BOC Report and accounts 2005 - Alle jaarverslagen

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96 The BOC Group plc Annual report and accounts 2005 Notes to the financial statements 1. Segmental information continued f) Significant country analysis UK US 2005 2004 2003 2005 2004 2003 £ million £ million £ million £ million £ million £ million Turnover 1 993.2 973.9 914.3 887.1 959.7 1,013.5 Total operating profit before exceptional items 1 85.5 112.9 110.4 41.7 21.5 31.3 Operating exceptional items 1 (5.1) – (5.0) (15.6) (14.8) (48.9) Operating profit 80.4 112.9 105.4 26.1 6.7 (17.6) Profit/(loss) on disposal of business – – – 13.2 (79.5) – Profit on disposal of fixed assets – 4.9 – 10.5 – – Capital employed 2 530.2 575.8 629.5 932.1 820.7 1,039.5 Capital expenditure 3 93.1 60.7 92.4 115.5 56.2 71.0 1. Including share of joint ventures and associates. 2. Capital employed comprises the capital and reserves of the Group, its long-term liabilities and all current borrowings net of cash and deposits. 3. Subsidiary undertakings only. 2. Profit and loss a) Analysis of costs 2005 2004 2003 i) Expense category £ million £ million £ million Cost of sales (2,161.6) (2,181.7) (2,137.9) Distribution costs (316.3) (317.7) (321.7) Administrative expenses 1 (861.0) (936.6) (913.2) Income from other fixed asset investments 0.1 0.2 1.7 Net operating expenses (1,177.2) (1,254.1) (1,233.2) Continuing operations before exceptional Exceptional items items 2 Total ii) 2005 analysis £ million £ million £ million Cost of sales (2,161.6) – (2,161.6) Distribution costs (316.3) – (316.3) Administrative expenses 1 (840.3) (20.7) (861.0) Income from other fixed asset investments 0.1 – 0.1 Net operating expenses (1,156.5) (20.7) (1,177.2) iii) 2004 analysis Cost of sales (2,181.7) – (2,181.7) Distribution costs (317.7) – (317.7) Administrative expenses 1 (921.8) (14.8) (936.6) Income from other fixed asset investments 0.2 – 0.2 Net operating expenses (1,239.3) (14.8) (1,254.1) iv) 2003 analysis Cost of sales (2,136.2) (1.7) (2,137.9) Distribution costs (318.6) (3.1) (321.7) Administrative expenses 1 (857.8) (55.4) (913.2) Income from other fixed asset investments 1.7 – 1.7 Net operating expenses (1,174.7) (58.5) (1,233.2) 1. Included in total administrative expenses is research and development expenditure of £43.2 million (2004: £41.6 million, 2003: £39.9 million). 2. All exceptional items arose in continuing operations.
Notes to the financial statements 97 2. Profit and loss continued b) Exceptional items analysis 2005 2004 2003 £ million £ million £ million Charged in arriving at operating profit Restructuring costs (6.8) (17.4) (23.8) Impairment of goodwill (13.9) – – Litigation settlement – – (43.2) Total operating exceptional items (20.7) (17.4) (67.0) i) Restructuring costs and impairment of goodwill £20.7 million has been charged in 2005 for restructuring in BOC Edwards.This comprises goodwill impairment of £13.9 million and severance costs.Savings of approximately £5 million are targeted from this restructuring during 2006. In 2004 following the sale of the packaged gas business in the US, costs of £14.8 million were incurred to restructure the footprint of the remaining business in the US.This covered the severance costs and other costs of restructuring those functions which are shared by BOC’s businesses in the US. Restructuring costs in 2004 also included a charge of £2.6 million (2003: £8.3 million) relating to the integration of BOC’s gases business and part of the Air Liquide business in Japan to form Japan Air Gases. The restructuring costs in 2003 related to various programmes including programmes under the business initiative announced in August 2001. The major programmes covered investments in information management systems, the restructuring of BOC Edwards’ manufacturing capacity and restructuring to deliver operational efficiencies in Process Gas Solutions and Industrial and Special Products.These programmes were completed in 2004. Cash flow from operating activities includes an outflow of £16.9 million (2004: £11.9 million, 2003: £28.3 million) in respect of the various restructuring programmes. ii) Litigation settlement An action was filed in the US against The BOC Group Cash Balance Retirement Plan (the Plan). It was alleged that the Plan improperly calculated lump sum distributions from the Plan in violation of the Employee Retirement Income Security Act. In November 2003, the parties reached an agreement to settle at US$69 million (£43.2 million).The settlement was approved by the court in March 2004.The full amount was provided in 2003 as an exceptional item.The settlement is being paid out of Plan assets. 2005 2004 2003 £ million £ million £ million Credited/(charged) after operating profit Profit on disposal of businesses – continuing operations 98.1 – – Loss on disposal of business – continuing operations – (79.5) – Profit on disposal of fixed assets – continuing operations 10.5 4.9 – Total non-operating exceptional items 108.6 (74.6) – iii) Disposal of businesses The sale of Afrox Healthcare Limited in South Africa was completed on 22 March 2005.African Oxygen Limited, BOC’s subsidiary in South Africa, retains a significant interest in the hospitals business through a 20 per cent holding in the new company.The gain on disposal was £84.9 million. The sale of the packaged gas business in the US was completed on 30 July 2004.The loss on disposal of £79.5 million in 2004 included the write-off of the assets associated with the business, severance and other disposal costs. It also included a goodwill write-off of £19.9 million, of which £15.3 million had been written off to reserves in the years up to, and including, 1998 in accordance with prevailing UK GAAP at that time. Part of the consideration was payable subject to certain conditions and accordingly was not recognised in 2004.This remaining consideration was received in November 2005 and has been recognised in 2005 as an exceptional item. iv) Profit on disposal of fixed assets The sale of an investment in the US in 2005 resulted in a profit of £10.5 million, which has been accounted for as an exceptional item.The sale of property in the UK in 2004 resulted in a profit of £4.9 million, which was accounted for as an exceptional item. c) Fees to auditors 2005 2004 2003 £ million £ million £ million Audit fees (Parent £0.3 million, 2004: £0.4 million, 2003: £0.4 million) 2.2 2.5 2.0 Non-audit fees Tax services – advisory 1.0 0.7 0.8 – compliance 0.2 0.4 0.8 Audit related services 1 1.9 0.9 0.5 Other services (expatriate administration services) 2 1.1 1.1 1.4 Total non-audit fees 4.2 3.1 3.5 Total fees paid to auditors 6.4 5.6 5.5 1. Audit related services include advice associated with the implementation of Section 404 of the US Sarbanes-Oxley Act 2002 and International Financial Reporting Standards.These services are treated as non-audit services in 2005. 2. The expatriate administration contract was signed in June 2001 for a five year period following a competitive tender process. 3. The audit fees for the Afrox hospitals business are £0.4 million for 2005.These fees are not included in the above figures for 2005 following the disposal by BOC’s South African subsidiary of its majority shareholding in Afrox Healthcare Limited in March 2005. BOC operates a number of policies designed to ensure auditor independence and objectivity.The audit committee is responsible for overseeing implementation of these policies including the review of all expenditure related to non-audit services.The audit committee, by delegation to the chairman of the audit committee, approves in advance any non-audit services and has approved a policy that prevents the use of the auditor for any services that could threaten the independence or objectivity of the audit.
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BOC Report and accounts 2005
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01 The BOC Group plc is a public li
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Financial highlights 03 Dividends p
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Chairman’s statement 05 Conduct a
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Chief executive’s review 07 Indus
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Board of directors 09 08 09 10 11 1
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Executive management board 11 09 10
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Group five year record 13 Capital e
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Group profile 15 Analysis of result
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Group profile 17 Principal industri
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Group profile 19 In China, signific
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Group profile 21 Sales opportunitie
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Employees 23 At 30 September 2005 t
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Employees 25 Retirement benefit pla
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Social, environmental and ethical p
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Research, development and informati
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Risk factors 39 BOC relies on devel
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Operating review 41 Exceptional ite
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Operating review (comparing 2005 wi
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Page 57 and 58: Financial review 55 Net debt/equity
Page 59 and 60: Financial review 57 The balance she
Page 61 and 62: Financial review 59 Manganese litig
Page 63 and 64: Financial review 61 Current asset p
Page 65 and 66: Financial review 63 Average exchang
Page 67 and 68: Corporate governance 65 During the
Page 69 and 70: Corporate governance 67 Performance
Page 71 and 72: Corporate governance 69 During the
Page 73 and 74: Corporate governance 71 There is a
Page 75 and 76: Report on remuneration 73 Variable
Page 77 and 78: Report on remuneration 75 Current m
Page 79 and 80: Report on remuneration 77 Individua
Page 81 and 82: Report on remuneration 79 Executive
Page 83 and 84: Report on remuneration 81 Opening m
Page 85 and 86: Report on remuneration 83 Mr Médor
Page 87 and 88: Report by the independent auditors
Page 89 and 90: Group balance sheet At 30 September
Page 91 and 92: Total recognised gains and losses Y
Page 93 and 94: Accounting policies 91 General •
Page 95 and 96: Notes to the financial statements 9
Page 97: Notes to the financial statements 9
Page 141 and 142: Group undertakings 139 Principal Gr
Page 143 and 144: Shareholder information 141 The tab
Page 145 and 146: Shareholder information 143 Taxatio
Page 147 and 148: Shareholder information 145 Payment
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Glossary of terms 147 Terms used in
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©The BOC Group plc 2005. Designed
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