The last 12 months has seen an unprecedented level of political, social, business and market challenge and change - from both a national and international perspective.
The period started off with uncertainty over whether Brexit would or would not happen, amplified by a polarised UK general election in December. In parallel, there was the distraction and turmoil generated by the planned implementation of the off-payroll working rules (IR35), which impacted a material element of Prosource's contingent labour providers through January and February. But both of these UK domestic challenges were eclipsed by the Covid-19 virus and the ramifications of the global pandemic - which included the collapse of the oil price; a collapse in "business as normal"; a deferral of the implementation of off-payroll working rules and the removal of focus from the BREXIT negotiations.
As this financial year concluded and we headed into winter, the COVID pandemic continued to cause widescale uncertainty and made medium and long term planning very difficult. The conclusion of Brexit negotiations and a change of US president did little to improve medium term clarity.
Despite the level of uncertainty and the impact that all of the above had on the general economy and business confidence, Prosource delivered a record year which would have been even better had it not been for the final quarter's revenues dropping 15% as a result of early COVID business reaction.
More importantly, our people have remained safe, healthy and well. Generally, the services we provide can be delivered remotely and the majority of our staff have worked from home for most of the pandemic. We thank them for their perseverance and diligence in these challenging times. Their focus on service delivery and safe working have been fundamental to successful trading throughout 2020. We understand our obligation to our staff and despite the 15% reduction in revenues we have made no COVID redundancies and our intent and aspiration is to avoid doing so.
We are also aware of the obligation we have to the Gathimba Edwards Foundation, as it supports some of the most vulnerable groups of children in Kenya during the pandemic and we provided additional funding to help provide COVID-specific support to keep the children and their families safe. For more information, see https://www.prosource.it/gathimba-edwards-foundation/.
Group revenue for the year rose to £67.3m, an increase of approximately 5%, whilst group pre-tax profits were broadly flat as margins were impacted by the reduction in business in the final quarter.
We started 2019/20 with confidence and financial strength and this momentum has helped our performance during the COVID period. Our balance sheet remains strong, we have no external debt and we have confidence that we will be able to endure whatever challenges arise during 2021 and beyond.
Our contracted operational support service; pandemic related incident support, a healthy pipeline of planned activity for 2021 and some additional new opportunities within both existing and new customer give us confidence to forecast our performance for 2020/21 and we are projecting a mid-teens percentage decline in group revenues and profits over 2020/21.
For the financial year ended 30 June 2020, the Prosource board of directors has diligently and in good faith, promoted the success of the company for the benefit of its members as a whole, and fulfilled its duties under s172(1) (a-f) of the Companies Act 2006. The board has considered the individual elements and obligations of s172(1) (a-f) in:
During the first half of the year, the board observed and managed a relatively normal business rhythm - balancing growth, safety, high quality delivery, financial performance and workforce wellbeing and harmony whilst delivering against the company’s strategy and its underpinning objectives.
During the second half of the financial year, the Covid-19 pandemic arose, worsened, and impacted all aspects of the business and the environment within which it operates. This required considered adjustments to short term plans and tactics and a supporting management and decision making approach and cadence to mitigate new Covid-19 related risks and to convert new opportunities in a rapidly and profoundly changing environment.
In reviewing the key elements of s172 and how the board has fulfilled its duties during the financial year, both the normal business rhythm and the Covid-19 pandemic related challenges are considered and referenced in the board summary below:
How we structure and despatch management and decision making:
The simple and flat management structure of the company was maintained throughout the year.
The board of directors set and reviewed the strategy and monitored and managed safety, risk and performance – the board delegated day to day delivery and the reporting of:
The company strategy is set with a three year outlook and a five year horizon – it was reviewed at each board meeting during the 2019 / 20 financial year and adjusted to take account of any material external or internal factors; which was necessary as the Covid-19 pandemic developed and the societal and business impact deepened.
As the pandemic unfolded, the board adjusted company strategy and tactics to best support:
The Workforce – ensuring our people were safe, informed and reassured. Working practices at home and for those supporting front line customer services were revised, ensuring they were safe and fit for purpose. We sought to provide assurance that jobs would be protected and ensure individual wellbeing.
Customers – maintaining a high quality service delivery and project delivery capability which could be performed via a largely “working from home” model, safely delivering services in the front line work place to our customers in essential industries; Energy, Health, Banking & Finance, Transport & Media sectors. This included the identification and promotion of efficiencies, cost savings and ways of working to all customers which supported their pandemic continuity plans and challenges and which helped reinforce our long term relationships.
Shareholders – minimising any negative revenue and profitability impacts through the pandemic challenges, identifying and securing new revenue streams and new customers, controlling costs and conserving cash, protecting our skills and capabilities by maintaining services and jobs across the workforce, maintaining and reinforcing our values and ethics to ensure that we emerge from the pandemic with our reputation as a good and fair employer and business upheld and enhanced.
How we engage and maintain strong relationships with stakeholders:
Employees – people are the core of our business. We aim to attract, recruit, develop and retain a diverse, highly capable, and cohesive workforce. Interaction with our workforce is key to achieving this aim and we maintain a flat management and governance structure to make it easier for the individual (at any level) to make their ideas, opinions and concerns heard.
Prosource assigns a BUL to each large customer or Business Unit and the BUL relies upon team leads to capture employee feedback and provide that to the leadership team and BULs. In addition, the company runs:
During the Covid-19 pandemic, the company recognised the need to engage virtually / remotely with its employees. It increased the frequency of newsletters and updates from the board and leadership team and introduced a series of seasonal giveaways with key messaging to reinforce the team dynamic and emphasise our commitment to staying in touch and connected.
Employees are encouraged to engage with each other and with the company management via the Intranet, employee and technical / excellence forums and the regular bulletins.
Long term service recognition awards have always been a key focus for the company – these have been adjusted and awards made in virtual events during the pandemic.
Customers – we strive to deliver high quality and constantly improving services, maintain safe and secure delivery and focus on the long term. We promote our company and service delivery values, ethics and quality standards via a structured and focused employee induction programme, supported by the leadership team and a series of collaterals to guide and inform what we expect of each employee and what they should expect of each other. This programme and the process is continually reviewed with regular assessment of employee understanding and alignment.
Our customers engage with us and stay. The majority of our customers have been with us for more than 5 years with our top 3 customers greater than 10 years.
We manage performance with a structured, objective and open approach, regular customer reviews and a can do / learn & improve attitude. Prosource encourages and supports customer shared events and workshops (physical in normal times and virtually during the pandemic).
Shareholders – there are no institutional shareholders in Prosource; the company is an employee-owned company with all shareholders being current or ex-employees.
Minor shareholders are represented via a nominated board member. Updates on strategy and performance and inputs from the minor shareholders are formally channelled through this representative. This ensures that they are engaged with and have currency in the board and leadership decisions and have a mechanism to input their ideas, opinions, and concerns. This two-way communication process is observed at every board meeting.
All shareholders are invited to the annual AGM.
The company invests in and maintains EMI and CSOP share schemes and has a philosophy of continuing to broaden the shareholder community and the sharing of success.
Suppliers – as a services business, Prosource consumes little in terms of physical supplies. It does make use of subcontractors for elements of its service delivery, particularly to meet short term peaks or niche requests. As a result of UK Government changes to off-payroll working (IR35) the commercial operating model of the subcontractor environment is being fundamentally restructured. Prosource has been monitoring events for the past 2 years+ and has proactively engaged with its subcontractors in a spirit of collaboration to ensure that the transition is as smooth and equitable as possible. The company and its contractors have agreed an approach and are ready to proceed when the changes are introduced for tax year 2021/22.
Society – the board strives to ensure that Prosource is considered as a good, fair and supportive business by wider society. It reviews its strategy, its short, medium and long term objectives and its regional plans and actions with that objective in mind. It considers how it treats its employees, its customers, the environment and its other stakeholders in all that it does.
During the year ended 30 June 2020, this was demonstrated with the board’s approach to protecting jobs across the workforce, when revenues dipped due to the Covid-19 pandemic. The company protected earnings for those employees who found themselves unable to work or without a customer role and no redundancies were made. It was communicated to staff that the company did not intend to consider making any redundancies due to the pandemic.
As the working environment begins to normalise, Prosource will aim to retain the progressive and sustaining aspects of our Covid-19 approach which have been successfully defined and refined into new ways of working. There is an opportunity to keep employee travel at lower levels and not to return to the pre-pandemic levels which had been considered the norm.
Prosource is also committed to supporting local, national and international selected charities and initiatives which improve the lives of the less fortunate within society. These selected charities and initiatives are reviewed annually.