Annual Report & Accounts 2010

The Combined Code

Principles of Good Governance: Part 1

The Company adheres to the principles of Corporate Governance contained in the Combined Code (available at www.frc.gov.uk) on Corporate Governance that was issued in 2003 and updated in 2006 and 2008 by the Financial Reporting Council.

The Board is committed to high standards of Corporate Governance and acknowledges the importance of good governance as being in the best interests of the Company, its shareholders and employees.

Statement of Compliance

The Group has adopted the 2008 Combined Code and considers that it has complied throughout the financial year ended 31 March 2010 with the provisions set out in section 1 of the Combined Code, except in respect of:

A3.2 – The Independence of the Board

We recognise that with three Executive Directors and two independent Non-Executive Directors excluding the Chairman, the Board does not fully comply with the Combined Code regarding the balance of the Board. However, the Board unanimously believes that the current composition of the Board remains suitable for the nature and size of the Group. Experience and independent judgement of our Non-Executive Directors are more important than absolute numbers. We believe that the collective skills, experience and approach to running the business is appropriate for driving the Group forward and achieving the Group’s goals whilst maintaining the highest standard of Corporate Governance. The Board is satisfied that no individual or group of Directors has unfettered powers of discretion and that an appropriate balance exists between the Executive and Non-Executive members of the Board. The appropriate number of independent Non-Executive Directors is regularly reviewed.

C.3.1 – The composition of the Audit Committee

We recognise that only two of the three members of the Audit Committee are independent Non-Executive Directors. However, the Chairman will remain a member of the Audit Committee as in the Board’s view his objectivity and ability to advise and question the Executive Directors, particularly in respect of financial affairs is not affected. His counsel has contributed significantly to the Group’s success.

Application of the Code

The Board has conducted a review of the Group’s Corporate Governance practice and the following statement describes how the principles of good governance in section 1 of the Combined Code have been applied.

The Board

The Company is controlled through the Board which currently consists of three Executive and three Non-Executive Directors. Biographical details of all Directors are given on the Board of Directors.

The Board considers that all of the Non-Executive Directors excluding the Chairman are independent of management within the meaning of the Combined Code and are free from any business or other relationships which could materially interfere with the exercise of their independent judgement. They bring to the Board a wide range of experience of senior management in other areas of commerce and industry and represent a source of strong independent advice and judgement. The Non-Executive Directors meet several times a year without the Executive Directors present.

The Non-Executive Directors are appointed for a two year term of office. The Executive Directors have one year service contracts. Details of all payments to Directors are included in the Report of the Remuneration Committee.

One third of the Directors are required to stand for re-election each year on a rotational basis. New Directors are subject to election at the first opportunity following appointment and all names submitted to shareholders for election are accompanied by biographies.

Any Non-Executive Directors who have served for more than nine years are subject to annual re-election, and Non-Executive Directors who have served for more than six years are subject to rigorous review. Details of the Directors retiring and seeking re-election at the 2010 AGM are given in the notice of the meeting.

The terms and conditions of appointment of Executive and Non-Executive Directors are available to shareholders during normal business hours at the Group’s head office and at the AGM.

Board Procedures

All Directors are equally accountable under the law for the proper stewardship of the Group’s affairs. The Non-Executive Directors’ have a particular responsibility to ensure that the strategies proposed by the Executive Directors are fully discussed and critically examined to ensure that they take proper account of the best long term interests of the shareholders, employees, customers, suppliers and the community.

To enable them to do this, all the Directors have full and timely access to all relevant information and can take independent professional advice at the Group’s expense at any time should it be necessary. All Directors have access to the advice and services of the Company Secretary whose responsibility it is to ensure that Board procedures are followed. The appointment and removal of the Company Secretary is a matter reserved for the Board. Appropriate training is available to all Directors on appointment and on an ongoing basis as a consequence of the Board appraisal process.

The Board uses an annual agenda and review timetable to ensure that relevant matters are given due consideration.

Strategy

The Executive Committee held an annual off site meeting at which the Group’s strategy was reviewed in the context of the macro and micro economic environment, competitor strategies and the need for the Group to create competitive advantage. The outcome was reported to the Board and taken into account when the Board reviewed and determined the strategy of the Group.

Business Plan

The Board reviewed the three year rolling Business Plan and yearly budgets/forecasts were updated quarterly to support the Group’s strategy. Progress reporting includes a detailed monthly Board report circulated to the Board and at each regular Board meeting the Group Chief Executive and Group Finance Director provide an update on progress within all areas. In addition, the interim and final results together with the Risk Register and the Register of Directors’ Conflicts were reviewed. As part of the biannual review of the Risk Register, the Board has analysed social, environmental and ethical (‘SEE’) risks but have found none to be material.

Compliance and External Relationships

All Divisional Managing Directors and Function Heads present to the Board annually. Health and Safety is reviewed in detail at each Board meeting and is the first item on the Board agenda.

The Board meets 10 times a year. Individual attendance at Board meetings and Board Committee meetings is set out in the table for the year ended 31 March 2010.

In addition, Directors have frequent contact between meetings. Directors also visit trading locations in order to maintain close contact with the Group’s business.

There is an agreed Schedule of Matters reserved for the Board for collective decision making, which was reviewed in April 2010. These matters include setting long term Group objectives and the strategies to be employed in achieving them, setting policies in the areas of health and safety, the environment, recruitment and employment, risk management, treasury and, subject to materiality thresholds, decisions on the raising of capital, financial commitments, acquisitions and disposals and the prosecution, defence and settlement of litigation.

The Board has delegated to the Group Chief Executive responsibility for the development and preparation of the Business Plan for the Group and annual Group budget for recommendation to the Board. As the Senior Executive Director, the Group Chief Executive is responsible for all aspects of day to day operational control of the Group and execution of the Group strategy. The Group Chief Executive has established and chairs an Executive Committee (whose other members are the Managing Directors of principal operating businesses, the Group Finance Director, Function Heads and the Group Company Secretary) to assist him in the performance of his duties which meets once a month. There is a clear division between the roles and responsibilities of the Chairman and the Group Chief Executive and both have been set out in writing.

The Terms of Reference for the Board and each of its Committees are available on request from the Group Company Secretary, for inspection at the Annual General Meeting and are also available on the Company’s website (www.bssgroup.com)). The Business Conduct Policy, the Environmental Policy, the Health and Safety Policy, the Ethical Trading Policy, the Charity Policy, the Community Policy and the Public Policy are also available on this website.

Information and Professional Development

The Board is supplied with information in a form and quality to enable it to take informed decisions and to discharge its duties. Directors were provided with the opportunity to update their skills and knowledge, including, in the year under review, updates on final implementation of the Companies Act 2006 and the Bribery Bill. In the case of newly appointed Directors, an induction programme which includes training on the responsibilities of a Director occurs prior to or immediately following the appointment to the Board. In addition, several Board meetings a year are held at Group locations other than Head Office.

Board Effectiveness

The evaluation of effectiveness of the Board and its Committees focused on a number of areas, including those concerned with best practice based on the principles of good governance. Our evaluation was carried out internally by the Chairman through a detailed questionnaire and formal appraisals of the individual performance of the Non-Executive Directors were conducted by the Chairman by holding a meeting with each Director. All Executive Directors are appraised annually by the Group Chief Executive and the Group Chief Executive is appraised by the Chairman. Led by the Senior Independent Director, the Non-Executive Directors meet without the Chairman present annually to appraise the Chairman’s performance.

The Directors assessed the findings of the appraisal in February 2010 and concluded that the Board members demonstrate commitment, give sound guidance and direction to the business and that the Board Committees operate effectively. Each Director continues to make an effective contribution to the work of the Board, is well prepared and informed and has a good understanding of the Group’s businesses. Points raised during the previous year have been satisfactorily addressed.

The papers presented by the executive management are comprehensive and plans brought to the Board are challenged robustly and critically. However, once the debate is summarised and a way forward agreed, the Executive Committee have total support with a strong sense of consensus and collective ownership.

Committee Attendance	Board	Audit Committee	Remuneration Committee	Nomination Committee
P T Warry*	10	2	5	3
R Murray	10	n/a	n/a	n/a
G Slark	10	n/a	n/a	3
R J Harrison OBE*	9	2	5	3
T Osbaldiston*	10	2	5	3
F M Elkins	4	n/a	n/a	n/a
A Ball	5	n/a	n/a	n/a
Number of meetings in the year	10	2	5	3

*Non-Executive Directors (three).
(Where n/a appears in the table the Director listed is not a member of the Committee.)