BOC Report and accounts 2005 - Alle jaarverslagen

Operating review (comparing 2005 with 2004) 47
There was better demand for vacuum equipment from the chemicals industry and from the aerospace industry for
metallurgical applications in 2005.A general improvement in Asian markets also helped towards better results from
BOC Edwards’ general vacuum business.Vacuum pump production was expanded in the Czech Republic and
some system assembly operations were established in Brazil during 2005.
Deliveries of pharmaceutical freeze-drying and packaging systems were at a higher level than in 2004.The
establishment of a new low-cost manufacturing base in China has opened up new possibilities for business with the
fast-growing pharmaceutical industry in Asia generally and particularly in India.
Exceptional costs of £20.7 million were charged within BOC Edwards during 2005. Some £14 million relates
to the impairment of goodwill.The remainder is a charge for restructuring. Savings of approximately £5 million are
targeted from this restructuring.
Operating exceptional items in 2004 were for the integration of the industrial and medical gases businesses of
BOC and Air Liquide in Japan that began in 2003.
Afrox hospitals
Change
on 2004 1
2005 Change (constant
£ million on 2004 currency)
Turnover 275.1 –36% –38%
Operating profit 37.2 –38% –39%
Adjusted operating profit 2 37.2 –38% –39%
1. A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.
2. A reconciliation of adjusted operating profit with operating profit is shown on page 41.
3. All comments below are on a constant currency basis.
The disposal of the majority shareholding in Afrox Healthcare Limited to a consortium led by two major black
empowerment investors was completed on 22 March 2005.African Oxygen Limited (Afrox), BOC’s subsidiary
in South Africa, retains a significant interest in the hospitals business through a 20 per cent holding in the new
company. Until disposal,Afrox Healthcare Limited was fully consolidated into the BOC Group accounts. For the
second half of 2005, a 20 per cent share of the results of the new company, with its adjusted operating profit and
net interest charge, was included in the BOC Group profit and loss account.The comparisons above are therefore
distorted by this change.
After adjusting for this disposal and change of accounting treatment, the underlying performance of the Afrox
hospitals business remained positive during 2005.
The disposal proceeds were received by Afrox in March and distributed to The BOC Group and Afrox
minority shareholders by means of a special dividend in June, followed by a share buy-back in July 2005.
Gist
Change
on 2004 1
2005 Change (constant
£ million on 2004 currency)
Turnover 315.9 +8% +8%
Operating profit 24.5 –2% –2%
Adjusted operating profit 2 24.5 –2% –2%
1. A reconciliation of results for 2004 at 2004 and at 2005 rates of exchange is shown on page 40.
2. A reconciliation of adjusted operating profit with operating profit is shown on page 41.
3. All comments below are on a constant currency basis.
While the market for distribution services remained difficult in the UK throughout 2005, Gist continued to expand
sales with existing customers and won new business.The higher turnover was not reflected in better operating
profit, principally because of increased pension costs. Gist accounts for a substantial proportion of BOC’s UK
workforce and the impact of pension costs is therefore significant.
Food business with Marks & Spencer, Gists’ major customer, expanded in 2005 as more new retail outlets
were opened. Logistic operations for the Ocado home food service in association with Waitrose also continued to
grow. Existing services for Carlsberg (UK) were expanded in 2005 and new business was won with Woolworths.
In September 2005 the Van Dongen group of logistics companies based in the Netherlands was acquired.
This adds to Gist’s primary distribution operations, bringing products from food manufacturers into the supply
chain. It also extends the reach into continental Europe, which is becoming an increasing source of food products
for UK retailers.This wider network has already generated additional business between the UK and continental
Europe from a number of existing and new customers.
In November 2005, Gist was awarded an extension to its food logistics contract with Marks & Spencer.
The contract covers the retailer’s growing food business until 2011, confirming it as one of the UK’s largest food
logistics contracts.
Corporate
Corporate costs increased in 2005 partly as a result of additional spending on procedures to ensure compliance with
Sarbanes-Oxley legislation and discretionary spending on litigation support in the US.The corporate charge also
included a provision of £4.3 million for environmental clean-up in the US.