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Report of the Directors

The Directors of The BSS Group plc present their annual report to the shareholders together with the financial statements of the Group for the financial year ended 31 March 2009.

Group Activities

The Group provides a comprehensive supply service for a wide range of products to industrial, commercial and domestic markets in the United Kingdom and the Republic of Ireland. The principal products relate to heating, plumbing, tools, industrial supplies, process control and pipeline equipment.

The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in note 29 to the financial statements.

An overview of the development of the Group’s businesses for the year and of future development is included in the Chairman’s Statement, the Business Review and the Financial Review.

Business Review

The Company is required to set out in this report a fair review of the business of the Group during the financial year ended 31 March 2009 and of the position of the Group at the end of that financial year and a description of the principal risks and uncertainties facing the Group. The information that fulfils the requirements of the Business Review are given in the Chairman’s Statement, the Business Review, Key Performance Indicators, Principal Risks and Uncertainties, CSR section and the Financial Review , which are incorporated in this report by reference.

Details of significant events since the balance sheet date are contained in note 30 to the financial statements.

Results and Dividends

The audited financial statements are set out on account section.

The Group Income Statement is set out on Consolidated Income Statement. The Group profit before tax for the year amounted to £57.8m (2008: £58.3m).

An interim dividend of £2.4m (2007: £2.3m) was paid on 7 January 2009. The Directors recommend the payment of a final dividend for the year of £6.8m (2008: £6.8m) to be paid on 24 July 2009 to shareholders on the register on 26 June 2009. This will make the total dividend for the year £9.2m (2008: £9.1m).

Share Capital

During the year the called up share capital was increased to £6,174,656 (123,493,126 shares of 5p each) as a result of the issue of 630,866 shares under the employees’ share option schemes.

Movements in the Company’s share capital are shown in note 19 to the financial statements. At the 2008 Annual General Meeting, shareholders renewed the Company’s authority to make market purchases of up to 12,349,712 ordinary shares of 5p each.

No shares were purchased under this authority during the year ended 31 March 2009 and at the forthcoming Annual General Meeting, the Board will again seek shareholders’ approval to renew the annual authority for the Company to make purchases of its own shares through the market.

Information on the Group’s share option schemes is set out in note 19 to the financial statements. Details of the Long Term Incentive Plan for key executives are set out in the Report of the Remuneration Committee page.

Directors and Secretary

The members of the Board at the date of this report are shown on Board of Directors page. No Director had an interest in any other contract other than a service contract with the Company or its subsidiaries at any time during or at the end of the year. A register of Directors’ conflicts has been established and Board authorisation obtained. The register is reviewed at regular intervals.

There have been no appointments or resignations during the year. T Osbaldiston and R Murray, retire by rotation, and being eligible offer themselves for re-election at the forthcoming Annual General Meeting. Commencing this year the Chairman will stand for annual re-election in line with A.7.2 of the Combined Code.

Directors’ Indemnities

In May 2006 the Company entered into a Deed of Indemnity to the extent permitted by law with each of the Directors. The Deeds of Indemnity will be available for inspection at the Annual General Meeting.

During the year the Company maintained Directors’ and Officers’ liability insurance cover, as permitted by section 309A of the Companies Act 1985.

Directors’ Interests and Share Options

The interests of Directors and their families in the shares of the Company and options to acquire shares are shown in the Report of the Remuneration Committee. There have been no transactions in shares by the Directors of the Company between 1 April 2009 and 27 May 2009.

No Director has a non-beneficial interest in the Company’s shares.

Creditors Payment Practice

We have a general policy whereby we agree and abide by terms of payment with our suppliers.

The average number of day’s credit taken by the Group at 31 March 2009 was 66 days (2008: 65 days). The Company had £nil trade creditors at 31 March 2009 (2008: £nil).

Charitable and Political Contributions

Charitable contributions amounted to £43,098 (2008: £14,760). More details of charitable donations can be found in the Corporate Responsibility Report.

There were no political contributions during the year (2008: £nil).

Acquisition of own Shares

On 30 November 2005, the Company purchased 90,000 of its ordinary shares through the Company brokers at a price of 285p per share. The purchased shares were held as treasury shares and have been issued in June 2008 under the Performance Share Plan to employees where performance targets had been attained. Following the exercise, the Company no longer holds any ordinary shares as treasury shares.

Takeover Directive

Ordinary shares are the Company’s only class of share capital. All the shares rank pari passu. There are no special control rights in relation to the Company’s shares. The rules governing the appointment and replacement of Board members and changes to the Articles of Association accord with English Company Law provisions. The Board has power to purchase its own shares and is seeking renewal of that power at the forthcoming Annual General Meeting. There are no significant agreements to which the Company is a party which take effect, alter or terminate in the event of change of control of the Company. Details of directors’ agreements providing compensation on change of control are in the Report of the Remuneration Committee. Significant shareholdings are disclosed in this report.

Employment Policy

The Group philosophy is that ‘People Make Quality’ and that quality of service gives competitive advantage. The recruitment, training, development and remuneration of staff reflect this philosophy. Significant staff vacancies are published throughout the Group. All employees receive regular information on the trading performance of the Group and their own particular Division by regular team briefs and presentations. The Group is an equal opportunities employer and the policy of the Group is to give disabled persons fair consideration for all vacancies for which they are suitably qualified, and having regard to their capabilities. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees. There is a share option scheme (‘SAYE’) available through which all employees may become shareholders in the Company, subject to conditions of eligibility.

We continue to invest substantially in a wide variety of training, both on and off the job, designed to meet the needs of the Group and staff at all levels.

SUBSTANTIAL HOLDINGS

So far as the Company is aware, the following held shares representing 3% or more of its ordinary share capital at 27 May 2009.

Auditors

In the case of each of the persons who are Directors at the time of the approval of this report on 27 May 2009, under Section 234ZA(2) the following applies:

• so far as the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware; and
• each Director has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information

PricewaterhouseCoopers LLP have expressed their willingness to continue in office as Auditors of the Company, and a resolution proposing their reappointment and authorising the Directors to determine their remuneration will be proposed at the forthcoming Annual General Meeting.

Annual General Meeting

The Notice of the Annual General Meeting, which is to be held at 3.00pm on 23 July 2009, is contained in a separate circular to shareholders and contains an explanation of the items of Special Business.

By order of the Board

Ute Ball
Group Company Secretary
27 May 2009