BOC Report and accounts 2005 - Alle jaarverslagen

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.