Annual Report & Accounts 2010

Specialist Division

Business positioned to grow market share
in multi-channel offer to end users

The Specialist Division serves the maintenance, repair and overhaul (‘MRO’) market which is worth in excess of £3bn. The market includes power tools, hand tools, personal protective equipment, janitorial products and general industrial supplies. Buck & Hickman sells to end user industrial customers and Birchwood Price Tools sells predominantly to trade customers.

The Division contributed revenue of £103.6m (2009: £117.9m) and generated a profit of £2.0m (2009: £4.7m), prior to amortisation of acquired intangibles of £1.4m (2009: £1.5m) and redundancy costs of £1.0m (2009: £0.1m). Like for like revenue for the Division improved as the year progressed with quarter four sales 0.8% below last year after an 11.9% decline in quarter three.

2009 has proven to be an extremely challenging year for the B & H business with many of its manufacturing and engineering customers being severely hit by the recession, leading to major cut backs and lower usage of consumable products. To counteract revenue pressures B & H has taken swift action on its cost base with headcount reduced by 12% from 562 to 494 and surplus warehouse capacity adjacent to the NDC in Coventry exited.

The management team has been strengthened with a new Managing Director and Commercial Director appointed. Further structural changes were made to the business to ensure that there is a clear focus on operational excellence and sales effectiveness. New and experienced national account and regional managers have been recruited and many sales representatives have been replaced. B & H now has a strongly motivated and high calibre team, focused on growth and profit delivery.

B & H will continue to develop its sales proposition to its large end user customers and has invested in industrial vending solutions which complement its line side cribs and batch scanning processes. These new systems offer its customers secure control of consumables on the shop floor and provide in the opportunity for B & H to grow share without major customers. A number of new customers have been recruited on the back of investment made.

B & H has invested in e-trading with major enhancements to its website and this will continue with further upgrades to ensure ease of shopping, improved product data and imagery plus a first class customer experience. Internet sales showed 25% growth in quarter four of the financial year.

B & H has also developed a stronger proposition in two of its key markets, PPE / Health and Safety and Janitorial, with new catalogues launched to complement the main catalogue and many new lines have been added to ensure a complete and competitive offer is available to all our customers. We remain confident that a more focused sales proposition will deliver growth in 2010 and beyond.

The Tooltastic trade counters have made good progress during 2009 and a major re-launch is planned for 1 June 2010, which will include a stronger stock profile, focusing on hand and power tools / PPE and fasteners and fixings. This will be backed up with a mini catalogue and a custom built website. The target for Tooltastic will be the construction sector.

Birchwood Price Tools (‘BPT’) (formed by merging Birchwood Products and Price Tools on 1 April 2009) is focused on the wholesale market distributing power tools, hand tools and site equipment in the UK. The new proposition combining leading manufacturers of hand and power tool brands with the proprietary site equipment brands, taken to market via a national sales force and integrated marketing campaigns, has been well received by customers.

Trading conditions in 2009 for BPT have continued to be difficult with some customer sectors having been adversely affected by the economic slowdown. New product developments and major marketing campaigns featured heavily in the plan to combat the challenges of a flat market and created sales growth of 10.4% in the final quarter of the year. We are confident that BPT will have a better year in 2010/11.

BPT has also been developing new profit streams including the sale of proprietary brands on an international basis, and supporting the wider BSS Group with its procurement objectives, both of which are producing encouraging results.