Gavin Slark, Group Chief Executive
Chief Executive's Statement: Part 1
Introduction
BSS has delivered sector leading results with revenue growth and earnings resilience despite the toughest year for the economy in more than 70 years.
The business has demonstrated its ability to ‘navigate the icebergs’, handling well the short term tactical issues, whilst remaining strategically strong.
The teams within the business have shown true strength of character, maintaining a positive attitude whilst having to remain flexible in some cases redeploying or reducing manpower.
The culture within the Group is a key component as we continue to identify new growth opportunities in adjacent markets whilst at the same time recruiting new customers and winning new contracts in our core businesses.
The Group is in good shape with a strong balance sheet and resilient revenue that is primarily driven by essential repair and maintenance activity. Revenue has held up well throughout the financial year as BSS has absorbed the worst of the recession and returned to growth in the fourth quarter of the financial year. 2009/10 has been a busy year for the Group: we have repositioned resources and reduced our cost base whilst continuing to invest to support a number of organic growth initiatives. Two new businesses were acquired, DHS and UGS, and they offer tremendous growth potential in new markets.
The resilience of underlying revenue has been partly due to a keen focus on keeping close to our customers, serving their needs and recognising the pressures they faced in the recessionary market of 2009. Being flexible to changing customer requirements has been key to our success.
New revenue streams have taken root and gross margin has been supported by the benefits of a direct sourcing capability acquired with Birchwood Products in 2008. The leverage that Birchwood has provided in this area has been essential to us remaining competitive. Costs have been reduced as the business has met the challenges of a contracting market. Like for like employee numbers have been reduced by 5% as market circumstances have been re-assessed.
The Group remains well funded with the capacity, flexibility and longevity of funding needed to take advantage of any development opportunities that may arise in the near term. With net debt of £85.3m at year end (2009: £86.0m), the Group remains well positioned with available funding of £127m above year end debt.
Strategy
Despite the recession in the wider economy throughout most of 2009 our strategy has remained unchanged; we continue to drive for profitable, cash generative organic growth in the existing businesses and continue to look for opportunities in adjacent markets where we have knowledge and expertise and where we believe we can add value. The business remains resilient as a specialist distributor with revenue primarily driven by R & M activity much of which is non-discretionary. Our strategic focus remains on four core elements:
- Consistently delivering excellent customer service
- Strong leadership and sensible business practices
- Profitable organic growth and value enhancing acquisitions
- A results driven culture
The challenge throughout the last year has been to reposition BSS during a period of contracting markets and competitive pressures, to scale down resource, to change the mix of skills in the business in support of the drive into new revenue streams in anticipation of further change in the marketplace.
In conversation
with Gavin Slark
Q: Which are the new markets you have entered into?
A: We have entered into the drainage, renewables, spares markets and water industry.
Q: Can you explain the resilience of the Group compared to the industry?
A: Our revenue is primarily based on repair and maintenance with limited exposure to new build and government spend.
Q: How will you counter the expected downturn in government spend?
A: The exposure has been assessed and new markets entered to off set the potential downturn in spend.
Q: How does your latest acquisition fit in?
A: UGS extends our above ground drainage offer to below ground. UGS, an underground specialist business, offers BSS considerable scope for growth by providing an opportunity to expand both the product range and national coverage.
Q: How many branches do you plan to open in the coming year?
A: We have opened 18 branches during the year and plan to open a similar number in the coming year.
The BSS Group’s Strategy
Key Strategies:
- Drive for profitable, cash generative organic growth through superior service
- Continue to look for opportunities in adjacent markets where we have knowledge and expertise and where we believe we can add value
Outlook:
- We are confident that 2010/11 will be a better year for the Group
- The increase in the final dividend of 10% is reflective of that confidence
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