Gavin Slark, Group Chief Executive
Peter Warry, Chairman
Chairman's Statement
Sector leading results –
final dividend increased
by 10% – strong start
to 2010/11
BSS has had a successful year. The Group has navigated its way through the most challenging economic conditions experienced for many years to deliver revenue growth, resilient earnings performance and strong cash flow.
Profit before tax at £44.2m (2009: £57.8m) was less than we would have liked but an excellent outcome compared to our industry peers in a period that has seen many stop paying dividends and undertake rights issues to repair their balance sheets. We actually increased sales over the year as we have each year throughout this recession and our market share has grown significantly. Domestic heating and plumbing is benefiting from early cycle recovery with strong quarter four performance, and is well positioned to grow further. The Domestic Division has become a major force in the industry from small beginnings some 10 years ago. During this period our Industrial Division has maintained its number one market position and has sustained a healthy operating margin. Our newer Specialist Division, although remaining profitable, has had a tougher time but is well placed with a number of initiatives that will increase revenue.
The year has seen the successful development of our above ground drainage centres in the Industrial Division and in February 2010 the acquisition of UGS to spearhead our development into below ground drainage. We are confident that these product extensions will replicate the success of our move into the ‘Big Pipe’ facility in Coventry a couple of years ago. In the Domestic Division the move into spares distribution through the acquisition of DHS in April 2009 has exceeded our profit expectations and there is considerable scope to grow this offering further. During 2010 we have targeted a number of adjacent markets where we can develop profitable businesses leveraging existing knowledge and expertise in the Group. These growth opportunities utilise BSS’ proven skills in plumbing and heating distribution enabling us to reach a broader group of trade customers.
During the economic downturn we have not had the need to close a single branch through poor performance and during the year we opened a further 18 new branches. The Group has remained strongly cash generative and is conservatively financed with year end net debt of £85.3m (2009: £86.0m) after investment of £22m. In recognition of this strong financial position and the positive trends in revenue and earnings, the Board is pleased to recommend a final dividend of 6.09p per share (2009: 5.54p) which represents a 10% increase on last year.
Of course none of this would be possible without the effort and commitment of the best team in the industry, from trade counter to boardroom, and I would like to thank them all for another year of exceptional performance. In December 2009, we were delighted to announce the appointment of Frank Elkins, Managing Director of BSS Industrial to the Board.
It is difficult for companies to forecast when economists and politicians cannot agree about the economic outlook. However, the Group has already demonstrated its ability to outperform in an adverse market and, on the back of the recent small economic upturn, Group sales for the latest three month period (February, March and April) are 11.0% like for like up on the same period last year, This excellent result gives support to the Board’s belief that as the economic situation improves the Group’s focus on growth will enable it to disproportionately outperform any rising market.
Peter Warry
Chairman
25 May 2010
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