOLDINGS At 24 July 2015, the following persons had notified the company of an interest of 3% or more of its issued share capital. Name S A King N C Coote Unicorn Asset Management Limited and Unicorn AIM VCT II plc James Faulkner Downing LLP held via Downing ONE VCT ANNUAL GENERAL MEETING Number of ordinary shares Percentage of issued share capital 3,203,100 3,144,342 849,057 455,000 441,509 25.25 24.79 6.69 3.59 3.48 This year’s annual general meeting will be held at 10.00am on Monday 7 September 2015 at The Old Church, 31 Rochester Road, Aylesford, Kent ME20 7PR. The notice of meeting is set out on pages 55 to 56 of this document and a form of proxy is on page 57. Details of the business to be considered at the meeting are given below. Report and accounts (Resolution 1) It is a requirement of company law that the annual report and accounts is laid before shareholders in general meeting. Dividend (Resolution 2) As noted above, the directors recommend a final dividend of 1.5p per share. Re-election of directors (Resolutions 3) Under the company’s articles of association, Stephen King retires by rotation and offers himself for re-election. Appointment of auditor (Resolution 4) A resolution for the reappointment of Crowe Clark Whitehill as the company’s auditor will be put to the annual general meeting, together with the usual practice of authorising the directors to set the auditor’s fees. Authority of directors to allot shares (Resolutions 5 and 6) By law, directors are not permitted to allot new shares (or to grant rights over shares) unless they are authorised to do so by shareholders. In addition, directors require specific authority from shareholders before allotting new shares (or granting rights over shares) for cash without first offering them to existing shareholders in proportion to their holdings. Resolution 5 gives the directors the necessary authority until the earlier of next year’s AGM or 6 December 2016 to allot securities up to an aggregate nominal amount of £418,649. Resolution 6 empowers the directors, until the earlier of next year’s AGM or 6 December 2016 to allot such securities for cash otherwise than on a pro-rata basis to existing shareholders, up to a maximum of 2,537,270 ordinary shares of 10p each, equivalent to 20% of the issued share capital as at 24 July 2015. It is intended to renew this authority and power at each annual general meeting. 11 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 12 P H S C p l c REPORT OF THE DIRECTORS (continued) for the year ended 31 March 2015 Voting A form of proxy is included at the end of this document for use at the AGM. Please complete, sign and return it as soon as possible in accordance with the instructions on it, whether or not you intend to come to the AGM. Returning a form of proxy will not prevent you from attending the meeting and voting in person if you wish. A form of proxy should be returned so that it is received not less than 48 hours (excluding non-working days) before the time of the AGM. The directors consider that all the resolutions to be put to the meeting are in the best interests of the company and its shareholders as a whole. The directors will be voting in favour of them and unanimously recommend that you do so as well. On behalf of the board L E Young Secretary 31 July 2015 12 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 13 P H S C p l c STATEMENT OF DIRECTORS’ RESPONSIBILITIES for the year ended 31 March 2015 The directors are responsible for preparing the strategic report, the directors’ report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the consolidated financial statements and company accounts in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and applicable law. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company and Group’s transactions and disclose with reasonable accuracy at any time the financial position of the company and Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are further responsible for ensuring that the strategic report and the report of the directors and other information included in the annual report and financial statements is prepared in accordance with applicable law in the UK. The maintenance and integrity of the PHSC plc website is the responsibility of the directors; the work carried out by the auditor does not involve the consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred in the accounts since they were initially presented on the website. Legislation in the UK governing the preparation and dissemination of the accounts and the other information included in annual reports may differ from legislation in other jurisdictions. Going concern basis The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the group strategic review on pages 3 to 9. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described within these financial statements. In addition, note 1 to the financial statements include the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; and its exposure to credit risk and liquidity risk. The Group has adequate financial resources together with long-term contracts with its customers and has a diversified income stream. Arrangements are in place with the Group’s bankers to secure an overdraft should the need arise to fund anniversary payments due in respect of recent acquisitions made. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 13 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 14 P H S C p l c CORPORATE GOVERNANCE STATEMENT for the year ended 31 March 2015 The directors support high standards of corporate governance as set out in the UK corporate governance code and consider that the company’s governance arrangements are appropriate to its size and stage of development. As the company’s shares are traded on AIM, it is not required to comply with all of the provisions of the code. LEADERSHIP The board is made up of four directors, two of whom are executive, Stephen King (group chief executive) and Nicola Coote (deputy group chief executive) and two of whom are independent non-executive, Mike Miller and Graham Webb MBE. Stephen King acts as chairman and chief executive. Since the board is comprised of only four members, the directors are of the view that there is no need to split these roles and for the same reason they have not appointed a senior independent director. Mike Miller has served nine years on the board and Graham Webb has served eleven years. The board is of the view that Graham Webb retains his independent judgement and continues to make a valuable contribution to the board even though he has been on the board for more than nine years. Biographical details of the directors can be found on the company’s website (www.phsc.plc.uk). The directors have a duty to promote the success of the company and to this end the board has clearly defined responsibilities set out in a formal schedule of matters reserved to it which includes setting the company’s strategy; approving business plans; approving the annual report and accounts and shareholder communications; ensuring a sound system of internal controls and risk management; approving major contracts; determining the remuneration policy (on the recommendation of the remuneration committee); and making appointments to the board and other offices. Health and safety within the Group is considered at every board meeting. The directors have continued to disclose their other interests (as required by the Companies Act 2006) and to date there have been no actual or potential conflicts of interest between these and the interests of the company. EFFECTIVENESS The board meets at least five times each year and the committees meet twice each year (or more often if required). During the year there was full attendance at all board and committee meetings. Monthly management accounts are circulated to all directors. All directors have access to advice from the company secretary. COMMITTEES The board has delegated certain matters to committees. There is an audit committee and a remuneration committee. The terms of reference of these committees are available on request. There is no separate nominations committee and the board as a whole deals with any matters that would normally be within the remit of such a committee. For example, the board reviews succession planning at senior levels within the Group at least annually. The audit committee comprises Mike Miller (chairman) and Graham Webb. During the year it has considered internal controls and risk management issues which are relevant to the Group. Accepting that no systems of control can provide absolute assurance against material misstatement or loss, the directors believe that the established systems for internal control within the Group are appropriate to the business. There is an annual audit planning meeting between the external auditor and the committee chairman as well as a formal meeting with the auditor and the committee at the time of the final results. The committee considers the continuing independence of the external auditor and notes the level of non-audit fees to ensure they remain at an acceptable level. Where relevant, developments in accounting standards and reporting have been discussed during the year. The audit committee reviews annually whether the Group needs to have an internal audit function and does not consider this to be necessary at present. 14 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 15 P H S C p l c CORPORATE GOVERNANCE STATEMENT (continued) for the year ended 31 March 2015 The remuneration committee comprises Graham Webb (chairman) and Mike Miller. The committee has written terms of reference and considers all aspects of the remuneration of the executive directors and other senior executives. As in prior years, any payments to senior executives under the Group bonus plan are approved by the committee. It also hears representations on any proposed general pay increases across Group subsidiaries, and is responsible for approving those (or otherwise). DIRECTORS’ REMUNERATION The remuneration of the executive directors was as follows: Short-term employee benefits Post-employment Year ended 31.3.15 Year ended 31.3.14 Salary £ 82,700 64,050 Bonus £ 5,183 5,183 Waiver £ (9,020) (1,000) Benefits £ 2,331 6,637 benefits Pension £ 3,684 3,203 Total £ 84,878 78,073 Total £ 75,437 76,116 S A King N C Coote Mr King’s benefits pertain to health insurance and Ms Coote’s to a company car and health insurance. The fees of the non-executive directors were as follows: M J L Miller G N Webb CORPORATE RESPONSIBILITY Year ended 31.3.15 £13,000 £13,000 Year ended 31.3.14 £11,500 £12,500 Group companies are involved in the communities in which they operate and also provide sponsorship and donations to good causes. Details of these can be found on the corporate social responsibility section of the Group’s website. RELATIONS WITH SHAREHOLDERS The annual report is sent to all shareholders and, on request, to other parties who have an interest in the group’s performance. The company endeavours to send the notice of AGM and supporting papers to shareholders at least 20 working days before the meeting and responds promptly to any enquiries received from shareholders. The AGM provides the board with the opportunity to meet and engage directly with shareholders and all shareholders have the opportunity to put forward questions on performance and operations as well as other related topics at the AGM. Stephen King is the principal contact between PHSC plc and its investors, with whom he maintains a regular dialogue. The views of investors are communicated to the whole board. 15 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P1-16_22630 PHSC Annual Report P1-16 30/07/2015 11:21 Page 16 P H S C p l c INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF PHSC plc for the year ended 31 March 2015 We have audited the financial statements of PHSC plc for the year ended 31 March 2015 which comprise the group statement of financial position, the group statement of comprehensive income, the group cash flow statement, the group statement of changes in equity, the parent statement of financial position, the parent cash flow statement, parent statement of changes in equity and related notes numbered 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the strategic report, the directors’ report and the corporate governance statement to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: • • • the financial statements give a true and fair view of the state of the group’s and of the parent company's affairs as at 31 March 2015 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. • Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or • • certain disclosures of directors' remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Darren Rigden (Senior Statutory Auditor) for and on behalf of Crowe Clark Whitehill LLP 10 Palace Avenue, Maidstone, Kent ME15 6NF 31 July 2015 16 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 17 P H S C p l c Registered number: 4121793 GROUP STATEMENT OF FINANCIAL POSITION as at 31 March 2015 Non-Current Assets Property, plant and equipment Goodwill Deferred tax asset Current Assets Inventories Trade and other receivables Cash and cash equivalents Total Assets Current Liabilities Trade and other payables Financial liabilities Current corporation tax payable Contingent consideration Non-Current Liabilities Deferred tax liabilities Total Liabilities Net Assets Capital and reserves attributable to equity holders of the Group Called up share capital Share premium account Capital redemption reserve Retained earnings Note 31.3.15 £ 31.3.14 £ 5 6 14 8 7 9 11 12 13 14 10 10 689,595 4,579,976 – 695,662 4,609,206 53 5,269,571 5,304,921 215,591 1,979,918 462,392 154,270 1,935,280 712,397 2,657,901 2,801,947 7,927,472 8,106,868 1,155,824 – 105,245 – 1,134,645 6,498 127,474 330,000 1,261,069 1,598,617 67,537 67,537 67,817 67,817 1,328,606 1,666,434 6,598,866 6,440,434 1,268,634 1,831,194 143,628 3,355,410 1,268,634 1,831,194 143,628 3,196,978 6,598,866 6,440,434 The financial statements were approved and authorised for issue by the board of directors on 31 July 2015, and were signed on its behalf by: S A King Director Accounting policies and notes on pages 21 to 41 form part of these financial statements 17 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 18 P H S C p l c GROUP STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2015 Continuing operations: Revenue Cost of sales Gross profit Administrative expenses Administrative expenses – exceptional Other income Profit from operations Finance income Finance costs Profit before taxation Corporation tax expense Profit for the year after tax attributable to owners of the parent Other comprehensive income Total comprehensive income attributable to owners of the parent Note 31.3.15 £ 31.3.14 £ 16 16 26 15 19 19 7,730,900 (4,226,206) 7,594,281 (4,356,092) 3,504,694 3,238,189 (2,738,562) (262,758) – (2,583,170) – 1,096 503,374 656,115 750 (796) 259 (1,524) 503,328 654,850 20 (154,601) (160,771) 348,727 494,079 – – 348,727 494,079 Basic and Diluted Earnings per Share from continuing operations 21 2.75p 4.24p Accounting policies and notes on pages 21 to 41 form part of these financial statements 18 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 19 P H S C p l c GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2015 Balance at 1 April 2013 Profit for year attributable to equity holders Issue of shares Deferred tax adjustment to property valuation Dividends Share Capital £ 1,060,634 – 208,000 – – Share Premium £ 1,555,529 – 275,665 – – Capital Redemption Reserve £ 143,628 – – – – Retained Earnings £ 2,867,359 494,079 – (5,365) (159,095) Total £ 5,627,150 494,079 483,665 (5,365) (159,095) Balance at 31 March 2014 1,268,634 1,831,194 143,628 3,196,978 6,440,434 Balance at 1 April 2014 Profit for year attributable to equity holders Dividends 1,268,634 – – 1,831,194 – – 143,628 – – 3,196,978 348,727 (190,295) 6,440,434 348,727 (190,295) Balance at 31 March 2015 1,268,634 1,831,194 143,628 3,355,410 6,598,866 Accounting policies and notes on pages 21 to 41 form part of these financial statements 19 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 20 P H S C p l c GROUP STATEMENT OF CASH FLOWS for the year ended 31 March 2015 Cash flows from operating activities: Cash generated from operations Interest paid Tax paid Net cash generated from operating activities Cash flows used in investing activities Purchase of property, plant and equipment Payment of contingent consideration on acquisitions Disposal of fixed assets Interest received Net cash used in investing activities Cash flows (used by)/from financing activities Proceeds from placement of shares Dividends paid to Group shareholders Net cash (used by)/from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Note I 31.3.15 £ 31.3.14 £ 739,423 (796) (177,057) 856,333 (1,524) (211,248) 561,570 643,561 (58,952) (563,528) 450 750 (621,280) – (190,295) (190,295) (250,005) 712,397 462,392 (30,933) (441,148) – 259 (471,822) 483,665 (159,095) 324,570 496,309 216,088 712,397 NOTES TO THE GROUP STATEMENT OF CASH FLOWS for the year ended 31 March 2015 I. CASH GENERATED FROM OPERATIONS Operating profit – continuing operations Depreciation charge Goodwill impairment Fair value movement in contingent consideration Loss on sale of fixed assets Increase in inventories Decrease/(increase) in trade and other receivables Increase in trade and other payables Decrease in financial liabilities Cash generated from operations 20 31.3.15 £ 31.3.14 £ 503,374 52,249 29,230 233,528 12,320 (61,321) (44,638) 21,179 (6,498) 739,423 656,115 48,533 27,871 – – (1,399) 102,444 35,967 (13,198) 856,333 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 21 P H S C p l c ACCOUNTING POLICIES for the year ended 31 March 2015 General information PHSC plc is a company listed on AIM and incorporated in England and Wales under the Companies Act 2006. The address of the registered office is given at the front of this report. The nature of the Group’s operations and its principal activities are set out in the strategic report on page 3. The financial statements are presented in pounds sterling which is the Group’s functional and presentation currency. The figures shown in the financial statements are rounded to the nearest pound. Basis of preparation of financial statements The Group’s financial statements have been prepared in accordance with IFRSs, as adopted by the European Union, International Financial Reporting Intermediate Committee (IFRIC) interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs. The financial statements have been prepared under the historical cost convention except as noted below. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Accounting standards require the directors to consider the appropriateness of the going concern basis when preparing the financial statements. The directors confirm that they consider that the going concern basis remains appropriate as the Group has adequate resources to continue in operational existence for the foreseeable future based upon forecasts. Further details are provided in the directors’ report. At the date of authorisation of these financial statements, the directors have considered the standards and interpretations which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU) and only IFRS 15 “Revenue from Contracts with Customers” was considered to be relevant. The Directors are still assessing whether the application of IFRS 15 once effective will have a material impact on the results of the Company. Adoption of the other standards and interpretations referred to above is not expected to have a material impact on the results of the Company. Application of these standards may result in some changes in presentation of information within the Company’s financial statements. Basis of consolidation The Group financial statements consolidate the financial statements of PHSC plc and all its subsidiary undertakings made up to 31 March 2015. Subsidiaries are entities over which the Group has control. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. The acquisition of subsidiaries has been accounted for using the acquisition method of accounting. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Goodwill arising on purchases prior to 1 April 2006 was capitalised and amortised over its useful economic life. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. 21 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 22 P H S C p l c ACCOUNTING POLICIES (continued) for the year ended 31 March 2015 Property, plant and equipment Property, plant and equipment are stated at cost or fair value, net of depreciation and any provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income in the period in which they are incurred. All other decreases are charged to the statement of comprehensive income. At the date of transition to IFRSs, the carrying value of land and freehold buildings that had previously been revalued is shown as deemed cost, and not subsequently revalued. Depreciation is provided on all property, plant and equipment, other than freehold land, at rates calculated to write off the cost or valuation, less estimated residual value, of each asset over its expected useful life, as follows: Freehold buildings Improvements to property Fixtures and equipment Motor vehicles – – – – 2% on cost shorter of the lease term and 10% on cost 25% on reducing balance 25% on reducing balance Material residual value estimates are updated as required. An asset is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount, and are recognised in the statement of comprehensive income. Operating lease commitments An operating lease is one in which a significant portion of the risks and rewards of ownership are retained by the lessor. Rentals payable under operating leases are charged to the statement of comprehensive income on a straight-line basis over the term of the lease. Intangible assets Goodwill arises on the acquisition of subsidiary undertakings and interests and represents the excess of the cost of acquisition over the net asset values of the subsidiaries or interests acquired. Such goodwill is capitalised as an intangible asset and is stated at cost less accumulated amortisation and impairment losses. Impairment of intangible assets and property, plant and equipment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from the business combination on which the goodwill arose, and represent the lowest level within the Group at which management monitors the related cash flows. Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use, are tested for impairment at least annually. All intangible assets and property, plant and equipment with a finite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment losses are charged to administrative expenses. 22 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 23 P H S C p l c ACCOUNTING POLICIES (continued) for the year ended 31 March 2015 Inventories Inventories are stated at the lower of cost and net realisable value after making due allowance for obsolete and slow-moving inventory. The value of inventory is calculated on purchase cost on a first-in, first-out basis. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, demand deposits, bank overdrafts, and short-term, highly liquid investments that are readily convertible into known amounts of cash, and are subject to an insignificant risk of changes in value. Financial instruments Provision is made for diminution in value where appropriate. Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable. Trade payables are recognised at initially fair value and subsequently measured at amortised cost. Financial liabilities Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are measured initially at fair value, with all transaction costs being recognised immediately in the statement of comprehensive income. All other financial liabilities are measured initially at fair value, net of direct issue costs. Financial liabilities categorised as at fair value through profit or loss are measured after initial recognition at fair value, with changes in fair value being taken to the statement of comprehensive income in the period in which they occur. All other financial liabilities are recorded at amortised cost, using the effective interest method, with interest-related charges being recognised as an expense under finance costs in the statement of comprehensive income. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the statement of comprehensive income on an accruals basis, using the effective interest method, and are added to the carrying amount of the instrument, to the extent that they are not settled in the period in which they arise. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged, is cancelled, or expires. Taxation Current tax is the tax currently payable based on the taxable profit for the year. Deferred tax is provided in full, using the liability method, on temporary differences between the carrying amounts of assets and liabilities and their tax bases, except when, at the initial recognition of the asset or liability, there is no effect on accounting or taxable profit or loss. Deferred tax is determined using tax rates and laws that have been substantially enacted by the statement of financial position date, and that are expected to apply when the temporary difference reverses. Tax losses available to be carried forward, and other tax credits to the Group, are recognised as deferred tax assets, to the extent that it is probable that there will be future taxable profits against which the temporary differences can be utilised. Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity. 23 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 24 P H S C p l c ACCOUNTING POLICIES (continued) for the year ended 31 March 2015 Provisions These are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The proceeds of share issues, received net of any directly attributable transactions costs are credited to share capital at nominal value and the excess credited to the share premium account. The capital redemption reserve arose when the company repurchased some of its own shares. At that point the nominal value of those shares was transferred to the capital redemption reserve. Employee benefits The Group supports various personal pension arrangements. Payments are made to individual defined contribution pension schemes. Agreed contributions are charged to the statement of comprehensive income as they become payable. Revenue recognition Revenue consists of the fair value of the consideration received or receivable by the Group for services provided in the ordinary course of the Group’s activities, excluding VAT and trade discounts. The majority of the Group’s revenue continues to arise from the core health and safety businesses with the major income streams being derived from activities such as asbestos management, training, consultancy, and supporting the education sector. The Group also serves the leisure industry and carries out statutory examination of plant and machinery via insurance brokers or directly for clients. In addition one of the Group subsidiaries, B to B, provides innovative retail security solutions including tagging, labelling and CCTV. Consultancy and inspection revenue is recognised in the accounting period in which the services are rendered, by reference to the stage of completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Training revenue is recognised on the date the training is carried out. The sale of products such as security tagging, labelling and CCTV through B to B are recognised when the products are transferred to the customer. Revenue relating to installations of security equipment such as CCTV is recognised at the point it is installed. Foreign currencies Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the date of the group statement of financial position are reported at the rates of exchange prevailing at that date. All foreign exchange gains and losses are presented in the statement of comprehensive income within the administration expense heading. 24 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 25 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2015 1. FINANCIAL RISK MANAGEMENT Financial risk The Group’s activities expose it to a variety of financial risks. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. Risk management is carried out by the board who evaluate and manage financial risks in close co-operation with the managing directors of the subsidiary companies. The Group • • • regularly reviews credit extended to customers with appropriate action being taken to minimise the cost of bad debts; balances risk and return when assessing where to place cash surplus to the Group’s immediate requirements; and keeps open options to employ debt finance to ensure that the Group has sufficient funds for continuing operations and planned expansions. Market risk The Group has interest-bearing assets which are subject to a variable rate of interest. Thus the Group is only exposed to cash flow interest rate risk, which is not expected to have a significant impact on profit or loss or equity. Credit risk The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. No credit limits were exceeded during the year, and management does not expect any losses from non-performance by these counterparties. Liquidity risk The Group keeps open avenues for securing debt finance to ensure that funds may be called upon if and when needed for operations and payments due in respect of acquisitions. The board monitors the Group’s liquidity position on the basis of expected cash flow on a regular basis. The following table analyses the Group’s financial liabilities, which will be settled on a net basis, into relevant maturity groupings, based on the remaining period to maturity at 31 March. The amounts disclosed are the contractual undiscounted cash flows: At 31 March 2015 Trade and other payables HP liabilities At 31 March 2014 Trade and other payables HP liabilities Capital risk Less than 1 year £ Between 1 & 2 yrs £ Between 2 & 5 yrs £ Over 5 yrs £ 1,155,824 – 1,134,645 6,498 – – – – – – – – – – – – The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns to shareholders. The Group defines capital as share capital plus reserves. The Group is not subject to any externally imposed capital requirements. The board monitors levels of cash and any excess levels have historically been used for acquisitions. Since 2008 the Group has run a share buy-back programme and paid additional exceptional dividends in September 2011 and 2012 to continue providing shareholder returns. 25 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 26 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions The directors are required to make estimates and judgements concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The areas involving a higher degree of judgement or complexity and areas where assumptions are significant to the production of these financial statements are disclosed below. (a) Provisions for warranties The B to B statement of financial position includes a £32,300 provision in respect of potential repairs and replacements under warranty. The assumed risk is expressed in percentage terms over the term of the two year warranty. A further provision of £14,900 relates to work that may be required under retention clauses. (b) Impairment of goodwill An impairment of goodwill has the potential to significantly impact upon the Group’s statement of comprehensive income for the year. In order to determine whether impairments are required the directors estimate the recoverable amount of the goodwill. This calculation is based on the Group’s forecasts over a six year horizon assuming a maximum growth rate of 2.5% in any one year. In accordance with the provisions of IAS 36 the estimated disposal proceeds, should the business be sold at the end of year 6, are included in the recoverable amount. Estimated future results for impairment calculations are based on the directors’ expectations of future volumes and margins based on the business plan. Full details are disclosed in note 6. Critical judgements in applying the entity’s accounting policies Income as at 31 March 2015 has been valued in accordance with IAS 18 “Revenue”. It has been recognised in line with contract activity and reflects the right to consideration as the contract activity progresses. 26 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 27 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 3. SEGMENTAL REPORTING IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision-making. PHSC plc’s operating segments are by subsidiary company as the directors and management team receive and make decisions based on monthly management accounts by subsidiary. A description of each subsidiary’s activities is included in the strategic report on pages 5 to 8. The following table shows the Group’s revenue and results for the year under review analysed by operating segment. Segment operating profit represents the trading profit after depreciation, but before tax and management charge. All revenue arose in the UK and all assets and liabilities are located in the UK. The Group’s key customer profile is given in note 7. PHSC plc PHSCL £’000 £’000 RSA £’000 ALS £’000 ISL £’000 QLM £’000 QCS B to B £’000 £’000 Total £’000 As at 31 March 2015 Total revenue (all external) Depreciation Subsidiary operating profit/(loss) Net interest Taxation Deferred taxation Group profit for year As at 31 March 2014 Total revenue (all external) Depreciation Subsidiary operating profit/(loss) Net interest Taxation Deferred taxation Consolidation adjustments: Taxation – group loss relief Taxation – deferred taxation Goodwill impairment Group profit for year – 7 (787) 1 – 1 – 8 (431) – (1) (3) 754 12 332 – (47) 2 750 11 327 – (36) 4 422 1 2,694 15 196 – 35 – (2) – 276 – (23) – 17 – (1) – 534 4 124 – (18) 1 527 1 2,604 12 7,731 52 148 – (9) – 358 (1) (54) (4) 503 – (154) – 349 499 1 2,660 15 195 1 464 6 516 1 2,510 6 7,594 49 56 – (9) – 312 – (36) 2 6 – – – (4) – – (2) 161 – (35) – 257 (1) (63) (1) 684 (1) (180) – 14 5 (28) 494 27 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 28 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 3. SEGMENTAL REPORTING – continued The table below shows assets and liabilities by subsidiary, exclusive of inter-company balances. PHSC plc PHSCL £’000 £’000 RSA £’000 ALS £’000 ISL £’000 QLM £’000 QCS B to B £’000 £’000 Total £’000 Year ended 31 March 2015 Non-current asset additions – 6 62 17 – 5 1 28 59 5,710 *(821) 4,889 *106 2 108 4,781 342 469 811 95 39 134 677 420 176 217 1,160 596 1,377 82 – 82 291 14 305 514 1,072 1 110 111 106 – 106 5 12 246 258 154 2 156 102 4 303 35 1,014 6,741 2,657 307 1,049 9,398 75 1 76 352 4 1,261 62 356 1,323 231 693 8,075 Non-current assets Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Consolidation adjustments: Non-current assets Current liabilities Non-current liabilities i ii iii Net assets Year ended 31 March 2014 (1,471) – (5) 6,599 1 1 95 96 95 – 95 1 7 2 – 31 17 228 245 156 3 159 86 4 268 18 1,025 6,776 2,802 272 1,043 9,578 87 1 88 375 – 1,613 63 375 1,676 184 668 7,902 (1,471) 14 (5) 6,440 Non-current asset additions 10 2 – 9 5,746 *(560) 5,186 *385 4 389 4,797 349 376 725 85 41 126 599 421 171 220 1,199 592 1,419 84 – 84 346 14 360 508 1,059 Non-current assets Current assets Total assets Current liabilities Non-current liabilities Total liabilities Net operating assets Consolidation adjustments: Non-current assets Current liabilities Non-current liabilities i ii iii Net assets (i) Adjustment of goodwill on consolidation including goodwill amortisation write back under IFRS and goodwill impairment. (ii) Group relief of corporation tax losses. (iii) Deferred tax adjustment to property revaluation * PHSC plc company accounts reflects the overdraft in current liabilities. In PHSC plc group accounts and segmental analysis, the overdraft is reflected as part of group facility shown under current assets. 28 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 29 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 4. AUDITOR REMUNERATION Audit Fees payable to the company’s auditor for the audit of the annual parent company and consolidated accounts (Over)/under accrual in previous years Fees payable to the company’s auditor for other services provided to the company and its subsidiaries: The audit of the company’s subsidiaries under legislative requirements Total audit Tax Tax compliance services Tax advisory services Total tax Total 31.3.15 £ 31.3.14 £ 3,030 (1,800) 24,300 25,530 8,770 4,400 13,170 38,700 4,100 5,486 21,900 31,486 8,600 4,300 12,900 44,386 29 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 30 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 5. PROPERTY, PLANT AND EQUIPMENT COST At 1 April 2013 Additions Freehold Improvements to property property £ £ Fixtures and equipment £ Motor vehicles £ Totals £ 712,000 – 32,299 – 327,463 30,933 25,130 – 1,096,892 30,933 At 31 March 2014 712,000 32,299 358,396 25,130 1,127,825 Additions Disposals At 31 March 2015 DEPRECIATION At 1 April 2013 Charge for the year At 31 March 2014 Charge for year Disposals At 31 March 2015 NET BOOK VALUE At 31 March 2015 At 31 March 2014 At 1 April 2013 – – – – 44,439 (132,169) 14,513 – 58,952 (132,169) 712,000 32,299 270,666 39,643 1,054,608 108,502 14,240 19,186 2,398 253,766 26,157 122,742 21,584 279,923 14,240 – 2,398 – 27,679 (119,399) 2,176 5,738 7,914 7,932 – 383,630 48,533 432,163 52,249 (119,399) 136,982 23,982 188,203 15,846 365,013 575,018 589,258 603,498 8,317 10,715 13,113 82,463 78,473 73,697 23,797 689,595 17,216 695,662 22,954 713,262 Depreciation expenses of £52,249 (2014: £48,533) are included in administrative expenses in the statement of comprehensive income. There were no motor vehicles subject to finance lease at the year end (2014: net book value of £11,856). Lease rentals amounting to £137,291 (2014: £132,999), relating to the lease of buildings and motor vehicles are included in the statement of comprehensive income. 30 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 31 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 6. GOODWILL COST At 31 March 2015 and 31 March 2014 AMORTISATION At 1 April 2013 Impairment At 31 March 2014 Impairment At 31 March 2015 NET BOOK VALUE At 31 March 2015 At 31 March 2014 At 1 April 2013 Goodwill £ 4,981,933 344,856 27,871 372,727 29,230 401,957 4,579,976 4,609,206 4,637,077 Impairment Tests for Goodwill Goodwill is allocated to the Group’s cash-generating units, identified according to subsidiary. The following table shows a summary of the goodwill allocation by subsidiary: Personnel Health & Safety Consultants Limited and dormant subsidiaries RSA Environmental Health Limited Adamson’s Laboratory Services Limited Inspection Services (UK) Limited Quality Leisure Management Limited QCS International Limited B to B Links Limited At company level Total goodwill for Group 31.3.15 £ 594,952 581,482 1,234,127 205,207 582,844 417,638 943,564 4,559,814 20,162 31.3.14 £ 594,952 581,482 1,234,127 205,207 582,844 417,638 943,564 4,559,814 49,392 4,579,976 4,609,206 When considering impairment, the directors have taken the cash flow forecast prepared over a six-year horizon as this period is used by the board to assess potential acquisitions. Adoption of a growth rate of a maximum of 2.5% in any one year is deemed prudent in the current economic environment. 31 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 32 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 6. GOODWILL – continued The cash flow projections: • • • are based on profits before tax and inter group management charges; allow for estimated disposal proceeds should the business be sold at the end of year six in accordance with the provisions of IAS36 based upon a multiple of EBITDA of 7.3 based on quoted p/e ratios, and; have been discounted using the Group’s weighted average cost of capital (WACC) which has been calculated to be 8.48% using the Black-Scholes model. The annual impairment review suggested that no impairment of goodwill was required at group level. At company level, a goodwill balance of £29,230, relating to the purchase of a number of sales contracts serviced by RSA, was impaired to reduce its net book value to nil in light of the contracts now having expired. The table below shows the amount by which each subsidiary’s recoverable amount exceeds its carrying value. An illustration is also provided of the extent to which the key assumptions regarding cash flow and WACC need to change before impairment would be necessary. Personnel Health & Safety Consultants Limited and dormant subsidiaries RSA Environmental Health Limited Adamson’s Laboratory Services Limited Inspection Services (UK) Limited Quality Leisure Management Limited QCS International Limited B to B Links Limited 7. TRADE AND OTHER RECEIVABLES Trade receivables Less provision for impairment of trade receivables Trade receivables – net Other debtors, prepayments and accrued income Total Proceed multiple at which impairment required Annual cash flow at which impairment required £ WACC at which impairment required % (3.3) 6.1 3.3 7.3 2.5 (2.1) 3.6 72,837 71,188 151,089 25,123 71,355 51,530 115,516 73 10 15 8 17 33 31 Margin in carrying value £ 2,365,663 58,327 529,812 – 331,915 1,003,838 362,005 31.3.15 £ 31.3.14 £ 1,688,973 (21,442) 1,667,531 312,387 1,559,116 (24,416) 1,534,700 400,580 1,979,918 1,935,280 32 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 33 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 7. TRADE AND OTHER RECEIVABLES – continued Revenues from one customer within the B to B business segment totalled £1,634,765 (2014: £1,437,208). There are no non-current receivables and no adjustment is required to result in a fair value. At 31 March 2015 there were £20,841 impaired trade receivables (2014: £24,416). The ageing of receivables over the Group’s normal credit terms is: Up to 3 months 3 – 6 months Over 6 months Historically the Group has had a good record of collecting debts with few bad debts. Movements on the Group provision for impairment of trade receivables are as follows: At 1 April Provision for receivables impairment Receivables written off during the year as uncollectible At 31 March 31.3.15 £ 502,099 120,532 40,282 31.3.14 £ 661,025 70,691 36,087 662,913 767,803 31.3.15 £ 24,416 12,571 (15,545) 21,442 31.3.14 £ 9,641 38,915 (24,140) 24,416 The creation and release of the provision for impaired receivables is included in administrative expenses in the statement of comprehensive income. Amounts charged to the provision account are generally written off when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk at the year-end is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. 33 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 34 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 8. INVENTORIES Stocks 31.3.15 £ 31.3.14 £ 215,591 154,270 A total of £nil inventory was written down in the current year (2014: £nil). The value of inventory consumed and recognised as an expense was £1,127,724 (2014: £1,176,755). 9. CASH AND CASH EQUIVALENTS The cash balance for the purposes of the cash flow statement were as follows: Cash at bank and in hand 31.3.15 £ 31.3.14 £ 462,392 712,397 On 1 October 2008, PHSC plc entered into an unlimited multilateral guarantee with HSBC plc (see note 12). 10. CALLED UP SHARE CAPITAL Called up, allotted and fully paid At 1 April 2013 Shares issued Number of shares (Nominal value of 1p) Ordinary shares £ Share premium £ Total £ 10,606,353 2,080,000 1,060,634 208,000 1,555,529 275,665 2,616,163 483,665 At 31 March 2014 and 2015 12,686,353 1,268,634 1,831,194 3,099,828 11. TRADE AND OTHER PAYABLES Trade payables Social security and other taxes Other payables Accruals and deferred income Total 31.3.15 £ 341,231 325,575 76,401 412,617 31.3.14 £ 354,332 349,730 68,533 362,050 1,155,824 1,134,645 34 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 35 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 12. FINANCIAL LIABILITIES Current Hire purchase agreements Non-current Hire purchase agreements 31.3.15 £ – – 31.3.14 £ 6,498 – On 1 October 2008, PHSC plc entered into an unlimited multilateral guarantee with HSBC plc. Each company within the Group operates its own current account, the balance on which is allowed to fluctuate according to trading conditions. Interest is only charged on a net overdrawn balance as the Group has the right to offset overdrawn accounts with accounts in credit across the Group. During the year HSBC plc renewed the Group’s extended overdraft facility which is secured by a debenture including a fixed charge over all present freehold and leasehold property; first fixed charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and first floating charge over all assets and undertakings both present and future. 13. CONTINGENT CONSIDERATION At 1 April 2013 Movement from non-current to current Paid in year At 31 March 2014 Paid in year At 31 March 2015 Current £ Non-current £ Total £ 441,148 330,000 (441,148) 330,000 (330,000) – 330,000 (330,000) – – – – 771,148 – (441,148) 330,000 (330,000) – On the second anniversary of the purchase of QCS a final payment of £80,000 was due, subject to adjustment up or down according to performance against targets. As a result of the positive performance of the company in the two years post acquisition an additional amount of £25,283 was due resulting in a total payment of £105,283. Similarly on the second anniversary of the purchase of B to B, a final cash payment of between £120,000 and £800,000 fell due, subject to performance over the two years post completion. A provision of £250,000 was made in the accounts, but the actual payment was £458,245 due to a strong trading finish to the two year earn out period. The statement of cash flows shows the total of £563,528 as funds used in investing activities. The company’s statement of comprehensive income treats the £25,283 and £208,245 additional payments for QCS and B to B respectively as exceptional expenses. 35 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 36 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 14. DEFERRED TAX Deferred tax asset At 1 April 2013 Credited to income statement At 31 March 2014 Credited to income statement At 31 March 2015 Deferred tax liabilities At 1 April 2013 (Credited)/debited to income statement At 31 March 2014 (Credited)/debited to income statement At 31 March 2015 Provision revalued properties £ Accelerated capital allowances £ Other short term timing differences £ – – – – – 1,161 (1,161) 1,581 (1,528) – – – 53 (53) – Provision revalued properties £ Accelerated capital allowances £ Intangible assets £ 54,942 (5,365) 49,577 (2,957) 46,620 8,529 4,554 13,083 2,677 15,760 5,157 – 5,157 – 5,157 Total £ 2,742 (2,689) 53 (53) – Total £ 68,628 (811) 67,817 (280) 67,537 Deferred tax has been provided on the revalued fixed assets at 20% (2014: 21%). At present it is not envisaged that any tax will become payable in the foreseeable future. 15. OTHER INCOME Rent received Miscellaneous income 16. EXPENSES BY NATURE Cost of sales Staff related costs Premises costs Professional fees Other expenses Total cost of sales and administrative expenses 31.3.15 £ – – – 31.3.14 £ 1,050 46 1,096 31.3.15 £ 2,344,203 3,205,358 129,124 248,611 1,037,472 31.3.14 £ 2,581,000 3,035,758 94,958 231,931 995,615 6,964,768 6,939,262 36 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 37 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 17. EMPLOYEES Staff costs (including executive directors) Wages and salaries Social security costs Other pension costs The average monthly number of employees during the year was as follows: Directors Consultants Administrative Total 31.3.15 £ 2,782,351 277,093 35,831 31.3.14 £ 2,685,678 266,268 37,654 3,095,275 2,989,600 31.3.15 31.3.14 10 51 29 90 10 45 29 84 The aggregate compensation for key management, being the members of the board of PHSC plc and the directors of the subsidiary companies, was as follows: Short-term employee benefits Post-employment benefits Total 18. DIRECTORS’ REMUNERATION Directors of PHSC plc only Emoluments Pension contributions to money purchase schemes 31.3.15 531,353 40,600 571,953 31.3.14 510,161 39,492 549,653 31.3.15 £ 182,064 6,887 188,951 31.3.14 £ 169,170 6,383 175,553 Year ended 31.3.14 Total £ 75,437 76,116 The remuneration of the executive directors from all group companies was as follows: Year ended 31.3.15 Short term employee benefits S A King N C Coote Salary £ 82,700 64,050 Bonus £ 5,183 5,183 Waiver £ (9,020) (1,000) Benefits £ 2,331 6,637 Post employment benefits Pension £ 3,684 3,203 Total £ 84,878 78,073 Mr King’s benefits pertain to health insurance and Ms Coote’s to a company car and health insurance. The fees of the non-executive directors were as follows: M J L Miller G N Webb 37 Year ended 31.3.15 £ 13,000 13,000 Year ended 31.3.14 £ 11,500 12,500 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 38 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 19. FINANCE INCOME AND COSTS Finance income Interest received Interest expense Bank interest HP interest Net finance income 20. TAXATION Analysis of tax charge in year Current tax: UK corporation tax on profits in the year Adjustments in respect of previous year Total current tax Deferred tax on origination and reversal of timing differences (provided at 20%) Taxation Factors affecting tax charge for year 31.3.15 £ 750 9 787 796 46 31.3.14 £ 259 – 1,524 1,524 1,265 31.3.15 £ 31.3.14 £ 155,297 (469) 154,828 157,469 6,791 164,260 (227) (3,489) 154,601 160,771 The relationship between expected tax expense based on the effective tax rate of PHSC plc at 21% (2014: 23%) and the tax expense actually recognised in the income statement can be reconciled as follows: Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 21% (2014: 23%) Effects of: Expenses not deductible for tax purposes Other permanent differences Capital allowances in excess of depreciation Group relief claimed before payment Marginal relief Adjustments in respect of prior periods Current tax charge There were no factors that may affect future tax charges. 31.3.15 £ 31.3.14 £ 503,328 654,850 105,699 150,616 53,791 100 (3,291) – (1,002) (469) 8,816 1,750 – (1,877) (1,836) 6,791 154,828 164,260 38 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 39 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 21. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year. Profit attributable to equity holders of the Group (£) Weighted average number of ordinary shares in issue Basic earnings per share (pence per share) There are no dilutive shares, options or warrants in issue. 22. DIVIDENDS 31.3.15 31.3.14 348,727 12,686,353 494,079 11,643,504 2.75p 4.24p The dividends paid in respect of the years ended 31 March 2014 and 2013 were £190,295 and £209,223 respectively, For both the years ended 31 March 2013 and 2014, the dividend was 1.5p per ordinary share. A dividend in respect of the year ended 31 March 2015 of 1.5p per ordinary share amounting to a total dividend of £190,295 is to be proposed at the annual general meeting on 7 September 2015. These financial statements do not reflect this dividend payable. 23. COMMITMENTS Operating lease commitments The Group leases various offices under non-cancellable operating lease agreements. The leases have varying terms and renewal rights. The Group also leases various motor vehicles under cancellable operating lease agreements. The lease expenditure is charged to the statement of comprehensive income during the year. The minimum lease payments to which the Group is committed under non-cancellable operating leases are: 31.3.15 31.3.14 Land and buildings £ 15,500 33,667 Motor vehicles £ 78,466 61,185 Land and buildings £ 17,492 30,663 Motor vehicles £ 76,362 60,055 49,167 139,651 48,155 136,417 Within one year Between two and five years Total The Group had no capital commitments at the year end. 24. RELATED PARTY DISCLOSURES A management charge is levied by PHSC plc to its subsidiary companies to reflect the central services it provides. The charges were as follows: Adamson’s Laboratory Services Limited B to B Links Limited Inspection Services (UK) Limited Personnel Health & Safety Consultants Limited QCS International Limited Quality Leisure Management Limited RSA Environmental Health Limited Total 39 31.3.15 £ 169,200 82,200 9,000 115,800 21,600 40,200 22,200 460,200 31.3.14 £ 164,640 12,000 6,000 180,000 10,800 48,000 12,000 433,440 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 40 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 24. RELATED PARTY DISCLOSURES – continued The inter-company balances between PHSC plc and its subsidiary companies at the year end are summarised below: Amounts owed by group undertakings: Adamson’s Laboratory Services Limited B to B Links Limited In House the Hygiene Company Limited* Inspection Services (UK) Limited Personnel Health & Safety Consultants Limited QCS International Limited Quality Leisure Management Limited Amounts owed to group undertakings: RSA Environmental Health Limited PHSC plc dividends were paid to directors as follows: S A King N C Coote G N Webb MBE Total 31.3.15 £ 31.3.14 £ – – 469,304 – 336 799 1,864 472,303 – – 46,546 46,265 300 93,111 50,289 3,698 469,304 209 1,066 – – 524,566 414 414 46,546 46,265 300 93,111 * The above balance is effectively owed from RSA as there are equal debtor and creditor balances in the financial statements of In House the Hygiene Company Limited and RSA respectively. 25. ULTIMATE CONTROLLING PARTY PHSC plc, incorporated in England and Wales, is the ultimate parent company of the Group. There is no ultimate controlling party, but Mr S A King, Group Chief Executive, holds 25.25% (2014: 25.25%) of the issued share capital of PHSC plc. 26. EXCEPTIONAL COSTS Exceptional costs of £262,758 (2014: nil) relate to two items; (a) A goodwill balance of £29,230, relating to the purchase of a number of sales contracts serviced by RSA, was impaired to reduce its net book value to nil in light of the contracts now having expired (note 6). (b) The additional sums of £25,283 and £208,245 paid for the acquisition of QCS and B to B respectively (note 13). 40 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 41 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 27. FINANCIAL INSTRUMENTS Set out below are the Group’s financial instruments: Financial assets at amortised cost Trade and other receivables Cash and cash equivalents Financial liabilities at amortised cost Trade and other receivables HP liabilities Due within 1 year Due in over 1 year Full details of the overdraft facility can be found in note 14. Financial liabilities at fair value through profit and loss Contingent consideration 31.3.15 £ 31.3.14 £ 1,979,918 462,392 1,935,280 712,397 2,442,310 2,647,677 1,155,824 – 1,134,645 6,498 1,155,824 1,141,143 1,155,824 – 1,141,143 – 1,155,824 1,141,143 – – 330,000 330,000 The main risk arising from the Group’s financial instruments is liquidity risk. The Group seeks to manage this risk by ensuring sufficient liquidity is available from current banking facilities to meet foreseeable needs and to invest cash assets safely and profitably. This policy has remained unchanged from previous periods. The source currency of the assets and liabilities of the Group are held in sterling and all transactions are in sterling. The Group is not therefore exposed to currency risk. The fair values of the Group’s financial instruments are considered not to be materially different to their book value. 41 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 42 Company number: 4121793 PHSC plc COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015 42 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 43 P H S C p l c Registered number: 4121793 COMPANY STATEMENT OF FINANCIAL POSITION as at 31 March 2015 Non-Current Assets Goodwill Property, plant and equipment Investments Current Assets Trade and other receivables Cash and cash equivalents Total Assets Current Liabilities Trade and other payables Financial liabilities Current corporation tax Contingent consideration Non-Current Liabilities Deferred taxation Total Liabilities Net Assets Capital and reserves attributable to equity holders of the Group Called up share capital Share premium account Capital redemption reserve Retained earnings Note 31.3.15 £ 31.3.14 £ 9 10 11 12 13 14 15 16 17 – 116,442 5,593,394 29,230 123,572 5,593,394 5,709,836 5,746,196 499,534 – 499,534 546,997 – 546,997 6,209,370 6,293,193 106,684 848,814 – – 955,498 2,821 2,821 54,823 583,299 588 330,000 968,710 3,711 3,711 958,319 972,421 5,251,051 5,320,772 1,268,634 1,831,194 143,628 2,007,595 1,268,634 1,831,194 143,628 2,077,316 5,251,051 5,320,772 Approved and authorised for issue by the board on 31 July 2015 and signed on its behalf by: S A King Director 43 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 44 P H S C p l c COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2015 Share Capital £ Share Premium £ Capital Redemption Reserve £ Retained Earnings £ Total £ Balance at 1 April 2013 1,060,634 1,555,529 143,628 1,837,948 4,597,739 Loss for year attributable to equity holders Issue of shares Dividend paid Dividends received – 208,000 – – – 275,665 – – – – – – (1,537) – (159,095) 400,000 (1,537) 483,665 (159,095) 400,000 Balance at 31 March 2014 1,268,634 1,831,194 143,628 2,077,316 5,320,772 Balance at 1 April 2014 1,268,634 1,831,194 143,628 2,077,316 5,320,772 Loss for year attributable to equity holders Dividends paid Dividends received – – – – – – – – – (324,426) (190,295) 445,000 (324,426) (190,295) 445,000 Balance at 31 March 2015 1,268,634 1,831,194 143,628 2,007,595 5,251,051 44 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 45 P H S C p l c COMPANY STATEMENT OF CASH FLOWS for the year ended 31 March 2015 Cash flows from/(used by) operating activities: Cash generated from/(used by) operations Tax paid Interest paid Net cash generated from/(used by) operating activities Cash flows used in investing activities Payment of contingent consideration on acquisitions Interest received Purchase of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from placement of shares Dividends from subsidiary companies Dividends paid to Group shareholders Net cash from financing activities Net (decrease)/increase in financial liabilities Cash and cash equivalents at beginning of year Financial liabilities at end of year Note I 31.3.15 £ 31.3.14 £ 42,767 (200) (9) 42,558 (8,766) (3,988) (34) (12,788) (563,528) 750 – (562,778) (441,148) 150 (9,599) (450,597) – 445,000 (190,295) 483,665 400,000 (159,095) 254,705 724,570 (265,515) (583,299) (848,814) 261,185 (844,484) (583,299) NOTES TO THE COMPANY STATEMENT OF CASH FLOWS for the year ended 31 March 2015 I. CASH (USED BY)/GENERATED FROM OPERATIONS (Loss)/profit before taxation and interest Depreciation charge Impairment of goodwill Fair value movement in contingent consideration Decrease/(increase) in trade and other receivables Increase in trade and other payables Cash generated from/(used by) operations 45 31.3.15 £ 31.3.14 £ (326,445) 7,130 29,230 233,528 47,463 51,861 42,767 2,698 7,895 – – (25,703) 6,344 (8,766) Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 46 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2015 1. BASIS OF PREPARATION The company’s financial statements have been prepared in accordance with IFRSs, as adopted by the European Union, International Financial Reporting Intermediate Committee (IFRIC) interpretations and the Companies Act 2006 applicable to companies reporting under IFRSs. The financial statements have been prepared under the historical cost convention except as noted below. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 20. The company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the parent company profit and loss account. The loss for the year before dividends received from subsidiaries (2015: £445,000, 2014: £400,000) was £324,426 (2014: £1,537 loss). There were no recognised gains and losses for 2015 or 2014 other than those included in the company profit and loss account. The financial statements have been prepared on a going concern basis. The company made a loss of £324,426 (2014: loss £1,537) for the year ended 31 March 2015 and had net assets of £5,251,051 at the balance sheet date (2014: £5,320,772). Accounting standards require the directors to consider the appropriateness of the going concern basis when preparing the financial statements. The directors confirm that they consider that the going concern basis remains appropriate as the company has adequate resources to continue in operational existence for the foreseeable future based upon forecasts. Further details are provided in the directors’ report. At the date of authorisation of these financial statements, the directors have considered the standards and interpretations which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU) and only IFRS 15 “Revenue from Contracts with Customers” was considered to be relevant. The directors are still assessing whether the application of IFRS 15 once effective will have a material impact on the results of the Company. Adoption of the other standards and interpretations referred to above is not expected to have a material impact on the results of the Company. Application of these standards may result in some changes in presentation of information within the Company’s financial statements. 2. ACCOUNTING POLICIES Revenue Management charge income is recognised when the service the company has provided is fulfilled. Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. The deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 46 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 47 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 2. ACCOUNTING POLICIES – continued Segmental reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The directors regard the operations of the company as being one business segment. Further analysis of revenue is disclosed in note 3. Pensions The company operates a defined contribution pension scheme. Contributions payable for the year are charged to the income statement. Property, plant and equipment Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost of non-current assets, less their estimated residual value, over their expected useful lives on the following bases: Freehold buildings Improvements to property Fixtures and equipment – – – 2% straight line on cost shorter of the lease term and 10% straight line on cost 25% reducing balance Intangible assets Goodwill represents the amount paid in connection with the acquisition of a business and represents the excess of the cost of acquisition over the net asset values of the interests acquired. Such goodwill is capitalised as an intangible asset and is stated at cost less accumulated amortisation and impairment losses. Investments Investments in subsidiary undertakings are stated at cost less amounts provided for any impairment in value. An impairment review is carried out each year. Where the consideration for the acquisition of shares in a subsidiary undertaking is satisfied by the issue of equity shares and the provisions of Section 612 of the Companies Act 2006 apply, cost is taken as the nominal value of the shares issued together with the fair value of any other consideration given. Impairment of tangible and intangible assets For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from the business combination on which the goodwill arose, and represent the lowest level within the Group at which management monitors the related cash flows. Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use, are tested for impairment at least annually. All intangible assets and property, plant and equipment with a finite life are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment losses are charged to administrative expenses. 47 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 48 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 2. ACCOUNTING POLICIES – continued Taxation Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. Provisions These are recognised when the company has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation, using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The proceeds of share issues, received net of any directly attributable transactions costs are credited to share capital at nominal value and the excess credited to the share premium account. The capital redemption reserve arose when the company repurchased some of its own shares. At that point the nominal value of those shares was transferred to the capital redemption reserve. Dividends Dividends received from subsidiary companies are recognised at the point that the right to receive the dividend has been established. 3. REVENUE The revenue of the company during the year was generated in the United Kingdom and derives from the management charge levied to the subsidiary companies. 4. PROFIT BEFORE TAXATION The profit before taxation is stated after charging: Depreciation – owned assets 5. DIRECTORS’ REMUNERATION Full details are given on page 37 of the group accounts. 31.3.15 £ 7,130 31.3.14 £ 7,895 48 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 49 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 6. STAFF COSTS The average monthly number of employees during the year was as follows: Directors Consultants Administration The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs The directors are considered to be key management personnel of the company. 7. AUDITOR’S REMUNERATION Full details are given on page 29 of the group accounts. 8. FINANCE INCOME AND COSTS Finance income Interest received Interest expense Bank interest Net finance income 9. GOODWILL COST At 1 April 2014 Disposal At 31 March 2015 AMORTISATION At 1 April 2014 Disposal At 31 March 2015 NET BOOK VALUE At 31 March 2015 At 31 March 2014 31.3.15 31.3.14 4 2 3 9 £ 4 – 3 7 £ 265,329 26,113 8,637 300,079 243,230 24,534 8,141 275,905 31.3.15 £ 31.3.14 £ 750 (9) 741 150 (34) 116 Goodwill £ 45,739 (45,739) – 16,509 (16,509) – – 29,230 The goodwill in relation to a group of contracts purchased a number of years ago was written off during the year as the value of the contracts to the company are now considered negligible. 49 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:37 Page 50 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 10. TANGIBLE FIXED ASSETS COST OR VALUATION At 1 April 2014 Additions At 31 March 2015 DEPRECIATION At 1 April 2014 Charge for the year At 31 March 2015 NET BOOK VALUE At 31 March 2015 At 31 March 2014 11. INVESTMENT IN SUBSIDIARY UNDERTAKINGS Investment in shares of subsidiary undertakings At 31 March 2014 and 2015 Freehold improvements £ Plant and equipment £ Totals £ Freehold land and buildings £ 122,000 – 122,000 18,310 2,440 20,750 23,978 – 23,978 13,266 2,398 15,664 101,250 8,314 103,690 10,712 13,103 – 159,081 – 13,103 159,081 3,933 2,292 6,225 6,878 9,170 35,509 7,130 42,639 116,442 123,572 31.3.15 £ 31.3.14 £ 5,593,394 5,593,394 Investments in subsidiary undertakings are stated at cost and include the following: Name of Company Personnel Health & Safety Consultants Limited Safetymark Certification Services Limited RSA Environmental Health Limited Adamson’s Laboratory Services Limited Envex Company Limited In House The Hygiene Management Company Limited Inspection Services (UK) Limited Quality Leisure Management Limited QCS International Limited B to B Links Limited 12. TRADE AND OTHER RECEIVABLES Amount owed by subsidiary undertakings Other receivables, prepayments and accrued income Country of registration Proportion of voting rights held Nature of business England England England England England England England England Scotland England 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Health and safety Dormant Health and safety Health and safety Dormant Dormant Health and safety Health and safety Health and safety Retail security 31.3.15 £ 472,303 27,231 499,534 31.3.14 £ 524,566 22,431 546,997 50 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 51 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 13. TRADE AND OTHER PAYABLES Trade payables Amount owed to subsidiary undertakings Social security and other taxes Other payables Accruals and deferred income 14. FINANCIAL LIABILITIES Current Bank overdraft 31.3.15 £ 4,006 – 26,110 6,810 69,758 106,684 31.3.14 £ 500 414 24,724 7,505 21,680 54,823 31.3.15 £ 31.3.14 £ 848,814 583,299 On 1 October 2008, PHSC plc entered into an unlimited multilateral guarantee with HSBC plc. Each company within the Group operates its own current account, the balance on which is allowed to fluctuate according to trading conditions. Interest is only charged on a net overdrawn balance as the Group has the right to offset overdrawn accounts with accounts in credit across the Group. During the year HSBC plc renewed the Group’s extended overdraft facility which is secured by a debenture including a fixed charge over all present freehold and leasehold property; first fixed charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and first floating charge over all assets and undertakings both present and future. On 31 March 2015, PHSC plc’s company balance was £848,814 overdrawn (2014: £583,299 overdrawn) within the Group’s cash at bank and in hand figure of £462,392 (2014: £712,397). The overdraft facility is reviewed subject to requirement. 15. CONTINGENT CONSIDERATION At 1 April 2014 Paid in year At 31 March 2015 Current £ Non-current £ Total £ 330,000 (330,000) – – – – 330,000 (330,000) – On the second anniversary of the purchase of QCS a final payment of £80,000 was due, subject to adjustment up or down according to performance against targets. As a result of the positive performance of the company in the two years post acquisition an additional amount of £25,283 was due resulting in a total payment of £105,283. Similarly on the second anniversary of the purchase of B to B, a final cash payment of between £120,000 and £800,000 fell due, subject to performance over the two years post completion. A provision of £250,000 was made in the accounts, but the actual payment was £458,245 due to a very strong trading finish to the two year earn out period. The statement of cash flows shows the total of £563,528 as funds used in investing activities. The company’s statement of comprehensive income treats the £25,283 and £208,245 additional payments for QCS and B to B respectively as exceptional expenses. 51 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 52 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 16. DEFERRED TAXATION Deferred taxation – accelerated capital allowances At 1 April 2014 Deferred tax (credit)/debit in year At 31 March 2015 17. SHARE CAPITAL 31.3.15 £ 2,821 31.3.14 £ 3,711 Deferred tax £ Deferred tax £ 3,711 (890) 2,821 Number of shares (Nominal value of 1p per share) Ordinary shares £ Share premium £ – 3,711 3,711 Total £ Called up, allotted and fully paid At 1 April 2013 Shares issued 10,606,353 2,080,000 1,060,634 208,000 1,555,529 275,665 2,616,163 483,665 At 31 March 2014 and 2015 12,686,353 1,268,634 1,831,194 3,099,828 18. RELATED PARTY DISCLOSURES A management charge is levied by PHSC plc to its subsidiary companies to reflect the central services it provides. Management charge from PHSC plc to subsidiary companies 31.3.15 £ 31.3.14 £ 460,200 433,440 The inter-company balances between PHSC plc and the other companies within the PHSC plc group are summarised below. 31.3.15 £ 31.3.14 £ – – 469,304 – 336 799 1,864 472,303 – – 50,289 3,698 469,304 209 1,066 – – 524,566 414 414 Amounts owed by group undertakings Adamson’s Laboratory Services Limited B to B Links Limited In House the Hygiene Company Limited Inspection Services (UK) Limited Personnel Health & Safety Consultants Limited QCS International Limited Quality Leisure Management Limited Amounts owed to group undertakings RSA Environmental Health Limited 52 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 53 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 18. RELATED PARTY DISCLOSURES – continued PHSC plc dividends received from subsidiaries as follows: Adamson’s Laboratory Services Limited B to B Links Limited Inspection Services (UK) Limited Personnel Health & Safety Consultants Limited QCS International Limited Quality Leisure Management Limited RSA Environmental Health Limited PHSC plc dividends were paid to directors as follows: S A King N C Coote G N Webb MBE 19. FINANCIAL INSTRUMENTS Set out below are the company’s financial instruments: Financial assets at amortised cost Trade and other receivables Financial liabilities at amortised cost Overdraft Trade and other payables Due within 1 year Due in over 1 year Full details of the overdraft facility can be found in note 14. Financial liabilities at fair value through profit and loss Contingent consideration 31.3.15 £ 31.3.14 £ 10,000 200,000 5,000 100,000 70,000 50,000 10,000 445,000 46,546 46,265 300 93,111 200,000 – 10,000 100,000 50,000 40,000 – 400,000 46,546 46,265 300 93,111 31.3.15 £ 31.3.14 £ 499,534 499,534 848,814 106,684 955,498 955,498 – 955,498 546,997 546,997 583,299 54,823 638,122 638,122 – 638,122 – – 330,000 330,000 The main risk arising from the company’s financial instruments is liquidity risk. The company seeks to manage this risk by ensuring sufficient liquidity is available from current banking facilities to meet foreseeable needs and to invest cash assets safely and profitably. This policy has remained unchanged from previous periods. The source currency of the assets and liabilities of the company are held in sterling and all transactions are in sterling. The company is not therefore exposed to currency risk. The fair values of the company’s financial instruments are considered not to be materially different to their book value. 53 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 54 P H S C p l c NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 March 2015 20. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The company may be required to make estimates and assumptions concerning the future. These estimates and judgements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The principal areas where judgement was exercised are as follows: Property, plant and equipment The directors annually assess both the residual value of these assets and the expected useful life of such assets which is currently judged to be up to 4 years, based on experience. Impairment of investments An impairment of investments has the potential to significantly impact upon the company’s profit for the year. In order to determine whether impairments are required the directors estimate the recoverable amount of the investment. This calculation is based on cash flow forecasts for the following financial year extrapolated over a six year period assuming a zero growth rate. In accordance with the provisions of IAS36 the estimated disposal proceeds, should the business be sold at the end of year 6, are included in the recoverable amount. Estimated future results for impairment calculations are based on the directors’ expectations of future volumes and margins based on the business plan. When considering impairment, the directors have taken the cash flow forecast prepared over a six-year horizon. Adoption of a maximum growth rate of 2.5% in any one year is deemed prudent in the current economic climate. The cash flow projections: • • • are based on profits before tax and inter group management charges; allow for estimated disposal proceeds should the business be sold at the end of year six in accordance with the provisions of IAS36 based upon a multiple of EBITDA of 7.3 per quoted p/e ratios, and; have been discounted using the Group’s weighted average cost of capital (WACC) which has been calculated to be 8.48% using the Black-Scholes model. 21. PARENT UNDERTAKING PHSC plc, incorporated in the UK, is the ultimate parent company of the group. There is no ultimate controlling party but Mr S A King, Group Chief Executive, owns 25.25% (2014: 25.25%) of the issued share capital of PHSC plc. The parent company operates within the UK and its accounts may be obtained from the same registered office address as noted on page 2 of the group accounts. 54 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 55 P H S C p l c P H S C p l c NOTICE OF ANNUAL GENERAL MEETING Notice is given that the Annual General Meeting of PHSC plc will be held at 10am on Monday 7 September 2015 at The Old Church, 31 Rochester Road, Aylesford, Kent ME20 7PR to consider the following resolutions of which resolutions 1 to 5 will be proposed as ordinary resolutions and resolution 6 will be proposed as a special resolution. 1. To receive the annual report and audited accounts for the year ended 31 March 2015. 2 3 4 5. To declare a final dividend of 1.5p per ordinary share. To re-elect Stephen King as a director. To reappoint Crowe Clark Whitehill LLP as auditor to the company to hold office until the conclusion of the next general meeting at which accounts are laid before the members and to authorise the directors to determine their remuneration. THAT, in substitution for any existing such authority, the directors be generally and unconditionally authorised in accordance with section 551 of the Companies Act 2006 to exercise all the powers of the company to allot shares in the company or to grant rights to subscribe for, or to convert any security into, shares in the company up to a total nominal amount of £418,649 during the period commencing on the date of the passing of this resolution and expiring at the conclusion of the annual general meeting in 2016 or on 6 December 2016, whichever is earlier, but so that the authority shall allow the company to make before the expiry of this authority offers or agreements which would or might require shares to be allotted, rights to be granted or securities to be converted after such expiry and notwithstanding such expiry the directors may allot shares, grant rights or convert securities under such offers or agreements. Special resolution 6. THAT, subject to and conditional upon the passing as an ordinary resolution of resolution number 5 set out in the notice of this meeting the directors be empowered under section 570 of the Companies Act 2006 (the “Act”) to allot equity securities (as defined in section 560 of the Act) for cash; under the authority conferred by resolution 5 above as if section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to: (a) the allotment of equity securities in connection with a rights issue, open offer or other offer of securities in favour of the holders of ordinary shares on the register of members at such record date(s) as the directors may determine where the equity securities respectively attributable to the interests of the ordinary shareholders are proportionate (as nearly as may be) to the respective numbers of ordinary shares held by them on any such record date(s), subject to such exclusions or other arrangements as the directors may deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising under the laws of any overseas territory or the requirements of any regulatory body or stock exchange or by virtue of shares being represented by depositary receipts or any other matter whatever; and (b) the allotment (otherwise than under sub-paragraph (a) above) to any person or persons of equity securities up to an aggregate nominal amount of £253,727 such power to expire at the conclusion of the annual general meeting of the company in 2016 or, if earlier, on 6 December 2016, unless such power is varied, revoked or renewed prior to such time by the company in general meeting by special resolution; except that the company may before such expiry make offers or agreements which would or might require equity securities to be allotted after such expiry and notwithstanding such expiry the directors may allot equity securities under such offers or agreements. By order of the board L E Young Secretary 5 August 2015 Registered Office: The Old Church 31 Rochester Road Aylesford Kent ME20 7PR 55 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 56 P H S C p l c P H S C p l c NOTICE OF ANNUAL GENERAL MEETING (continued) Right to attend, speak and vote Notes 1. If you want to attend, speak and vote at the AGM you must be on the Company’s register of members at 6.00pm on 4 September 2015. This will allow us to confirm how many votes you have on a poll. Changes to the entries in the register of members after that time, or, if the AGM is adjourned, 48 hours before the time of any adjourned meeting, shall be disregarded in determining the rights of any person to attend, speak or vote at the AGM. 2. If you are a member of the Company you may appoint one or more proxies to exercise all or any of your rights to attend, speak and vote at the meeting. You may only appoint a proxy using the procedures set out in these notes and in the notes on the proxy form, which you should have received with this notice of meeting. Appointment of proxies A proxy does not need to be a member of the Company but must attend the meeting to represent you. Details of how to appoint the Chairman of the meeting or another person as your proxy using the proxy form are set out in the notes on the form. If you wish your proxy to speak on your behalf at the meeting you will need to appoint your own choice of proxy (not the Chairman) and give your instructions directly to them. Appointment of proxy using hard copy proxy form You may appoint more than one proxy in relation to the AGM provided that each proxy is appointed to exercise the rights attached to a different share or shares which you hold. If you wish to appoint more than one proxy you may photocopy the proxy form or alternatively you may contact the Company Secretary. 3. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If you do not indicate on the proxy form how your proxy should vote, they will vote or abstain from voting at their discretion. They will also vote (or abstain from voting) as they think fit in relation to any other matter which is put before the meeting. To appoint a proxy using the proxy form, the form must be completed and signed and received by the Company Secretary at Freepost, RTCU-SSLT-AXUX, 190 High Street, Tonbridge, Kent TN9 1BE no later than 48 hours (excluding non-working days) before the meeting. Any proxy forms (including any amended proxy appointments) received after the deadline will be disregarded. The completed form may be returned by any of the following methods: • • Sending or delivering it to Freepost, RTCU-SSLT-AXUX, 190 High Street, Tonbridge, Kent TN9 1BE Scanning it and sending it by email to proxies@lorraineyoung.co.uk Changing your instructions Appointment of proxy by joint members If the shareholder is a company, the proxy form must be executed under its common seal or signed on its behalf by an officer or attorney. Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of such power or authority) must be included with the proxy form. 4. In the case of joint holders, where more than one joint holder purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the first-named being the most senior). 5. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. The amended instructions must be received by the registrars by the same cut-off time noted above. Where you have appointed a proxy using a hard copy proxy form and would like to change the instructions using another hard copy proxy form, please contact the Company Secretary on 01732 366561. If you submit more than one valid proxy form, the one received last before the latest time for the receipt of proxies will take precedence. 6. In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard copy notice clearly stating your intention to revoke your proxy appointment to the Company, Freepost RTCU-SSLT-AXUX, 190 High Street, Tonbridge, Kent TN9 1BE. Alternatively you may send the notice by email to proxies@lorraineyoung.co.uk. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer or attorney. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. Termination of proxy appointments Communications with the Company In either case, your revocation notice must be received by the Company no later than 48 hours (excluding non-working days) before the meeting. If your revocation is received after the deadline, your proxy appointment will remain valid. However, the appointment of a proxy does not prevent you from attending the meeting and voting in person. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated. 7. Except as provided above, members who have general queries about the meeting should telephone the Company Secretary on 01732 366561 (no other methods of communication will be accepted). You may not use any electronic address provided either in this notice of general meeting; or any related documents (including the Chairman’s letter and proxy form), to communicate with the Company for any purposes other than those expressly stated. 8. As at 5.00pm on the day immediately prior to the date of posting of this notice of meeting, the Company’s issued share capital comprised 12,686,348 ordinary shares of 10p each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company at that time was 12,686,348. Issued shares and total voting rights 56 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 57 P H S C p l c P H S C p l c Proxy form for use by holders of ordinary shares in PHSC plc at the Annual General Meeting (AGM) to be held on Monday 7 September 2015 Please read carefully the notice of meeting, the accompanying notes and the explanation of the business to be transacted at the AGM (contained in the directors’ report) before completing this form. As a member of PHSC plc you have the right to attend, speak at and vote at the AGM. If you cannot or do not wish to attend the AGM but still want to vote you can appoint someone to attend the AGM and vote on your behalf. That person is known as a “proxy”. You can use the proxy form to appoint the Chairman of the meeting or someone else, as your proxy. Your proxy does not have to be a member of the Company. I/We .......................................................................................................... (FULL NAME IN BLOCK CAPITALS) being a member(s) of PHSC plc, appoint the Chairman of the meeting or .................................................................... (see note 1) as my/our proxy to attend and, on a poll, to vote for me/us and on my/our behalf as indicated below at the AGM and at any adjournment (see notes 2, 3 and 4). Please clearly mark the boxes below to instruct your proxy how to vote. RESOLUTIONS FOR AGAINST VOTE WITHHELD AT DISCRETION 1. To receive the report and accounts 2. To declare a final dividend 3. To re-elect Stephen King as a director 4. To reappoint the auditors and authorise the directors to set their fees 5. To authorise the directors to allot shares 6. To disapply pre-emption rights Signature(s) ............................................................................ (see note 5) Date ......................................... Notes 1. If you wish to appoint as a proxy someone other than the Chairman of the meeting, please delete the words “The Chairman of the meeting” and insert the name of the other person (who need not be a member of the Company). All alterations made to the proxy form must be initialled by the signatory. 2. The completion and return of the proxy form will not prevent you from attending the AGM and voting in person should you subsequently decide to do so. 3. If you wish your proxy to cast all of your votes for or against a resolution you should insert an “X” in the appropriate box. If you wish your proxy to cast only some votes for and some against insert the relevant number of shares in the appropriate box. In the absence of instructions your proxy may vote or abstain from voting as they think fit on the specified resolutions, and, unless instructed otherwise, may also vote or abstain from voting as they think fit on any other business (including on a resolution to amend a resolution, to propose a new resolution or to adjourn the meeting) which may properly come before the meeting. (cid:0) 4. The “Vote Withheld” option is provided so that you can instruct your proxy to abstain from voting on a particular resolution. A “Vote Withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes “for” or “against” a resolution. The “At Discretion” option is provided so that you can give discretion to your proxy to vote or abstain from voting on a particular resolution as they think fit. 5. The proxy form must be signed by the shareholder or their attorney. Where the shareholder is a corporation the signature must be under seal or that of a duly authorised representative. In the case of joint holders, any one may sign the form. The vote of the senior joint holder (whether in person or by proxy) will be taken to the exclusion of all others, seniority being determined by the order in which the names appear in the register of members for the joint shareholding. 6. To be valid, this proxy form and any power of attorney or other authority under which it is signed or a certified copy of such authority, must be deposited with the Company Secretary, Freepost RTCU-SSLT-AXUX, 190 High Street, Tonbridge, Kent TN9 1BE no later than 48 hours (excluding non-working days) before the time of the AGM or any adjournment. 57 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600 22630 PHSC Annual Report P17-60_22630 PHSC Annual Report 17-60 30/07/2015 11:38 Page 58 Job No.: 22630 Customer: PHSC Proof Event: 6 Project Title: Annual Report Park Communications Ltd Alpine Way London E6 6LA T: 020 7055 6500 F: 020 7055 6600