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EXHIBIT 14.2
The Company’s responses to the requirements of Form 20-F have been incorporated into this annual report by reference to the Company’s Report on Form 6-K dated December 6, 2004 which contains the Company’s Report and Accounts 2004. Pursuant to Rule 12b-23(a) of the Securities Exchange Act of 1934, the information incorporated into this annual report by reference to such Form 6-K is attached as an exhibit hereto.
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BOC |
The BOC Group plcReport and accounts 2004 |
REPORT AND ACCOUNTS 2004 |
Report of the directors
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Financial statements
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Shareholder information
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THE BOC GROUP plc IS A PUBLIC LIMITED COMPANY LISTED ON THE LONDON AND NEW YORK STOCK EXCHANGES AND REGISTERED IN ENGLAND. THIS IS THE REPORT AND ACCOUNTS FOR THE YEAR ENDED 30 SEPTEMBER 2004. IT COMPLIES WITH UK REGULATIONS AND INCORPORATES THE ANNUAL REPORT ON FORM 20-F FOR THE SECURITIES AND EXCHANGE COMMISSION TO MEET US REGULATIONS. AN ANNUAL REVIEW AND SUMMARY FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2004 HAS BEEN ISSUED TO ALL SHAREHOLDERS WHO HAVE NOT ELECTED TO RECEIVE THIS REPORT AND ACCOUNTS. |
Cautionary statement |
The report and accounts includes ‘forward-looking information’ within the meaning of section 27A of the US Securities Act of 1933 (the ‘Securities Act’), as amended, and section 21E of the US Securities Exchange Act of 1934 (the ‘Exchange Act’), as amended. Certain sections of this annual report including, without limitation, those concerning (i) the company’s strategies, (ii) the company’s research and product development, and information technology, (iii) the company’s investments, (iv) commencement of operations of new plants and other facilities, (v) efficiencies, including cost savings, for the company resulting from business reviews and reorganisations, (vi) management’s view of the general development and competition in the economies and markets in which it does, or plans to do, business, (vii) management’s view of the competitiveness of its products and services, and (viii) the company’s liquidity, capital resources and capital expenditure, contain certain forward-looking statements concerning the company’s operation, economic performance and financial condition. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic conditions, changes in the level of capital investment by the semiconductor industry, success of business and operating initiatives and restructuring objectives, changes in the regulatory environment, outcome of litigation, other government actions, natural phenomena such as floods and earthquakes, customer strategies and stability, and fluctuations in interest and exchange rates. |
Financial year |
Throughout the report and accounts, reference to ‘2004’ in the text means the financial year ended 30 September 2004. Similarly, references to other years, eg ‘2005’,’2003’ and ‘2002’, also mean the financial years to 30 September unless stated otherwise. |
01 The BOC Group plcAnnual report and accounts 2004 |
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BOARD OF DIRECTORS
Rob Margetts CBEnp(01)
58, chairman.
Appointed chairman in January 2002. He is chairman of Legal & General Group plc, a non-executive director of Anglo American plc and chairman of the Natural Environment Research Council. Previously he was with ICI PLC for 31 years, becoming a main board director in 1992 and vice chairman in 1998. He is a fellow of both the Royal Academy of Engineering and the Institution of Chemical Engineers.
Tony Isaacnp4ê(02)
62, chief executive.
Appointed an executive director in October 1994 and became chief executive in May 2000. He was previously finance director of Arjo Wiggins Appleton plc, which he joined shortly before the demerger from BAT Industries p.l.c. in 1990. Prior to that he had been finance director of GEC Plessey Telecommunications Ltd since its formation in 1988. He is a non-executive director of International Power plc and Schlumberger Ltd.
Julie Baddeleylmnp(03)
53, non-executive director.
Appointed in May 2001. She was an executive director of Woolwich plc until October 2000, responsible for e-commerce, information technology and human resources, and was previously head of change management for Maritime Region, Accenture. She is a non-executive director of the Yorkshire Building Society, the Government Pensions Group and director of four venture capital trusts. She is also an Associate Fellow of Templeton College, Oxford and a Companion of the Institute of Management. She has an MA honours degree in zoology from Oxford University.
John Bevan4ê(04)
47, chief executive, Process Gas Solutions.
Appointed an executive director in December 2002. He joined BOC in 1978 as a graduate in the Australian gases business and has held various positions in general management in Australia, Korea,Thailand and the UK. He was formerly chief executive Asia. He has a degree in commerce (marketing) from the University of New South Wales.
Andrew Bonfieldlmn(05)
42, non-executive director.
Appointed in July 2003. He is senior vice-president and chief financial officer of Bristol-Myers Squibb Company. He qualified as a chartered accountant in South Africa, working for Price Waterhouse, before joining SmithKline Beecham in 1990 and rising to become chief financial officer in 1999. He joined BG Group plc in 2001 as executive director, finance, before assuming his current role at Bristol-Myers Squibb Company in September 2002.
Guy Dawsonlmnp(06)
51, non-executive director.
Appointed in March 2004. He was chairman of European investment banking at Merrill Lynch until 2003. Before joining Merrill Lynch in 1995 he held senior positions in Morgan Grenfell and Deutsche Bank. He is a partner in Tricorn, an independent corporate advisory business that he co-founded in 2003, and he is also a non-executive director of Boots Group PLC.
René Médorip4ê(07)
47, group finance director.
Appointed an executive director in July 2000. He joined BOC in 1987 and has held several finance appointments in the Group. He was appointed finance director of BOC’s gases business in the Americas in 1997. Before joining BOC, he worked for Accenture and Schlumberger Ltd. He is a non-executive director of Scottish & Southern Energy plc. He is a finance graduate of the Université de Paris-Dauphine and has a doctorate degree in economics.
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Board of directors
Matthew Miaulmn(08)
58, non-executive director.
Appointed in January 2002. He is chairman of MiTAC-Synnex Group, one of Taiwan’s leading high-tech industrial groups. He is also a Convenor of Civil Advisory Committee of National Information and Communications Initiatives (NICI) and on the Board of Directors of the Institute for Information Industry (III),Taiwan. He obtained a BS in electronic engineering and computer science from U.C. Berkeley, an MBA from Santa Clara University and holds an honorary doctorate degree from the National Chiao Tung University,Taiwan.
Iain Napierlmn(09)
55, non-executive director.
Appointed in May 2004. He is chief executive of Taylor Woodrow plc and a non-executive director of Imperial Tobacco Group PLC. Previously, he was chief executive of Bass Brewers, a director of Bass plc and a member of the executive management committee of Interbrew SA.
Sir Christopher O’Donnelllmn(10)
58, non-executive director.
Appointed in March 2001. He is chief executive of Smith & Nephew plc. Previously he held senior positions with Davy Ashmore,Vickers Limited and C R Bard Inc. He has an honours degree in mechanical engineering from Imperial College, London and an MBA from the London Business School. He is a chartered engineer and a member of the Institution of Mechanical Engineers.
Anne Quinn CBElmn(11)
53, non-executive director.
Appointed in May 2004. She is group vice president of BP’s gas, power and renewables business. Previously she was managing director of BP Gas Marketing Ltd, managing director of Alliance Gas Ltd and an executive with Standard Oil of Ohio. She serves on the President’s Advisory Committee to the Sloan School, Massachusetts Institute of Technology.
Dr ‘Raj’ Rajagopal4ê(12)
51, chief executive, BOC Edwards.
Appointed an executive director in July 2000. He joined BOC in 1981 and has held several positions in BOC Edwards including manufacturing systems manager, director of manufacturing and managing director, being appointed chief executive in 1998. He was appointed a non-executive director of FSI International Inc in January 2001 and in June 2004 he joined the board of the business support organisation, Sussex Enterprise. He was appointed to The Council of Science and Technology in March 2004. He is a Fellow of the Royal Academy of Engineers as well as the Institution of Mechanical Engineers, the Institution of Electrical Engineers and the Chartered Management Institute. He has an MSc in manufacturing technology and a PhD in mechanical engineering both from Manchester University and an honorary degree from Cranfield University received in May 2004. He was awarded the Sir Eric Mensforth Manufacturing Gold Medal in March 2003.
John Walsh4ê(13)
49, chief executive, Industrial and Special Products.
Appointed an executive director in July 2001. He was previously president, Process Gas Solutions, north America. He joined BOC in 1986 as vice president, special gases and has held various senior management positions in the Group, including president, BOC Process Plants. He has a BA in economics from Harvard College and an MBA from Harvard Business School.
Board committees l Audit committee m Remuneration committee n Nomination committee p Pensions committee 4 Executive management board ê Investment committee |
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EXECUTIVE
MANAGEMENT BOARD
John Bevan (01)
47, chief executive, Process Gas Solutions since January 2003.
Appointed to the executive management board in June 2000. See page 08 for biographical details.
Nick Deeming (02)
50, group legal director and company secretary since May 2001.
Appointed to the executive management board in May 2001. He has over 17 years in-house counsel experience, including Schlumberger SEMA and Axa PPP Healthcare, specialising in corporate and commercial law. He has a degree in law from Guildhall University, an MBA from Cranfield University and qualified as a solicitor in 1980.
Stephen Dempsey (03)
53, group director, corporate relations since February 1999.
Appointed to the executive management board in October 1999. He joined BOC in 1990 as director of marketing services for the UK gases business and has held various communications roles in the Group. He has an MA in geography from Oxford University and an MBA from Cranfield University.
Peter Dew (04)
44, group director, information management since February 1998.
Appointed to the executive management board in October 1999. He joined BOC in 1986. He has held information technology roles in the Group’s businesses in South Africa, the UK and most recently as information management director for the Group’s businesses in Asia/Pacific.
Tony Isaac (05)
62, chief executive since May 2000.
Appointed to the executive management board in July 1996. See page 08 for biographical details.
Rob Lourey (06)
47, group human resources director since June 2000.
Appointed to the executive management board in June 2000. He joined BOC in Australia in 1996 and most recently was human resources director for Asia/Pacific. Since October 2003 he has been a non-executive director of Michael Page International PLC. He has a bachelor of business degree in personnel management.
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Executive management board
Kent Masters (07)
43, president, Process Gas Solutions, north America, since July 2001.
Appointed to the executive management board in December 2002. He joined BOC in 1985 and has held positions of increasing responsibility in engineering, marketing and general management, most recently, president, BOC Process Plants. He holds an engineering degree from Georgia Institute of Technology and an MBA from New York University.
René Médori (08)
47, group finance director since June 2000.
Appointed to the executive management board in June 2000. See page 08 for biographical details.
Mark Nichols (09)
47, group director, business development since January 2004.
Appointed to the executive management board in January 2004. He joined BOC in February 1988 and held senior financial roles in the UK and US before moving into general management, most recently as managing director, Industrial and Special Products, East Asia. Before joining BOC he worked for Total Oil and Merck. He is a Fellow of the Association of Chartered Certified Accountants.
Dr ‘Raj’ Rajagopal (10)
51, chief executive, BOC Edwards since June 1998.
Appointed to the executive management board in July 1996. See page 09 for biographical details.
John Walsh (11)
49, chief executive, Industrial and Special Products since June 2001.
Appointed to the executive management board in June 2000. See page 09 for biographical details.
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GROUP FIVE YEAR RECORD
Turnover
Profit before tax
Adjusted profit before tax4
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||||
Profit and loss | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||
Turnover1 | 3,579.7 | 3,772.9 | 3,657.7 | 3,718.3 | 3,885.4 | |||||||||||||||||
Total operating profit before exceptional items2 | 496.4 | 530.6 | 500.1 | 505.6 | 576.9 | |||||||||||||||||
Exceptional items | (4.4 | ) | (108.3 | ) | (74.5 | ) | (67.0 | ) | (17.4 | ) | ||||||||||||
Total operating profit2 | 492.0 | 422.3 | 425.6 | 438.6 | 559.5 | |||||||||||||||||
Profit/(loss) on termination/disposal of businesses | 12.5 | — | (20.2 | ) | — | (79.5 | ) | |||||||||||||||
Profit on disposal of fixed assets | — | 3.6 | — | — | 4.9 | |||||||||||||||||
Profit before interest | 504.5 | 425.9 | 405.4 | 438.6 | 484.9 | |||||||||||||||||
Interest on net debt | (111.5 | ) | (123.4 | ) | (103.1 | ) | (96.1 | ) | (88.4 | ) | ||||||||||||
Interest on pension scheme liabilities | (100.7 | ) | (107.2 | ) | (106.1 | ) | (110.2 | ) | (117.4 | ) | ||||||||||||
Expected return on pension scheme assets | 149.5 | 166.9 | 139.1 | 119.6 | 133.2 | |||||||||||||||||
Other net financing income | 48.8 | 59.7 | 33.0 | 9.4 | 15.8 | |||||||||||||||||
Profit before tax | 441.8 | 362.2 | 335.3 | 351.9 | 412.3 | |||||||||||||||||
Tax on profit on ordinary activities | (135.2 | ) | (104.6 | ) | (106.2 | ) | (96.4 | ) | (101.7 | ) | ||||||||||||
Profit after tax | 306.6 | 257.6 | 229.1 | 255.5 | 310.6 | |||||||||||||||||
Minority interests | (28.0 | ) | (33.5 | ) | (26.2 | ) | (36.4 | ) | (46.6 | ) | ||||||||||||
Profit for the financial year | 278.6 | 224.1 | 202.9 | 219.1 | 264.0 | |||||||||||||||||
Earnings per 25p Ordinary share | ||||||||||||||||||||||
Basic: | ||||||||||||||||||||||
– on profit for the financial year | 57.2 | p | 46.0 | p | 41.4 | p | 44.5 | p | 53.5 | p | ||||||||||||
– before exceptional items | 53.5 | p | 57.5 | p | 55.9 | p | 52.9 | p | 63.2 | p | ||||||||||||
Diluted: | ||||||||||||||||||||||
– on profit for the financial year | 56.9 | p | 45.9 | p | 41.2 | p | 44.5 | p | 53.5 | p | ||||||||||||
– before exceptional items | 53.3 | p | 57.3 | p | 55.7 | p | 52.9 | p | 63.1 | p | ||||||||||||
Ordinary dividends per share3 | ||||||||||||||||||||||
Actual | 35.0 | p | 37.0 | p | 38.0 | p | 39.0 | p | 40.0 | p | ||||||||||||
Number of fully paid Ordinary shares in issue at the year end (million) | 492.2 | 494.4 | 497.3 | 497.7 | 498.8 | |||||||||||||||||
1. | Subsidiary undertakings only. | |
2. | Including share of operating profit of joint ventures and associates. | |
3. | Dividends paid in the calendar year. | |
4. | Excludes exceptional items. A fuller explanation of the term ‘adjusted’, and the reasons for presenting such a measure, is given in the operating review on pages 34 and 35. A reconciliation of adjusted profit before tax to profit before tax is given in the profit and loss account on page 78. A reconciliation of adjusted return on capital employed to return on capital employed is given in the operating review on page 35. |
All turnover and operating profit arose from continuing operations.
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Group five year record
Capital employed
Capital expenditure
2000 | 2001 | 2002 | 2003 | |||||||||||||||||
(restated) | (restated) | (restated) | (restated) | 2004 | ||||||||||||||||
Balance sheet | £ million | £ million | £ million | £ million | £ million | |||||||||||||||
Fixed assets | ||||||||||||||||||||
– intangible assets | 49.2 | 48.1 | 150.7 | 206.1 | 174.9 | |||||||||||||||
– tangible assets | 3,294.0 | 3,168.6 | 3,027.4 | 2,913.4 | 2,618.4 | |||||||||||||||
– joint ventures, associates and other investments | 395.8 | 390.3 | 426.1 | 608.6 | 548.2 | |||||||||||||||
Working capital | ||||||||||||||||||||
(excluding bank balances and short-term loans) | 282.8 | 257.0 | 203.1 | 220.1 | 154.5 | |||||||||||||||
Deferred tax provisions | (295.8 | ) | (294.3 | ) | (291.8 | ) | (279.2 | ) | (253.0 | ) | ||||||||||
Other non current liabilities and provisions | (181.4 | ) | (184.3 | ) | (173.7 | ) | (145.8 | ) | (126.9 | ) | ||||||||||
Net borrowings and finance leases | (1,308.4 | ) | (1,272.1 | ) | (1,325.6 | ) | (1,368.1 | ) | (962.4 | ) | ||||||||||
Net assets excluding pension assets and liabilities | 2,236.2 | 2,113.3 | 2,016.2 | 2,155.1 | 2,153.7 | |||||||||||||||
Pension assets5 | 402.0 | 107.0 | 54.3 | 50.7 | 68.9 | |||||||||||||||
Pension liabilities5 | (31.1 | ) | (56.0 | ) | (311.0 | ) | (341.8 | ) | (344.5 | ) | ||||||||||
Net assets including pension assets and liabilities | 2,607.1 | 2,164.3 | 1,759.5 | 1,864.0 | 1,878.1 | |||||||||||||||
Shareholders’ capital and reserves | 2,333.5 | 2,026.7 | 1,641.6 | 1,686.7 | 1,675.3 | |||||||||||||||
Minority shareholders’ interests | 273.6 | 137.6 | 117.9 | 177.3 | 202.8 | |||||||||||||||
Total capital and reserves | 2,607.1 | 2,164.3 | 1,759.5 | 1,864.0 | 1,878.1 | |||||||||||||||
Other selected financial information | ||||||||||||||||||||
Capital employed6 | ||||||||||||||||||||
Total capital and reserves | 2,607.1 | 2,164.3 | 1,759.5 | 1,864.0 | 1,878.1 | |||||||||||||||
Non current liabilities and provisions | 477.2 | 478.6 | 465.5 | 425.0 | 379.9 | |||||||||||||||
Net borrowings and finance leases7 | 1,308.4 | 1,272.1 | 1,325.6 | 1,368.1 | 962.4 | |||||||||||||||
4,392.7 | 3,915.0 | 3,550.6 | 3,657.1 | 3,220.4 | ||||||||||||||||
Total assets | 5,557.8 | 5,000.5 | 4,904.9 | 4,883.7 | 4,665.7 | |||||||||||||||
Long-term liabilities and provisions | 1,399.0 | 1,554.5 | 1,897.5 | 1,851.5 | 1,652.9 | |||||||||||||||
Capital expenditure1 | 413.7 | 352.6 | 354.3 | 281.2 | 256.1 | |||||||||||||||
Depreciation and amortisation1 | 313.3 | 329.5 | 330.9 | 333.4 | 324.0 | |||||||||||||||
Employees | ||||||||||||||||||||
UK | 9,929 | 10,597 | 11,266 | 10,414 | 10,682 | |||||||||||||||
Overseas | 32,780 | 32,574 | 35,014 | 34,093 | 32,701 | |||||||||||||||
Continuing operations | 42,709 | 43,171 | 46,280 | 44,507 | 43,383 | |||||||||||||||
Ratios | ||||||||||||||||||||
Return on capital employed8 | 12.6 | % | 10.4 | % | 10.6 | % | 10.9 | % | 14.9 | % | ||||||||||
Adjusted return on capital employed4,9 | 12.7 | % | 13.1 | % | 12.5 | % | 12.6 | % | 15.4 | % | ||||||||||
Net debt/capital employed | 29.8 | % | 32.5 | % | 37.3 | % | 37.4 | % | 29.9 | % | ||||||||||
Net debt/equity | 50.2 | % | 58.8 | % | 75.3 | % | 73.4 | % | 51.2 | % | ||||||||||
5. | Pension assets represents the excess of pension assets over pension liabilities in countries where pension assets exceed pension liabilities. Pension liabilities represents the excess of pension liabilities over pension assets in countries where pension liabilities exceed pension assets. | |
6. | As defined in note 1 b) to the financial statements. | |
7. | Analysed for 2004 and 2003 in note 20 to the financial statements. | |
8. | Operating profit as a percentage of the average capital employed excluding net pension liabilities. The average is calculated on a monthly basis. | |
9. | Operating profit before exceptional items as a percentage of the average capital employed excluding net pension liabilities. The average is calculated on a monthly basis. |
Information for years 2000 to 2003 has been restated to be on a comparable basis with 2004 following the application of UITF37 and UITF38 in 2004, as explained on page 83.
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GROUP PROFILE
Introduction
Analysis of results by business
(including share of joint ventures and associates)
Turnover | Operating profit | Adjusted operating profit | ||||||||||||||||||||||
£ million | % | £ million | % | £ million | % | |||||||||||||||||||
Process Gas Solutions | 1,275.2 | 28 | 189.5 | 34 | 190.3 | 33 | ||||||||||||||||||
Industrial and Special Products | 1,782.3 | 39 | 253.9 | 45 | 269.5 | 47 | ||||||||||||||||||
BOC Edwards | 816.5 | 18 | 46.8 | 8 | 47.8 | 8 | ||||||||||||||||||
Afrox hospitals | 432.1 | 9 | 59.8 | 11 | 59.8 | 11 | ||||||||||||||||||
Gist | 293.2 | 6 | 25.1 | 5 | 25.1 | 4 | ||||||||||||||||||
Corporate | – | – | (15.6 | ) | (3 | ) | (15.6 | ) | (3 | ) | ||||||||||||||
4,599.3 | 100 | 559.5 | 100 | 576.9 | 100 | |||||||||||||||||||
The BOC Group contributes to the economies of some 50 countries throughout the world. The UK is the largest single source of sales revenue for the Group’s products and services, followed by the US. Other major geographic areas for the Group are Australia, South Africa, Japan and other markets in the Asia/Pacific region. The business therefore operates from a broad geographical base with local manufacturing in most of the key overseas markets.
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Group profile
Analysis of results by region
(including share of joint ventures and associates)
Turnover | Operating profit | Adjusted operating profit | ||||||||||||||||||||||
£ million | % | £ million | % | £ million | % | |||||||||||||||||||
Europe | 1,224.6 | 27 | 155.4 | 28 | 155.4 | 27 | ||||||||||||||||||
Americas | 1,218.3 | 26 | 62.6 | 11 | 77.4 | 13 | ||||||||||||||||||
Africa | 699.0 | 15 | 108.9 | 19 | 108.9 | 19 | ||||||||||||||||||
Asia/Pacific | 1,457.4 | 32 | 232.6 | 42 | 235.2 | 41 | ||||||||||||||||||
4,599.3 | 100 | 559.5 | 100 | 576.9 | 100 | |||||||||||||||||||
The UK accounts for the largest part of the Group’s activities in Europe but BOC has significant gases subsidiaries in Ireland and Poland, vacuum products manufacturing in France and a pharmaceutical packaging machinery operation in the Netherlands.
Management organisation
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Group profile
The segment reporting as Afrox hospitals operates through Afrox Healthcare Limited, which is quoted on the Johannesburg Stock Exchange. It owns and manages private hospitals and clinics in southern Africa. Additional services include a direct medicines service for chronic medication, occupational health services, nursing training, pharmacy management and laboratory services. BOC’s majority-owned subsidiary, African Oxygen Limited (Afrox), holds 69 per cent of Afrox Healthcare Limited (AHealth). In July 2003 Afrox announced that it was in the process of considering its strategic options with regard to its shareholding in AHealth. On 17 November 2003, Afrox announced that it had agreed to sell its entire holding in AHealth to a consortium led by two major black economic empowerment investors. The sale remains subject to approval by the South African Competition Tribunal, at which closing hearings are currently scheduled for March 2005. In addition an application has been brought in the South African High Court by two shareholders in Afrox Healthcare Limited to have the Scheme of Arrangement, by which the disposal would be implemented, declared to have lapsed. This application, which is being opposed, is currently due to be heard in the week commencing 29 November 2004.
Corporate development
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Group profile
In June 2003, BOC announced an agreement to obtain half the output of a new helium extraction facility to be constructed in Qatar. Deliveries from the new source are scheduled to commence in July 2005.
Industrial gases
Industry structure and consolidationThe industrial gases business is capital-intensive, with increasing demand, together with economies of scale, leading to the need for large production units and distribution networks. The need for fixed asset investments, the trend towards global customers and the benefits from the transfer of applications technology worldwide have resulted in the business being handled by a relatively small number of companies internationally.
Principal industrial gas productsNitrogen possesses two key characteristics that make it the world’s most widely used and versatile industrial gas. Nitrogen is almost inert and when liquefied it is intensely cold. This makes liquid nitrogen a highly effective, versatile and non-polluting agent for freezing and chilling.
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Group profile
Carbon dioxide supplied by BOC is obtained as a by-product from other companies’ manufacturing processes, from natural sources or recovered in the generation process for hydrogen or syngas and put to constructive use. Solid carbon dioxide is, like liquid nitrogen, used for chilling and freezing in the food industry. As a gas it is used to carbonate and dispense beverages of all kinds.
Production of industrial gasesOxygen was first extracted from the atmosphere by a chemical process. This was superseded over 80 years ago by the cryogenic (low temperature) process involving the liquefaction and distillation of air. The cryogenic process is still by far the most widely used, but non-cryogenic techniques (pressure swing adsorption and membrane diffusion), which were first developed during the 1970s, are becoming increasingly significant for smaller or less demanding on-site applications.
Distribution of industrial gasesIndustrial gases may be supplied to customers in a variety of ways; through pipelines from on-site or nearby cryogenic or non-cryogenic plants, by deliveries of liquefied gases in road or rail tankers, in portable cryogenic containers or in cylinders (also called compressed or packaged gases).
Business segments
Process Gas Solutions (PGS)
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Group profile
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Group profile
Industrial and Special Products (ISP)
Business developmentIn April 2002, BOC acquired Matheson Gas Products Canada Inc, one of Canada’s leading providers of special gases and equipment. Unique Gas and Petrochemicals Public Company Limited (UGP), a leading distributor of liquefied petroleum gas (LPG) and ammonia in Thailand, was acquired in May 2002. BOC’s associated company in Malaysia acquired 35.6 per cent of the gases company Nissan Industrial Oxygen Inc (NIOI) in March 2002 and, following a tender offer, increased its holding to 100 per cent in September 2002. At the end of August 2002, BOC announced an agreement to purchase Praxair’s Polish gases business. The transaction was completed in January 2003 following approval by the Polish competition authority. The business acquired includes a high proportion of ISP sales.
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Group profile
BOC Edwards
Business developmentThroughout the period 2002 to 2004, new ranges of dry pumps for the semiconductor industry were introduced as well as a comprehensive new range of exhaust management products. These new products meet the needs of 300mm wafer and flat panel manufacturing facilities.
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Group profile
BOC Edwards’ range of electronic materials in Asia was expanded in 2004 with the addition of ultra-pure wet chemicals through a partnership with Asia Union Electronic Chemical Corporation (AUECC) and through that company with Huayi, a chemical manufacturer in China.
Afrox hospitals
69 per cent interest. This disposal was in accordance with the terms of the transaction between Afrox and PresMed that took place in 1999.
Gist
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EMPLOYEES
At 30 September 2004 the Group had 43,383 employees (2003: 44,507 employees, 2002: 46,280 employees). During the year the disposal of the US packaged gas business resulted in the successful transfer of over 1,000 employees to the new owner. Employees of the company and its subsidiaries were located as follows:
Europe | 12,712 | |||
Americas | 6,283 | |||
Africa | 16,790 | |||
Asia/Pacific | 7,598 | |||
Unplanned employee turnover remains low and as a result the employee base remains stable. BOC invests time and energy in developing the potential of its people. Opportunities are reviewed and discussed with identified individuals to provide cross-line of business experience or to set up a range of functional and geographical assignments. This contributes to BOC’s success in retaining and developing the core skills and capabilities it needs to meet its business, customer service and health and safety targets. BOC regularly reviews its succession planning processes and the availability of essential capabilities. Results show it has solid capability in most areas and adequate succession depth to meet both its technical and leadership requirements.
Employee satisfaction and commitment
Employment policies and Code of Conduct
Communication and involvement
Resourcing, training and development
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Employees
BOC continued to place great emphasis on personal and career development over the past year. Employees are encouraged to be proactive about their future careers and development opportunities. The aim is for all employees to have regular discussions with their managers regarding their aspirations, prospects and development needs. These result in the formulation of an individual development plan, which is an agreed course of action to meet employees’ needs as well as the needs of the organisation. The GROW process not only aids the development of individual development plans but also performance management. Action plans can be developed and monitored incorporating input from 360 degree appraisals. BOC offers many opportunities for career and personal development. Employee development takes the form of on-the-job coaching and training, development projects, secondments, e-learning, as well as more traditional classroom-based training.
Reward and recognition
Retirement benefit plans
Diversity
Employee share schemes
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SOCIAL, ENVIRONMENTAL AND ETHICAL PERFORMANCE
Exercising sound corporate responsibility is fundamental to the way BOC operates. The Group aims always to behave ethically and to manage risk strategically. It has a process for identifying, evaluating and managing all risks in accordance with best practice.
Executive responsibility
The Code of Conduct
• | setting minimum and consistent standards around the world; | |
• | communicating Group priorities, principles and standards to all employees; | |
• | stakeholder engagement to identify, prioritise and respond to key issues; | |
• | training for employees; | |
• | setting standards for agents, consultants, distributors and suppliers through the Group’s ethical purchasing policy; | |
• | managing Group performance in line with the code; | |
• | assurance, using the Group’s business assurance audit/risk management, SHEQ and HR functions as well as external auditors where appropriate. |
This year the Group moved from the code’s implementation phase into its sustainability phase. This is aimed at further embedding the code and so far as possible measuring the Group’s performance against standards laid down by the code.
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Social, environmental and ethical performance
BOC’s global management system (IMSS)
Stakeholders
Identifying and prioritising SEE risks
Managing corporate responsibility performance
Safety, health and the environment
• | updated its safety, health and environment policy; | |
• | launched Safety in BOC focusing on key safety behaviours across the organisation; | |
• | continued to conduct its audit programme of safety standards and assessment of the organisation’s safety culture. Annual safety action plans are derived from these processes, and integrated into individual and business performance contracts; | |
• | continued to conduct its annual environment survey. Annual environmental action plans are derived from the survey’s results, which are integrated into individual and business performance contracts; | |
• | commenced the sustainability phase of its Code of Conduct programme, ensuring that SHEQ considerations continue to be reinforced and integrated into the organisation’s legal and ethical framework. |
Along with the Code of Conduct and the Group’s ACTS operating principles, Safety in BOC ensures that SHEQ issues are managed consistently across all countries and businesses.
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Social, environmental and ethical performance
Overall safety performance
20031 | 20041 | |||||||
Lost workday case rate | 0.45 | 0.41 | ||||||
Total recordable case rate | 1.18 | 1.18 | ||||||
Passenger car avoidable accident rate | 1.99 | 2.12 | ||||||
Truck avoidable accident rate | 2.75 | 2.38 | ||||||
Lost workday case rate
Total recordable case rate
Passenger car avoidable accidents per million miles
Truck avoidable accidents per million miles
1. | 2003 and 2004 safety statistics include mergers, acquisitions and all joint ventures. Previous years have not been restated. |
Safety
• | lost workday case rate (LWCR) per 200,000 hours. This includes all accidents resulting in the loss of one complete day of work, according to best international practice. Many companies only report cases resulting in three or more lost workdays as deemed reportable under RIDDOR regulations; | |
• | total recordable case rate (TRCR) per 200,000 hours. This includes all LWCRs and medical treatment cases; | |
• | passenger car avoidable accident rate (PCAAR) per million miles; | |
• | truck avoidable accident rate (TAAR) per million miles. |
Occupational health and hygiene
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Social, environmental and ethical performance
Non-compliances
Hazardous waste
Ozone depleting potential substance release (solvents and refrigerants)
General waste disposal 2004
Total 26,675 tonnes
Types of general waste
Total 26,675 tonnes
Employees have access to guidance on OH from qualified SHEQ managers. This is supported by a range of training programmes, manuals, videos and safety data sheets, which are available through local and global SHEQ functions and on dedicated SHEQ intranet sites.
• | exposure to noise from gas compression activities and from cylinder handling; | |
• | potential exposure to some gases filled into cylinders; | |
• | potential exposure to chemicals used in metal cleaning; | |
• | painting operations; | |
• | ergonomic and manual handling risks. |
OH programmes have been developed to deal with these issues and are applied across the Group. BOC programmes include: a new OH service with a global provider to enhance the emergency care given to BOC business travellers taken ill away from home; an AIDS/HIV prevention, treatment and care programme for employees in southern Africa; an education programme to raise awareness of the effects of noise; a manual handling training video; a legionella control programme for water systems such as cooling towers present on sites; a programme for the assessment of manual handling and display screen equipment to minimise ergonomic health risks; a chemical assessment and management programme; and specific work to reduce the use of solvents. The last includes a new training video addressing the specific hazards of using chemicals to clean plant and equipment for use with oxygen.
The environment
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Social, environmental and ethical performance
1. | BOC’s methodology is consistent with all major point sources of carbon dioxide emissions within Scope 1 of the World Business Council for Sustainable Development and the World Resources Institute (March 2004) and all major sources of carbon dioxide emissions under Scope 2 of the protocol. The figure does not include non-carbon dioxide global warming gases (N2O, SF6, CH4, PFCs and HFCs), freight and logistics and minor sources such as business travel, office electricity at small sites and decomposition of wastes and carbon dioxide emissions associated with heat and steam imported to BOC plants. |
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RESEARCH, DEVELOPMENT AND INFORMATION TECHNOLOGY
Research and development (R&D)
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Research, development and information technology
BOC Edwards, assisted by Gist technology, has developed supply chain management for gases and chemicals and won a major contract from a leading microprocessor manufacturer. Total materials management and total gas and chemical management capability are part of an innovative and broad service offering. The use of enhanced metal and dielectric coatings on process tool parts has helped reduce customer cost of ownership.
Information technology
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RISK FACTORS
This document contains certain forward-looking statements which involve risk and uncertainty as they relate to future events and circumstances. The following risk factors, as well as those discussed on page 50 of the financial review could cause actual results to differ materially from those expressed or implied by these forward-looking statements:
BOC is affected by the semiconductor business cycle
Acquisitions may not be successful in achieving intended benefits and synergies
• | delays or difficulties in completing the integration of acquired companies or assets; | |
• | higher than expected costs or a need to allocate resources to manage unexpected operating difficulties; | |
• | diversion of the attention and resources of BOC’s management; | |
• | inability to retain key employees in acquired companies; | |
• | inability to retain key customers; | |
• | assumption of liabilities unrecognised in due diligence. |
The growth of BOC’s gases business will depend on the ability to win and execute large projects profitably
• | failure to complete the project on time owing to unforeseen construction problems (which may require BOC to pay penalties under the terms of the customer contract); | |
• | failure of the plant to deliver the contracted volumes and quantities of product required by the customer because of design errors or errors in manufacturing or construction (which may require BOC to pay penalties under the terms of the customer contract); | |
• | inability to operate the plant at costs assumed in BOC’s financial evaluation of the project. |
The safety of BOC’s operations is critical to success
• | fines and penalties for breaches of safety laws; | |
• | liability payments and costs to employees or third parties arising from injury or damage; | |
• | exclusion from certain market sectors deemed important for future development of the business (such as medical gases); | |
• | damage to reputation. |
BOC operates in over 50 different countries and is therefore exposed to economic, political and business risks associated with international operations
BOC relies on development of, or access to, technology to support business growth
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Risk factors
BOC operates in a highly competitive environment
Recognising and anticipating changes in the manufacturing economy is key to BOC’s success
BOC’s success depends to a significant extent on its key personnel and employees
Litigation may have an adverse impact on financial results
Increased energy costs could reduce profitability
Implementation of computer software systems is a key success factor for BOC
Further consolidation between major competitors may impact BOC’s competitive position
• | an uncompetitive cost base for large projects; | |
• | an inability to participate in further consolidation due to competition concerns; | |
• | retention and/or recruitment of key personnel; | |
• | weakened geographical positions. |
Managing joint venture relationships is a key success factor for BOC
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OPERATING REVIEW
Introduction
Impact of currency movements
Impact of | 2002 results | Impact of | 2003 results | |||||||||||||||||||||
2002 results | movements | (at 2003 rates | 2003 results | movements | (at 2004 rates | |||||||||||||||||||
(as reported) | in currency | of exchange) | (as reported) | in currency | of exchange) | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Turnover (including share of joint ventures and associates) | ||||||||||||||||||||||||
Process Gas Solutions | 1,200.6 | (50.5 | ) | 1,150.1 | 1,242.7 | (71.1 | ) | 1,171.6 | ||||||||||||||||
Industrial and Special Products | 1,605.3 | (5.0 | ) | 1,600.3 | 1,751.2 | (19.6 | ) | 1,731.6 | ||||||||||||||||
BOC Edwards | 688.2 | (30.3 | ) | 657.9 | 684.1 | (39.4 | ) | 644.7 | ||||||||||||||||
Afrox hospitals | 259.0 | 46.9 | 305.9 | 353.4 | 41.4 | 394.8 | ||||||||||||||||||
Gist | 264.8 | (0.1 | ) | 264.7 | 291.8 | (0.1 | ) | 291.7 | ||||||||||||||||
Total | 4,017.9 | (39.0 | ) | 3,978.9 | 4,323.2 | (88.8 | ) | 4,234.4 | ||||||||||||||||
Operating profit | ||||||||||||||||||||||||
Process Gas Solutions | 161.2 | (6.6 | ) | 154.6 | 177.1 | (10.3 | ) | 166.8 | ||||||||||||||||
Industrial and Special Products | 229.3 | 2.1 | 231.4 | 238.2 | 3.1 | 241.3 | ||||||||||||||||||
BOC Edwards | (1.4 | ) | (0.8 | ) | (2.2 | ) | 7.9 | (1.1 | ) | 6.8 | ||||||||||||||
Afrox hospitals | 29.7 | 5.4 | 35.1 | 46.1 | 5.4 | 51.5 | ||||||||||||||||||
Gist | 25.5 | 0.3 | 25.8 | 29.2 | 0.1 | 29.3 | ||||||||||||||||||
Corporate | (18.7 | ) | 0.4 | (18.3 | ) | (59.9 | ) | 6.1 | (53.8 | ) | ||||||||||||||
Total | 425.6 | 0.8 | 426.4 | 438.6 | 3.3 | 441.9 | ||||||||||||||||||
Adjusted operating profit | ||||||||||||||||||||||||
Process Gas Solutions | 185.2 | (7.1 | ) | 178.1 | 184.0 | (10.5 | ) | 173.5 | ||||||||||||||||
Industrial and Special Products | 248.0 | 2.0 | 250.0 | 242.7 | 2.8 | 245.5 | ||||||||||||||||||
BOC Edwards | 26.1 | (1.0 | ) | 25.1 | 18.5 | (1.5 | ) | 17.0 | ||||||||||||||||
Afrox hospitals | 29.7 | 5.4 | 35.1 | 46.1 | 5.4 | 51.5 | ||||||||||||||||||
Gist | 25.5 | 0.3 | 25.8 | 29.2 | 0.1 | 29.3 | ||||||||||||||||||
Corporate | (14.4 | ) | 0.4 | (14.0 | ) | (14.9 | ) | 1.5 | (13.4 | ) | ||||||||||||||
Total | 500.1 | – | 500.1 | 505.6 | (2.2 | ) | 503.4 | |||||||||||||||||
Exceptional or non-recurring items
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2004 | 2003 | 2002 | ||||||||||||||||||||||||||||||||||
Adjusted | Operating | Adjusted | Operating | Adjusted | Operating | |||||||||||||||||||||||||||||||
operating | exceptional | Operating | operating | exceptional | Operating | operating | exceptional | Operating | ||||||||||||||||||||||||||||
profit | items | profit | profit | items | profit | profit | items | profit | ||||||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||||||||
Process Gas Solutions | 190.3 | (0.8 | ) | 189.5 | 184.0 | (6.9 | ) | 177.1 | 185.2 | (24.0 | ) | 161.2 | ||||||||||||||||||||||||
Industrial and Special Products | 269.5 | (15.6 | ) | 253.9 | 242.7 | (4.5 | ) | 238.2 | 248.0 | (18.7 | ) | 229.3 | ||||||||||||||||||||||||
BOC Edwards | 47.8 | (1.0 | ) | 46.8 | 18.5 | (10.6 | ) | 7.9 | 26.1 | (27.5 | ) | (1.4 | ) | |||||||||||||||||||||||
Afrox hospitals | 59.8 | – | 59.8 | 46.1 | – | 46.1 | 29.7 | – | 29.7 | |||||||||||||||||||||||||||
Gist | 25.1 | – | 25.1 | 29.2 | – | 29.2 | 25.5 | – | 25.5 | |||||||||||||||||||||||||||
Corporate | (15.6 | ) | – | (15.6 | ) | (14.9 | ) | (45.0 | ) | (59.9 | ) | (14.4 | ) | (4.3 | ) | (18.7 | ) | |||||||||||||||||||
Total Group | 576.9 | (17.4 | ) | 559.5 | 505.6 | (67.0 | ) | 438.6 | 500.1 | (74.5 | ) | 425.6 | ||||||||||||||||||||||||
Other non GAAP measures
2003 | 2002 | |||||||||||||||||||||||||||||||||||
2004 | (restated) | (restated) | ||||||||||||||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||||||||||||||
Operating | capital | Operating | capital | Operating | capital | |||||||||||||||||||||||||||||||
profit | employed | ROCE | profit | employed | ROCE | profit | employed | ROCE | ||||||||||||||||||||||||||||
£ million | £ million | % | £ million | £ million | % | £ million | £ million | % | ||||||||||||||||||||||||||||
Adjusted ROCE | 576.9 | 3,752.4 | 15.4 | 505.6 | 4,010.5 | 12.6 | 500.1 | 4,002.9 | 12.5 | |||||||||||||||||||||||||||
Operating exceptional items | (17.4 | ) | – | (67.0 | ) | – | (74.5 | ) | – | |||||||||||||||||||||||||||
ROCE | 559.5 | 3,752.4 | 14.9 | 438.6 | 4,010.5 | 10.9 | 425.6 | 4,002.9 | 10.6 | |||||||||||||||||||||||||||
1. | ROCE is operating profit as a percentage of the average capital employed excluding net pension liabilities. | |
2. | Average capital employed and ROCE for 2003 and 2002 have been restated following the application of UK GAAP UITF37 and UITF38 in 2004 (see note 31 to the financial statements). |
The Group commentary in this review also comments on free cash flow. Free cash flow is a measure often referred to by BOC management and other users of financial information to highlight the cash flow available from underlying ongoing business operations before acquisition and disposal activity. Whether or not this remains positive over time is an indicator that dividends to shareholders are being paid out of cash generated by existing Group businesses. As such it is a useful additional measure of financial performance.
2003 | 2002 | |||||||||||
2004 | (restated) | (restated) | ||||||||||
£ million | £ million | £ million | ||||||||||
Free cash flow | 257.9 | 141.8 | 166.5 | |||||||||
Exceptional cash items | (11.9 | ) | (28.3 | ) | (67.3 | ) | ||||||
Acquisitions and disposals | 92.5 | (118.3 | ) | (215.5 | ) | |||||||
Other items within capital expenditure and financial investment: | ||||||||||||
Purchases of intangible fixed assets | (0.2 | ) | (1.2 | ) | (0.1 | ) | ||||||
Net (purchases)/sales of current asset investments | (0.9 | ) | 16.6 | 4.3 | ||||||||
Purchases of trade and other investments | (3.8 | ) | (3.3 | ) | (19.7 | ) | ||||||
Sales of trade and other investments | 5.6 | 5.3 | 0.9 | |||||||||
Net cash inflow/(outflow) before use of liquid resources and financing | 339.2 | 12.6 | (130.9 | ) | ||||||||
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OPERATING REVIEW (COMPARING 2004 WITH 2003)
Turnover, including share of joint ventures and associates
Profit before tax
Group
2003 (at 2004 | ||||||||||||
2004 | 2003 | exchange rates)1 | ||||||||||
Turnover including share of joint ventures and associates (£ million) | 4,599.3 | 4,323.2 | 4,234.4 | |||||||||
Operating profit (£ million) | 559.5 | 438.6 | 441.9 | |||||||||
Adjusted operating profit (£ million)2 | 576.9 | 505.6 | 503.4 | |||||||||
Profit before tax (£ million) | 412.3 | 351.9 | 360.3 | |||||||||
Adjusted profit before tax (£ million)2 | 504.3 | 418.9 | 421.8 | |||||||||
Earnings per share | 53.5 | p | 44.5 | p | 44.9 | p | ||||||
Adjusted earnings per share2 | 63.2 | p | 52.9 | p | 52.7 | p | ||||||
1. | A reconciliation of turnover, operating profit and adjusted operating profit for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted results with UK GAAP results is shown on page 35 and in the profit and loss account on page 78. |
Process Gas Solutions (PGS)
Change | ||||||||||||
on 20031 | ||||||||||||
2004 | Change | (constant | ||||||||||
£ million | on 2003 | currency) | ||||||||||
Turnover | 1,275.2 | +3% | +9% | |||||||||
Operating profit | 189.5 | +7% | +14% | |||||||||
Adjusted operating profit2 | 190.3 | +3% | +10% | |||||||||
1. | A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
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Operating review (comparing 2004 with 2003)
EuropeTurnover increased in all parts of Europe except for Ireland. Adjusted operating profit increased significantly, mainly as a result of more efficient plant operation and careful control of costs.
North AmericaTurnover increased as a result of including a full year of syngas production for Celanese at Clear Lake, Texas and the start-up of a new plant supplying hydrogen to Citgo’s refinery at Lemont, Illinois, in October 2003.
Latin AmericaRevenues increased across the region during 2004, although business in Venezuela continued to be affected by political uncertainty. In Brazil, BOC’s new 400 tonnes-a-day plant entered production serving CST, the world’s biggest producer of slab steel.
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Operating review (comparing 2004 with 2003)
AfricaTurnover increased and adjusted operating profit was further improved by cost savings and firm pricing trends leading to better margins. Although the stronger rand adversely affected platinum and gold mining in 2004, strong demand and firmer prices led to increased activity in the steel industry. New business was obtained for carbon dioxide in the beverage sector and for the use of oxygen in the de-lignification of wood pulp.
JapanThe combination of BOC’s and Air Liquide’s industrial and medical gases businesses in Japan took effect from January 2003. This distorts the comparison of turnover and profit for BOC’s three lines of business between 2004 and 2003 and with earlier years. The results of Japan Air Gases were consolidated on an equity basis throughout 2004 and for the last three quarters of 2003. In 2004 turnover increased mainly as a result of equipment sales and adjusted operating profit increased faster as a result of achieving integration cost savings as planned.
North AsiaTurnover and adjusted operating profit increased in 2004 but at a more modest pace than in 2003. Production plants across the region were almost fully utilized and little new capacity came on stream in 2004. However a number of new plants will add significantly to production within the next 12 months.
South and South East AsiaThese regions came under the same business unit management during 2004. The economies continued to be buoyant across both regions during the year, helped by generally strong steel demand and a more active electronics industry in Singapore, Malaysia and the Philippines. The major market sectors for PGS across the region are steel, petrochemicals and the food industry.
South PacificTurnover and adjusted operating profit were higher than a year ago. The Australian and New Zealand economies remained generally strong in 2004. The strength of local currencies led to some further customer plant closures but firm commodity prices for minerals and particularly for steel enabled leading customers to prosper. There was some increase in tonnage volumes but volumes overall were similar to a year ago.
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Operating review (comparing 2004 with 2003)
Water servicesBOC acquired Environmental Management Corporation (EMC), a US water services company in October 2002. Turnover increased modestly in 2004 but the business remained close to break-even after the amortisation of goodwill as a result of planned costs to increase business development resources.
Industrial and Special Products (ISP)
Change | ||||||||||||
on 20031 | ||||||||||||
2004 | Change | (constant | ||||||||||
£ million | on 2003 | currency) | ||||||||||
Turnover | 1,782.3 | +2% | +3% | |||||||||
Operating profit | 253.9 | +7% | +5% | |||||||||
Adjusted operating profit2 | 269.5 | +11% | +10% | |||||||||
1. | A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Nearly all regions delivered better results in 2004 with increased turnover in most countries and an overall improvement in operating margin. Robust economic conditions supported a further improvement in the south Pacific region and Africa delivered better results despite the handicap of the stronger currency on manufacturing and mining. There was also some improvement in the US manufacturing economy.
EuropeTurnover and adjusted operating profit increased further in 2004. Manufacturing activity continued to decline in the UK but BOC maintained a strong position in the market. Improved service levels enabled selling price increases to be implemented. At the same time costs were reduced through improved productivity.
North AmericaThe BOC Group announced on 27 January 2004 that it had signed a letter of intent to sell its US packaged gas business to Airgas. This business had turnover of approximately US$240 million in 2003. The disposal was completed on 30 July 2004 upon receipt of initial cash proceeds of US$175 million.
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Operating review (comparing 2004 with 2003)
Following this transaction, the ISP business in north America consists of bulk medical gases, bulk supplies to distributors, tube trailer and liquefied helium in the US as well as the Canadian packaged gas business. In total these elements currently generate turnover of some US$450 million a year.
Latin AmericaTurnover increased significantly and margins improved. Growth across the region was driven principally by sales of medical products supplemented by sales of BOC-branded cutting and welding equipment. Sales of packaged chemicals increased in Colombia and Venezuela.
AfricaImportant sections of South African industry were depressed during 2004 because of the stronger currency. Rand exchange rates reduced the profitability of gold mining and manufacturing for export in particular. At the same time the cost of imported goods was lowered making them more competitive with those manufactured locally. However lower interest rates began to stimulate domestic consumption towards the end of the year.
JapanThe basis of accounting for BOC’s business in Japan changed during 2003 as a result of a merger. Full details can be seen in the PGS section on page 38. In 2004 ISP’s turnover in Japan was slightly less than the previous year but adjusted operating profit was higher through cost savings following the merger and from some asset disposals.
South and South East AsiaThese regions came under the same business unit management during 2004. In aggregate there were modest improvements in both turnover and adjusted operating profit. In Taiwan, buoyant activity in manufacturing and infrastructure development was reflected in higher turnover and adjusted operating profit. There were also sharply better results from the industrial products business in Thailand but ammonia margins were under strong competitive pressure and liquefied petroleum gas (LPG) selling prices remained subject to restrictive regulation. Hong Kong continued to be affected by the migration of manufacturing to mainland China and in Singapore shipbuilding and construction activity failed to improve in 2004. Competition intensified in the Malaysian market for industrial gases. Demand for helium was strong throughout Asia.
South PacificTurnover and adjusted operating profit increased in 2004 and margins were improved by holding down costs. The economic environment remained favourable across the region. Manufacturing activity was buoyant in Australia despite a challenging environment for export-oriented manufacturers created by the stronger currency. New projects in the oil and gas sector and in mining generated increased demand for welding and safety products. During 2004 BOC secured major contracts with Western Mining to meet its requirements for safety products across Australia.
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Operating review (comparing 2004 with 2003)
A dedicated refrigerant reclaim fleet was established to help customers comply with new refrigeration regulations that make it mandatory to recover, return and safely dispose of hydrofluorocarbons. BOC’s new Heliox gas mixture, which helps the treatment of patients with airway obstructions, and Inhalo, the new lightweight cylinder, were both successfully launched into the medical market.
BOC Edwards | ||||||||||||
Change | ||||||||||||
on 2003 1 | ||||||||||||
2004 | Change | (constant | ||||||||||
£ million | on 2003 | currency) | ||||||||||
Turnover | 816.5 | +19% | +27% | |||||||||
Operating profit | 46.8 | +492% | +588% | |||||||||
Adjusted operating profit 2 | 47.8 | +158% | +181% | |||||||||
1. | A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
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.
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Contracts were won in Asia and Europe furthering a strategy to expand the range of value-added services to electronic manufacturers. These include gases management, chemicals supply, support services and materials logistics. Other developments included an improved offering of gases and vacuum systems for lithography and supercritical carbon dioxide cleaning technology.
Afrox hospitals | ||||||||||||
Change | ||||||||||||
on 2003 1 | ||||||||||||
2004 | Change | (constant | ||||||||||
£ million | on 2003 | currency) | ||||||||||
Turnover | 432.1 | +22% | +9% | |||||||||
Operating profit | 59.8 | +30% | +16% | |||||||||
Adjusted operating profit 2 | 59.8 | +30% | +16% | |||||||||
1. | A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Adjusted operating profit increased faster than turnover as a result of careful control of overhead costs and positive pricing trends. Hospital occupancy rates remained similar to a year ago. Acquisitions were a minor factor in the turnover increase but 2004 was the first full year of ownership for Joint Medical Holdings and the Little Company of Mary hospitals. During the year Afrox Healthcare increased its holding in the Wilgeheuwel hospital from 28 per cent to 80 per cent and closed down the Cape Anaesthetic and Brackenfield surgery centres in Cape Town. It also sold its interest in the 123 bed Jan Marais hospital in Cape Town. The Lifecare chronic care facilities and Afrox occupational health services both delivered a good performance in 2004.
Gist | ||||||||||||
Change | ||||||||||||
on 2003 1 | ||||||||||||
2004 | Change | (constant | ||||||||||
£ million | on 2003 | currency) | ||||||||||
Turnover | 293.2 | no change | +1% | |||||||||
Operating profit | 25.1 | –14% | –14% | |||||||||
Adjusted operating profit 2 | 25.1 | –14% | –14% | |||||||||
1. | A reconciliation of results for 2003 at 2003 and at 2004 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
The comparison of turnover and adjusted operating profit between 2003 and 2004 is distorted by a non-recurrent item during 2003. In 2003 a gain of some £4.1 million arising principally from the termination of operations for the Marks & Spencer General Merchandise business was credited to adjusted operating profit. The termination of this business also eliminated some £26 million of turnover in 2004 compared with 2003. After adjusting for this item, underlying turnover grew principally as a result of increased food business for Marks & Spencer, as well as new contracts and the expansion of activity with Ocado and Carlsberg UK. On the same basis, adjusted operating profit in 2004 was at a similar level to 2003. A slowdown in the previous trend towards outsourcing logistics operations was a factor in pricing pressures in UK distribution and so were dislocations arising from recent consolidation in the industry.
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OPERATING REVIEW (COMPARING 2003 WITH 2002)
Group
2002 (at 2003 | ||||||||||||
2003 | 2002 | exchange rates) 1 | ||||||||||
Turnover including share of joint ventures and associates (£ million) | 4,323.2 | 4,017.9 | 3,978.9 | |||||||||
Operating profit (£ million) | 438.6 | 425.6 | 426.4 | |||||||||
Adjusted operating profit (£ million) 2 | 505.6 | 500.1 | 500.1 | |||||||||
Profit before tax (£ million) | 351.9 | 335.3 | 342.8 | |||||||||
Adjusted profit before tax (£ million) 2 | 418.9 | 430.0 | 435.3 | |||||||||
Earnings per share | 44.5 | p | 41.4 | p | 41.9 | p | ||||||
Adjusted earnings per share 2 | 52.9 | p | 55.9 | p | 56.2 | p | ||||||
1. | A reconciliation of turnover, operating profit and adjusted operating profit for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted results with UK GAAP results is shown on page 35 and in the profit and loss account on page 78. |
Exceptional items in 2003 amounted to a charge of £67.0 million. This comprised £43.2 million for a litigation settlement, costs of £15.5 million for completion of restructuring programmes and £8.3 million relating to the integration of the BOC and Air Liquide businesses in Japan.
Process Gas Solutions (PGS) | ||||||||||||
Change | ||||||||||||
on 2002 1 | ||||||||||||
2003 | Change | (constant | ||||||||||
£ million | on 2002 | currency) | ||||||||||
Turnover | 1,242.7 | +4% | +8% | |||||||||
Operating profit | 177.1 | +10% | +15% | |||||||||
Adjusted operating profit 2 | 184.0 | –1% | +3% | |||||||||
1. | A reconciliation of results for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Increased turnover in 2003 resulted from generally firm price trends as well as revenues from acquisitions and new plants serving chemical industry customers. The additional revenues came principally from BOC’s joint venture with Yangtze Petrochemical Corporation (YPC) at Nanjing, China, from a new hydrogen and carbon monoxide (HyCO) plant at Map Ta Phut, Thailand and from the acquisitions of a partial oxidation syngas plant at Clear Lake, Texas, and the US water services company, Environmental Management Corporation.
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Operating review (comparing 2003 with 2002)
Improved adjusted operating profit was also a result of operational efficiency gains. The closure of facilities in connection with the combination of BOC’s Process Plants business with Linde Engineering in the US led to lower costs towards the end of 2002 and there was a full year of savings in 2003. There were also further cost reductions arising from continued progress in delivery scheduling and remote plant operation.
EuropeTurnover and adjusted operating profit increased in the UK and in Poland in 2003 but declined slightly in Ireland. A full year of revenues from the plant commissioned in January 2002 to supply hydrogen to Huntsman on Teesside and from the Teesside pipeline system acquired in July 2002 were contributors to increased turnover in the UK. Despite continued weakness in UK manufacturing, sales volumes increased in the merchant market for liquefied gases and prices were also slightly firmer. The key factors behind the increase in adjusted operating profit were lower costs in 2003 as a result of restructuring and a charge of £3.6 million in 2002 for an asset write down and debt provision after a steel customer went into receivership.
North AmericaDespite a small increase in turnover, adjusted operating profit in 2003 was at a similar level to 2002. Selling price trends were favourable – particularly in the second half of the year – and were sufficient to offset cost inflation. Sales volumes were lower as a result of general weakness in manufacturing industries and some business was lost early in 2003 as customers changed to alternative supplies. At the same time, a significant volume of new liquefied gas business was obtained, mainly in the closing months of the year.
Latin AmericaTurnover increased significantly, although growth was held back by a general strike in Venezuela in the period December 2002 to February 2003. This inevitably affected customers’ requirements for industrial gases. Adjusted operating profit also increased because of better sales volumes especially in Chile and Brazil and because of selling price increases that generally exceeded local rates of inflation.
AfricaBoth turnover and adjusted operating profit increased in 2003. Sales volumes were broadly similar but selling prices were higher and cost controls also contributed to better margins. The focus of business development was on the use of gases in mineral processes in the extraction of precious metals.
JapanThe combination of BOC’s and Air Liquide’s industrial and medical gases businesses in Japan took effect from January 2003. Until then the results of OSK, BOC’s gases business in Japan, were consolidated as a subsidiary. Subsequently BOC accounted for its share of turnover and profit of the merged company, Japan Air Gases, on an equity basis. This distorts the comparison of turnover and profit between 2003 and earlier years for BOC’s three lines of business. On the respective bases used in each year, there was an increase in both turnover and adjusted operating profit for PGS in Japan for 2003.
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Operating review (comparing 2003 with 2002)
The integration process that began in 2003 made good progress. The two organisations were successfully integrated in the key areas and the number of branch offices was reduced. Cryogenic equipment manufacturing was integrated into a single location.
North AsiaTurnover and adjusted operating profit were up significantly in 2003. Margins improved as a result of better operational efficiency coupled with some price increases.
South East AsiaEconomic growth was generally buoyant across the region but Singapore continued to be affected by the migration of electronics and other industries to lower cost countries in Asia. The outbreak of the SARS infection also curtailed travel and affected business activity. Economic trends in Thailand, Malaysia and Indonesia were favourable.
South AsiaEconomic growth in India led to better sales of liquefied gases in the merchant market and sustained demand from the steel industry. A new 225 tonnes-a-day oxygen plant was commissioned in the last quarter of 2003 for the Tata Iron and Steel Company, BOC’s principal tonnage customer in the region.
South PacificTurnover and adjusted operating profit were slightly higher in 2003 than in 2002 despite adverse business trends in some Australian industries. The strengthening of the Australian dollar in 2003 had a negative impact on the important minerals sector, which responded by restructuring. There was also an adverse effect on the food industry. Volumes of liquefied gas sales in the merchant market were therefore lower.
Process systemsDuring 2003 BOC continued to benefit from lower costs arising from the combination of its Process Plants business with Linde Engineering in the US to form the new company, Linde BOC Process Plants LLC, based in Tulsa, Oklahoma. This transaction was completed at the end of September 2002, making Linde Engineering the principal supplier of BOC’s industrial gas plants worldwide with access to Linde’s global technical capabilities in air separation, hydrogen production and other gas technologies.
Water servicesIn October 2002, BOC acquired Environmental Management Corporation (EMC), a US water services company with the intention of using a similar business model to that of PGS in developing additional business with industrial customers.
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Operating review (comparing 2003 with 2002)
Industrial and Special Products (ISP) | ||||||||||||
Change | ||||||||||||
on 2002 | 1 | |||||||||||
2003 | Change | (constant | ||||||||||
£ million | on 2002 | currency) | ||||||||||
Turnover | 1,751.2 | +9% | +9% | |||||||||
Operating profit | 238.2 | +4% | +3% | |||||||||
Adjusted operating profit 2 | 242.7 | –2% | –3% | |||||||||
1. | A reconciliation of results for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Good business performances in most markets were offset by a disappointing result in the US. Market conditions remained depressed in the US and in the UK but there was an overall improvement elsewhere. Trends were particularly favourable in South Africa and in the south Pacific region during the first half of 2003 but the pace of growth slowed later in the year as a result of exchange rate movements, which affected exporting industries.
EuropeTurnover and adjusted operating profit increased in 2003 despite weak manufacturing activity in the key markets.
North AmericaIn total, sales of gases in 2003 were similar to those of 2002 but sales of welding products were depressed. Weak conditions in the manufacturing economy across north America coupled with costs related to the implementation of a new business system in the US led to a sharp decline in adjusted operating profit.
Latin AmericaThere was an improvement in both turnover and adjusted operating profit across the region. This was generally based on trends that were favourable in terms of both volumes and selling prices.
AfricaTurnover and adjusted operating profit again increased significantly in 2003, as manufacturing activity was strong in South Africa. Although economic growth moderated later in the year as the rand strengthened, the increased international investment in manufacturing in South Africa continued to provide a firm base for sales of gases and welding products.
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Operating review (comparing 2003 with 2002)
JapanThe basis of accounting for BOC’s business in Japan changed during 2003 as a result of a merger. Full details can be seen in the PGS section on page 44. On the respective bases used in each year, turnover and adjusted operating profit for ISP in Japan were lower in 2003.
East AsiaTurnover increased but adjusted operating profit was marginally lower in 2003, with the full year benefit of acquisitions being reduced by the effect of industrial decline in the key market of Hong Kong and also by the increase in business overheads to support the future development of business in the region.
South PacificAlthough economic growth was less rapid in 2003 than it was in 2002, both turnover and adjusted operating profit improved. Increased turnover was largely a result of better prices rather than increased sales volume and firm prices were coupled with effective cost controls.
BOC Edwards | ||||||||||||
Change | ||||||||||||
on 2002 1 | ||||||||||||
2003 | Change | (constant | ||||||||||
£ million | on 2002 | currency) | ||||||||||
Turnover | 684.1 | –1% | +4% | |||||||||
Operating profit | 7.9 | note 4a | note 4b | |||||||||
Adjusted operating profit 2 | 18.5 | –29% | –26% | |||||||||
1. | A reconciliation of results for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. | |
4a. | Compares with a loss of £1.4 million in 2002. | |
4b. | Compares with a loss of £2.2 million in 2002. |
Operating exceptional items in 2003 were for the completion of restructuring programmes, including those that were part of the programme announced in August 2001. Additionally, there were charges relating to the integration of the BOC and Air Liquide businesses in Japan to form Japan Air Gases.
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Operating review (comparing 2003 with 2002)
Vacuum equipment volumes worldwide were slightly better in 2003 and much of the increase was derived from pumping products for flat panel display manufacture. However, these pumps currently earn lower margins than semiconductor pumping systems. Although semiconductor equipment demand was weak in 2003, improved products were developed to strengthen BOC Edwards’ position in vacuum technology. These included single axis on-tool semiconductor pumps and a range of small dry pumps for the growing scientific equipment market.
Afrox hospitals | ||||||||||||
Change | ||||||||||||
on 2002 1 | ||||||||||||
2003 | Change | (constant | ||||||||||
£ million | on 2002 | currency) | ||||||||||
Turnover | 353.4 | +36% | +16% | |||||||||
Operating profit | 46.1 | +55% | +31% | |||||||||
Adjusted operating profit 2 | 46.1 | +55% | +31% | |||||||||
1. | A reconciliation of results for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Although hospital occupancy rates increased only marginally in 2003, turnover and adjusted operating profit both increased significantly. This resulted from some minor acquisitions, positive price trends and a reduction in overhead costs. New facilities continued to be added to existing hospitals in order to widen the range of available services.
Gist | ||||||||||||
Change | ||||||||||||
on 2002 1 | ||||||||||||
2003 | Change | (constant | ||||||||||
£ million | on 2002 | currency) | ||||||||||
Turnover | 291.8 | +10% | +10% | |||||||||
Operating profit | 29.2 | +15% | +13% | |||||||||
Adjusted operating profit 2 | 29.2 | +15% | +13% | |||||||||
1. | A reconciliation of results for 2002 at 2002 and at 2003 rates of exchange is shown on page 34. | |
2. | A reconciliation of adjusted operating profit with operating profit is shown on page 35. | |
3. | All comments below are on a constant currency basis. |
Improved turnover reflected both new contracts and increased volumes with existing customers. The increase in adjusted operating profit was not only as a result of higher turnover but also because of a gain of some £4.1 million arising principally from the termination of operations for the Marks & Spencer General Merchandise business.
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FINANCIAL REVIEW
Net debt/equity
Net debt/capital employed
Corporate transactions and restructuring
Financial indicators
2003 | 2002 | |||||||||||
2004 | (restated) | (restated) | ||||||||||
Interest cover (times) 1 | 6.3 | 4.6 | 4.1 | |||||||||
Adjusted interest cover (times) 2 | 6.5 | 5.3 | 4.9 | |||||||||
Net debt/equity (%) | 51.2 | 73.4 | 75.3 | |||||||||
Net debt/capital employed (%) | 29.9 | 37.4 | 37.3 | |||||||||
Average cost of net borrowings (%) | 6.2 | 5.6 | 6.2 | |||||||||
Group tax rate (%) | 24.7 | 27.4 | 31.7 | |||||||||
Adjusted Group tax rate (%) 3 | 29.0 | 29.0 | 30.0 | |||||||||
1. | Interest on net debt covered by operating profit. | |
2. | Interest on net debt covered by adjusted operating profit. | |
3. | The adjusted tax charge expressed as a percentage of adjusted profit before tax. |
The ratios are commented on below in the appropriate section.
Financing
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Financial review
The gearing ratio (net debt including finance leases as a percentage of capital employed) was 29.9 per cent in 2004 compared with 37.4 per cent in 2003 and 37.3 per cent in 2002. The 2004 year end net debt/equity ratio was 51.2 per cent, compared with 73.4 per cent in 2003 and 75.3 per cent in 2002.
Management of financial risks
Currency riskThe Group faces currency risk principally on its net assets, most of which are in currencies other than sterling. Currency movements can therefore have a significant effect on the Group’s balance sheet when translating these foreign currency assets into sterling. In order to reduce this effect the Group manages its borrowings, where practicable and cost effective, to hedge its foreign currency assets.
Interest rate riskAt 30 September 2004, the Group’s net debt position after interest rate hedging activity included a net exposure of £74.6 million (2003: £436.3 million) to floating interest rates. Based on the Group’s 2004 year end level and composition of net debt, an increase in average interest rates of one per cent per annum would result in a decrease in future earnings, before tax, of £0.7 million per annum (2003: £4.4 million).
Foreign exchange riskAt 30 September 2004, the Group had outstanding forward exchange contracts totalling £224.4 million (2003: £173.8 million) in respect of its actual and forecast transaction exposures. The fair value of these contracts at 30 September 2004 amounted to a gain of £7.5 million (2003: a gain of £5.8 million). A ten per cent appreciation of sterling would increase the fair value of these contracts by £11.0 million (2003: £13.7 million).
Counterparty riskCash deposits and other financial instruments give rise to credit risk on the amounts due from counterparties. Credit risk is managed by limiting the aggregate amount and duration of exposure to any one counterparty depending upon its credit rating and by regular reviews of these ratings. The possibility of material loss arising in the event of non-performance by a counterparty is considered unlikely by management.
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Financial review
Average cost of net borrowings1
Interest on net debt
Net interest on pension financing items
Debt maturity profile
2004 | 2003 | |||||||||||||||
£ million | % | £ million | % | |||||||||||||
More than five years | 320.5 | 26.9 | 521.8 | 36.1 | ||||||||||||
Three to five years | 260.9 | 21.9 | 214.4 | 14.8 | ||||||||||||
One to three years | 347.1 | 29.2 | 348.5 | 24.1 | ||||||||||||
Within one year | 262.1 | 22.0 | 360.9 | 25.0 | ||||||||||||
Total | 1,190.6 | 100.0 | 1,445.6 | 100.0 | ||||||||||||
Other contractual obligations
Other creditors | Total | |||||||||||||||
(excluding | Unconditional | contractual | ||||||||||||||
deferred | Operating | purchase | cash | |||||||||||||
income) | leases | obligations | obligations | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
More than five years | 22.2 | 115.3 | 418.8 | 556.3 | ||||||||||||
Three to five years | 0.8 | 49.2 | 126.3 | 176.3 | ||||||||||||
One to three years | 8.5 | 71.0 | 131.3 | 210.8 | ||||||||||||
Within one year | 819.7 | 46.5 | 57.9 | 924.1 | ||||||||||||
Total | 851.2 | 282.0 | 734.3 | 1,867.5 | ||||||||||||
Off-balance sheet arrangements
Total group tax rate
Taxation
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Financial review
Contingencies
Legal proceedings
Welding fumes litigationA US subsidiary of the Group, The BOC Group, Inc., has been named in US lawsuits alleging injury from exposure to welding fumes. Certain of these cases have been either filed in, or transferred for pre-trial purposes to, the federal district court in the Northern District of Ohio, where a multi-district litigation (MDL) proceeding has been commenced. The MDL proceeding is a vehicle for coordinating pre-trial proceedings in cases pending in different federal district courts in the US. It is currently contemplated that the MDL court will try three cases during the MDL proceeding. The first such case is currently scheduled for mid 2005. In addition to the cases in federal court, The BOC Group, Inc. is a defendant in a number of similar cases pending in state courts. These cases are in different stages of procedural development, and certain cases are scheduled for trial from time to time.
Fluorogas litigationIn February 2003, the company was notified that a jury verdict in the US District Court for the Western District of Texas (the District Court) was obtained for US$132 million against Fluorogas Limited, The BOC Group, Inc. and The BOC Group plc. The verdict arose primarily out of an alleged breach of a memorandum of understanding by Fluorogas Limited before it was acquired by The BOC Group plc in September 2001. In March 2003, the court also awarded interest and costs against the defendants, making them jointly and severally liable for a total of US$174 million. A bond for the full amount was posted with the District Court as part of the normal appeals process.
ERISA litigationAn action was filed in the US District Court for the Southern District of Illinois (the District Court) against The BOC Group Cash Balance Retirement Plan (the Plan). The plaintiffs brought this action on behalf of themselves and all others similarly affected, alleging that the Plan improperly calculated lump sum distributions from the Plan in violation of the Employee Retirement Income Security Act.
Insurance
Inflation
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Financial review
Critical accounting policies
Tangible fixed assetsA significant part of the capital employed of the Group, particularly in the Process Gas Solutions and Industrial and Special Products lines of business, is invested in tangible fixed assets. The nature of the business demands significant capital investment to renew or increase production capacity or to enable the business to achieve greater productivity and efficiency.
Intangible fixed assetsIn a similar manner to tangible fixed assets, management uses its judgement to determine the extent to which goodwill arising from the acquisition of a business has a value that will benefit the performance of the Group over future periods. It is the Group’s policy to amortise goodwill on a straight line basis over its useful economic life. This takes into account, among other things, the maturity of the business acquired and its product and customer base. Any change in these assumptions would have an impact on the earnings of the Group.
Retirement benefitsResults of the Group include costs relating to the provision of retirement benefits for employees. It is the directors’ responsibility to set the assumptions used in determining the key elements of the costs of meeting such future obligations. The assumptions are based on actual historical experience and are set after consultation with the Group’s actuaries. They include the assumptions used for regular service costs and for the financing elements related to the pension schemes’ assets and liabilities. Whilst management believes that the assumptions used are appropriate, a change in the assumptions used would affect both the operating profit and net interest cost of the Group.
Environmental provisionsIn certain parts of the business, mainly in the US, the Group has obligations to carry out environmental clean-ups at former and current production sites. Many of these obligations will not arise for a number of years, and the costs are difficult to predict accurately. Management uses its judgement and experience to provide an appropriate amount for the likely cost of such clean-ups, and the amounts, if material, are discounted to present values. Both the amount of anticipated costs, and the interest rates used to discount such costs, are subjective. The use of different assumptions would impact the earnings of the Group.
Current asset provisionsIn the course of normal trading activities, management uses its judgement in establishing the net realisable value of various elements of working capital — principally stocks, work-in-progress and accounts receivable. Provisions are established for obsolete or slow moving stocks, bad or doubtful debts and product warranties. Actual costs in future periods may be different from the provisions established and any such differences would affect future earnings of the Group.
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Financial review
Accounting
International Financial Reporting Standards
a) | accounting for options and other share-based payments. This will require a charge against profit; | |
b) | the treatment of goodwill. Existing goodwill, and goodwill on future acquisitions, will no longer be amortised. However, amortisation will continue to be charged on other intangibles, more of which are expected to be identified in future business acquisitions. Also, future annual impairment reviews of goodwill could result in periodic charges against profit; | |
c) | financial instruments. Accounting for derivative financial instruments may cause some volatility of earnings, although this is not expected to be significant as the Group has few financial instruments and they are restricted to managing currency and interest rate risk. |
Other areas impacted to a lesser extent include the treatment of deferred tax and intangible assets. The presentation and layout of the financial statements will also be affected. As the Group already reports its obligations for post retirement benefits under UK GAAP FRS17, there is not expected to be any significant impact as a result of adopting the equivalent international standard, IAS19 (subject to ratification of the proposed revision to IAS19).
US GAAP
Related party transactions
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Financial review
Average exchange rates:
Exchange rates
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
US dollar | ||||||||||||||||||||
At 30 September | 1.81 | 1.66 | 1.57 | 1.47 | 1.48 | |||||||||||||||
Average for the year | 1.79 | 1.60 | 1.47 | 1.44 | 1.56 | |||||||||||||||
Highest rate during year | 1.90 | 1.69 | 1.58 | 1.50 | 1.67 | |||||||||||||||
Lowest rate during year | 1.66 | 1.54 | 1.41 | 1.37 | 1.40 | |||||||||||||||
Australian dollar | ||||||||||||||||||||
At 30 September | 2.50 | 2.45 | 2.89 | 2.98 | 2.73 | |||||||||||||||
Average for the year | 2.47 | 2.62 | 2.77 | 2.76 | 2.56 | |||||||||||||||
Highest rate during year | 2.68 | 2.89 | 3.00 | 3.03 | 2.85 | |||||||||||||||
Lowest rate during year | 2.33 | 2.40 | 2.54 | 2.62 | 2.45 | |||||||||||||||
Japanese yen | ||||||||||||||||||||
At 30 September | 199.44 | 185.60 | 191.45 | 175.09 | 159.77 | |||||||||||||||
Average for the year | 195.17 | 191.01 | 184.34 | 170.04 | 166.03 | |||||||||||||||
Highest rate during year | 206.90 | 199.49 | 193.05 | 181.26 | 178.67 | |||||||||||||||
Lowest rate during year | 180.80 | 182.17 | 173.82 | 153.13 | 149.77 | |||||||||||||||
South African rand | ||||||||||||||||||||
At 30 September | 11.72 | 11.57 | 16.58 | 13.24 | 10.68 | |||||||||||||||
Average for the year | 11.85 | 13.24 | 15.64 | 11.47 | 10.24 | |||||||||||||||
Highest rate during year | 13.33 | 16.41 | 19.49 | 13.26 | 11.18 | |||||||||||||||
Lowest rate during year | 10.75 | 11.40 | 13.00 | 10.54 | 9.92 | |||||||||||||||
The highest and lowest rates of exchange for sterling against the US dollar for the last six months were:
May | June | July | August | September | October | |||||||||||||||||||
High | 1.84 | 1.84 | 1.87 | 1.84 | 1.81 | 1.84 | ||||||||||||||||||
Low | 1.76 | 1.81 | 1.82 | 1.79 | 1.77 | 1.78 | ||||||||||||||||||
Principal operating companies
• | The BOC Group Inc, a wholly-owned Delaware corporation and a subsidiary of The BOC Group Inc, a wholly-owned Nevada corporation; | |
• | BOC Limited, a wholly-owned English company; | |
• | BOC Limited, a wholly-owned Australian company; | |
• | Gist Limited, a wholly-owned English company; | |
• | Japan Air Gases Ltd, a Japanese company, in which the Group’s Japanese 98 per cent owned subsidiary holds 45 per cent; | |
• | African Oxygen Limited, a South African company, in which the Group’s shareholding is 56 per cent. |
Supplier payment policy
Going concern
Substantial holdings
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CORPORATE GOVERNANCE
The BOC Group is committed to business integrity, high ethical values and professionalism in all its activities. As an essential part of this commitment, the board supports the highest standards of corporate governance.
Combined Code on Corporate Governance
US Sarbanes-Oxley Act 2002
New York Stock Exchange Corporate Governance Listing Standards
The board
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Corporate governance
The senior independent director is Sir Christopher O’Donnell. He has responsibility for chairing meetings of the non-executive directors at which the chairman’s performance is appraised. He is also available to shareholders should they have any concerns which contact through other channels has failed to resolve or for which such contact may be inappropriate.
Audit | Nomination | Remuneration | ||||||||||||||
Board | committee | committee | committee | |||||||||||||
(six meetings) | (four meetings) | (six meetings) | (six meetings) | |||||||||||||
Rob Margetts | 6 | n/a | 6 | n/a | ||||||||||||
Tony Isaac | 6 | n/a | 6 | n/a | ||||||||||||
Fabiola Arredondo1 | 3 | 1 | 3 | 3 | ||||||||||||
Julie Baddeley | 6 | 4 | 6 | 6 | ||||||||||||
John Bevan | 6 | n/a | n/a | n/a | ||||||||||||
Andrew Bonfield | 6 | 4 | 6 | 6 | ||||||||||||
Guy Dawson2 | 3 | 2 | 3 | 3 | ||||||||||||
René Médori | 6 | n/a | n/a | n/a | ||||||||||||
Roberto Mendoza3 | 4 | 3 | 3 | 3 | ||||||||||||
Matthew Miau | 5 | 2 | 5 | 4 | ||||||||||||
Iain Napier4 | 1 | 1 | 1 | 1 | ||||||||||||
Sir Christopher O’Donnell | 5 | 4 | 5 | 5 | ||||||||||||
Anne Quinn4 | 2 | 2 | 2 | 2 | ||||||||||||
‘Raj’ Rajagopal | 6 | n/a | n/a | n/a | ||||||||||||
John Walsh | 6 | n/a | n/a | n/a | ||||||||||||
1. | resigned on 28 February 2004. | |
2. | appointed on 1 March 2004. | |
3. | resigned on 12 May 2004. | |
4. | appointed on 1 May 2004. |
Throughout 2004 the company has continued to maintain directors’ and officers’ liability insurance.
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Corporate governance
Induction and professional development
Performance evaluation
Board committees
Audit committee
Audit committee report
a) | interim and full year financial results and announcement statements; | |
b) | interim and full year report from the internal audit function of progress against the 2004 audit plan and effectiveness of internal controls; | |
c) | the Group’s project to comply with the requirements of Section 404 of the US Sarbanes-Oxley Act. This review included the project plan, progress against the plan and matters arising in the implementation of the plan; | |
d) | details of the Group’s project to transition to International Financial Reporting Standards from 2006; | |
e) | the external audit plan for 2004 performed by the Group’s auditors, PricewaterhouseCoopers LLP (PwC). This review included the audit objectives, auditor independence and objectivity policies managed by PwC, partner rotation, audit scope, team, timetable deliverables and fee proposal; |
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Corporate governance
f) | the annual report disclosure items relevant to the audit committee. Included in this review were the Group’s critical accounting policies, the going concern statement, the report on risk and internal controls and the risk factors statement. The audit committee also reviewed the disclosure control review procedures employed by the Group which enabled the chief executive and Group finance director to sign the Section 302 and 906 certificates pursuant to the US Sarbanes-Oxley Act; | |
g) | the external auditor report for 2004; | |
h) | the independence and objectivity of the external auditors, including a review of non-audit fees. The audit committee has reviewed and approved a policy for the provision of non-audit services by the external auditor. This policy has been in place since 2002 and defines services which can be provided by the auditor. The policy also specifies which services cannot be provided. The policy requires all non-audit services to be approved in advance by the audit committee, which has delegated this task to the chairman of the audit committee. The approval process requires full disclosure of the objectives and scope of the services to be performed and fee structure. The audit committee reviews all approved services at subsequent meetings. The auditor is permitted to perform non-audit services only if the scope of work is within the terms of the policy and there is a business benefit to the Group in these services being performed by the external auditors rather than an alternative supplier. The level of the fee spend is closely monitored to ensure independence and objectivity of the audit is maintained. Further details of actual fees paid to external auditors are given in note 2c) on page 90; | |
i) | the procedures by which staff can report, in confidence, any matters of a financial or non-financial nature alleging breaches of the Group’s Code of Conduct. The audit committee also reviewed the procedures by which allegations are reported to senior management and the audit committee. |
During this period the audit committee met with the Group’s external auditors without the presence of management. The audit committee also met with the Group’s head of internal audit without the presence of management. The head of internal audit has access to the chairman of the audit committee, if necessary, outside of meetings.
Nomination committee
Remuneration committee
Pensions committee
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Corporate governance
Executive management board
Investment committee
Accountability and audit
Risk management and internal controls
Risk management in BOCThe BOC risk management programme assists management throughout the Group to identify, assess and mitigate business risk.
Internal controls in BOCThe directors have delegated to executive management the establishment and implementation of a system of internal controls appropriate to the various business environments in which it operates. The Group operates under a system of controls that has been developed and refined over time to meet its current and future needs and the risks and opportunities to which it is exposed. These controls, which are communicated through various operating and procedural manuals and processes, include but are not limited to:
• | the definition of the organisational structure and the appropriate delegation of authorities to operational management; | |
• | procedures for the review and authorisation of capital investments through the investment committee including post-acquisition reviews and appraisals; | |
• | strategic planning and the related annual planning process including the ongoing review by the board of the Group’s strategies; | |
• | the establishment of individual business unit annual performance targets and the quarterly business review of actual performance; | |
• | the monthly financial reporting and review of financial results and other operating statistics such as the health and safety reports as well as the Group’s published quarterly financial statements, which are based on a standardised reporting process; | |
• | accounting and financial reporting policies to ensure the consistency, integrity and accuracy of the Group’s accounting records; | |
• | specific treasury policies and objectives and the ongoing reporting and review of all significant transactions and financing operations. |
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The internal control system is monitored and supported by an internal audit function that operates on a global basis and reports its results on the Group’s operations to management and the audit committee. The work of the internal auditors is focused on the areas of greatest risk to the Group determined on the basis of a risk management approach to audit.
Disclosure controls and procedures
Going concern
Communications with shareholders
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REPORT ON REMUNERATION
The remuneration committee
Current expected value (chart 1)
Remuneration policy
Remuneration components
Basic salarySalaries for executive directors and executive management board members are based on median market rates drawn from market data provided by Towers Perrin and take account of an executive’s experience, responsibilities and performance. Performance is assessed both from an individual and business perspective. Executive salaries are reviewed annually by the remuneration committee. Remuneration for those executives of businesses outside the UK is denominated in the local currency.
Benefits in kindBenefits in kind comprise company car benefits and membership of BOC’s healthcare insurance scheme. Where appropriate directors on international assignment receive overseas allowances such as housing and children’s education fees. These allowances are on similar terms to those applying to other employees on the international programme. Such benefits are in line with those offered by peer group companies. Benefits in kind do not form part of pensionable earnings.
Variable compensation plan (VCP)The executive directors and senior management participate in the variable compensation bonus plan. The plan focuses on annual objectives and links individual performance with business plans. The financial targets for the executive directors and other executive management board members are set on an annual basis by the remuneration committee and performance against these targets is reviewed by the remuneration committee on a six monthly basis. The remuneration committee considers that a six monthly review acts as a significant incentive and is conducive to sustaining performance throughout the year. The financial targets are based equally on adjusted earnings per share (EPS) and adjusted return on capital employed (ROCE) at Group level. Adjusted means excluding exceptional items. Bonuses are assessed two-thirds on these financial targets with the remaining third based on personal objectives. These are based on BOC’s strategic priorities and include safety, growth, people and change management and productivity. Performance is measured against key performance indicators determined during formal appraisals. There is a threshold performance level below which no bonus is paid. For 2004 the financial targets set by the remuneration committee were EPS 56.2p and ROCE 13.3 per cent and the achievement against these targets was EPS 63.2p and ROCE 15.4 per cent. The remuneration committee agreed that the maximum bonus payable would be 100 per cent of salary.
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Current long-term incentive arrangements
Long-Term Incentive Plan (LTIP)Executive directors, members of the executive management board and a number of other key executives selected from the company’s global operations participate in the LTIP. The remuneration committee has the discretion to grant awards up to a maximum of two times salary. The award made in February 2004 to the chief executive was based on 1.9 times salary and for other board directors 1.5 times salary. There are three performance conditions: total shareholder return (TSR), adjusted earnings per share (EPS) and adjusted return on capital employed (ROCE). Up to one third of the award could vest in respect of each performance condition.
UK group | ||||||
Aggregate Industries | BPB | Invensys | Scottish & Southern Energy | |||
AMEC | Centrica | Johnson Matthey | Scottish Power | |||
Anglo American | Corus Group | Kelda Group | Severn Trent | |||
AWG | FKI | National Grid Transco | Shell Transport & Trading | |||
BAE Systems | Hanson | Pilkington | Smiths Group | |||
BG Group | IMI | Rio Tinto | Tomkins | |||
BHP Billiton | ICI | RMC Group | United Utilities | |||
BP | International Power | Rolls-Royce | ||||
Global gases group | ||||||
Airgas | (US – S&P 500 Index) | |||||
Air Liquide | (France – CAC 40 Index) | |||||
Air Products & Chemicals | (US – S&P 500 Index) | |||||
Linde | (Germany – DAX 30 Index) | |||||
Nippon Sanso | (Japan – NIKKEI 225 Index) | |||||
Praxair | (US – S&P 500 Index) | |||||
The BOC Group | (UK – FTSE100 Index) | |||||
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Current measures and their weights for variable incentives using on target VCP awards and the expected values of long-term incentives (chart 2)
Savings Related Share Option SchemesThese are operated in the UK, Australia, New Zealand and Ireland and are open to all employees including executive directors with one year’s service or more. The UK scheme is approved by the Inland Revenue. The current schemes are due to expire in 2005 and a proposal to adopt new schemes is to be put to shareholders at the Annual General Meeting in January 2005.
TSR performance
Former long-term incentive arrangements
Executive Share Option Scheme 1995The last grant of options to the executive directors and members of the executive management board took place in February 2002 and the last award to other Group employees took place in December 2002. No further awards will be made under this scheme. The options vest when the company’s adjusted EPS growth is equal to, or exceeds, the growth in the retail prices index (RPI) by three per cent per annum over any three year performance period.
Senior Executive Share Option SchemeThe last grant under this scheme took place in November 1994. In line with market practice at the time when this scheme was introduced the vesting of these awards was not subject to performance conditions.
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Report on remuneration
Retirement benefits
Outside appointments
Remuneration proposals
For the reasons outlined above the remuneration committee proposes:
• | to cease making option awards under the Executive Share Option Scheme (ESOS) to the executive directors and other executives covered by the VCP. However, the ESOS will be kept in place for the time being for employees below this level until an alternative scheme can be developed in the near future. The facility will also be kept to make option awards to executives who are covered by VCP on an exceptional basis, for example as part of a hiring package. There is however no intention to make any further awards to existing executive directors; | |
• | to increase the target and maximum value of the VCP to 110 per cent and 160 per cent respectively of salary and at the same time introduce a deferred, share-matching plan, compulsorily deferring one-third of the VCP bonus (see details below). The current target value of the VCP is 73.4 per cent and the plan is capped at 100 per cent; | |
• | to seek approval to increase the maximum award levels to be made under the LTIP from 200 per cent to 250 per cent of salary. The remuneration committee’s purpose in seeking approval for a higher maximum is simply to give flexibility to remain fully competitive in the event that a higher level of award is required for an appointment to an executive role. In the immediate term, however, this change would have little practical impact as the intention next year is simply to increase the chief executive’s conditional share award from 1.9 times salary to 2.0 times and to make no increase to the 1.5 times salary award received by other directors last year. |
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Current expected value(chart 3)
Current measures and their weights for variable incentives using on target VCP awards and the expected values of long-term incentives (chart 5)
Share Matching Plan
• | at the same time that the VCP opportunity is increased, one-third of any VCP award (an amount equivalent to the increase) will be compulsorily applied to the acquisition of BOC shares; | |
• | the executives will become entitled to these shares only if they are still in service with BOC three years after the award is made; | |
• | executives will then receive an additional number of shares equal to the value of dividends paid during the deferral period on these shares; | |
• | executives may also receive a matching share award of up to 100 per cent of the number of shares originally allotted. The percentage award will depend on BOC’s performance over the deferral period. Adjusted EPS will account for 75 per cent of the performance weighting with TSR accounting for the remaining 25 per cent; | |
• | the adjusted EPS performance condition is based upon the company’s EPS relative to three year targets. These targets will be on a sliding scale, where a five per cent per annum growth rate over three years is required for the minimum award of 25 per cent of that portion. The maximum award will be achieved if EPS growth is 12 per cent per annum over the three year period; | |
• | the TSR performance condition compares BOC’s TSR performance against the same UK comparator group as used for the LTIP. Awards will vest for this portion where BOC’s TSR position is at median, measured over three years. At this point 25 per cent of this portion of the award will vest. A maximum award of 25 per cent overall will vest if the company is ranked at or above the upper quartile. |
As previously stated, it is the view of the remuneration committee that performance-related remuneration should form a substantial element of total remuneration. The effect of these proposals would lead to a shift in the balance of variable performance-related remuneration to fixed remuneration (see charts 3 and 4).
Non-executive directors
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Service contracts
Individual service contractsMr Bevan has a contract dated 5 December 2002 that can be terminated by the company on 12 months’ notice. In the event of early termination, the contract provides for the payment of compensation based on the value of salary, car benefit and bonus entitlement (calculated on the basis of the average of actual payments over the preceding two years) for the unexpired portion of the notice period. Mr Bevan would also be entitled to his deferred pension, with the unexpired portion of the notice period being added to his pensionable service in the calculation of his pension entitlement.
Shareholding guidelines
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Directors’ emoluments and compensation | ||||||||
Charged against profit in the year | 2004 | 2003 | ||||||
£’000 | £’000 | |||||||
Salaries and benefits | 2,853 | 2,578 | ||||||
Annual bonuses payable for the year | 2,055 | 1,038 | ||||||
Fees to non-executive directors | 499 | 423 | ||||||
5,407 | 4,039 | |||||||
Company pension contributions to money purchase plans | 283 | 279 | ||||||
Company pension contributions to lump sum benefit plans | 145 | 196 | ||||||
Provision for share incentive schemes1 | 1,011 | 387 | ||||||
Payments to former directors and their dependants2 | 31 | 2,160 | ||||||
6,877 | 7,061 | |||||||
Year ended 30 September 2004 | 2003 | |||||||||||||||||||
Allowances | Total | |||||||||||||||||||
Basic | and | Bonus | remunera- | Total | ||||||||||||||||
Individual remuneration | salary/fees | benefits3 | payable | tion | remuneration | |||||||||||||||
£’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||||||||
Chairman | ||||||||||||||||||||
R J Margetts | 225 | – | – | 225 | 225 | |||||||||||||||
Executive directors | ||||||||||||||||||||
J A Bevan | 323 | 214 | 323 | 860 | 496 | |||||||||||||||
A E Isaac4 | 686 | 136 | 686 | 1,508 | 1,143 | |||||||||||||||
R Médori5 | 360 | 288 | 360 | 1,008 | 810 | |||||||||||||||
Dr K Rajagopal | 343 | 16 | 343 | 702 | 526 | |||||||||||||||
J L Walsh | 343 | 144 | 343 | 830 | 641 | |||||||||||||||
Non-executive directors | ||||||||||||||||||||
J M Baddeley | 49 | – | – | 49 | 43 | |||||||||||||||
A R J Bonfield | 39 | – | – | 39 | 7 | |||||||||||||||
G N Dawson6 | 23 | – | – | 23 | – | |||||||||||||||
M F C Miau | 39 | – | – | 39 | 35 | |||||||||||||||
I J G Napier6 | 17 | – | – | 17 | – | |||||||||||||||
Sir Christopher O’Donnell7 | 49 | – | – | 49 | 43 | |||||||||||||||
A C Quinn6 | 17 | – | – | 17 | – | |||||||||||||||
Directors retiring in the year | ||||||||||||||||||||
F R Arredondo8 | 17 | – | – | 17 | 35 | |||||||||||||||
R G Mendoza8 | 24 | – | – | 24 | 35 | |||||||||||||||
Total | 2,554 | 798 | 2,055 | 5,407 | 4,039 | |||||||||||||||
1. | This represents the amount charged to operating profit for those elements of the various share incentive schemes relating to directors. | |
2. | Of the amount recognised in 2003, £2,089,000 relates to Mr Grant, who resigned from the board on 31 December 2002. | |
3. | Includes overseas and relocation expenses. | |
4. | Mr Isaac was the highest paid director in 2004. | |
5. | The allowances and benefits of Mr Médori include a salary supplement of £103,600 (2003: £97,700) in respect of the pensions earnings cap. | |
6. | Mr Dawson was appointed to the board on 1 March 2004 and Mr Napier and Ms Quinn were both appointed to the board on 1 May 2004. The remuneration above is the total remuneration earned since their appointment. | |
7. | Fees in respect of Sir Christopher O’Donnell are paid to Smith & Nephew plc. | |
8. | Mrs Arredondo resigned from the board on 28 February 2004 and Mr Mendoza resigned from the board on 12 May 2004. The remuneration above, is the total remuneration earned to their date of resignation. | |
9. | The aggregate remuneration charged against profits for directors and members of the executive management board in the year was £10.0 million. Remuneration of members of the executive management board other than directors is given on page 71. |
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Executive officersThe aggregate remuneration of members of the executive management board, other than directors, for services in all capacities during 2004 was as follows:
2004 | ||||
Charged against profit in the year | £'000 | |||
Salaries, allowances and benefits | 1,508 | |||
Annual bonuses payable for the year | 1,126 | |||
Provision for share incentive schemes1 | 454 | |||
Company pension contributions | 58 | |||
3,146 | ||||
1. | This represents the amount charged to operating profit for those elements of the various share incentive schemes relating to executive officers. |
Directors’ share interests at 30 September 2004The directors of the company and their families had the following beneficial interests in the company’s securities and rights under the share incentive schemes:
At 1 October 2003 | ||||||||||||||||||||||||
At 30 September 2004 | (or at date of appointment if later) | |||||||||||||||||||||||
Long-term | Long-term | |||||||||||||||||||||||
Ordinary | Share | incentive | Ordinary | Share | incentive | |||||||||||||||||||
shares | options | plan awards | shares | options | plan awards | |||||||||||||||||||
J M Baddeley | 2,268 | – | – | 1,254 | – | – | ||||||||||||||||||
J A Bevan | 17,108 | 307,107 | 95,490 | 16,070 | 269,993 | 38,659 | ||||||||||||||||||
A R J Bonfield | 1,175 | – | – | 500 | – | – | ||||||||||||||||||
G N Dawson | 892 | – | – | – | – | – | ||||||||||||||||||
A E Isaac | 8,057 | 1,129,824 | 279,387 | 5,700 | 1,096,535 | 127,867 | ||||||||||||||||||
R J Margetts | 34,000 | – | – | 17,000 | – | – | ||||||||||||||||||
R Médori | 16,772 | 442,496 | 107,312 | 16,772 | 435,253 | 44,652 | ||||||||||||||||||
M F C Miau | 3,447 | – | – | 2,772 | – | – | ||||||||||||||||||
I J G Napier | 779 | – | – | – | – | – | ||||||||||||||||||
Sir Christopher O’Donnell | 2,274 | – | – | 2,179 | – | – | ||||||||||||||||||
A C Quinn | 779 | – | – | – | – | – | ||||||||||||||||||
Dr K Rajagopal | 21,816 | 549,765 | 102,432 | 14,416 | 526,589 | 42,622 | ||||||||||||||||||
J L Walsh | 22,175 | 477,412 | 102,432 | 13,175 | 452,089 | 42,622 | ||||||||||||||||||
Directors retiring in the year | ||||||||||||||||||||||||
F R Arredondo | – | – | – | 991 | – | – | ||||||||||||||||||
R G Mendoza | 11,232 | – | – | 10,763 | – | – | ||||||||||||||||||
There has been no change in the interest of any of the directors between 1 October 2004 and 18 November 2004.
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Directors’ share interests — movements during the year
Share options | ||||||||||||||||||||||||||||||||||||
Opening | ||||||||||||||||||||||||||||||||||||
market price | ||||||||||||||||||||||||||||||||||||
At | At | Exercise | at date | Earliest | Latest | |||||||||||||||||||||||||||||||
1 October | 30 September | price | of exercise | exercise | exercise | |||||||||||||||||||||||||||||||
2003 | Granted | Exercised | Lapsed | 2004 | pence | pence | date | date | Notes | |||||||||||||||||||||||||||
J A Bevan | ||||||||||||||||||||||||||||||||||||
6,000 | – | – | – | 6,000 | 722 | 10/02/98 | 10/02/05 | c. | ||||||||||||||||||||||||||||
10,000 | – | – | – | 10,000 | 919 | 14/02/99 | 14/02/06 | c. | ||||||||||||||||||||||||||||
10,000 | – | – | – | 10,000 | 980 | 21/02/00 | 21/02/07 | c. | ||||||||||||||||||||||||||||
10,000 | – | – | – | 10,000 | 914 | 11/02/01 | 11/02/08 | c. | ||||||||||||||||||||||||||||
30,000 | – | – | – | 30,000 | 894 | 18/11/01 | 18/11/08 | c. | ||||||||||||||||||||||||||||
45,000 | – | – | – | 45,000 | 937 | 26/05/03 | 26/05/10 | |||||||||||||||||||||||||||||
301 | – | – | 301 | – | 870 | 01/07/03 | 31/12/03 | a. b. | ||||||||||||||||||||||||||||
35,000 | – | – | – | 35,000 | 993 | 07/02/04 | 07/02/11 | |||||||||||||||||||||||||||||
619 | – | 619 | – | – | 766 | 921 | 01/04/04 | 30/09/04 | a. b. | |||||||||||||||||||||||||||
419 | – | 419 | – | – | 894 | 921 | 01/04/04 | 30/09/04 | a. b. | |||||||||||||||||||||||||||
55,000 | – | – | – | 55,000 | 1016 | 06/02/05 | 06/02/12 | |||||||||||||||||||||||||||||
67,654 | – | – | – | 67,654 | 776 | 06/02/06 | 06/02/13 | |||||||||||||||||||||||||||||
– | 36,574 | – | – | 36,574 | 820 | 14/11/06 | 14/11/13 | |||||||||||||||||||||||||||||
– | 1,879 | – | – | 1,879 | 795 | 01/04/09 | 30/09/09 | a. | ||||||||||||||||||||||||||||
269,993 | 38,453 | 1,038 | 301 | 307,107 | ||||||||||||||||||||||||||||||||
A E Isaac | ||||||||||||||||||||||||||||||||||||
45,000 | – | 45,000 | – | – | 716 | 923 | 16/11/98 | 16/11/04 | b. | |||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 722 | 10/02/98 | 10/02/05 | c. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 919 | 14/02/99 | 14/02/06 | c. | ||||||||||||||||||||||||||||
2,357 | – | 2,357 | – | – | 827 | 827 | 01/05/03 | 31/10/03 | a. b. | |||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 980 | 21/02/00 | 21/02/07 | c. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 914 | 11/02/01 | 11/02/08 | c. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 851 | 10/02/02 | 10/02/09 | c. | ||||||||||||||||||||||||||||
250,000 | – | – | – | 250,000 | 937 | 26/05/03 | 26/05/10 | |||||||||||||||||||||||||||||
200,000 | – | – | – | 200,000 | 993 | 07/02/04 | 07/02/11 | |||||||||||||||||||||||||||||
200,000 | – | – | – | 200,000 | 1016 | 06/02/05 | 06/02/12 | |||||||||||||||||||||||||||||
149,178 | – | – | – | 149,178 | 776 | 06/02/06 | 06/02/13 | |||||||||||||||||||||||||||||
– | 80,646 | – | – | 80,646 | 820 | 14/11/06 | 14/11/13 | |||||||||||||||||||||||||||||
1,096,535 | 80,646 | 47,357 | – | 1,129,824 | ||||||||||||||||||||||||||||||||
R Médori | ||||||||||||||||||||||||||||||||||||
20,000 | – | 20,000 | – | – | 677 | 827 | 11/02/98 | 11/02/04 | b. | |||||||||||||||||||||||||||
15,000 | – | 15,000 | – | – | 722 | 927 | 10/02/98 | 10/02/05 | c. | |||||||||||||||||||||||||||
15,000 | – | – | – | 15,000 | 919 | 14/02/99 | 14/02/06 | c. | ||||||||||||||||||||||||||||
15,000 | – | – | – | 15,000 | 980 | 21/02/00 | 21/02/07 | c. | ||||||||||||||||||||||||||||
30,000 | – | – | – | 30,000 | 914 | 11/02/01 | 11/02/08 | c. | ||||||||||||||||||||||||||||
30,000 | – | – | – | 30,000 | 851 | 10/02/02 | 10/02/09 | c. | ||||||||||||||||||||||||||||
100,000 | – | – | – | 100,000 | 937 | 26/05/03 | 26/05/10 | |||||||||||||||||||||||||||||
2,112 | – | – | – | 2,112 | 870 | 01/08/07 | 31/01/08 | a. b. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 993 | 07/02/04 | 07/02/11 | |||||||||||||||||||||||||||||
80,000 | – | – | – | 80,000 | 1016 | 06/02/05 | 06/02/12 | |||||||||||||||||||||||||||||
78,141 | – | – | – | 78,141 | 776 | 06/02/06 | 06/02/13 | |||||||||||||||||||||||||||||
– | 42,243 | – | – | 42,243 | 820 | 14/11/06 | 14/11/13 | |||||||||||||||||||||||||||||
435,253 | 42,243 | 35,000 | – | 442,496 | ||||||||||||||||||||||||||||||||
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Opening | ||||||||||||||||||||||||||||||||||||
market price | ||||||||||||||||||||||||||||||||||||
At | At | Exercise | at date | Earliest | Latest | |||||||||||||||||||||||||||||||
1 October | 30 September | price | of exercise | exercise | exercise | |||||||||||||||||||||||||||||||
2003 | Granted | Exercised | Lapsed | 2004 | pence | pence | date | date | Notes | |||||||||||||||||||||||||||
Dr K Rajagopal | ||||||||||||||||||||||||||||||||||||
15,000 | – | 15,000 | – | – | 677 | 871 | 11/02/98 | 11/02/04 | b. | |||||||||||||||||||||||||||
25,000 | – | – | – | 25,000 | 722 | 10/02/98 | 10/02/05 | c. | ||||||||||||||||||||||||||||
35,000 | – | – | – | 35,000 | 919 | 14/02/99 | 14/02/06 | c. | ||||||||||||||||||||||||||||
471 | – | – | 471 | – | 827 | 01/05/03 | 31/10/03 | a. b. | ||||||||||||||||||||||||||||
20,000 | – | – | – | 20,000 | 848 | 14/08/99 | 14/08/06 | c. | ||||||||||||||||||||||||||||
35,000 | – | – | – | 35,000 | 980 | 21/02/00 | 21/02/07 | c. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 914 | 11/02/01 | 11/02/08 | c. | ||||||||||||||||||||||||||||
1,676 | – | – | 1,676 | – | 823 | 01/05/02 | 31/10/03 | a. b. | ||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 851 | 10/02/02 | 10/02/09 | c. | ||||||||||||||||||||||||||||
87,500 | – | – | – | 87,500 | 937 | 26/05/03 | 26/05/10 | |||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 993 | 07/02/04 | 07/02/11 | |||||||||||||||||||||||||||||
80,000 | – | – | – | 80,000 | 1016 | 06/02/05 | 06/02/12 | |||||||||||||||||||||||||||||
74,589 | – | – | – | 74,589 | 776 | 06/02/06 | 06/02/13 | |||||||||||||||||||||||||||||
2,353 | – | – | – | 2,353 | 698 | 01/05/08 | 31/10/08 | a. b. | ||||||||||||||||||||||||||||
– | 40,323 | – | – | 40,323 | 820 | 14/11/06 | 14/11/13 | |||||||||||||||||||||||||||||
526,589 | 40,323 | 15,000 | 2,147 | 549,765 | ||||||||||||||||||||||||||||||||
J L Walsh | ||||||||||||||||||||||||||||||||||||
15,000 | – | 15,000 | – | – | 677 | 839 | 11/02/98 | 11/02/04 | b. | |||||||||||||||||||||||||||
10,000 | – | – | – | 10,000 | 722 | 10/02/98 | 10/02/05 | c. | ||||||||||||||||||||||||||||
10,000 | – | – | – | 10,000 | 919 | 14/02/99 | 14/02/06 | c. | ||||||||||||||||||||||||||||
12,500 | – | – | – | 12,500 | 980 | 21/02/00 | 21/02/07 | c. | ||||||||||||||||||||||||||||
30,000 | – | – | – | 30,000 | 914 | 11/02/01 | 11/02/08 | c. | ||||||||||||||||||||||||||||
70,000 | – | – | – | 70,000 | 851 | 10/02/02 | 10/02/09 | c. | ||||||||||||||||||||||||||||
100,000 | – | – | – | 100,000 | 937 | 26/05/03 | 26/05/10 | |||||||||||||||||||||||||||||
50,000 | – | – | – | 50,000 | 993 | 07/02/04 | 07/02/11 | |||||||||||||||||||||||||||||
80,000 | – | – | – | 80,000 | 1016 | 06/02/05 | 06/02/12 | |||||||||||||||||||||||||||||
74,589 | – | – | – | 74,589 | 776 | 06/02/06 | 06/02/13 | |||||||||||||||||||||||||||||
– | 40,323 | – | – | 40,323 | 820 | 14/11/06 | 14/11/13 | |||||||||||||||||||||||||||||
452,089 | 40,323 | 15,000 | – | 477,412 | ||||||||||||||||||||||||||||||||
a. | Options granted under the Savings Related Share Option scheme. All other options shown above are granted under the executive share option schemes. | |
b. | Options with no performance conditions attached. All other options shown above have performance related conditions attached to them. These conditions are described on pages 65 and 66. | |
c. | The performance conditions attaching to these options have been satisfied. |
The total gains made by directors on options exercised during the year were £208,400 (2003: £1,500).
73 The BOC Group plcAnnual report and accounts 2004
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Report on remuneration
Long-Term Incentive Plan - movements during the year | ||||||||||||||||||||||||
At | At | |||||||||||||||||||||||
1 October | 30 September | Earliest | Latest | |||||||||||||||||||||
2003 | Granted | 2004 | Performance period | exercise date | exercise date | |||||||||||||||||||
J A Bevan | 38,659 | – | 38,659 | 01/10/02 – 30/09/05 | 06/02/06 | 06/02/13 | ||||||||||||||||||
– | 56,831 | 56,831 | 01/10/03 – 30/09/06 | 04/02/07 | 04/02/14 | |||||||||||||||||||
38,659 | 56,831 | 95,490 | ||||||||||||||||||||||
A E Isaac | 127,867 | – | 127,867 | 01/10/02 – 30/09/05 | 06/02/06 | 06/02/13 | ||||||||||||||||||
– | 151,520 | 151,520 | 01/10/03 – 30/09/06 | 04/02/07 | 04/02/14 | |||||||||||||||||||
127,867 | 151,520 | 279,387 | ||||||||||||||||||||||
R Médori | 44,652 | – | 44,652 | 01/10/02 – 30/09/05 | 06/02/06 | 06/02/13 | ||||||||||||||||||
– | 62,660 | 62,660 | 01/10/03 – 30/09/06 | 04/02/07 | 04/02/14 | |||||||||||||||||||
44,652 | 62,660 | 107,312 | ||||||||||||||||||||||
Dr K Rajagopal | 42,622 | – | 42,622 | 01/10/02 – 30/09/05 | 06/02/06 | 06/02/13 | ||||||||||||||||||
– | 59,810 | 59,810 | 01/10/03 – 30/09/06 | 04/02/07 | 04/02/14 | |||||||||||||||||||
42,622 | 59,810 | 102,432 | ||||||||||||||||||||||
J L Walsh | 42,622 | – | 42,622 | 01/10/02 – 30/09/05 | 06/02/06 | 06/02/13 | ||||||||||||||||||
– | 59,810 | 59,810 | 01/10/03 – 30/09/06 | 04/02/07 | 04/02/14 | |||||||||||||||||||
42,622 | 59,810 | 102,432 | ||||||||||||||||||||||
The performance conditions attaching to the above awards are shown on page 65. Awards take the form of nil cost options.
Pensions
Defined benefit plans | ||||||||||||||||||||||||||||
Transfer | ||||||||||||||||||||||||||||
value of | ||||||||||||||||||||||||||||
Deferred | Increase in | Transfer | Transfer | Change in | Increase in | increase in | ||||||||||||||||||||||
benefit at | deferred | value at | value at | transfer value | deferred | deferred | ||||||||||||||||||||||
30 September | benefit in | 1 October | 30 September | less member's | benefit (net | benefit (net | ||||||||||||||||||||||
2004 | year | 2003 | 2004 | contributions | of inflation) | of inflation) | ||||||||||||||||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||||||||||||
Annual pension | ||||||||||||||||||||||||||||
R Médori | 15 | 4 | 100 | 147 | 41 | 3 | 33 | |||||||||||||||||||||
Dr K Rajagopal | 165 | 15 | 1,667 | 2,002 | 317 | 10 | 127 | |||||||||||||||||||||
Lump sum benefit1 | ||||||||||||||||||||||||||||
J A Bevan | 1,162 | 60 | 1,102 | 1,162 | 60 | 29 | 29 | |||||||||||||||||||||
R Médori | 165 | 21 | 144 | 165 | 21 | 16 | 16 | |||||||||||||||||||||
J L Walsh | 512 | 124 | 388 | 512 | 124 | 112 | 112 | |||||||||||||||||||||
1. | All amounts have been retranslated at the exchange rate prevailing at 30 September 2004. |
All transfer values have been calculated in accordance with Actuarial Guidance Note GN11.
74 The BOC Group plcAnnual report and accounts 2004
Table of Contents
Report on remuneration
Money purchase plansThe company made contributions in the year to money purchase plans in respect of the following directors:
2004 | 2003 | |||||||
£'000 | £'000 | |||||||
A E Isaac | 270 | 252 | ||||||
J L Walsh | 13 | 13 | ||||||
Former director | ||||||||
R S Grant | – | 14 | ||||||
283 | 279 | |||||||
Excess retirement benefits
Sums paid to third parties
Auditable part of the report on remuneration
a) | sections relating to ‘Long-Term Incentive Plan’, ‘Executive Share Option Scheme 2003’, ‘Pensions’, ‘Excess retirement benefits’ and ‘Sums paid to third parties’; | |
b) | tables headed ‘Individual remuneration’, ‘Directors’ share interests at 30 September 2004’, ‘Directors’ share interests – movements during the year’, ‘Long-Term Incentive Plan – movements during the year’, ‘Defined benefits plans’ and ‘Money purchase plans’. |
The report on remuneration has been approved by the board and signed on its behalf by:
Julie BaddeleyRemuneration committee chairman
22 November 2004
75 The BOC Group plcAnnual report and accounts 2004
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GROUP PROFIT AND LOSS ACCOUNT
2004 | 2003 | 2002 | ||||||||||||||||||||||||||||||||||||||||
Before | After | Before | After | Before | After | |||||||||||||||||||||||||||||||||||||
exceptional | Exceptional | exceptional | exceptional | Exceptional | exceptional | exceptional | Exceptional | exceptional | ||||||||||||||||||||||||||||||||||
items | items | items | items | items | items | items | items | items | ||||||||||||||||||||||||||||||||||
Notes | £ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||||||||||||||||
Turnover, including share of joint ventures and associates | 1 | 4,599.3 | – | 4,599.3 | 4,323.2 | – | 4,323.2 | 4,017.9 | – | 4,017.9 | ||||||||||||||||||||||||||||||||
Less:Share of turnover of joint ventures | 647.0 | – | 647.0 | 544.3 | – | 544.3 | 324.1 | – | 324.1 | |||||||||||||||||||||||||||||||||
Share of turnover of associates | 66.9 | – | 66.9 | 60.6 | – | 60.6 | 36.1 | – | 36.1 | |||||||||||||||||||||||||||||||||
Turnover of subsidiary undertakings | 3,885.4 | – | 3,885.4 | 3,718.3 | – | 3,718.3 | 3,657.7 | – | 3,657.7 | |||||||||||||||||||||||||||||||||
Cost of sales | 2 | (a) | (2,181.7 | ) | – | (2,181.7 | ) | (2,136.2 | ) | (1.7 | ) | (2,137.9 | ) | (2,089.7 | ) | (15.1 | ) | (2,104.8 | ) | |||||||||||||||||||||||
Gross profit | 1,703.7 | – | 1,703.7 | 1,582.1 | (1.7 | ) | 1,580.4 | 1,568.0 | (15.1 | ) | 1,552.9 | |||||||||||||||||||||||||||||||
Net operating expenses | 2 | (a) | (1,239.3 | ) | (14.8 | ) | (1,254.1 | ) | (1,174.7 | ) | (58.5 | ) | (1,233.2 | ) | (1,142.4 | ) | (58.9 | ) | (1,201.3 | ) | ||||||||||||||||||||||
Operating profit of subsidiary undertakings | 464.4 | (14.8 | ) | 449.6 | 407.4 | (60.2 | ) | 347.2 | 425.6 | (74.0 | ) | 351.6 | ||||||||||||||||||||||||||||||
Share of operating profit of joint ventures | 99.4 | (2.6 | ) | 96.8 | 86.8 | (6.8 | ) | 80.0 | 63.8 | (0.5 | ) | 63.3 | ||||||||||||||||||||||||||||||
Share of operating profit of associates | 13.1 | – | 13.1 | 11.4 | – | 11.4 | 10.7 | – | 10.7 | |||||||||||||||||||||||||||||||||
Total operating profit including share of joint ventures and associates | 1 | 576.9 | (17.4 | ) | 559.5 | 505.6 | (67.0 | ) | 438.6 | 500.1 | (74.5 | ) | 425.6 | |||||||||||||||||||||||||||||
Loss on termination/disposal of businesses – continuing operations | 2 | (b) | – | (79.5 | ) | (79.5 | ) | – | – | – | – | (20.2 | ) | (20.2 | ) | |||||||||||||||||||||||||||
Profit on disposal of fixed assets – continuing operations | 2 | (b) | – | 4.9 | 4.9 | – | – | – | – | – | – | |||||||||||||||||||||||||||||||
Profit on ordinary activities before interest | 576.9 | (92.0 | ) | 484.9 | 505.6 | (67.0 | ) | 438.6 | 500.1 | (94.7 | ) | 405.4 | ||||||||||||||||||||||||||||||
Interest on net debt | 3 | (88.4 | ) | – | (88.4 | ) | (96.1 | ) | – | (96.1 | ) | (103.1 | ) | – | (103.1 | ) | ||||||||||||||||||||||||||
Interest on pension scheme liabilities | 8 | (a) | (117.4 | ) | – | (117.4 | ) | (110.2 | ) | – | (110.2 | ) | (106.1 | ) | – | (106.1 | ) | |||||||||||||||||||||||||
Expected return on pension scheme assets | 8 | (a) | 133.2 | – | 133.2 | 119.6 | – | 119.6 | 139.1 | – | 139.1 | |||||||||||||||||||||||||||||||
Other net financing income | 15.8 | – | 15.8 | 9.4 | – | 9.4 | 33.0 | – | 33.0 | |||||||||||||||||||||||||||||||||
Profit on ordinary activities before tax | 504.3 | (92.0 | ) | 412.3 | 418.9 | (67.0 | ) | 351.9 | 430.0 | (94.7 | ) | 335.3 | ||||||||||||||||||||||||||||||
Tax on profit on ordinary activities | 4 | (a) | (146.2 | ) | 44.5 | (101.7 | ) | (121.4 | ) | 25.0 | (96.4 | ) | (129.0 | ) | 22.8 | (106.2 | ) | |||||||||||||||||||||||||
Profit on ordinary activities after tax | 358.1 | (47.5 | ) | 310.6 | 297.5 | (42.0 | ) | 255.5 | 301.0 | (71.9 | ) | 229.1 | ||||||||||||||||||||||||||||||
Minority interests – equity | (46.6 | ) | – | (46.6 | ) | (36.8 | ) | 0.4 | (36.4 | ) | (26.7 | ) | 0.5 | (26.2 | ) | |||||||||||||||||||||||||||
Profit for the financial year | 311.5 | (47.5 | ) | 264.0 | 260.7 | (41.6 | ) | 219.1 | 274.3 | (71.4 | ) | 202.9 | ||||||||||||||||||||||||||||||
Dividends | 9 | (197.3 | ) | – | (197.3 | ) | (192.1 | ) | – | (192.1 | ) | (186.6 | ) | – | (186.6 | ) | ||||||||||||||||||||||||||
Retained profit for the financial year | 114.2 | (47.5 | ) | 66.7 | 68.6 | (41.6 | ) | 27.0 | 87.7 | (71.4 | ) | 16.3 | ||||||||||||||||||||||||||||||
Earnings per 25p Ordinary share | 10 | |||||||||||||||||||||||||||||||||||||||||
– basic | 63.2 | p | (9.7 | )p | 53.5 | p | 52.9 | p | (8.4 | )p | 44.5 | p | 55.9 | p | (14.5 | )p | 41.4 | p | ||||||||||||||||||||||||
– diluted | 63.1 | p | (9.6 | )p | 53.5 | p | 52.9 | p | (8.4 | )p | 44.5 | p | 55.7 | p | (14.5 | )p | 41.2 | p | ||||||||||||||||||||||||
All turnover and operating profit arose from continuing operations.
Acquisitions in 2004 were not material.
78 The BOC Group plcAnnual report and accounts 2004
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GROUP BALANCE SHEET
2003 | ||||||||||||||
2004 | (restated) | |||||||||||||
Notes | £ million | £ million | ||||||||||||
Fixed assets | ||||||||||||||
Intangible assets | 11 | 174.9 | 206.1 | |||||||||||
Tangible assets | 12 | 2,618.4 | 2,913.4 | |||||||||||
Investment in joint ventures | ||||||||||||||
— share of gross assets | 996.1 | 870.3 | ||||||||||||
— share of gross liabilities | (737.4 | ) | (468.0 | ) | ||||||||||
258.7 | 402.3 | |||||||||||||
— loans to joint ventures | 199.3 | 103.0 | ||||||||||||
Investment in associates | ||||||||||||||
— share of net assets | 52.4 | 59.6 | ||||||||||||
— loans to associates | 3.3 | 4.9 | ||||||||||||
Other investments | 34.5 | 38.8 | ||||||||||||
Investments | 13 | 548.2 | 608.6 | |||||||||||
3,341.5 | 3,728.1 | |||||||||||||
Current assets | ||||||||||||||
Stocks | 14 | 284.4 | 284.2 | |||||||||||
Debtors falling due within one year | 15 | (a) | 705.6 | 697.8 | ||||||||||
Debtors falling due after more than one year | 15 | (b) | 16.3 | 23.6 | ||||||||||
Investments | 16 | 20.8 | 21.8 | |||||||||||
Cash at bank and in hand | 17 | 228.2 | 77.5 | |||||||||||
1,255.3 | 1,104.9 | |||||||||||||
Creditors: amounts falling due within one year | ||||||||||||||
Borrowings and finance leases | 18 | (a) | (262.1 | ) | (360.9 | ) | ||||||||
Other creditors | 18 | (b) | (872.6 | ) | (807.3 | ) | ||||||||
(1,134.7 | ) | (1,168.2 | ) | |||||||||||
Net current assets/(liabilities) | 120.6 | (63.3 | ) | |||||||||||
Total assetsless current liabilities | 3,462.1 | 3,664.8 | ||||||||||||
Creditors: amounts falling due after more than one year | ||||||||||||||
Borrowings and finance leases | 19 | (a) | (928.5 | ) | (1,084.7 | ) | ||||||||
Other creditors | 19 | (b) | (34.7 | ) | (48.4 | ) | ||||||||
(963.2 | ) | (1,133.1 | ) | |||||||||||
Provisions for liabilities and charges | ||||||||||||||
Deferred tax | 22 | (253.0 | ) | (279.2 | ) | |||||||||
Other | 22 | (92.2 | ) | (97.4 | ) | |||||||||
Total provisions for liabilities and charges | (345.2 | ) | (376.6 | ) | ||||||||||
Total net assets excluding pension assets and liabilities | 2,153.7 | 2,155.1 | ||||||||||||
Pension assets | 8 | (a) | 68.9 | 50.7 | ||||||||||
Pension liabilities | 8 | (a) | (344.5 | ) | (341.8 | ) | ||||||||
Total net assets including pension assets and liabilities | 1,878.1 | 1,864.0 | ||||||||||||
Capital and reserves | ||||||||||||||
Equity called up share capital | 23 | 124.7 | 124.4 | |||||||||||
Share premium account | 24 | (a) | 374.9 | 366.0 | ||||||||||
Revaluation reserves | 24 | (a) | 30.1 | 30.8 | ||||||||||
Profit and loss account | 24 | (a) | 1,181.5 | 1,199.1 | ||||||||||
Pensions reserves | 24 | (a) | (253.6 | ) | (291.1 | ) | ||||||||
Joint ventures’ reserves | 24 | (a) | 238.0 | 273.3 | ||||||||||
Associates’ reserves | 24 | (a) | 26.0 | 33.0 | ||||||||||
Own shares | 24 | (a) | (46.3 | ) | (48.8 | ) | ||||||||
Equity shareholders’ funds | 1,675.3 | 1,686.7 | ||||||||||||
Minority shareholders’ equity interests | 202.8 | 177.3 | ||||||||||||
Total capital and reserves | 1,878.1 | 1,864.0 | ||||||||||||
The financial statements were approved by the board of directors on 22 November 2004 and are signed on its behalf by:
A E IsaacDirectorR MédoriDirector
79 The BOC Group plcAnnual report and accounts 2004
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GROUP CASH FLOW STATEMENT
2003 | 2002 | |||||||||||||||
2004 | (restated) | (restated) | ||||||||||||||
Notes | £ million | £ million | £ million | |||||||||||||
Net cash inflow from operating activities | 27 | (a) | 758.5 | 700.1 | 759.3 | |||||||||||
Dividends from joint ventures and associates | ||||||||||||||||
Dividends from joint ventures | 69.0 | 31.7 | 30.5 | |||||||||||||
Dividends from associates | 10.1 | 3.3 | 3.4 | |||||||||||||
Dividends from joint ventures and associates | 79.1 | 35.0 | 33.9 | |||||||||||||
Returns on investments and servicing of finance | ||||||||||||||||
Interest paid | (83.3 | ) | (94.4 | ) | (89.6 | ) | ||||||||||
Interest received | 13.9 | 16.6 | 18.5 | |||||||||||||
Dividends paid to minorities in subsidiaries | (19.3 | ) | (12.4 | ) | (13.9 | ) | ||||||||||
Interest element of finance lease rental payments | (2.5 | ) | (4.2 | ) | (5.7 | ) | ||||||||||
Returns on investments and servicing of finance | (91.2 | ) | (94.4 | ) | (90.7 | ) | ||||||||||
Tax paid | (98.2 | ) | (90.7 | ) | (96.2 | ) | ||||||||||
Capital expenditure and financial investment | ||||||||||||||||
Purchases of tangible fixed assets | (244.6 | ) | (281.4 | ) | (352.1 | ) | ||||||||||
Sales of tangible fixed assets | 39.7 | 37.0 | 31.6 | |||||||||||||
Purchases of intangible fixed assets | (0.2 | ) | (1.2 | ) | (0.1 | ) | ||||||||||
Net (purchases)/sales of current asset investments | (0.9 | ) | 16.6 | 4.3 | ||||||||||||
Purchases of trade and other investments | (3.8 | ) | (3.3 | ) | (19.7 | ) | ||||||||||
Sales of trade and other investments | 5.6 | 5.3 | 0.9 | |||||||||||||
Capital expenditure and financial investment | (204.2 | ) | (227.0 | ) | (335.1 | ) | ||||||||||
Acquisitions and disposals | ||||||||||||||||
Acquisitions of businesses | 28 | (a) | (50.9 | ) | (135.5 | ) | (207.3 | ) | ||||||||
Net cash/(overdrafts) acquired with subsidiaries | 2.8 | – | (7.4 | ) | ||||||||||||
Disposals of businesses | 28 | (a) | 98.3 | 3.9 | 10.6 | |||||||||||
Net cash disposed of with subsidiaries | – | (0.1 | ) | – | ||||||||||||
Receipts from capital restructuring of joint ventures 1 | 53.0 | – | – | |||||||||||||
Investments in joint ventures | (12.9 | ) | – | (12.6 | ) | |||||||||||
Divestments/repayments from joint ventures | – | 12.4 | – | |||||||||||||
Investments in associates | (3.9 | ) | (8.4 | ) | (0.5 | ) | ||||||||||
Divestments/repayments from associates | 6.1 | 9.4 | 1.7 | |||||||||||||
Acquisitions and disposals | 92.5 | (118.3 | ) | (215.5 | ) | |||||||||||
Equity dividends paid | (197.3 | ) | (192.1 | ) | (186.6 | ) | ||||||||||
Net cash inflow/(outflow) before use of liquid resources and financing | 339.2 | 12.6 | (130.9 | ) | ||||||||||||
Management of liquid resources | ||||||||||||||||
Net (purchases)/sales of short-term investments | (20.8 | ) | 16.2 | 52.6 | ||||||||||||
Financing | ||||||||||||||||
Issue of shares | 12.4 | (2.6 | ) | 35.6 | ||||||||||||
(Decrease)/increase in debt | 27 | (d) | (180.7 | ) | (128.7 | ) | 64.1 | |||||||||
Net cash (outflow)/inflow from financing | (168.3 | ) | (131.3 | ) | 99.7 | |||||||||||
Increase/(decrease) in cash | 150.1 | (102.5 | ) | 21.4 | ||||||||||||
1. | Receipts from capital restructuring of joint ventures relates to an amount received in September 2004 from Japan Air Gases Ltd. This has no impact on BOC’s effective shareholding. |
A reconciliation of the movement in cash to the movement in net debt in the year is given in note 27(b).
Liquid resources are defined as short-term deposits.
80 The BOC Group plcAnnual report and accounts 2004
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TOTAL RECOGNISED GAINS AND LOSSES
2004 | 2003 | 2002 | ||||||||||||||
Notes | £ million | £ million | £ million | |||||||||||||
Parent 1 | 24 | (b) | 11.4 | 218.6 | 26.2 | |||||||||||
Subsidiary undertakings | 269.8 | (0.4 | ) | 170.1 | ||||||||||||
Joint ventures | (13.1 | ) | (0.2 | ) | 4.5 | |||||||||||
Associates | (4.1 | ) | 1.1 | 2.1 | ||||||||||||
Profit for the financial year | 264.0 | 219.1 | 202.9 | |||||||||||||
Actuarial loss recognised on the pension schemes | (2.2 | ) | (17.5 | ) | (431.2 | ) | ||||||||||
Movement on deferred tax relating to actuarial loss on pensions | (8.1 | ) | 2.0 | 134.0 | ||||||||||||
Movement on current tax relating to actuarial loss on pensions | 3.2 | – | – | |||||||||||||
Unrealised loss on write-down of revaluation reserve | – | – | (11.5 | ) | ||||||||||||
Unrealised profit on disposal of a subsidiary | – | 8.2 | – | |||||||||||||
Exchange translation effect on: | ||||||||||||||||
– results for the year of subsidiaries | 0.2 | 8.0 | (5.2 | ) | ||||||||||||
– results for the year of joint ventures | (0.7 | ) | 0.2 | (2.6 | ) | |||||||||||
– results for the year of associates | (0.1 | ) | (0.2 | ) | (0.3 | ) | ||||||||||
– foreign currency net investments in subsidiaries | (76.1 | ) | 15.3 | (114.6 | ) | |||||||||||
– foreign currency net investments in joint ventures | (21.5 | ) | 9.6 | (11.9 | ) | |||||||||||
– foreign currency net investments in associates | (2.8 | ) | (1.4 | ) | (1.7 | ) | ||||||||||
Total recognised gains and losses for the financial year | 24 | (a) | 155.9 | 243.3 | (242.1 | ) | ||||||||||
1. | In accordance with the concession granted under the Companies Act 1985, the profit and loss account of The BOC Group plc has not been presented separately in these financial statements. | |
2. | There were no material differences between reported profits and losses and historical cost profits and losses on ordinary activities before tax for 2004, 2003 and 2002. | |
3. | Profit attributable to the parent company includes dividends received from subsidiaries, joint ventures and associates, often through intermediate holding companies. These dividends may include the distribution of earnings of previous periods. As a result, the relationship of profit between parent, subsidiaries, joint ventures and associates may show fluctuations from year to year. | |
4. | Excluding the amounts recognised above, a current tax release of £6.7 million (2003: £9.7 million, 2002: £(13.5) million charge) has been recognised directly in the Group reserves. |
MOVEMENT IN SHAREHOLDERS’ FUNDS
2003 | 2002 | |||||||||||||||||
2004 | (restated) | (restated) | ||||||||||||||||
Notes | £ million | £ million | £ million | |||||||||||||||
Profit for the financial year | 264.0 | 219.1 | 202.9 | |||||||||||||||
Dividends | (197.3 | ) | (192.1 | ) | (186.6 | ) | ||||||||||||
66.7 | 27.0 | 16.3 | ||||||||||||||||
Other recognised gains and losses | (108.1 | ) | 24.2 | (445.0 | ) | |||||||||||||
Reversal of goodwill in total recognised gains and losses on disposal of subsidiaries | 15.3 | (4.2 | ) | – | ||||||||||||||
Shares issued | 8.7 | 3.7 | 24.6 | |||||||||||||||
Consideration paid for the purchase of own shares held in an ESOP trust | – | (7.5 | ) | – | ||||||||||||||
Consideration received for the sale of own shares held in an ESOP trust | 2.5 | 1.2 | 17.0 | |||||||||||||||
Credit in respect of employee share schemes | 3.5 | 0.7 | 2.0 | |||||||||||||||
Net (decrease)/increase in shareholders’ funds for the financial year | (11.4 | ) | 45.1 | (385.1 | ) | |||||||||||||
Shareholders’ funds at 1 October – previously reported | 1,734.8 | 1,684.1 | 2,086.2 | |||||||||||||||
Prior year adjustment | 31 | (48.1 | ) | (42.5 | ) | (59.5 | ) | |||||||||||
Shareholders’ funds at 1 October – restated | 1,686.7 | 1,641.6 | 2,026.7 | |||||||||||||||
Shareholders’ funds at 30 September | 1,675.3 | 1,686.7 | 1,641.6 | |||||||||||||||
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BALANCE SHEET OF THE BOC GROUP plc
2003 | ||||||||||||
2004 | (restated) | |||||||||||
Notes | £ million | £ million | ||||||||||
Fixed assets | ||||||||||||
Tangible assets | 12 | (e) | 11.3 | 15.7 | ||||||||
Investments | 13 | (d) | 2,982.6 | 3,058.0 | ||||||||
2,993.9 | 3,073.7 | |||||||||||
Current assets | ||||||||||||
Debtors falling due within one year | 15 | (a) | 320.4 | 694.4 | ||||||||
Cash at bank and in hand | 17 | 80.8 | – | |||||||||
401.2 | 694.4 | |||||||||||
Creditors: amounts falling due within one year | ||||||||||||
Borrowings and finance leases | 18 | (a) | (252.1 | ) | (303.6 | ) | ||||||
Other creditors | 18 | (b) | (1,004.1 | ) | (1,049.9 | ) | ||||||
(1,256.2 | ) | (1,353.5 | ) | |||||||||
Net current liabilities | (855.0 | ) | (659.1 | ) | ||||||||
Total assets less current liabilities | 2,138.9 | 2,414.6 | ||||||||||
Creditors: amounts falling due after more than one year | ||||||||||||
Borrowings and finance leases | 19 | (a) | (674.5 | ) | (766.6 | ) | ||||||
Other creditors | 19 | (b) | (3.2 | ) | (10.4 | ) | ||||||
(677.7 | ) | (777.0 | ) | |||||||||
Total net assets | 1,461.2 | 1,637.6 | ||||||||||
Capital and reserves | ||||||||||||
Equity called up share capital | 23 | 124.7 | 124.4 | |||||||||
Share premium account | 24 | (b) | 374.9 | 366.0 | ||||||||
Other reserves | 24 | (b) | 336.4 | 336.4 | ||||||||
Profit and loss account | 24 | (b) | 671.0 | 854.0 | ||||||||
Own shares | 24 | (b) | (45.8 | ) | (43.2 | ) | ||||||
Total capital and reserves | 1,461.2 | 1,637.6 | ||||||||||
The financial statements were approved by the board of directors on 22 November 2004 and are signed on its behalf by:
A E IsaacDirectorR MédoriDirector
82 The BOC Group plcAnnual report and accounts 2004
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ACCOUNTING POLICIES
General
• | Basis of preparationThese financial statements are based on the historical cost accounting convention in accordance with the Companies Act 1985 and comply with all applicable UK accounting standards. |
• | Basis of consolidationThe Group accounts include the accounts of the parent undertaking and of all subsidiaries, joint ventures and associates. |
• | Accounting policiesThese accounts have been prepared on an accounting basis consistent with that applied in the financial year ended 30 September 2003, except for changes arising from the application of UITF37: Purchases and sales of own shares, and UITF38: Accounting for ESOP trusts. These deal mainly with the balance sheet accounting treatment for own shares and do not have an impact on Group earnings. Comparative figures have been restated accordingly. The impact is explained further in note 31 to the financial statements. |
• | ExchangeProfit and loss and other period statements of the Group’s overseas operations are translated at average rates of exchange for the financial year. Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the financial year end. Assets or liabilities swapped into other currencies are accounted for in those currencies. Exchange differences are dealt with as a movement in reserves where they arise from: |
i) | the translation of the opening net assets of overseas operations; | ||
ii) | the retranslation of retained earnings of overseas operations from average to closing rates of exchange; and | ||
iii) | the translation or conversion of foreign currency borrowings taken to hedge overseas assets. |
All other exchange differences are taken to the profit and loss account. The principal exchange rates affecting the Group are shown in the financial review on page 55.
Revenue recognition
Retirement benefits
Research and development
Operating leases
Intangible fixed assets
• | GoodwillGoodwill arising on the acquisition of a business, being the excess of the fair value of the purchase price over the fair value of the net assets acquired, is capitalised and amortised on a straight line basis over its useful economic life, generally up to a maximum period of 20 years. An impairment review is carried out at the end of the first full financial year following acquisition. Any impairment in the value of goodwill, calculated by discounting estimated future cash flows, is dealt with in the profit and loss account in the period in which it arises. Negative goodwill, being the excess of the fair value of the net assets acquired over the fair value of the purchase price, is capitalised and amortised on a straight line basis, generally over a period equivalent to the realisation of the non-monetary assets acquired. |
Goodwill, both positive and negative, arising on acquisitions before 30 September 1998 was taken to reserves and has not been reinstated on the balance sheet. This is in line with the relevant accounting standard on goodwill, FRS10. This goodwill will remain in reserves until such time as it becomes impaired or the business or businesses to which it relates are disposed of, at which time it will be taken to the profit and loss account or statement of total recognised gains and losses where appropriate.
• | IntangiblesOther material intangible assets acquired, such as patents and trademarks, are capitalised and written off on the straight line basis over their effective economic lives. |
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Accounting policies
Tangible fixed assets
Per annum | |||||
Freehold property | 2%–4 | % | |||
Leasehold property (or at higher rates based on the life of the lease) | 2%–4 | % | |||
Plant and machinery | 3%–10 | % | |||
Cylinders | 4%–10 | % | |||
Motor vehicles | 7%–20 | % | |||
Computer hardware and major software | 15%–25 | % | |||
• | Until 30 September 1999, land and buildings were revalued periodically. Following the adoption of FRS15, land and buildings are no longer revalued. At 1 October 1999, the net book value of assets previously revalued is regarded as the historical cost. |
• | Interest costs on major fixed asset additions are capitalised during the construction period and written off as part of the total cost. |
• | Where finance leases have been entered into, the capital element of the obligations to the lessor are shown as part of borrowings and the rights in the corresponding assets are treated in the same way as owned fixed assets. |
• | Any impairment in the value of fixed assets, calculated by comparing the carrying value against the higher of the net realisable value or value in use, is dealt with in the profit and loss account in the period in which it arises. |
Investments
Stocks
Deferred tax
Provisions
Financial instruments
• | Foreign exchange transaction exposuresThe Group generally hedges actual and forecast foreign exchange exposures up to two years ahead. Forward contracts are used to hedge the forecast exposure and any gains or losses resulting from changes in exchange rates on contracts designated as hedges of forecast foreign exchange are deferred until the financial period in which they are realised. If the contract ceases to be a hedge, any gains and losses are recognised through the profit and loss account. |
• | Balance sheet translation exposuresA large proportion of the Group’s net assets are denominated in currencies other than sterling. Where practicable and cost effective the Group hedges these balance sheet translation exposures by borrowing in relevant currencies and markets and by the use of currency swaps. Currency swaps are used only as balance sheet hedging instruments, and the Group does not hedge the currency translation of its profit and loss account. Exchange gains and losses arising on the notional principal of these currency swaps during their life and at termination or maturity are dealt with as a movement in reserves. If the swap ceases to be a hedge of the underlying transaction, any gains or losses are recognised in the profit and loss account. |
• | Interest rate risk exposuresThe Group hedges its exposure to movements in interest rates associated with its borrowings primarily by means of interest rate swaps and forward rate agreements. Interest payments and receipts on these agreements are included with net interest payable. They are not revalued to fair value and shown on the Group balance sheet at the balance sheet date. |
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NOTES TO THE FINANCIAL STATEMENTS
1. Segmental information
a) Turnover (including share of joint ventures and associates) | ||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||||
Process Gas | and Special | BOC | Afrox | Total Group | Total Group | |||||||||||||||||||||||
Solutions | Products | Edwards | hospitals | Gist | by origin | by destination | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||
Europe | 292.8 | 449.1 | 189.5 | – | 293.2 | 1,224.6 | 1,162.7 | |||||||||||||||||||||
Americas | 523.4 | 422.6 | 272.3 | – | – | 1,218.3 | 1,171.6 | |||||||||||||||||||||
Africa | 36.1 | 230.8 | – | 432.1 | – | 699.0 | 699.4 | |||||||||||||||||||||
Asia/Pacific | 422.9 | 679.8 | 354.7 | – | – | 1,457.4 | 1,565.6 | |||||||||||||||||||||
Turnover | 1,275.2 | 1,782.3 | 816.5 | 432.1 | 293.2 | 4,599.3 | 4,599.3 | |||||||||||||||||||||
2003 | ||||||||||||||||||||||||||||
Europe | 278.3 | 430.0 | 154.3 | – | 291.8 | 1,154.4 | 1,137.4 | |||||||||||||||||||||
Americas | 517.5 | 461.7 | 259.6 | – | – | 1,238.8 | 1,191.5 | |||||||||||||||||||||
Africa | 30.8 | 201.3 | – | 353.4 | – | 585.5 | 588.0 | |||||||||||||||||||||
Asia/Pacific | 416.1 | 658.2 | 270.2 | – | – | 1,344.5 | 1,406.3 | |||||||||||||||||||||
Turnover | 1,242.7 | 1,751.2 | 684.1 | 353.4 | 291.8 | 4,323.2 | 4,323.2 | |||||||||||||||||||||
2002 | ||||||||||||||||||||||||||||
Europe | 257.1 | 399.3 | 150.0 | – | 263.2 | 1,069.6 | 1,055.3 | |||||||||||||||||||||
Americas | 528.1 | 464.8 | 298.9 | – | – | 1,291.8 | 1,240.1 | |||||||||||||||||||||
Africa | 23.6 | 158.4 | – | 259.0 | – | 441.0 | 443.3 | |||||||||||||||||||||
Asia/Pacific | 391.8 | 582.8 | 239.3 | – | 1.6 | 1,215.5 | 1,279.2 | |||||||||||||||||||||
Turnover | 1,200.6 | 1,605.3 | 688.2 | 259.0 | 264.8 | 4,017.9 | 4,017.9 | |||||||||||||||||||||
Inter segment turnover is not material.
b) Business analysis | ||||||||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||||||||
Industrial | ||||||||||||||||||||||||||||||
Process Gas | and Special | BOC | Afrox | |||||||||||||||||||||||||||
Solutions | Products | Edwards | hospitals | Gist | Corporate | Total Group | ||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||
Total operating profit before exceptional items 1 | 190.3 | 269.5 | 47.8 | 59.8 | 25.1 | (15.6 | ) | 576.9 | ||||||||||||||||||||||
Operating exceptional items 1 | (0.8 | ) | (15.6 | ) | (1.0 | ) | – | – | – | (17.4 | ) | |||||||||||||||||||
Operating profit | 189.5 | 253.9 | 46.8 | 59.8 | 25.1 | (15.6 | ) | 559.5 | ||||||||||||||||||||||
Loss on disposal of business | – | (79.5 | ) | – | – | – | – | (79.5 | ) | |||||||||||||||||||||
Profit on disposal of fixed assets | 4.9 | – | – | – | – | – | 4.9 | |||||||||||||||||||||||
Capital employed 2 | 1,625.2 | 943.9 | 548.1 | 162.5 | 6.9 | (66.2 | ) | 3,220.4 | ||||||||||||||||||||||
Capital expenditure 3 | 100.1 | 99.4 | 30.1 | 17.5 | 9.0 | – | 256.1 | |||||||||||||||||||||||
Depreciation and amortisation 3 | 156.0 | 101.5 | 40.1 | 12.3 | 12.9 | 1.2 | 324.0 | |||||||||||||||||||||||
2003 (restated) | ||||||||||||||||||||||||||||||
Total operating profit before exceptional items 1 | 184.0 | 242.7 | 18.5 | 46.1 | 29.2 | (14.9 | ) | 505.6 | ||||||||||||||||||||||
Operating exceptional items 1 | (6.9 | ) | (4.5 | ) | (10.6 | ) | – | – | (45.0 | ) | (67.0 | ) | ||||||||||||||||||
Operating profit | 177.1 | 238.2 | 7.9 | 46.1 | 29.2 | (59.9 | ) | 438.6 | ||||||||||||||||||||||
Capital employed 2 | 1,822.9 | 1,158.1 | 596.1 | 167.2 | 0.8 | (88.0 | ) | 3,657.1 | ||||||||||||||||||||||
Capital expenditure 3 | 93.1 | 105.2 | 37.6 | 17.8 | 22.3 | 5.2 | 281.2 | |||||||||||||||||||||||
Depreciation and amortisation 3 | 165.8 | 101.2 | 39.1 | 9.8 | 15.8 | 1.7 | 333.4 | |||||||||||||||||||||||
2002 (restated) | ||||||||||||||||||||||||||||||
Total operating profit before exceptional items 1 | 185.2 | 248.0 | 26.1 | 29.7 | 25.5 | (14.4 | ) | 500.1 | ||||||||||||||||||||||
Operating exceptional items 1 | (24.0 | ) | (18.7 | ) | (27.5 | ) | – | – | (4.3 | ) | (74.5 | ) | ||||||||||||||||||
Operating profit | 161.2 | 229.3 | (1.4 | ) | 29.7 | 25.5 | (18.7 | ) | 425.6 | |||||||||||||||||||||
(Loss)/profit on termination/disposal of businesses 1 | (21.3 | ) | – | 1.1 | – | – | – | (20.2 | ) | |||||||||||||||||||||
Capital employed 2 | 1,831.3 | 1,058.1 | 595.3 | 105.0 | 22.8 | (61.9 | ) | 3,550.6 | ||||||||||||||||||||||
Capital expenditure 3 | 157.3 | 123.6 | 42.0 | 9.2 | 19.0 | 3.2 | 354.3 | |||||||||||||||||||||||
Depreciation and amortisation 3 | 167.7 | 96.8 | 41.1 | 7.2 | 16.1 | 2.0 | 330.9 | |||||||||||||||||||||||
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. | |
4. | Net interest and net borrowings are managed centrally and are not directly attributable to individual business segments or regions. |
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Notes to the financial statements
1. Segmental informationcontinued
c) Regional analysis | ||||||||||||||||||||
Total | ||||||||||||||||||||
Europe | Americas | Africa | Asia/Pacific | Group | ||||||||||||||||
£ million | £ million | £ million | £ million | £ million | ||||||||||||||||
2004 | ||||||||||||||||||||
Total operating profit before exceptional items1 | 155.4 | 77.4 | 108.9 | 235.2 | 576.9 | |||||||||||||||
Operating exceptional items1 | – | (14.8 | ) | – | (2.6 | ) | (17.4 | ) | ||||||||||||
Operating profit | 155.4 | 62.6 | 108.9 | 232.6 | 559.5 | |||||||||||||||
Loss on disposal of business | – | (79.5 | ) | – | – | (79.5 | ) | |||||||||||||
Profit on disposal of fixed assets | 4.9 | – | – | – | 4.9 | |||||||||||||||
Capital employed2 | 796.6 | 992.9 | 335.4 | 1,095.5 | 3,220.4 | |||||||||||||||
Capital expenditure3 | 72.3 | 71.8 | 44.2 | 67.8 | 256.1 | |||||||||||||||
2003 (restated) | ||||||||||||||||||||
Total operating profit before exceptional items1 | 144.3 | 91.8 | 85.0 | 184.5 | 505.6 | |||||||||||||||
Operating exceptional items1 | (7.3 | ) | (49.1 | ) | – | (10.6 | ) | (67.0 | ) | |||||||||||
Operating profit | 137.0 | 42.7 | 85.0 | 173.9 | 438.6 | |||||||||||||||
Capital employed2 | 866.2 | 1,225.0 | 321.5 | 1,244.4 | 3,657.1 | |||||||||||||||
Capital expenditure3 | 102.7 | 79.1 | 36.7 | 62.7 | 281.2 | |||||||||||||||
2002 (restated) | ||||||||||||||||||||
Total operating profit before exceptional items1 | 155.2 | 121.3 | 56.7 | 166.9 | 500.1 | |||||||||||||||
Operating exceptional items1 | (38.4 | ) | (8.1 | ) | (0.4 | ) | (27.6 | ) | (74.5 | ) | ||||||||||
Operating profit | 116.8 | 113.2 | 56.3 | 139.3 | 425.6 | |||||||||||||||
(Loss)/profit on termination/disposal of businesses1 | (1.5 | ) | (18.7 | ) | – | – | (20.2 | ) | ||||||||||||
Capital employed2 | 907.4 | 1,241.3 | 221.2 | 1,180.7 | 3,550.6 | |||||||||||||||
Capital expenditure3 | 121.4 | 134.7 | 25.6 | 72.6 | 354.3 | |||||||||||||||
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. | |
4. | Net interest and net borrowings are managed centrally and are not directly attributable to individual business segments or regions. |
d) Joint ventures and associates - business analysis | ||||||||||||||||||||||||||||||
Joint ventures | Associates | |||||||||||||||||||||||||||||
Industrial | Industrial | |||||||||||||||||||||||||||||
Process Gas | and Special | BOC | Process Gas | and Special | BOC | Afrox | ||||||||||||||||||||||||
Solutions | Products | Edwards | Solutions | Products | Edwards | hospitals | ||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||||
2004 | ||||||||||||||||||||||||||||||
Turnover1 | 230.0 | 238.9 | 178.1 | 36.3 | 7.7 | 5.5 | 17.4 | |||||||||||||||||||||||
Operating profit before exceptional items1 | 40.8 | 30.4 | 28.2 | 6.3 | 0.7 | 1.4 | 4.7 | |||||||||||||||||||||||
Operating exceptional items1 | (0.8 | ) | (0.8 | ) | (1.0 | ) | – | – | – | - | ||||||||||||||||||||
Operating profit | 40.0 | 29.6 | 27.2 | 6.3 | 0.7 | 1.4 | 4.7 | |||||||||||||||||||||||
Capital employed2 | 89.5 | 69.3 | 99.9 | 35.3 | 4.9 | 2.5 | 9.7 | |||||||||||||||||||||||
Capital expenditure | 58.5 | 15.5 | 30.1 | 2.1 | 2.7 | 0.1 | - | |||||||||||||||||||||||
Group share | 25.7 | 7.4 | 14.8 | 0.6 | 0.7 | – | - | |||||||||||||||||||||||
Other partners | 32.8 | 8.1 | 15.3 | 1.5 | 2.0 | 0.1 | - | |||||||||||||||||||||||
Depreciation and amortisation1 | 27.0 | 10.2 | 10.1 | 2.7 | 0.5 | 0.1 | 1.0 | |||||||||||||||||||||||
2003 | ||||||||||||||||||||||||||||||
Turnover1 | 191.9 | 221.6 | 130.8 | 30.9 | 8.6 | 5.7 | 15.4 | |||||||||||||||||||||||
Operating profit before exceptional items1 | 39.0 | 25.6 | 22.2 | 5.8 | 0.7 | 1.4 | 3.5 | |||||||||||||||||||||||
Operating exceptional items1 | (2.5 | ) | (1.8 | ) | (2.5 | ) | – | – | – | – | ||||||||||||||||||||
Operating profit | 36.5 | 23.8 | 19.7 | 5.8 | 0.7 | 1.4 | 3.5 | |||||||||||||||||||||||
Capital employed2 | 183.8 | 108.2 | 118.0 | 40.8 | 7.2 | 3.3 | 8.3 | |||||||||||||||||||||||
Capital expenditure | 40.7 | 10.5 | 20.7 | 8.0 | 1.1 | 0.4 | – | |||||||||||||||||||||||
Group share | 17.7 | 5.1 | 10.3 | 2.5 | 0.3 | 0.2 | – | |||||||||||||||||||||||
Other partners | 23.0 | 5.4 | 10.4 | 5.5 | 0.8 | 0.2 | – | |||||||||||||||||||||||
Depreciation and amortisation1 | 28.0 | 10.1 | 9.6 | 5.4 | 1.2 | 0.6 | 0.7 | |||||||||||||||||||||||
1. | Group share. | |
2. | Capital employed comprises the Group’s share of the net assets of joint ventures or associates. | |
3. | The decrease in capital employed of joint ventures in 2004 is principally due to the acquisition of an additional 30 per cent ownership interest in the Cantarell joint venture (see note 28a)). | |
4. | The increase in joint ventures in 2003 is principally due to the formation of the Japan Air Gases business in January 2003. Prior to that all of BOC’s turnover in Japan was reported by subsidiary companies. |
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Notes to the financial statements
1. Segmental informationcontinued
Joint ventures | Associates | |||||||||||||||||||||||||||||
Industrial | Industrial | |||||||||||||||||||||||||||||
Process Gas | and Special | BOC | Process Gas | and Special | BOC | Afrox | ||||||||||||||||||||||||
Solutions | Products | Edwards | Solutions | Products | Edwards | hospitals | ||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||||
2002 | ||||||||||||||||||||||||||||||
Turnover1 | 119.9 | 142.7 | 61.5 | 10.6 | 7.9 | 7.1 | 10.5 | |||||||||||||||||||||||
Operating profit before exceptional items1 | 30.9 | 20.8 | 12.1 | 5.0 | 1.9 | 1.7 | 2.1 | |||||||||||||||||||||||
Operating exceptional items1 | (0.4 | ) | (0.1 | ) | – | – | – | – | – | |||||||||||||||||||||
Operating profit | 30.5 | 20.7 | 12.1 | 5.0 | 1.9 | 1.7 | 2.1 | |||||||||||||||||||||||
Capital employed2 | 93.6 | 63.8 | 48.1 | 40.1 | 11.9 | 2.1 | 3.4 | |||||||||||||||||||||||
Capital expenditure | 46.5 | 7.5 | 8.0 | 8.3 | 1.8 | 1.5 | 0.6 | |||||||||||||||||||||||
Group share | 23.0 | 3.7 | 4.0 | 2.6 | 0.6 | 0.4 | 0.2 | |||||||||||||||||||||||
Other partners | 23.5 | 3.8 | 4.0 | 5.7 | 1.2 | 1.1 | 0.4 | |||||||||||||||||||||||
Depreciation and amortisation1 | 20.9 | 8.2 | 6.1 | 2.9 | 0.7 | 0.1 | 0.2 | |||||||||||||||||||||||
1. | Group share. | |
2. | Capital employed comprises the Group’s share of the net assets of joint ventures or associates. |
e) Joint ventures and associates – regional analysis
Joint ventures | Associates | |||||||||||||||||||||
Americas | Asia/Pacific | Americas | Africa | Asia/Pacific | ||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | ||||||||||||||||||
2004 | ||||||||||||||||||||||
Turnover1 | 87.6 | 559.4 | 26.5 | 17.4 | 23.0 | |||||||||||||||||
Operating profit before exceptional items1 | 17.2 | 82.2 | 1.1 | 4.7 | 7.3 | |||||||||||||||||
Operating exceptional items1 | – | (2.6 | ) | – | – | – | ||||||||||||||||
Operating profit | 17.2 | 79.6 | 1.1 | 4.7 | 7.3 | |||||||||||||||||
Capital employed2 | (30.0 | ) | 288.7 | 12.5 | 9.7 | 30.2 | ||||||||||||||||
Capital expenditure | 6.0 | 98.1 | 0.1 | – | 4.8 | |||||||||||||||||
Group share | 2.4 | 45.5 | – | – | 1.3 | |||||||||||||||||
Other partners | 3.6 | 52.6 | 0.1 | – | 3.5 | |||||||||||||||||
2003 | ||||||||||||||||||||||
Turnover1 | 68.0 | 476.3 | 19.1 | 15.4 | 26.1 | |||||||||||||||||
Operating profit before exceptional items1 | 19.1 | 67.7 | (0.7 | ) | 3.5 | 8.6 | ||||||||||||||||
Operating exceptional items1 | – | (6.8 | ) | – | – | – | ||||||||||||||||
Operating profit | 19.1 | 60.9 | (0.7 | ) | 3.5 | 8.6 | ||||||||||||||||
Capital employed2 | 26.5 | 383.5 | 13.1 | 8.3 | 38.2 | |||||||||||||||||
Capital expenditure | 13.8 | 58.1 | 6.0 | – | 3.5 | |||||||||||||||||
Group share | 5.4 | 27.7 | 1.8 | – | 1.2 | |||||||||||||||||
Other partners | 8.4 | 30.4 | 4.2 | – | 2.3 | |||||||||||||||||
2002 | ||||||||||||||||||||||
Turnover1 | 85.4 | 238.7 | – | 10.5 | 25.6 | |||||||||||||||||
Operating profit before exceptional items1 | 21.9 | 41.9 | – | 2.1 | 8.6 | |||||||||||||||||
Operating exceptional items1 | – | (0.5 | ) | – | – | – | ||||||||||||||||
Operating profit | 21.9 | 41.4 | – | 2.1 | 8.6 | |||||||||||||||||
Capital employed2 | 25.2 | 180.3 | 13.7 | 3.4 | 40.4 | |||||||||||||||||
Capital expenditure | 3.4 | 58.6 | 5.5 | 0.6 | 6.1 | |||||||||||||||||
Group share | 1.4 | 29.3 | 1.7 | 0.2 | 1.9 | |||||||||||||||||
Other partners | 2.0 | 29.3 | 3.8 | 0.4 | 4.2 | |||||||||||||||||
1. | Group share. | |
2. | Capital employed comprises the Group’s share of the net assets of joint ventures or associates. | |
3. | The decrease in capital employed of joint ventures in 2004 is principally due to the acquisition of an additional 30 per cent ownership interest in the Cantarell joint venture (see note 28a)). | |
4. | The increase in joint ventures in 2003 is principally due to the formation of the Japan Air Gases business in January 2003. Prior to that all of BOC’s turnover in Japan was reported by subsidiary companies. |
87 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
1. Segmental informationcontinued
f) Significant country analysis
UK | US | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Turnover1 | 973.9 | 914.3 | 868.7 | 959.7 | 1,013.5 | 1,065.6 | ||||||||||||||||||
Total operating profit before exceptional items1 | 112.9 | 110.4 | 115.2 | 21.5 | 31.3 | 50.5 | ||||||||||||||||||
Operating exceptional items1 | – | (5.0 | ) | (36.5 | ) | (14.8 | ) | (48.9 | ) | (25.7 | ) | |||||||||||||
Operating profit | 112.9 | 105.4 | 78.7 | 6.7 | (17.6 | ) | 24.8 | |||||||||||||||||
Loss on disposal of business | – | – | – | (79.5 | ) | – | – | |||||||||||||||||
Profit on disposal of fixed assets | 4.9 | – | – | – | – | – | ||||||||||||||||||
Capital employed2 (restated) | 575.8 | 629.5 | 696.9 | 820.7 | 1,039.5 | 1,088.9 | ||||||||||||||||||
Capital expenditure3 | 60.7 | 92.4 | 110.0 | 56.2 | 71.0 | 124.8 | ||||||||||||||||||
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
2004 | 2003 | 2002 | ||||||||||
i) Expense category | £ million | £ million | £ million | |||||||||
Cost of sales | (2,181.7 | ) | (2,137.9 | ) | (2,104.8 | ) | ||||||
Distribution costs | (317.7 | ) | (321.7 | ) | (344.1 | ) | ||||||
Administrative expenses1 | (936.6 | ) | (913.2 | ) | (861.4 | ) | ||||||
Income from other fixed asset investments | 0.2 | 1.7 | 4.2 | |||||||||
Net operating expenses | (1,254.1 | ) | (1,233.2 | ) | (1,201.3 | ) | ||||||
Continuing | ||||||||||||
operations | ||||||||||||
before | ||||||||||||
exceptional | Exceptional | |||||||||||
items | items2 | Total | ||||||||||
ii) 2004 analysis | £ million | £ million | £ million | |||||||||
Cost of sales | (2,181.7 | ) | – | (2,181.7 | ) | |||||||
Distribution costs | (317.7 | ) | – | (317.7 | ) | |||||||
Administrative expenses1 | (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 | ) | ||||||
iii) 2003 analysis | ||||||||||||
Cost of sales | (2,136.2 | ) | (1.7 | ) | (2,137.9 | ) | ||||||
Distribution costs | (318.6 | ) | (3.1 | ) | (321.7 | ) | ||||||
Administrative expenses1 | (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 | ) | ||||||
iv) 2002 analysis | ||||||||||||
Cost of sales | (2,089.7 | ) | (15.1 | ) | (2,104.8 | ) | ||||||
Distribution costs | (341.9 | ) | (2.2 | ) | (344.1 | ) | ||||||
Administrative expenses1 | (804.7 | ) | (56.7 | ) | (861.4 | ) | ||||||
Income from other fixed asset investments | 4.2 | – | 4.2 | |||||||||
Net operating expenses | (1,142.4 | ) | (58.9 | ) | (1,201.3 | ) | ||||||
1. | Included in total administrative expenses is research and development expenditure of £41.6 million (2003: £39.9 million, 2002: £47.0 million). | |
2. | All exceptional items arose in continuing operations. |
88 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
2. Profit and losscontinued
b) Exceptional items analysis
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Charged in arriving at operating profit | ||||||||||||
Restructuring costs | (17.4 | ) | (23.8 | ) | (47.2 | ) | ||||||
Litigation settlement | – | (43.2 | ) | – | ||||||||
Write-down of assets | – | – | (21.2 | ) | ||||||||
Costs of proposed takeover | – | – | (6.1 | ) | ||||||||
Total operating exceptional items | (17.4 | ) | (67.0 | ) | (74.5 | ) | ||||||
i) Restructuring costs
ii) Litigation settlement
iii) Write-down of assets
iv) Costs of proposed takeover
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
(Charged)/credited after operating profit | ||||||||||||
Loss on disposal of business – continuing operations | (79.5 | ) | – | – | ||||||||
Profit on disposal of fixed assets – continuing operations | 4.9 | – | – | |||||||||
Profit on disposal of businesses – continuing operations | – | – | 1.1 | |||||||||
Closure of business – continuing operations | – | – | (21.3 | ) | ||||||||
Total non-operating exceptional items | (74.6 | ) | – | (20.2 | ) | |||||||
v) Disposal of businesses
vi) Profit on disposal of fixed assets
vii) Closure of business
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Notes to the financial statements
2. Profit and losscontinued
c) Fees to auditors
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Audit fees (Parent: £0.4 million, 2003: £0.3 million, 2002: £0.3 million) | 2.5 | 2.0 | 1.9 | |||||||||
Non-audit fees | ||||||||||||
Tax services | 1.1 | 1.6 | 2.5 | |||||||||
Audit related services | 0.9 | 0.5 | 0.8 | |||||||||
Other services (principally expatriate tax and administration services) | 1.1 | 1.4 | 1.8 | |||||||||
Total non-audit fees | 3.1 | 3.5 | 5.1 | |||||||||
Total fees paid to auditors | 5.6 | 5.5 | 7.0 | |||||||||
3. Interest on net debt
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Interest payable on borrowings totally repayable within five years | 55.9 | 48.0 | 47.5 | |||||||||
Interest payable on all other borrowings | 35.9 | 46.5 | 55.7 | |||||||||
Interest payable and similar charges | 91.8 | 94.5 | 103.2 | |||||||||
Interest capitalised | (0.1 | ) | (0.8 | ) | (2.0 | ) | ||||||
Interest payable (net of interest capitalised) | 91.7 | 93.7 | 101.2 | |||||||||
Interest receivable and similar income | (21.2 | ) | (17.9 | ) | (22.6 | ) | ||||||
Interest (net) | 70.5 | 75.8 | 78.6 | |||||||||
Share of interest of joint ventures (net) | 17.0 | 19.3 | 23.2 | |||||||||
Share of interest of associates (net) | 0.9 | 1.0 | 1.3 | |||||||||
Total interest on net debt | 88.4 | 96.1 | 103.1 | |||||||||
Interest payable on finance leases | 1.7 | 3.5 | 5.3 | |||||||||
Interest payable on borrowings repayable by installments | 10.0 | 14.1 | 19.5 | |||||||||
4. Tax
a) Tax on profit on ordinary activities
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Current tax: | ||||||||||||
Payable in the UK | ||||||||||||
Corporation tax at 30% (2003: 30%, 2002: 30%) | 79.8 | 85.7 | 51.7 | |||||||||
Double tax relief | (52.9 | ) | (57.5 | ) | (19.7 | ) | ||||||
26.9 | 28.2 | 32.0 | ||||||||||
Payable overseas | ||||||||||||
US – Federal tax at 35% (2003: 35%, 2002: 35%) | 0.1 | 0.2 | (1.0 | ) | ||||||||
– State and local taxes | 0.1 | (0.3 | ) | 0.6 | ||||||||
Australia at 30% (2003: 30%, 2002: 30%) | 23.2 | 16.4 | 14.6 | |||||||||
South Africa at 30% (2003: 30%, 2002: 30%) | 35.5 | 26.0 | 18.0 | |||||||||
Japan at 42% (2003: 42%, 2002: 42%) | 14.1 | 11.3 | 8.3 | |||||||||
Other countries | 14.3 | 35.6 | 30.9 | |||||||||
87.3 | 89.2 | 71.4 | ||||||||||
Total current tax | 114.2 | 117.4 | 103.4 | |||||||||
Deferred tax: | ||||||||||||
Origination and reversal of timing differences | (12.4 | ) | (20.9 | ) | 3.4 | |||||||
Effect of change in tax rate on opening liability | (0.1 | ) | (0.1 | ) | (0.6 | ) | ||||||
Total deferred tax1 | (12.5 | ) | (21.0 | ) | 2.8 | |||||||
Tax on profit on ordinary activities | 101.7 | 96.4 | 106.2 | |||||||||
90 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
4. Taxcontinued
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Analysis of charge in the year by entity type | ||||||||||||
Subsidiary undertakings | 75.9 | 77.9 | 100.3 | |||||||||
Share of joint ventures | 23.5 | 16.0 | 3.6 | |||||||||
Share of associates | 2.3 | 2.5 | 2.3 | |||||||||
Tax on profit on ordinary activities | 101.7 | 96.4 | 106.2 | |||||||||
1. | The deferred tax includes a credit of £13.5 million (2003: £18.5 million credit, 2002: £9.5 million charge) relating to subsidiary undertakings. The balance relates to the Group’s share of joint ventures and associates. |
The tax charge includes a credit of £18.9 million for operating exceptional items (2003: £25.0 million, 2002: £15.3 million) and a credit of £25.6 million for non-operating exceptional items (2003: £nil, 2002: £7.5 million). The credit in respect of operating exceptional items includes a credit of £12.5 million relating to prior year exceptional items. The effective rate of tax on adjusted profit was 29.0 per cent (2003: 29.0 per cent, 2002: 30.0 per cent). The total rate of tax was 24.7 per cent (2003: 27.4 per cent, 2002: 31.7 per cent).
b) Deferred tax
i) Deferred tax – UK GAAP | 2004 | 2003 | 2002 | |||||||||
£ million | £ million | £ million | ||||||||||
Analysis | ||||||||||||
Arising from accelerated depreciation allowances | 312.2 | 346.5 | 362.1 | |||||||||
Other timing differences | (34.2 | ) | (43.7 | ) | (53.5 | ) | ||||||
Tax losses and other credits available | (30.8 | ) | (30.2 | ) | (24.7 | ) | ||||||
247.2 | 272.6 | 283.9 | ||||||||||
Movement during the year1 | ||||||||||||
At 1 October 2003 | 272.6 | 283.9 | 285.9 | |||||||||
Exchange adjustment | (3.8 | ) | 5.7 | (8.6 | ) | |||||||
Arising during the year | (13.5 | ) | (18.5 | ) | 9.5 | |||||||
Transfers (to)/from current tax | (0.2 | ) | (1.0 | ) | 0.8 | |||||||
Acquisitions/(disposals) of businesses | – | (18.7 | ) | – | ||||||||
Other movements | (7.9 | ) | 21.2 | (3.7 | ) | |||||||
At 30 September 2004 | 247.2 | 272.6 | 283.9 | |||||||||
1. | Subsidiary undertakings only. |
The balance at 30 September 2004 is shown in: | ||||||||||||
Provisions for liabilities and charges (note 22) | 253.0 | 279.2 | 291.8 | |||||||||
Less:Debtors falling due after more than one year (note 15 b)) | 5.8 | 6.6 | 7.9 | |||||||||
247.2 | 272.6 | 283.9 | ||||||||||
ii) Deferred tax – US GAAP
The table below provides a reconciliation of deferred taxes from a UK GAAP basis to a US GAAP basis at 30 September 2004.
Adjustments | ||||||||||||
UK GAAP | to US GAAP | US GAAP | ||||||||||
£ million | £ million | £ million | ||||||||||
Accelerated capital allowances | 312.2 | – | 312.2 | |||||||||
Other temporary differences | (34.2 | ) | (10.2 | ) | (44.4 | ) | ||||||
Tax losses and other credits available | (30.8 | ) | – | (30.8 | ) | |||||||
247.2 | (10.2 | ) | 237.0 | |||||||||
1. | The UK deferred tax balance of £247.2 million does not include the deferred tax asset of £106.4 million relating to the Group’s net pension liabilities. As required by the applicable UK GAAP accounting standard, FRS17, this asset is set against the relevant retirement benefit liability to show the net position (see note 8 a)). If it was included above, it would be wholly reversed in the adjustments to US GAAP. |
US GAAP | ||||
£ million | ||||
Movement during the year | ||||
At 1 October 2003 | 223.0 | |||
Exchange adjustment | (6.3 | ) | ||
Arising during the year | 1.3 | |||
Transfers to current tax | (0.2 | ) | ||
Acquisitions/(disposals) of businesses | – | |||
Other movements2 | 19.2 | |||
At 30 September 2004 | 237.0 | |||
2. | This mainly relates to the deferred tax on an additional minimum pension liability under US GAAP. See note 8 c) and 30 e). |
91 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
4. Taxcontinued
The components of deferred tax assets/(liabilities) at 30 September 2004 were:
2004 | 2003 | |||||||
£ million | £ million | |||||||
Long-term | ||||||||
Asset | 153.6 | 188.0 | ||||||
Liability | (383.9 | ) | (431.8 | ) | ||||
Net liability | (230.3 | ) | (243.8 | ) | ||||
Short-term | ||||||||
Asset | 19.1 | 25.8 | ||||||
Liability | (25.8 | ) | (5.0 | ) | ||||
Net (liability)/asset | (6.7 | ) | 20.8 | |||||
Total deferred tax assets | 172.7 | 213.8 | ||||||
Total deferred tax liabilities | (409.7 | ) | (436.8 | ) | ||||
(237.0 | ) | (223.0 | ) | |||||
c) Factors affecting the current and total tax charge for the period
Reconciliation of total tax rate | Reconciliation of effective tax rate on adjusted profit | |||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||
UK corporation tax rate | 30.0 | 30.0 | 30.0 | 30.0 | 30.0 | 30.0 | ||||||||||||||||||
Difference in tax rates of overseas subsidiaries, joint ventures and associates | 1.1 | 0.5 | 0.6 | 0.9 | 0.4 | 0.5 | ||||||||||||||||||
Excess of tax depreciation over book depreciation | (2.5 | ) | (3.3 | ) | (5.2 | ) | (2.1 | ) | (2.8 | ) | (3.9 | ) | ||||||||||||
Other timing differences | (0.9 | ) | 2.1 | 3.5 | (0.7 | ) | 1.8 | 2.7 | ||||||||||||||||
State and local taxes | 0.2 | 0.3 | 0.6 | 0.2 | 0.3 | 0.5 | ||||||||||||||||||
Net creation/(utilisation) of losses | – | 0.9 | (1.4 | ) | – | 0.7 | (1.1 | ) | ||||||||||||||||
Investment tax credits | – | (0.1 | ) | (3.0 | ) | – | (0.1 | ) | (2.4 | ) | ||||||||||||||
Prior year tax | (3.0 | ) | (0.1 | ) | 1.2 | (2.4 | ) | – | 0.9 | |||||||||||||||
Tax effect of exceptional items | 3.6 | 4.4 | 4.4 | – | – | – | ||||||||||||||||||
Permanent items and other items with less than a 5% net effect | (0.8 | ) | (1.3 | ) | 0.1 | (0.7 | ) | (1.1 | ) | 0.1 | ||||||||||||||
Current total tax rate/effective tax rate | 27.7 | 33.4 | 30.8 | 25.2 | 29.2 | 27.3 | ||||||||||||||||||
Deferred tax timing differences | (3.0 | ) | (6.0 | ) | 0.9 | 3.8 | (0.2 | ) | 2.7 | |||||||||||||||
Total tax rate/effective tax rate | 24.7 | 27.4 | 31.7 | 29.0 | 29.0 | 30.0 | ||||||||||||||||||
Profit on ordinary activities before tax, as shown in the consolidated profit and loss account, is analysed over its component parts as follows:
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
UK | 83.7 | 67.0 | 66.6 | |||||||||
Overseas | 328.6 | 284.9 | 268.7 | |||||||||
412.3 | 351.9 | 335.3 | ||||||||||
92 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
4. Taxcontinued
d) Factors that may affect future tax charges
e) Unused tax credits
Net | ||||
operating loss | ||||
Year | £ million | |||
2005 | 0.9 | |||
2006 | – | |||
2007 | – | |||
2008 | – | |||
2009 | – | |||
Thereafter, or no expiry date | 56.1 | |||
5. Directors
6. Employee numbers
a) Subsidiaries
2004 | 2003 | |||||||||||||||
Year end | Average | Year end | Average | |||||||||||||
i) Employees by business | ||||||||||||||||
Process Gas Solutions | 5,836 | 5,631 | 5,730 | 5,837 | ||||||||||||
Industrial and Special Products | 13,874 | 14,895 | 15,267 | 15,142 | ||||||||||||
BOC Edwards | 4,911 | 4,823 | 4,790 | 4,931 | ||||||||||||
Afrox hospitals | 13,392 | 13,654 | 13,694 | 13,804 | ||||||||||||
Gist | 4,961 | 4,852 | 4,613 | 5,343 | ||||||||||||
Corporate | 409 | 405 | 413 | 405 | ||||||||||||
43,383 | 44,260 | 44,507 | 45,462 | |||||||||||||
ii) Employees by region | ||||||||||||||||
Europe | 12,712 | 12,504 | 12,353 | 13,101 | ||||||||||||
Americas | 6,283 | 7,140 | 7,451 | 7,411 | ||||||||||||
Africa | 16,790 | 17,073 | 17,138 | 17,178 | ||||||||||||
Asia/Pacific | 7,598 | 7,543 | 7,565 | 7,772 | ||||||||||||
43,383 | 44,260 | 44,507 | 45,462 | |||||||||||||
b) Joint ventures and associates | ||||||||||||||||
Joint ventures | 6,094 | 5,993 | 6,064 | 5,626 | ||||||||||||
Associates | 906 | 885 | 878 | 877 | ||||||||||||
7,000 | 6,878 | 6,942 | 6,503 | |||||||||||||
c) Employment costs
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Wages and salaries | 855.2 | 844.7 | 813.9 | |||||||||
Social security costs | 79.6 | 77.7 | 77.7 | |||||||||
Other pension costs | 80.8 | 115.4 | 66.3 | |||||||||
1,015.6 | 1,037.8 | 957.9 | ||||||||||
93 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
7. Options and incentive schemes
a) Policy
b) Summary of movements
Long-term | Executive | |||||||||||||||||||||||||||||||
incentive | share award | |||||||||||||||||||||||||||||||
Employee options | Executive options | plan1 | plan | 1 | ||||||||||||||||||||||||||||
Number of | Weighted | Number of | Weighted | Number of | Number of | |||||||||||||||||||||||||||
shares | Range of | average | shares | Range of | average | shares | shares | |||||||||||||||||||||||||
million | option prices | option price | million | option prices | option price | million | million | |||||||||||||||||||||||||
Outstanding at 1 October 2001 | 5.7 | 610p-894p | 835p | 21.7 | 627p-1119p | 914p | – | 0.7 | ||||||||||||||||||||||||
Granted | 1.2 | 914p | 914p | 5.5 | 1016p-1079p | 1016p | – | – | ||||||||||||||||||||||||
Exercised | (1.0 | ) | 610p-914p | 787p | (3.1 | ) | 627p-980p | 868p | – | (0.7 | ) | |||||||||||||||||||||
Lapsed | (0.5 | ) | 610p-914p | 857p | (0.6 | ) | 742p-1119p | 957p | – | – | ||||||||||||||||||||||
Outstanding at 30 September 2002 | 5.4 | 650p-914p | 855p | 23.5 | 677p-1119p | 943p | – | – | ||||||||||||||||||||||||
Granted | 2.3 | 698p | 698p | 4.9 | 776p-873p | 837p | 1.2 | – | ||||||||||||||||||||||||
Exercised | (0.3 | ) | 650p-914p | 826p | (0.4 | ) | 677p-851p | 751p | – | – | ||||||||||||||||||||||
Lapsed | (1.1 | ) | 650p-914p | 868p | (1.6 | ) | 677p-1016p | 937p | – | – | ||||||||||||||||||||||
Outstanding at 30 September 2003 | 6.3 | 698p-914p | 801p | 26.4 | 677p-1119p | 926p | 1.2 | – | ||||||||||||||||||||||||
Granted | 1.2 | 795p | 795p | 2.9 | 820p-896p | 820p | 1.4 | – | ||||||||||||||||||||||||
Exercised | (0.7 | ) | 698p-914p | 811p | (0.7 | ) | 677p-919p | 749p | – | – | ||||||||||||||||||||||
Lapsed | (1.2 | ) | 698p-914p | 821p | (2.0 | ) | 677p-1119p | 940p | (0.1 | ) | – | |||||||||||||||||||||
Outstanding at 30 September 2004 | 5.6 | 698p-914p | 794p | 26.6 | 722p-1079p | 919p | 2.5 | – | ||||||||||||||||||||||||
Number of participants at 30 September 2004 | 5,700 | 1,173 | 81 | – | ||||||||||||||||||||||||||||
Options exercisable: | ||||||||||||||||||||||||||||||||
At 30 September 2004 | 0.2 | 766p-894p | 875p | 6.3 | 722p-980p | 892p | – | – | ||||||||||||||||||||||||
At 30 September 2003 | – | – | – | 7.5 | 677p-1119p | 880p | – | – | ||||||||||||||||||||||||
Fair value of options granted during: | ||||||||||||||||||||||||||||||||
Year ended 30 September 2004 | 205p | 175p | 705p | |||||||||||||||||||||||||||||
Year ended 30 September 2003 | 174p | 177p | 609p | |||||||||||||||||||||||||||||
1. | The long-term incentive and executive share award plans were granted at an option price of £nil. |
The weighted average fair value of options granted during the year was calculated using the Black-Scholes option pricing model. Details of the assumptions used are given in note 30 g).
c) Analysis of options outstanding
Employee options | Executive options | Long-term incentive plan | 1 | |||||||||||||||||||||||||||||
Number of | Weighted | Normal | Number of | Weighted | Normal | Number | Normal | |||||||||||||||||||||||||
options | average | exercisable | options | average | exercisable | of awards | exercisable | |||||||||||||||||||||||||
thousand | option price | date | thousand | option price | date | thousand | date | |||||||||||||||||||||||||
Outstanding at 30 September 2004 | ||||||||||||||||||||||||||||||||
Date of grant | ||||||||||||||||||||||||||||||||
1995 | – | – | – | 432 | 722p | 1998-2005 | – | – | ||||||||||||||||||||||||
1996 | – | – | – | 886 | 916p | 1999-2006 | – | – | ||||||||||||||||||||||||
1997 | 63 | 882p | 2004-2005 | 1,004 | 980p | 2000-2007 | – | – | ||||||||||||||||||||||||
1998 | 293 | 823p | 2005-2006 | 1,700 | 915p | 2001-2008 | – | – | ||||||||||||||||||||||||
1999 | 276 | 766p | 2004-2007 | 2,239 | 860p | 2002-2009 | – | – | ||||||||||||||||||||||||
2000 | 588 | 870p | 2005-2008 | 4,564 | 937p | 2003-2010 | – | – | ||||||||||||||||||||||||
2001 | 578 | 894p | 2004-2009 | 3,630 | 994p | 2004-2011 | – | – | ||||||||||||||||||||||||
2002 | 650 | 914p | 2005-2010 | 4,759 | 1016p | 2005-2012 | – | – | ||||||||||||||||||||||||
2003 | 1,980 | 698p | 2006-2011 | 4,606 | 836p | 2006-2013 | 1,173 | 2006-2013 | ||||||||||||||||||||||||
2004 | 1,133 | 795p | 2007-2012 | 2,825 | 820p | 2007-2014 | 1,353 | 2007-2014 | ||||||||||||||||||||||||
5,561 | 26,645 | 2,526 | ||||||||||||||||||||||||||||||
1. | The long-term incentive plan was granted at an option price of £nil. |
94 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefits
a) UK GAAP Group
Main assumptions for FRS17 purposes | Europe | Americas | Africa | Asia/Pacific | |||||||||||||
Date of latest actuarial funding valuation | 31 Mar 02 | 1 Jan 03 | 30 Jun 03 | 31 Dec 03 | |||||||||||||
2004 | |||||||||||||||||
Rate of increase in salaries | 4.4% | 3.8% | 7.5% | 3.6% | |||||||||||||
Rate of increase in pensions in payment | 2.9% | – | 5.3% | 2.4% | |||||||||||||
Discount rate | 5.5% | 5.7% | 10.0% | 6.1% | |||||||||||||
Inflation | 2.9% | 2.5% | 5.5% | 2.5% | |||||||||||||
2003 | |||||||||||||||||
Rate of increase in salaries | 4.1% | 3.75% | 7.5% | 3.5% | |||||||||||||
Rate of increase in pensions in payment | 2.6% | – | 4.8% | 2.5% | |||||||||||||
Discount rate | 5.3% | 5.9% | 10.0% | 6.2% | |||||||||||||
Inflation | 2.6% | 2.5% | 5.0% | 2.5% | |||||||||||||
2002 | |||||||||||||||||
Rate of increase in salaries | 3.9% | 3.75% | 9.5% | 3.5% | |||||||||||||
Rate of increase in pensions in payment | 2.4% | – | 6.8% | 2.5% | |||||||||||||
Discount rate | 5.5% | 6.5% | 12.0% | 6.1% | |||||||||||||
Inflation | 2.4% | 2.5% | 7.0% | 2.5% | |||||||||||||
The assumptions used for the US health care benefits for FRS17 purposes are a discount rate of 5.7 per cent (2003: 5.9 per cent, 2002: 6.5 per cent) and an ultimate health care cost trend rate of 4.5 per cent (2003: 4.5 per cent, 2002: 4.5 per cent).
95 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefitscontinued
Equities | Bonds | Other | Total | |||||||||||||
Long-term rate of return expected at 30 September 2004 | ||||||||||||||||
Europe | 8.5% | 5.1% | 7.5% | – | ||||||||||||
Americas | 9.5% | 3.2% | 3.5% | – | ||||||||||||
Africa | 13.5% | 10.0% | 9.0% | – | ||||||||||||
Asia/Pacific | 8.1% | 4.6% | 5.0% | – | ||||||||||||
Value at 30 September 2004 (£ million) | ||||||||||||||||
Europe | 870.3 | 260.5 | 106.9 | 1,237.7 | ||||||||||||
Americas | 292.7 | 76.1 | 0.3 | 369.1 | ||||||||||||
Africa | 93.8 | 17.5 | 6.9 | 118.2 | ||||||||||||
Asia/Pacific | 116.7 | 15.6 | 37.1 | 169.4 | ||||||||||||
Total | 1,373.5 | 369.7 | 151.2 | 1,894.4 | ||||||||||||
Long-term rate of return expected at 30 September 2003 | ||||||||||||||||
Europe | 8.5% | 5.0% | 6.4% | – | ||||||||||||
Americas | 9.5% | 4.1% | – | – | ||||||||||||
Africa | 13.0% | 10.0% | 8.1% | – | ||||||||||||
Asia/Pacific | 8.5% | 4.8% | 5.2% | – | ||||||||||||
Value at 30 September 2003 (£ million) | ||||||||||||||||
Europe | 793.9 | 216.1 | 62.3 | 1,072.3 | ||||||||||||
Americas | 307.0 | 66.2 | – | 373.2 | ||||||||||||
Africa | 73.6 | 16.8 | 7.9 | 98.3 | ||||||||||||
Asia/Pacific | 105.6 | 15.1 | 25.2 | 145.9 | ||||||||||||
Total | 1,280.1 | 314.2 | 95.4 | 1,689.7 | ||||||||||||
Long-term rate of return expected at 30 September 2002 | ||||||||||||||||
Europe | 8.5% | 4.9% | 4.0% | – | ||||||||||||
Americas | 9.5% | 6.0% | – | – | ||||||||||||
Africa | 14.0% | 12.0% | 8.5% | – | ||||||||||||
Asia/Pacific | 7.7% | 4.7% | 5.7% | – | ||||||||||||
Value at 30 September 2002 (£ million) | ||||||||||||||||
Europe | 686.2 | 235.0 | 18.8 | 940.0 | ||||||||||||
Americas | 289.2 | 51.0 | – | 340.2 | ||||||||||||
Africa | 49.6 | 15.3 | 5.4 | 70.3 | ||||||||||||
Asia/Pacific | 89.8 | 16.3 | 16.7 | 122.8 | ||||||||||||
Total | 1,114.8 | 317.6 | 40.9 | 1,473.3 | ||||||||||||
96 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefitscontinued
Americas | Americas | |||||||||||||||||||||||
Europe | pensions | health care | Africa | Asia/Pacific | Total | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
2004 | ||||||||||||||||||||||||
Total market value of assets | 1,237.7 | 369.1 | – | 118.2 | 169.4 | 1,894.4 | ||||||||||||||||||
Present value of scheme liabilities | (1,682.0 | ) | (266.0 | ) | (46.4 | ) | (91.8 | ) | (163.8 | ) | (2,250.0 | ) | ||||||||||||
Irrecoverable surplus | – | – | – | (26.4 | ) | – | (26.4 | ) | ||||||||||||||||
(Deficit)/surplus in the scheme | (444.3 | ) | 103.1 | (46.4 | ) | – | 5.6 | (382.0 | ) | |||||||||||||||
Related deferred tax asset/(liability) | 130.4 | (41.0 | ) | 18.3 | – | (1.3 | ) | 106.4 | ||||||||||||||||
Net pension (liabilities)/assets1 | (313.9 | ) | 62.1 | (28.1 | ) | – | 4.3 | (275.6 | ) | |||||||||||||||
2003 | ||||||||||||||||||||||||
Total market value of assets | 1,072.3 | 373.2 | – | 98.3 | 145.9 | 1,689.7 | ||||||||||||||||||
Present value of scheme liabilities | (1,516.9 | ) | (294.0 | ) | (50.5 | ) | (92.5 | ) | (142.1 | ) | (2,096.0 | ) | ||||||||||||
Irrecoverable surplus | – | – | – | (5.8 | ) | – | (5.8 | ) | ||||||||||||||||
(Deficit)/surplus in the scheme | (444.6 | ) | 79.2 | (50.5 | ) | – | 3.8 | (412.1 | ) | |||||||||||||||
Related deferred tax asset/(liability) | 133.4 | (31.2 | ) | 19.9 | – | (1.1 | ) | 121.0 | ||||||||||||||||
Net pension (liabilities)/assets1 | (311.2 | ) | 48.0 | (30.6 | ) | – | 2.7 | (291.1 | ) | |||||||||||||||
2002 | ||||||||||||||||||||||||
Total market value of assets | 940.0 | 340.2 | – | 70.3 | 122.8 | 1,473.3 | ||||||||||||||||||
Present value of scheme liabilities | (1,331.6 | ) | (250.4 | ) | (50.1 | ) | (59.3 | ) | (134.0 | ) | (1,825.4 | ) | ||||||||||||
Irrecoverable surplus | – | – | – | (11.0 | ) | – | (11.0 | ) | ||||||||||||||||
(Deficit)/surplus in the scheme | (391.6 | ) | 89.8 | (50.1 | ) | – | (11.2 | ) | (363.1 | ) | ||||||||||||||
Related deferred tax asset/(liability) | 117.5 | (35.5 | ) | 19.8 | – | 4.6 | 106.4 | |||||||||||||||||
Net pension (liabilities)/assets1 | (274.1 | ) | 54.3 | (30.3 | ) | – | (6.6 | ) | (256.7 | ) | ||||||||||||||
1. | Included in the net pension (liabilities)/assets are assets of £68.9 million (2003: £50.7 million, 2002: £54.3 million) and liabilities of £344.5 million (2003: £341.8 million, 2002: £311.0 million). In addition to deferred tax on pension assets and liabilities, a further £22.0 million of current tax relating to pension assets and liabilities is included within Creditors: amounts falling due within one year. Of this, £3.2 million has been accounted for in the total recognised gains and losses and £18.8 million has been included in the profit and loss account. There were no equivalent current tax items in 2003 or 2002. |
Americas | Americas | |||||||||||||||||||||||
Europe | pensions | health care | Africa | Asia/Pacific | Total | |||||||||||||||||||
Analysis of the amount charged to operating profit | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||
Year to 30 September 2004 | ||||||||||||||||||||||||
Current service cost | (47.4 | ) | (10.1 | ) | (1.5 | ) | (2.4 | ) | (7.7 | ) | (69.1 | ) | ||||||||||||
Past service cost | (0.5 | ) | – | – | – | – | (0.5 | ) | ||||||||||||||||
Curtailments/settlements2 | – | 1.6 | 2.8 | – | – | 4.4 | ||||||||||||||||||
Total operating charge | (47.9 | ) | (8.5 | ) | 1.3 | (2.4 | ) | (7.7 | ) | (65.2 | ) | |||||||||||||
Year to 30 September 2003 | ||||||||||||||||||||||||
Current service cost | (39.4 | ) | (12.3 | ) | (1.6 | ) | (2.1 | ) | (7.9 | ) | (63.3 | ) | ||||||||||||
Past service cost3 | (0.4 | ) | (43.2 | ) | – | – | – | (43.6 | ) | |||||||||||||||
Curtailments/settlements | 3.5 | – | – | – | – | 3.5 | ||||||||||||||||||
Total operating charge | (36.3 | ) | (55.5 | ) | (1.6 | ) | (2.1 | ) | (7.9 | ) | (103.4 | ) | ||||||||||||
Year to 30 September 2002 | ||||||||||||||||||||||||
Current service cost | (33.5 | ) | (12.8 | ) | (1.6 | ) | (1.7 | ) | (7.2 | ) | (56.8 | ) | ||||||||||||
Past service cost3 | (0.6 | ) | 0.7 | – | – | – | 0.1 | |||||||||||||||||
Total operating charge | (34.1 | ) | (12.1 | ) | (1.6 | ) | (1.7 | ) | (7.2 | ) | (56.7 | ) | ||||||||||||
2. | The curtailment gains in Americas pensions and Americas health care in 2004 relate to the sale of the US packaged gas business and were accounted for as exceptional items (see note 2b)). | |
3. | The past service cost amounts in Americas pensions in 2003 were accounted for as exceptional items (see note 2 b)). Two amendments were made to the US pension plan in 2002 relating to the allocation of the interest credit to plan members, both retrospectively and in the future. The net impact of the amendments was a £0.7 million credit against past service cost in the year. |
97 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefitscontinued
Americas | Americas | |||||||||||||||||||||||
Europe | pensions | health care | Africa | Asia/Pacific | Total | |||||||||||||||||||
Analysis of the amount included in other net financing income | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||
Year to 30 September 2004 | ||||||||||||||||||||||||
Expected return on pension scheme assets4 | 83.1 | 28.1 | – | 11.2 | 10.7 | 133.1 | ||||||||||||||||||
Interest on pension scheme liabilities4 | (80.4 | ) | (15.4 | ) | (2.6 | ) | (8.9 | ) | (9.7 | ) | (117.0 | ) | ||||||||||||
Net interest on FRS17 pension schemes | 2.7 | 12.7 | (2.6 | ) | 2.3 | 1.0 | 16.1 | |||||||||||||||||
Year to 30 September 2003 | ||||||||||||||||||||||||
Expected return on pension scheme assets4 | 70.2 | 29.1 | – | 10.8 | 9.4 | 119.5 | ||||||||||||||||||
Interest on pension scheme liabilities4 | (72.9 | ) | (15.8 | ) | (3.1 | ) | (8.8 | ) | (9.2 | ) | (109.8 | ) | ||||||||||||
Net interest on FRS17 pension schemes | (2.7 | ) | 13.3 | (3.1 | ) | 2.0 | 0.2 | 9.7 | ||||||||||||||||
Year to 30 September 2002 | ||||||||||||||||||||||||
Expected return on pension scheme assets | 87.4 | 36.2 | – | 7.2 | 8.3 | 139.1 | ||||||||||||||||||
Interest on pension scheme liabilities | (71.1 | ) | (18.6 | ) | (3.7 | ) | (5.6 | ) | (7.1 | ) | (106.1 | ) | ||||||||||||
Net interest on FRS17 pension schemes | 16.3 | 17.6 | (3.7 | ) | 1.6 | 1.2 | 33.0 | |||||||||||||||||
4. | The profit and loss account includes amounts relating to joint ventures and associates of £0.1 million and £(0.4) million in respect of expected return on pension scheme assets and interest on pension scheme liabilities respectively (2003: £0.1 million and £(0.4) million). There were no corresponding amounts for joint ventures and associates in 2002. |
Americas | Americas | |||||||||||||||||||||||
Analysis of the amount recognised in the statement | Europe | pensions | health care | Africa | Asia/Pacific | Total | ||||||||||||||||||
of total recognised gains and losses | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||
Year to 30 September 2004 | ||||||||||||||||||||||||
Actual return less expected return on pension scheme assets | 31.9 | 17.6 | – | 12.5 | 14.2 | 76.2 | ||||||||||||||||||
Experience gains and losses arising on the scheme liabilities | (28.6 | ) | 12.5 | 0.2 | – | (14.2 | ) | (30.1 | ) | |||||||||||||||
Changes in assumptions underlying the present value of the scheme liabilities | (29.4 | ) | (3.3 | ) | (2.0 | ) | 5.9 | – | (28.8 | ) | ||||||||||||||
Irrecoverable surplus | – | – | – | (20.6 | ) | – | (20.6 | ) | ||||||||||||||||
Actuarial (loss)/gain recognised in the statement of total recognised gains and losses5 | (26.1 | ) | 26.8 | (1.8 | ) | (2.2 | ) | – | (3.3 | ) | ||||||||||||||
Year to 30 September 2003 | ||||||||||||||||||||||||
Actual return less expected return on pension scheme assets | 73.7 | 44.2 | – | (10.8 | ) | 4.7 | 111.8 | |||||||||||||||||
Experience gains and losses arising on the scheme liabilities | 8.3 | (1.7 | ) | 0.1 | 0.1 | (2.6 | ) | 4.2 | ||||||||||||||||
Changes in assumptions underlying the present value of the scheme liabilities | (134.8 | ) | (6.3 | ) | (2.0 | ) | – | – | (143.1 | ) | ||||||||||||||
Irrecoverable surplus | – | – | – | 8.7 | – | 8.7 | ||||||||||||||||||
Actuarial (loss)/gain recognised in the statement of total recognised gains and losses5 | (52.8 | ) | 36.2 | (1.9 | ) | (2.0 | ) | 2.1 | (18.4 | ) | ||||||||||||||
Year to 30 September 2002 | ||||||||||||||||||||||||
Actual return less expected return on pension scheme assets | (246.4 | ) | (71.6 | ) | – | 3.0 | (13.6 | ) | (328.6 | ) | ||||||||||||||
Experience gains and losses arising on the scheme liabilities | (9.7 | ) | 6.7 | 5.8 | (3.9 | ) | (1.3 | ) | (2.4 | ) | ||||||||||||||
Changes in assumptions underlying the present value of the scheme liabilities | (91.7 | ) | (2.2 | ) | (5.9 | ) | – | 5.5 | (94.3 | ) | ||||||||||||||
Irrecoverable surplus | – | – | – | (11.6 | ) | – | (11.6 | ) | ||||||||||||||||
Actuarial (loss) recognised in the statement of total recognised gains and losses5 | (347.8 | ) | (67.1 | ) | (0.1 | ) | (12.5 | ) | (9.4 | ) | (436.9 | ) | ||||||||||||
5. | Included in the actuarial (loss)/gain for the year is £(1.1) million in respect of minority interests (2003: £(0.9) million, 2002: £(5.7) million). |
98 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefitscontinued
Americas | Americas | |||||||||||||||||||||||
History of experience gains and losses | Europe | pensions | health care | Africa | Asia/Pacific | Total | ||||||||||||||||||
Year to 30 September 2004 | ||||||||||||||||||||||||
Difference between the expected and actual return on scheme assets | ||||||||||||||||||||||||
Amount (£ million) | 31.9 | 17.6 | – | 12.5 | 14.2 | 76.2 | ||||||||||||||||||
Percentage of scheme assets | 2.6% | 4.8% | – | 10.6% | 8.4% | 4.0% | ||||||||||||||||||
Experience gains and losses on scheme liabilities | ||||||||||||||||||||||||
Amount (£ million) | (28.6 | ) | 12.5 | 0.2 | – | (14.2 | ) | (30.1 | ) | |||||||||||||||
Percentage of the present value of scheme liabilities | (1.7% | ) | 4.7% | 0.4% | – | (8.7% | ) | (1.3% | ) | |||||||||||||||
Total amount recognised in the statement of total recognised gains and losses | ||||||||||||||||||||||||
Amount (£ million) | (26.1 | ) | 26.8 | (1.8 | ) | (2.2 | ) | – | (3.3 | ) | ||||||||||||||
Percentage of the present value of scheme liabilities | (1.6% | ) | 10.0% | (3.9% | ) | (2.4% | ) | – | (0.1% | ) | ||||||||||||||
Year to 30 September 2003 | ||||||||||||||||||||||||
Difference between the expected and actual return on scheme assets | ||||||||||||||||||||||||
Amount (£ million) | 73.7 | 44.2 | – | (10.8 | ) | 4.7 | 111.8 | |||||||||||||||||
Percentage of scheme assets | 6.9% | 11.8% | – | (11.0% | ) | 3.2% | 6.6% | |||||||||||||||||
Experience gains and losses on scheme liabilities | ||||||||||||||||||||||||
Amount (£ million) | 8.3 | (1.7 | ) | 0.1 | 0.1 | (2.6 | ) | 4.2 | ||||||||||||||||
Percentage of the present value of scheme liabilities | 0.5% | (0.6% | ) | 0.2% | 0.1% | (1.8% | ) | 0.2% | ||||||||||||||||
Total amount recognised in the statement of total recognised gains and losses | ||||||||||||||||||||||||
Amount (£ million) | (52.8 | ) | 36.2 | (1.9 | ) | (2.0 | ) | 2.1 | (18.4 | ) | ||||||||||||||
Percentage of the present value of scheme liabilities | (3.5% | ) | 12.3% | (3.8% | ) | (2.2% | ) | 1.5% | (0.9% | ) | ||||||||||||||
Year to 30 September 2002 | ||||||||||||||||||||||||
Difference between the expected and actual return on scheme assets | ||||||||||||||||||||||||
Amount (£ million) | (246.4 | ) | (71.6 | ) | – | 3.0 | (13.6 | ) | (328.6 | ) | ||||||||||||||
Percentage of scheme assets | (26.2% | ) | (21.0% | ) | – | 4.3% | (11.1% | ) | (22.3% | ) | ||||||||||||||
Experience gains and losses on scheme liabilities | ||||||||||||||||||||||||
Amount (£ million) | (9.7 | ) | 6.7 | 5.8 | (3.9 | ) | (1.3 | ) | (2.4 | ) | ||||||||||||||
Percentage of the present value of scheme liabilities | (0.7% | ) | 2.7% | 11.6% | (6.6% | ) | (1.0% | ) | (0.1% | ) | ||||||||||||||
Total amount recognised in the statement of total recognised gains and losses | ||||||||||||||||||||||||
Amount (£ million) | (347.8 | ) | (67.1 | ) | (0.1 | ) | (12.5 | ) | (9.4 | ) | (436.9 | ) | ||||||||||||
Percentage of the present value of scheme liabilities | (26.1% | ) | (26.8% | ) | (0.2% | ) | (21.1% | ) | (7.0% | ) | (23.9% | ) | ||||||||||||
Year to 30 September 2001 | ||||||||||||||||||||||||
Difference between the expected and actual return on scheme assets | ||||||||||||||||||||||||
Amount (£ million) | (346.2 | ) | (156.4 | ) | – | (11.9 | ) | (13.3 | ) | (527.8 | ) | |||||||||||||
Percentage of scheme assets | (30.3% | ) | (37.6% | ) | – | (15.0% | ) | (10.4% | ) | (29.9% | ) | |||||||||||||
Experience gains and losses on scheme liabilities | ||||||||||||||||||||||||
Amount (£ million) | (7.6 | ) | (0.9 | ) | (6.9 | ) | (0.3 | ) | 10.7 | (5.0 | ) | |||||||||||||
Percentage of the present value of scheme liabilities | (0.6% | ) | (0.3% | ) | (13.3% | ) | (0.4% | ) | 8.2% | (0.3% | ) | |||||||||||||
Total amount recognised in the statement of total recognised gains and losses | ||||||||||||||||||||||||
Amount (£ million) | (289.8 | ) | (157.3 | ) | (6.9 | ) | (15.1 | ) | (2.6 | ) | (471.7 | ) | ||||||||||||
Percentage of the present value of scheme liabilities | (24.7% | ) | (60.9% | ) | (13.3% | ) | (22.7% | ) | (2.0% | ) | (28.1% | ) | ||||||||||||
Year to 30 September 2000 | ||||||||||||||||||||||||
Difference between the expected and actual return on scheme assets | ||||||||||||||||||||||||
Amount (£ million) | 109.0 | 57.2 | – | 8.5 | 9.0 | 183.7 | ||||||||||||||||||
Percentage of scheme assets | 7.6% | 10.6% | – | 8.3% | 6.0% | 8.3% | ||||||||||||||||||
Experience gains and losses on scheme liabilities | ||||||||||||||||||||||||
Amount (£ million) | 22.2 | (30.9 | ) | (17.8 | ) | 3.9 | (11.8 | ) | (34.4 | ) | ||||||||||||||
Percentage of the present value of scheme liabilities | 1.9% | (13.3% | ) | (40.7% | ) | 5.5% | (8.0% | ) | (2.1% | ) | ||||||||||||||
Total amount recognised in the statement of total recognised gains and losses | ||||||||||||||||||||||||
Amount (£ million) | 98.8 | 26.3 | (14.8 | ) | 12.4 | (2.8 | ) | 119.9 | ||||||||||||||||
Percentage of the present value of scheme liabilities | 8.5% | 11.3% | (33.9% | ) | 17.5% | (1.9% | ) | 7.2% | ||||||||||||||||
99 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
8. Pensions and other retirement benefitscontinued
Americas | Americas | |||||||||||||||||||||||
Europe | pensions | health care | Africa | Asia/Pacific | Total | |||||||||||||||||||
Movement in (deficit)/surplus during the year | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||
Year to 30 September 2004 | ||||||||||||||||||||||||
(Deficit)/surplus in scheme at 1 October | (444.6 | ) | 79.2 | (50.5 | ) | – | 3.8 | (412.1 | ) | |||||||||||||||
Movement in the year: | ||||||||||||||||||||||||
Current service cost | (47.4 | ) | (10.1 | ) | (1.5 | ) | (2.4 | ) | (7.7 | ) | (69.1 | ) | ||||||||||||
Past service cost | (0.5 | ) | – | – | – | – | (0.5 | ) | ||||||||||||||||
Curtailments/settlements | – | 1.6 | 2.8 | – | – | 4.4 | ||||||||||||||||||
Contributions | 71.6 | – | 2.9 | 2.3 | 8.7 | 85.5 | ||||||||||||||||||
Disposals of businesses | – | – | – | – | – | – | ||||||||||||||||||
Other finance income | 2.7 | 12.7 | (2.6 | ) | 2.3 | 1.0 | 16.1 | |||||||||||||||||
Actuarial (loss)/gain | (26.1 | ) | 26.8 | (1.8 | ) | (2.2 | ) | – | (3.3 | ) | ||||||||||||||
Exchange adjustment | – | (7.1 | ) | 4.3 | – | (0.2 | ) | (3.0 | ) | |||||||||||||||
(Deficit)/surplus in scheme at 30 September | (444.3 | ) | 103.1 | (46.4 | ) | – | 5.6 | (382.0 | ) | |||||||||||||||
Year to 30 September 2003 | ||||||||||||||||||||||||
(Deficit)/surplus in scheme at 1 October | (391.6 | ) | 89.8 | (50.1 | ) | – | (11.2 | ) | (363.1 | ) | ||||||||||||||
Movement in the year: | ||||||||||||||||||||||||
Current service cost | (39.4 | ) | (12.3 | ) | (1.6 | ) | (2.1 | ) | (7.9 | ) | (63.3 | ) | ||||||||||||
Past service cost | (0.4 | ) | (43.2 | ) | – | – | – | (43.6 | ) | |||||||||||||||
Curtailments/settlements | 3.5 | – | – | – | – | 3.5 | ||||||||||||||||||
Contributions | 38.8 | – | 3.5 | 2.1 | 10.2 | 54.6 | ||||||||||||||||||
Disposals of businesses | – | – | – | – | 10.4 | 10.4 | ||||||||||||||||||
Other finance income | (2.7 | ) | 13.3 | (3.1 | ) | 2.0 | 0.2 | 9.7 | ||||||||||||||||
Actuarial (loss)/gain | (52.8 | ) | 36.2 | (1.9 | ) | (2.0 | ) | 2.1 | (18.4 | ) | ||||||||||||||
Exchange adjustment | – | (4.6 | ) | 2.7 | – | – | (1.9 | ) | ||||||||||||||||
(Deficit)/surplus in scheme at 30 September | (444.6 | ) | 79.2 | (50.5 | ) | – | 3.8 | (412.1 | ) | |||||||||||||||
b) UK GAAP parent company
c) US GAAP
At 30 June 2004 the measurement date for SFAS132 reporting, the target asset allocation and actual asset allocation of the main UK scheme was:
2004 | 2003 | |||||||||||
Target | Actual | Actual | ||||||||||
Equity securities | 70.0% | 71.9% | 73.0% | |||||||||
Debt securities | 20.0% | 19.2% | 20.5% | |||||||||
Real estate | 10.0% | 7.8% | 5.0% | |||||||||
Cash | 0.0% | 1.1% | 1.5% | |||||||||
2004 | 2003 | |||||||
Equity securities | 77.5% | 87.4% | ||||||
Debt securities | 22.5% | 12.6% | ||||||
100 The BOC Group plcAnnual report and accounts 2004
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8. Pensions and other retirement benefitscontinued | ||||||||||||||||
Pension benefits | Other benefits1 | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Change in benefit obligation | ||||||||||||||||
Projected benefit obligation at 1 October 2003 | 2,089.3 | 1,695.9 | 50.5 | 50.1 | ||||||||||||
Exchange adjustment | (28.4 | ) | 31.3 | (4.2 | ) | (2.8 | ) | |||||||||
Service cost | 67.4 | 53.0 | 1.7 | 1.8 | ||||||||||||
Interest cost | 114.0 | 108.7 | 2.6 | 3.1 | ||||||||||||
Plan participants’ contributions | 13.5 | 13.9 | – | – | ||||||||||||
Actuarial (gains)/losses | 6.6 | 242.9 | 1.7 | 1.8 | ||||||||||||
Benefits paid | (93.6 | ) | (96.1 | ) | (2.9 | ) | (3.5 | ) | ||||||||
Other (income) less expenses | (0.2 | ) | (0.4 | ) | – | – | ||||||||||
Curtailments, settlements, termination benefits | (1.0 | ) | (3.1 | ) | (3.1 | ) | – | |||||||||
Plan amendments | – | 43.2 | – | – | ||||||||||||
Projected benefit obligation at 30 September 2004 | 2,167.6 | 2,089.3 | 46.3 | 50.5 | ||||||||||||
Change in fair value of assets | ||||||||||||||||
Fair value of assets at 1 October 2003 | 1,640.5 | 1,706.0 | – | – | ||||||||||||
Exchange adjustment | (34.8 | ) | 29.5 | – | – | |||||||||||
Actual return on plan assets | 279.5 | (57.1 | ) | – | – | |||||||||||
Employer contributions | 72.2 | 44.7 | – | – | ||||||||||||
Plan participants’ contributions | 13.5 | 13.9 | – | – | ||||||||||||
Other income less (expenses) | (0.2 | ) | (0.4 | ) | – | – | ||||||||||
Benefits paid | (93.6 | ) | (96.1 | ) | – | – | ||||||||||
Fair value of assets at 30 September 2004 | 1,877.1 | 1,640.5 | – | – | ||||||||||||
Funded status and unrecognised (gains)/losses | ||||||||||||||||
Funded status | (290.5 | ) | (448.8 | ) | (46.3 | ) | (50.5 | ) | ||||||||
Unrecognised net transition asset | (10.8 | ) | (14.3 | ) | – | – | ||||||||||
Unrecognised prior service cost/(credit) | 13.2 | 19.5 | (1.7 | ) | (2.8 | ) | ||||||||||
Unrecognised net loss | 535.8 | 669.6 | 7.7 | 10.2 | ||||||||||||
Adjustment for post measurement date contributions | 17.2 | 9.5 | – | – | ||||||||||||
Prepaid/(accrued) pension cost | 264.9 | 235.5 | (40.3 | ) | (43.1 | ) | ||||||||||
Amounts recognised in the statement of financial position consist of: | ||||||||||||||||
Prepaid benefit cost | 165.2 | 165.0 | ||||||||||||||
Accrued benefit liability | (263.4 | ) | (383.6 | ) | ||||||||||||
Intangible asset | 5.4 | 6.9 | ||||||||||||||
Accumulated other comprehensive income | 357.7 | 447.2 | ||||||||||||||
Prepaid pension cost | 264.9 | 235.5 | ||||||||||||||
1. | Other benefits relate to post retirement medical benefits. |
The weighted-average asset allocation, by asset category, for the pension plans are as follows:
Europe | Americas | Africa | Asia/Pacific | |||||||||||||
At 30 September 2004 | ||||||||||||||||
Equity securities | 70.3% | 79.3% | 79.4% | 68.9% | ||||||||||||
Debt securities | 21.1% | 20.6% | 14.8% | 9.2% | ||||||||||||
Real estate | 8.6% | – | 1.0% | 7.2% | ||||||||||||
Other | – | 0.1% | 4.8% | 14.7% | ||||||||||||
At 30 September 2003 | ||||||||||||||||
Equity securities | 74.0% | 82.3% | 74.8% | 72.3% | ||||||||||||
Debt securities | 20.2% | 17.7% | 17.1% | 10.4% | ||||||||||||
Real estate | 5.1% | – | 0.3% | 7.5% | ||||||||||||
Other | 0.7% | – | 7.8% | 9.8% | ||||||||||||
The accumulated benefit obligation for all pension plans totalled £1,962.2 million (2003: £1,848.5 million).
101 The BOC Group plcAnnual report and accounts 2004
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8. Pensions and other retirement benefitscontinued
Europe | Americas | Africa | Asia/Pacific | |||||||||||||
At 30 September 2004 | ||||||||||||||||
Discount rate | 5.75% | 6.1% | 10.0% | 6.1% | ||||||||||||
Expected return on all plan assets | 7.75% | 8.0% | 12.0% | 7.1% | ||||||||||||
Rate of compensation increase | 4.5% | 3.75% | 7.5% | 3.5% | ||||||||||||
At 30 September 2003 | ||||||||||||||||
Discount rate | 5.2% | 5.8% | 10.0% | 6.2% | ||||||||||||
Expected return on all plan assets | 7.6% | 8.0% | 12.0% | 7.6% | ||||||||||||
Rate of compensation increase | 4.0% | 3.75% | 7.5% | 3.5% | ||||||||||||
The weighted-average assumptions used to determine the net benefit cost are as follows:
Europe | Americas | Africa | Asia/Pacific | |||||||||||||
At 30 September 2004 | ||||||||||||||||
Discount rate | 5.2% | 5.8% | 10.0% | 6.2% | ||||||||||||
Expected return on all plan assets | 7.6% | 8.0% | 12.0% | 7.6% | ||||||||||||
Rate of compensation increase | 4.0% | 3.75% | 7.5% | 3.5% | ||||||||||||
At 30 September 2003 | ||||||||||||||||
Discount rate | 5.8% | 7.0% | 12.0% | 7.0% | ||||||||||||
Expected return on all plan assets | 7.7% | 9.0% | 12.0% | 8.0% | ||||||||||||
Rate of compensation increase | 3.9% | 4.75% | 9.5% | 3.5% | ||||||||||||
The Group presently expects its contributions to its pension plans and post retirement medical plans to be at a similar level in 2005 to the amounts contributed in 2004.
The following benefit payments, which reflect future service, as appropriate, are expected to be paid:
Total pension | Other | |||||||||||||||||||||||
Europe | Americas | 2 | Africa | Asia/Pacific | benefits | benefits | 3 | |||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Year ending 30 September | ||||||||||||||||||||||||
2005 | 64.6 | 38.4 | 3.9 | 8.3 | 115.2 | 3.2 | ||||||||||||||||||
2006 | 65.5 | 15.3 | 4.0 | 9.0 | 93.8 | 3.3 | ||||||||||||||||||
2007 | 68.9 | 15.6 | 4.2 | 9.6 | 98.3 | 3.3 | ||||||||||||||||||
2008 | 72.6 | 16.3 | 4.4 | 10.3 | 103.6 | 3.2 | ||||||||||||||||||
2009 | 76.9 | 17.1 | 4.6 | 11.2 | 109.8 | 3.3 | ||||||||||||||||||
2010 – 2014 | 448.7 | 93.4 | 25.8 | 70.3 | 638.2 | 17.4 | ||||||||||||||||||
2. | Payments in the Americas in 2005 include £21.5 million relating to a litigation settlement reached in November 2003 (see notes 2b) and 26b)). |
For the post retirement medical benefits plan at 30 September 2004, the initial health care cost trend rates for valuing the medical benefits and drug benefits post age 65 were 9.0 per cent (2003: 9.0 per cent) and 3.2 per cent (2003: 3.5 per cent) respectively. The rates for valuing post age 65 medical benefits are assumed to reduce gradually to 4.5 per cent in 2011 (2003: 4.5 per cent in 2009). The rates for valuing drug benefits post age 65 are assumed to reduce gradually to 0.65 per cent in 2011 (2003: 1.1 per cent in 2010). For valuing pre age 65 medical and drug benefits, a blended health care trend rate of 9.0 per cent was used for 30 September 2004 (2003: 9.0 per cent). This blended rate was assumed to reduce gradually to 4.5 per cent in 2011 (2003: 4.5 per cent in 2010).
Pensionable benefits | Other benefits | 3 | ||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Service cost net of employees’ contributions | 67.4 | 53.0 | 54.6 | 1.7 | 1.8 | 1.6 | ||||||||||||||||||
Interest cost on projected benefits obligation | 114.0 | 108.7 | 102.9 | 2.6 | 3.1 | 3.6 | ||||||||||||||||||
Expected return on assets | (157.4 | ) | (166.2 | ) | (156.7 | ) | – | – | – | |||||||||||||||
Amortisation of net transition asset | (2.9 | ) | (14.8 | ) | (14.7 | ) | – | – | – | |||||||||||||||
Amortisation of prior service cost/(credit)4 | 3.1 | 46.4 | 3.5 | (0.5 | ) | (0.5 | ) | (0.5 | ) | |||||||||||||||
Amortisation of net loss/(gain) | 14.8 | (1.6 | ) | (7.2 | ) | 0.3 | 0.3 | 0.3 | ||||||||||||||||
Cost of special termination benefits | 0.7 | 0.9 | 0.6 | – | – | – | ||||||||||||||||||
Curtailment | 0.6 | – | – | (0.4 | ) | – | – | |||||||||||||||||
Net periodic pension cost/(credit) | 40.3 | 26.4 | (17.0 | ) | 3.7 | 4.7 | 5.0 | |||||||||||||||||
3. | Other benefits relate to post retirement medical benefits. | |
4. | In 2003 the amortisation of pension prior service cost includes £43.2 million in respect of a settlement of litigation from which the company will derive no future economic benefit. |
It is estimated that a one per cent change in the weighted average health care costs trend would have the following effects on the accumulated benefit obligation and net periodic pension cost at 30 September 2004:
One percentage point | ||||||||
Increase | Decrease | |||||||
Accumulated benefit obligation | 4.0 | (3.8 | ) | |||||
Net periodic pension cost | 0.6 | (0.5 | ) | |||||
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9. Dividends | ||||||||||||||||||||||||
Per share | ||||||||||||||||||||||||
2004 | 2003 | 2002 | 2004 | 2003 | 2002 | |||||||||||||||||||
pence | pence | pence | £ million | £ million | £ million | |||||||||||||||||||
Ordinary | ||||||||||||||||||||||||
First interim | 15.5 | 15.5 | 15.5 | 76.3 | 76.4 | 75.8 | ||||||||||||||||||
Second interim | 24.5 | 23.5 | 22.5 | 121.0 | 115.7 | 110.8 | ||||||||||||||||||
40.0 | 39.0 | 38.0 | 197.3 | 192.1 | 186.6 | |||||||||||||||||||
10. Earnings per share
2004 | 2003 | 2002 | ||||||||||
i) Earnings | £ million | £ million | £ million | |||||||||
Amounts used in computing the earnings per share | ||||||||||||
Earnings attributable to Ordinary shareholders for the financial year | 264.0 | 219.1 | 202.9 | |||||||||
Adjustment for exceptional items 1 | 47.5 | 41.6 | 71.4 | |||||||||
Adjusted earnings | 311.5 | 260.7 | 274.3 | |||||||||
1. | This comprises the exceptional items before interest of £(92.0) million (2003: £(67.0) million, 2002: £(94.7) million) adjusted for the impact of tax of £44.5 million (2003: £25.0 million, 2002: £22.8 million) and minority interests of £nil (2003: £0.4 million, 2002: £0.5 million). |
2004 | 2003 | 2002 | ||||||||||
ii) Average number of 25p Ordinary shares | million | million | million | |||||||||
Average issued share capital | 498.2 | 497.5 | 496.0 | |||||||||
Less:Average own shares held in trust | 5.2 | 5.0 | 5.6 | |||||||||
Basic | 493.0 | 492.5 | 490.4 | |||||||||
Add:Dilutive share options | 0.8 | 0.2 | 1.8 | |||||||||
Diluted | 493.8 | 492.7 | 492.2 | |||||||||
11. Fixed assets — intangible assets
a) Group summary | ||||||||||||
Other | ||||||||||||
Goodwill | intangibles | Total | ||||||||||
£ million | £ million | £ million | ||||||||||
Gross book value | ||||||||||||
At 1 October 2003 | 232.3 | 6.2 | 238.5 | |||||||||
Exchange adjustment | (13.3 | ) | (0.4 | ) | (13.7 | ) | ||||||
Acquired during the year | 3.9 | 0.2 | 4.1 | |||||||||
Adjustments relating to prior year acquisitions | (1.0 | ) | – | (1.0 | ) | |||||||
Disposed of during the year | (9.1 | ) | (1.2 | ) | (10.3 | ) | ||||||
At 30 September 2004 | 212.8 | 4.8 | 217.6 | |||||||||
Amortisation | ||||||||||||
At 1 October 2003 | 31.1 | 1.3 | 32.4 | |||||||||
Exchange adjustment | (1.9 | ) | (0.1 | ) | (2.0 | ) | ||||||
Provided during the year | 14.0 | 0.5 | 14.5 | |||||||||
Impairment | 2.5 | – | 2.5 | |||||||||
Disposed of during the year | (4.5 | ) | (0.2 | ) | (4.7 | ) | ||||||
At 30 September 2004 | 41.2 | 1.5 | 42.7 | |||||||||
Net book value | ||||||||||||
At 1 October 2003 | 201.2 | 4.9 | 206.1 | |||||||||
At 30 September 2004 | 171.6 | 3.3 | 174.9 | |||||||||
103 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
11. Fixed assets – intangible assetscontinued
b) Analysis of acquisitions and disposals
Positive | Negative | Amortisation | ||||||||||
goodwill | goodwill | period | ||||||||||
i) Businesses acquired | £ million | £ million | Years | 4 | ||||||||
2004 | ||||||||||||
There was no significant goodwill on acquisitions of subsidiary undertakings in the year. | ||||||||||||
2003 | ||||||||||||
Praxair Polska | 10.1 | – | 20 | |||||||||
Environmental Management Corporation 1 | 32.9 | – | 15 | |||||||||
2002 | ||||||||||||
Seiko Instruments Inc – turbomolecular pumps business 2 | 59.4 | – | 20 | |||||||||
Unique Gas and Petrochemicals Public Company Limited | 17.5 | – | 20 | |||||||||
Enron Teesside Operations Limited – industrial assets | 9.6 | – | 15 | |||||||||
Hydromatix Inc | 5.6 | – | 15 | |||||||||
Semco 3 | 3.8 | – | 15 | |||||||||
Minorities in Osaka Sanso Kogyo KK | – | (5.0 | ) | 10 | ||||||||
1. | Restated in 2004 to reflect an adjustment of £1.4 million to the fair value of the consideration. | |
2. | Restated in 2003 to reflect an adjustment of £0.8 million to the fair value of the net assets. | |
3. | Restated in 2003 to reflect an adjustment of £0.6 million to the fair value of the consideration. | |
4. | Amortisation periods are those over which it is estimated that the value of the business acquired will exceed the value of the identifiable net assets of the business acquired. |
Goodwill | ||||
ii) Businesses disposed of | £ million | |||
2004 | ||||
US packaged gas business | 9.1 | |||
2003 | ||||
Osaka Sanso Kogyo KK (see note 28c)) | (10.5 | ) | ||
104 The BOC Group plcAnnual report and accounts 2004
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12. Fixed assets – tangible assets
a) Group summary | ||||||||||||||||||||
Plant, | ||||||||||||||||||||
Land and | machinery | Construction | ||||||||||||||||||
buildings | and vehicles | Cylinders | in progress | Total | ||||||||||||||||
£ million | £ million | £ million | £ million | £ million | ||||||||||||||||
Gross book value | ||||||||||||||||||||
At 1 October 2003 | 640.4 | 4,392.3 | 690.0 | 158.4 | 5,881.1 | |||||||||||||||
Exchange adjustment | (17.5 | ) | (190.6 | ) | (17.5 | ) | (8.6 | ) | (234.2 | ) | ||||||||||
Capital expenditure 2 | 20.6 | 135.5 | 24.0 | 76.0 | 256.1 | |||||||||||||||
Disposals | (13.2 | ) | (121.0 | ) | (11.1 | ) | (5.3 | ) | (150.6 | ) | ||||||||||
Transfers | (10.1 | ) | 77.9 | 9.9 | (77.7 | ) | – | |||||||||||||
Acquisitions of businesses | 2.8 | 0.9 | – | – | 3.7 | |||||||||||||||
Disposals of businesses | (22.7 | ) | (78.1 | ) | (124.0 | ) | (0.9 | ) | (225.7 | ) | ||||||||||
At 30 September 2004 | 600.3 | 4,216.9 | 571.3 | 141.9 | 5,530.4 | |||||||||||||||
Depreciation | ||||||||||||||||||||
At 1 October 2003 | 207.7 | 2,440.4 | 319.6 | – | 2,967.7 | |||||||||||||||
Exchange adjustment | (7.2 | ) | (109.7 | ) | (8.0 | ) | – | (124.9 | ) | |||||||||||
Provided during the year | 17.1 | 261.3 | 31.1 | – | 309.5 | |||||||||||||||
Disposals | (5.6 | ) | (102.3 | ) | (9.0 | ) | – | (116.9 | ) | |||||||||||
Disposals of businesses | (7.8 | ) | (49.9 | ) | (65.7 | ) | – | (123.4 | ) | |||||||||||
Transfers | (10.4 | ) | 10.4 | – | – | – | ||||||||||||||
At 30 September 2004 | 193.8 | 2,450.2 | 268.0 | – | 2,912.0 | |||||||||||||||
Net book value at 1 October 2003 3 | ||||||||||||||||||||
Owned assets | 395.2 | 1,945.1 | 342.0 | 158.4 | 2,840.7 | |||||||||||||||
Leased assets 4 | 37.5 | 6.8 | 28.4 | – | 72.7 | |||||||||||||||
432.7 | 1,951.9 | 370.4 | 158.4 | 2,913.4 | ||||||||||||||||
Net book value at 30 September 2004 3 | ||||||||||||||||||||
Owned assets | 368.5 | 1,761.3 | 278.3 | 141.9 | 2,550.0 | |||||||||||||||
Leased assets 4 | 38.0 | 5.4 | 25.0 | – | 68.4 | |||||||||||||||
406.5 | 1,766.7 | 303.3 | 141.9 | 2,618.4 | ||||||||||||||||
1. | Net book value of land and buildings at cost was £369.7 million (2003: £395.0 million). | |
2. | Subsidiary undertakings only. Capital expenditure of joint ventures and associates is given in note 1. | |
3. | Net book value includes net interest capitalised of £47.8 million (2003: £56.4 million). The tax effect of this is included in the deferred tax provision. | |
4. | Leased assets are shown net of accumulated depreciation of £121.1 million (2003: £119.1 million). |
b) Depreciation and operating lease rentals | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Depreciation on leased assets included above | 6.5 | 8.1 | 8.5 | |||||||||
Amortisation of capitalised interest included above | 5.5 | 4.0 | 4.2 | |||||||||
Operating lease rentals | ||||||||||||
– hire of plant and machinery | 27.1 | 19.7 | 7.7 | |||||||||
– property rent | 31.6 | 34.3 | 23.1 | |||||||||
– other | 18.3 | 17.6 | 14.0 | |||||||||
c) Regional analysis
£ million | % | |||||||
Europe (mainly the UK) | 941.9 | 36 | ||||||
Americas (mainly the US) | 736.9 | 28 | ||||||
Africa | 278.4 | 11 | ||||||
Asia/Pacific | 661.2 | 25 | ||||||
2,618.4 | 100 | |||||||
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12. Fixed assets — tangible assetscontinued
d) Asset revaluations
e) Parent summary | ||||||||||||
Plant, | ||||||||||||
Land and | machinery | |||||||||||
buildings | and vehicles | Total | ||||||||||
£ million | £ million | £ million | ||||||||||
Gross book value | ||||||||||||
At 1 October 2003 | 14.3 | 18.5 | 32.8 | |||||||||
Capital expenditure | 0.1 | 1.1 | 1.2 | |||||||||
Disposals | – | (5.6 | ) | (5.6 | ) | |||||||
At 30 September 2004 | 14.4 | 14.0 | 28.4 | |||||||||
Depreciation | ||||||||||||
At 1 October 2003 | 4.2 | 12.9 | 17.1 | |||||||||
Provided during the year | 0.5 | 0.5 | 1.0 | |||||||||
Disposals | – | (1.0 | ) | (1.0 | ) | |||||||
At 30 September 2004 | 4.7 | 12.4 | 17.1 | |||||||||
Net book value | ||||||||||||
At 1 October 2003 | 10.1 | 5.6 | 15.7 | |||||||||
At 30 September 2004 | 9.7 | 1.6 | 11.3 | |||||||||
f) Net book value of land and buildings at 30 September 2004 | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Freehold property | 368.5 | 395.2 | 9.7 | 10.1 | ||||||||||||
Leasehold property — long-term | 33.9 | 34.2 | – | – | ||||||||||||
— short-term | 4.1 | 3.3 | – | – | ||||||||||||
406.5 | 432.7 | 9.7 | 10.1 | |||||||||||||
g) Capital commitments | ||||||||
Group | ||||||||
2004 | 2003 | |||||||
£ million | £ million | |||||||
Against which orders had been placed | 26.2 | 20.9 | ||||||
Authorised but not committed | 101.2 | 101.9 | ||||||
127.4 | 122.8 | |||||||
There were no capital commitments by The BOC Group plc at either 30 September 2004 or 30 September 2003.
The Group’s share of its joint ventures’ and associates’ capital commitments was:
2004 | 2003 | |||||||
£ million | £ million | |||||||
Against which orders had been placed | 33.6 | 14.5 | ||||||
Authorised but not committed | 24.8 | 12.2 | ||||||
58.4 | 26.7 | |||||||
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13. Fixed assets – investments
a) Group summary | ||||||||||||||||||||||||||||||||||||
Group | Group | Group | Provisions | |||||||||||||||||||||||||||||||||
share of | Negative | share of | loans to | Other | against | |||||||||||||||||||||||||||||||
Goodwill | net assets of | goodwill of | net assets of | joint ventures | investments | Own | other | |||||||||||||||||||||||||||||
of associates | associates | joint ventures | joint ventures | and associates | at cost | shares | investments | Total | ||||||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||||||||
At 1 October 2003 - previously reported | 7.0 | 52.6 | – | 402.3 | 107.9 | 39.4 | 48.1 | (0.6 | ) | 656.7 | ||||||||||||||||||||||||||
Prior year adjustment (see note 31) | – | – | – | – | – | – | (48.1 | ) | – | (48.1 | ) | |||||||||||||||||||||||||
At 1 October 2003 - restated | 7.0 | 52.6 | – | 402.3 | 107.9 | 39.4 | – | (0.6 | ) | 608.6 | ||||||||||||||||||||||||||
Exchange adjustment | (0.6 | ) | (3.9 | ) | 0.5 | (26.7 | ) | (9.9 | ) | (1.9 | ) | – | 0.1 | (42.4 | ) | |||||||||||||||||||||
Acquisitions/additions | – | 0.1 | (41.5 | ) | (2.5 | ) | 107.7 | 6.0 | – | – | 69.8 | |||||||||||||||||||||||||
(Charged)/credited to profit | (0.5 | ) | – | 0.2 | – | – | – | – | – | (0.3 | ) | |||||||||||||||||||||||||
Disposals/repayments/transfers | – | (2.5 | ) | – | (10.1 | ) | (3.1 | ) | (7.8 | ) | – | (0.7 | ) | (24.2 | ) | |||||||||||||||||||||
Increase/(decrease) in net assets | – | 0.2 | – | (10.5 | ) | – | – | – | – | (10.3 | ) | |||||||||||||||||||||||||
JAG capital restructuring | – | – | – | (53.0 | ) | – | – | – | – | (53.0 | ) | |||||||||||||||||||||||||
At 30 September 2004 | 5.9 | 46.5 | (40.8 | ) | 299.5 | 202.6 | 35.7 | – | (1.2 | ) | 548.2 | |||||||||||||||||||||||||
i) Joint ventures
Share of | Negative | |||||||||||
net assets | goodwill | Total | ||||||||||
£ million | £ million | £ million | ||||||||||
Share of fixed assets | 748.9 | – | 748.9 | |||||||||
Negative goodwill | – | (40.8 | ) | (40.8 | ) | |||||||
Share of current assets | 288.0 | – | 288.0 | |||||||||
1,036.9 | (40.8 | ) | 996.1 | |||||||||
Share of liabilities due within one year | (207.6 | ) | – | (207.6 | ) | |||||||
Share of liabilities due after more than one year | (529.8 | ) | – | (529.8 | ) | |||||||
(737.4 | ) | – | (737.4 | ) | ||||||||
Share of net assets | 299.5 | (40.8 | ) | 258.7 | ||||||||
The negative goodwill represents the excess of the fair value of the net assets over the fair value of the purchase consideration and is being amortised over 17 years.
The Group’s share of the borrowings of joint ventures at 30 September 2004 was:
Gross | Net | |||||||
borrowings | borrowings | |||||||
Compania de Nitrogeno de Cantarell 1 | 127.2 | 79.6 | ||||||
Japan Air Gases | 55.5 | 51.5 | ||||||
Elgas | 32.0 | 29.5 | ||||||
Other joint ventures | 56.2 | 33.7 | ||||||
Total | 270.9 | 194.3 | ||||||
1. | Excluding loans from joint venture partners. |
Of the net borrowings, £185.4 million was non-recourse.
ii) Associates
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13. Fixed assets – investmentscontinued
b) Valuation | ||||||||
2003 | ||||||||
2004 | (restated) | |||||||
£ million | £ million | |||||||
Listed on stock exchanges in the UK and overseas | 34.7 | 44.5 | ||||||
Unlisted – equity at directors’ valuation | 300.6 | 441.5 | ||||||
– other at directors’ valuation | 212.9 | 122.6 | ||||||
Total book value | 548.2 | 608.6 | ||||||
Market value of listed investments | 85.8 | 84.3 | ||||||
c) Income | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Listed securities | 9.9 | 4.7 | 7.5 | |||||||||
Unlisted securities | 69.4 | 32.0 | 30.6 | |||||||||
79.3 | 36.7 | 38.1 | ||||||||||
Less:Dividends receivable from joint ventures | 69.0 | 31.7 | 30.5 | |||||||||
Dividends receivable from associates | 10.1 | 3.3 | 3.4 | |||||||||
Income from other fixed asset investments | 0.2 | 1.7 | 4.2 | |||||||||
d) Parent | ||||||||||||||||||||||||||||
Amounts | ||||||||||||||||||||||||||||
Investments | Investments | due from | ||||||||||||||||||||||||||
in subsidiary | in related | subsidiary | Own | Other | ||||||||||||||||||||||||
undertakings | undertakings | undertakings | shares | investments | Provisions | Total | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
At 1 October 2003 – previously reported | 1,703.0 | 8.7 | 1,351.7 | 42.5 | 11.1 | (16.5 | ) | 3,100.5 | ||||||||||||||||||||
Prior year adjustment (see note 31) | – | – | – | (42.5 | ) | – | – | (42.5 | ) | |||||||||||||||||||
At 1 October 2003 – restated | 1,703.0 | 8.7 | 1,351.7 | – | 11.1 | (16.5 | ) | 3,058.0 | ||||||||||||||||||||
Additions | 463.8 | – | – | – | – | – | 463.8 | |||||||||||||||||||||
Charged to profit | – | – | – | – | – | (4.3 | ) | (4.3 | ) | |||||||||||||||||||
Disposals | (29.1 | ) | (8.7 | ) | – | – | (3.3 | ) | – | (41.1 | ) | |||||||||||||||||
Advances/repayments (net) | – | – | (493.8 | ) | – | – | – | (493.8 | ) | |||||||||||||||||||
At 30 September 2004 | 2,137.7 | – | 857.9 | – | 7.8 | (20.8 | ) | 2,982.6 | ||||||||||||||||||||
14. Stocks | ||||||||
Group | ||||||||
2004 | 2003 | |||||||
£ million | £ million | |||||||
Raw materials | 89.5 | 81.3 | ||||||
Work in progress | 68.0 | 51.1 | ||||||
Gases and other finished goods | 162.3 | 172.0 | ||||||
Payments on account | (35.4 | ) | (20.2 | ) | ||||
284.4 | 284.2 | |||||||
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15. Debtors
a) Debtors falling due within one year | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Trade debtors | 561.5 | 569.8 | – | – | ||||||||||||
Amounts due from subsidiary undertakings | – | – | 286.5 | 669.4 | ||||||||||||
Amounts due from joint ventures and associates | 7.6 | 5.7 | 5.7 | 5.0 | ||||||||||||
Other debtors | 106.4 | 93.5 | 28.2 | 15.0 | ||||||||||||
Prepayments and accrued income | 30.1 | 28.8 | – | 5.0 | ||||||||||||
705.6 | 697.8 | 320.4 | 694.4 | |||||||||||||
Trade debtors are shown net of provisions for bad and doubtful debts of £29.8 million (2003: £31.6 million).
b) Debtors falling due after more than one year | ||||||||
Group | ||||||||
2004 | 2003 | |||||||
£ million | £ million | |||||||
Deferred tax | 5.8 | 6.6 | ||||||
Other debtors | 10.5 | 17.0 | ||||||
16.3 | 23.6 | |||||||
There were no debtors falling due after more than one year on the balance sheet of The BOC Group plc at either 30 September 2004 or 30 September 2003.
16. Current asset investments | ||||||||
Group | ||||||||
2004 | 2003 | |||||||
£ million | £ million | |||||||
Listed investments | 20.8 | 21.8 | ||||||
Total current asset investments | 20.8 | 21.8 | ||||||
Market value of listed investments | 20.8 | 21.8 | ||||||
There were no current asset investments on the balance sheet of The BOC Group plc at either 30 September 2004 or 30 September 2003.
17. Cash at bank and in hand | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Deposits | 26.5 | 4.7 | – | – | ||||||||||||
Cash at bank and in hand | 201.7 | 72.8 | 80.8 | – | ||||||||||||
228.2 | 77.5 | 80.8 | – | |||||||||||||
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18. Creditors: amounts falling due within one year
a) Borrowings and finance leases 1 | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Bank loans and overdrafts | 80.1 | 164.6 | 83.2 | 178.6 | ||||||||||||
Loans other than from banks | 179.4 | 182.0 | 168.9 | 125.0 | ||||||||||||
Finance leases | 2.6 | 14.3 | – | – | ||||||||||||
262.1 | 360.9 | 252.1 | 303.6 | |||||||||||||
1. | Details of borrowings and finance leases are given in note 20. |
b) Other creditors | ||||||||||||||||
Deposits and advance payments by customers | 55.0 | 62.8 | – | – | ||||||||||||
Trade creditors | 329.2 | 308.9 | – | – | ||||||||||||
Amounts due to subsidiary undertakings | – | – | 949.7 | 992.3 | ||||||||||||
Taxation | 139.2 | 132.7 | – | – | ||||||||||||
Other taxes and social security payable | 32.4 | 34.8 | – | – | ||||||||||||
Other creditors | 159.9 | 117.3 | 0.9 | 2.6 | ||||||||||||
Accruals and deferred income | 156.9 | 150.8 | 53.5 | 55.0 | ||||||||||||
872.6 | 807.3 | 1,004.1 | 1,049.9 | |||||||||||||
19. Creditors: amounts falling due after more than one year
a) Borrowings and finance leases 1 | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Bank loans | 88.5 | 108.9 | (2.7 | ) | (20.7 | ) | ||||||||||
Loans other than from banks | 834.5 | 968.2 | 677.2 | 787.3 | ||||||||||||
Finance leases | 5.5 | 7.6 | – | – | ||||||||||||
928.5 | 1,084.7 | 674.5 | 766.6 | |||||||||||||
1. | Details of borrowings and finance leases are given in note 20. |
�� | ||||||||||||||||
b) Other creditors | ||||||||||||||||
Deposits and advance payments by customers | 22.2 | 25.2 | – | – | ||||||||||||
Other creditors | 6.7 | 13.1 | – | 4.3 | ||||||||||||
Accruals and deferred income | 5.8 | 10.1 | 3.2 | 6.1 | ||||||||||||
34.7 | 48.4 | 3.2 | 10.4 | |||||||||||||
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Notes to the financial statements
20. Net borrowings and finance leases
a) Analysis | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Secured | ||||||||||||||||
Finance leases | 8.1 | 21.9 | – | – | ||||||||||||
Other secured borrowings | 55.2 | 64.9 | – | – | ||||||||||||
Unsecured | ||||||||||||||||
12¼% Unsecured Loan Stock 2012/2017 | 100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
7.45% Guaranteed Notes 2006 | 138.1 | 150.6 | – | – | ||||||||||||
Pollution Control and Industrial Bonds | 16.7 | 18.3 | – | – | ||||||||||||
European Investment Bank loans | 15.7 | 15.3 | – | – | ||||||||||||
6.75% Bonds 2004 | – | 125.0 | – | 125.0 | ||||||||||||
1.00% Euroyen Bond 2006 | 125.4 | 134.7 | 125.4 | 134.7 | ||||||||||||
5⅞% Bonds 2009 | 200.0 | 200.0 | 200.0 | 200.0 | ||||||||||||
6.50% Bonds 2016 | 200.0 | 200.0 | 200.0 | 200.0 | ||||||||||||
Medium-term notes | 224.1 | 156.1 | 224.1 | 156.1 | ||||||||||||
Commercial paper | 5.5 | 55.2 | – | – | ||||||||||||
Other borrowings | 101.8 | 203.6 | 77.1 | 154.4 | ||||||||||||
Total borrowings and finance leases | 1,190.6 | 1,445.6 | 926.6 | 1,070.2 | ||||||||||||
Less:Cash at bank and in hand | 228.2 | 77.5 | 80.8 | – | ||||||||||||
Net borrowings and finance leases | 962.4 | 1,368.1 | 845.8 | 1,070.2 | ||||||||||||
A reconciliation of net cash flow to the movement in net debt is given in note 27 b).
b) Maturity | ||||||||||||||||
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Long and medium-term bank loans | ||||||||||||||||
Repayable — beyond five years | 17.0 | 19.1 | – | – | ||||||||||||
— two to five years | 26.1 | 59.1 | 0.2 | (2.9 | ) | |||||||||||
— one to two years | 45.4 | 30.7 | (2.9 | ) | (17.8 | ) | ||||||||||
Loans other than from banks | ||||||||||||||||
Repayable — beyond five years | 303.5 | 502.2 | 298.3 | 496.6 | ||||||||||||
— two to five years | 383.6 | 352.1 | 378.9 | 193.4 | ||||||||||||
— one to two years | 147.4 | 113.9 | – | 97.3 | ||||||||||||
Finance leases —repayable beyond one year | 5.5 | 7.6 | – | – | ||||||||||||
Borrowings and finance leases (note 19 a)) | 928.5 | 1,084.7 | 674.5 | 766.6 | ||||||||||||
Short-term — repayable within one year | ||||||||||||||||
Bank loans and overdrafts | 80.1 | 164.6 | 83.2 | 178.6 | ||||||||||||
Loans other than from banks | 179.4 | 182.0 | 168.9 | 125.0 | ||||||||||||
Finance leases | 2.6 | 14.3 | – | – | ||||||||||||
Total borrowings and finance leases | 1,190.6 | 1,445.6 | 926.6 | 1,070.2 | ||||||||||||
Less:Cash at bank and in hand | 228.2 | 77.5 | 80.8 | – | ||||||||||||
Net borrowings and finance leases | 962.4 | 1,368.1 | 845.8 | 1,070.2 | ||||||||||||
2004 | 2003 | |||||||||||||||||||||||
Finance | Other | Finance | Other | |||||||||||||||||||||
leases | borrowings | Total | leases | borrowings | Total | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Repayment profile of borrowings and finance leases | ||||||||||||||||||||||||
Long-term repayable | ||||||||||||||||||||||||
— beyond five years | – | 320.5 | 320.5 | 0.5 | 521.3 | 521.8 | ||||||||||||||||||
— four to five years | 0.1 | 201.4 | 201.5 | 0.2 | 62.6 | 62.8 | ||||||||||||||||||
— three to four years | 0.8 | 58.6 | 59.4 | 2.3 | 149.3 | 151.6 | ||||||||||||||||||
— two to three years | 2.6 | 149.7 | 152.3 | 2.7 | 199.3 | 202.0 | ||||||||||||||||||
— one to two years | 2.0 | 192.8 | 194.8 | 1.9 | 144.6 | 146.5 | ||||||||||||||||||
Total | 5.5 | 923.0 | 928.5 | 7.6 | 1,077.1 | 1,084.7 | ||||||||||||||||||
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Notes to the financial statements
20. Net borrowings and finance leasescontinued
c) Short-term interest rates
d) Facilities
2004 | 2003 | |||||||
$ million | $ million | |||||||
Four to five years | – | 450.0 | ||||||
Three to four years | 450.0 | – | ||||||
Two to three years | – | – | ||||||
One to two years | – | – | ||||||
Within one year | – | – | ||||||
450.0 | 450.0 | |||||||
e) Security
21. Financial instruments
a) Interest rate, currency and counterparty exposure
Interest rate swaps
2004 | 2003 | |||||||
Maturity profile | £ million | £ million | ||||||
Beyond five years | – | 200.0 | ||||||
Four to five years | 200.0 | 92.6 | ||||||
Three to four years | 85.3 | – | ||||||
Two to three years | – | – | ||||||
One to two years | – | – | ||||||
Within one year | – | 125.0 | ||||||
285.3 | 417.6 | |||||||
% | % | |||||||
Weighted average receivable swap rate | 3.8 | 5.2 | ||||||
Weighted average payable swap rate | 4.5 | 4.0 | ||||||
112 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
21. Financial instrumentscontinued
Currency swaps
2004 | 2003 | |||||||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||||||
Cash at | borrowings | Capital | borrowings | |||||||||||||||||||||||||
Capital | Gross | bank and | Currency | and finance | employed | and finance | ||||||||||||||||||||||
employed | borrowings | in hand | swaps | leases | (restated) | leases | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
Sterling | 593.6 | (478.1 | ) | 71.5 | 302.0 | (104.6 | ) | 626.6 | (285.3 | ) | ||||||||||||||||||
US dollar | 918.9 | (178.1 | ) | 15.5 | (189.8 | ) | (352.4 | ) | 1,152.0 | (444.4 | ) | |||||||||||||||||
Australian dollar | 298.7 | (0.1 | ) | 16.1 | (92.0 | ) | (76.0 | ) | 333.7 | (95.7 | ) | |||||||||||||||||
South African rand | 314.0 | (54.6 | ) | 40.2 | (85.2 | ) | (99.6 | ) | 306.4 | (47.7 | ) | |||||||||||||||||
Japanese yen | 186.7 | (204.8 | ) | 2.6 | 48.1 | (154.1 | ) | 265.6 | (237.9 | ) | ||||||||||||||||||
Canadian dollar | 104.2 | (6.7 | ) | 1.7 | (35.0 | ) | (40.0 | ) | 115.1 | (56.0 | ) | |||||||||||||||||
Thai baht | 121.0 | (54.9 | ) | 2.9 | – | (52.0 | ) | 134.2 | (67.2 | ) | ||||||||||||||||||
Other | 683.3 | (213.3 | ) | 77.7 | 51.9 | (83.7 | ) | 723.5 | (133.9 | ) | ||||||||||||||||||
Total | 3,220.4 | (1,190.6 | ) | 228.2 | — | (962.4 | ) | 3,657.1 | (1,368.1 | ) | ||||||||||||||||||
2004 | 2003 | |||||||||||||||||||||||
Fixed rate | Floating rate | Total | Fixed rate | Floating rate | Total | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Sterling | 296.8 | (192.2 | ) | 104.6 | 300.2 | (14.9 | ) | 285.3 | ||||||||||||||||
US dollar | 279.1 | 73.3 | 352.4 | 303.6 | 140.8 | 444.4 | ||||||||||||||||||
Australian dollar | 0.1 | 75.9 | 76.0 | 1.1 | 94.6 | 95.7 | ||||||||||||||||||
South African rand | 38.0 | 61.6 | 99.6 | 40.7 | 7.0 | 47.7 | ||||||||||||||||||
Japanese yen | 151.7 | 2.4 | 154.1 | 163.3 | 74.6 | 237.9 | ||||||||||||||||||
Canadian dollar | 22.8 | 17.2 | 40.0 | 22.3 | 33.7 | 56.0 | ||||||||||||||||||
Thai baht | 54.9 | (2.9 | ) | 52.0 | 58.3 | 8.9 | 67.2 | |||||||||||||||||
Other | 44.4 | 39.3 | 83.7 | 42.3 | 91.6 | 133.9 | ||||||||||||||||||
Total | 887.8 | 74.6 | 962.4 | 931.8 | 436.3 | 1,368.1 | ||||||||||||||||||
Counterparty risk
113 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
21. Financial instrumentscontinued
b) Fair value information
2004 | 2003 | |||||||||||||||||||
Carrying | Carrying | |||||||||||||||||||
amount | Fair value | amount | Fair value | |||||||||||||||||
Notes | £ million | £ million | £ million | £ million | ||||||||||||||||
Primary financial instruments | ||||||||||||||||||||
Loans to joint ventures and associates | 1 | 202.6 | 202.6 | 107.9 | 107.9 | |||||||||||||||
Other fixed asset investments | 2 | 34.5 | 41.8 | 38.8 | 39.7 | |||||||||||||||
Current asset investments | 3 | 20.8 | 20.8 | 21.8 | 21.8 | |||||||||||||||
Cash at bank and in hand | 4 | 228.2 | 228.2 | 77.5 | 77.5 | |||||||||||||||
Borrowings and finance leases (excluding swap agreements) | 5 | (1,218.5 | ) | (1,286.9 | ) | (1,463.3 | ) | (1,559.4 | ) | |||||||||||
Other creditors: amounts falling due after more than one year | 6 | (26.8 | ) | (26.8 | ) | (37.1 | ) | (37.1 | ) | |||||||||||
Provisions for liabilities and charges | 6 | (10.5 | ) | (10.5 | ) | (10.6 | ) | (10.6 | ) | |||||||||||
Derivative financial instruments held to manage the Group’s interest rate and currency risk profile | ||||||||||||||||||||
Foreign currency and interest rate swap agreements | 7 | 27.9 | 18.4 | 17.7 | 25.6 | |||||||||||||||
Forward foreign exchange contracts | 8 | – | 7.5 | – | 5.8 | |||||||||||||||
Net financial instruments | (741.8 | ) | (804.9 | ) | (1,247.3 | ) | (1,328.8 | ) | ||||||||||||
Financial assets | 486.1 | 246.0 | ||||||||||||||||||
Financial liabilities | 9 | (1,227.9 | ) | (1,493.3 | ) | |||||||||||||||
Net financial instruments | (741.8 | ) | (1,247.3 | ) | ||||||||||||||||
1. | For those bearing either no interest or a floating rate of interest it is deemed that the carrying amount approximates to the fair value. For those bearing a fixed rate of interest an assessment of the interest rate at which the Group could make the same loan under current conditions has been made. Unless this differs significantly from the fixed rate it is also deemed that the carrying amount approximates to the fair value. Where this does differ significantly, the fair value is based on the discounted value of future cash flows. | |
2. | For equity instruments listed on a recognised stock exchange the fair value is the quoted market price. For other equity instruments it is deemed that the carrying amount approximates to the fair value. | |
3. | The fair value is the quoted market price. Where no quoted market price exists, it is deemed that the carrying amount approximates to the fair value. | |
4. | As all bear either no interest or a floating rate of interest it is deemed that the carrying amount approximates to the fair value. | |
5. | For those bearing a floating rate of interest it is deemed that the carrying amount approximates to the fair value. For those bearing a fixed rate of interest the fair value is either the quoted market price where a liquid market exists or has been calculated using well established pricing models. | |
6. | The carrying amount is deemed to approximate to the fair value. | |
7. | The fair value is based on market valuations at the balance sheet date. | |
8. | The fair value is based on market prices and exchange rates at the balance sheet date. | |
9. | Includes foreign currency and interest rate swap agreements. |
ii) Hedges
Swap agreements | ||||||||||||
Gains | Losses | Net | ||||||||||
£ million | £ million | £ million | ||||||||||
Deferred gains and losses | ||||||||||||
Deferred gains and losses on hedges at 1 October 2003 | 23.4 | (5.7 | ) | 17.7 | ||||||||
Gains and losses on hedges maturing in 2004 | (2.7 | ) | 5.7 | 3.0 | ||||||||
Deferred gains and losses on hedges recognised in the statement of total recognised gains and losses in 2004 | 14.2 | (7.0 | ) | 7.2 | ||||||||
Deferred gains and losses on hedges at 30 September 2004 | 34.9 | (7.0 | ) | 27.9 | ||||||||
114 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
21. Financial instrumentscontinued
Forward foreign | ||||||||||||||||||||
exchange contracts | Swap agreements | |||||||||||||||||||
Gains | Losses | Gains | Losses | Net total | ||||||||||||||||
£ million | £ million | £ million | £ million | £ million | ||||||||||||||||
Unrecognised gains and losses | ||||||||||||||||||||
Unrecognised gains and losses on hedges at 1 October 2003 | 6.9 | (1.1 | ) | 18.9 | (11.0 | ) | 13.7 | |||||||||||||
Gains and losses arising in previous years that were recognised in 2004 | (5.1 | ) | 0.7 | (18.0 | ) | 0.6 | (21.8 | ) | ||||||||||||
Gains and losses arising before 2003 that were not recognised in 2004 | 1.8 | (0.4 | ) | 0.9 | (10.4 | ) | (8.1 | ) | ||||||||||||
Gains and losses arising in 2004 that were not recognised in 2004 | 6.6 | (0.5 | ) | 0.3 | (0.3 | ) | 6.1 | |||||||||||||
Unrecognised gains and losses on hedges at 30 September 2004 | 8.4 | (0.9 | ) | 1.2 | (10.7 | ) | (2.0 | ) | ||||||||||||
Of which | ||||||||||||||||||||
Gains and losses expected to be recognised in 2005 | 7.9 | (0.7 | ) | 0.6 | (0.5 | ) | 7.3 | |||||||||||||
Gains and losses expected to be recognised in 2006 or later | 0.5 | (0.2 | ) | 0.6 | (10.2 | ) | (9.3 | ) | ||||||||||||
c) Currency exposures
d) Financial instruments
2004 | 2003 | |||||||||||||||||||||||||||||||
Financial | Financial | |||||||||||||||||||||||||||||||
assets on | assets on | |||||||||||||||||||||||||||||||
Floating rate | Fixed rate | which no | Total | Floating rate | Fixed rate | which no | Total | |||||||||||||||||||||||||
financial | financial | interest is | financial | financial | financial | interest is | financial | |||||||||||||||||||||||||
assets | assets | received | assets | assets | assets | received | assets | |||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||||||||
Sterling | 81.0 | – | 2.3 | 83.3 | 14.7 | – | 2.3 | 17.0 | ||||||||||||||||||||||||
US dollar | 34.0 | 184.1 | 32.6 | 250.7 | 23.1 | 100.7 | 20.2 | 144.0 | ||||||||||||||||||||||||
Australian dollar | 16.1 | – | – | 16.1 | 3.0 | – | – | 3.0 | ||||||||||||||||||||||||
South African rand | 44.2 | – | 3.8 | 48.0 | 32.3 | – | 3.1 | 35.4 | ||||||||||||||||||||||||
Japanese yen | 2.6 | – | – | 2.6 | 0.8 | – | – | 0.8 | ||||||||||||||||||||||||
Canadian dollar | 1.7 | – | – | 1.7 | 0.2 | – | – | 0.2 | ||||||||||||||||||||||||
Thai baht | 5.1 | – | 0.7 | 5.8 | 4.7 | – | 0.8 | 5.5 | ||||||||||||||||||||||||
Other | 69.1 | 8.7 | 0.1 | 77.9 | 40.1 | – | – | 40.1 | ||||||||||||||||||||||||
Total | 253.8 | 192.8 | 39.5 | 486.1 | 118.9 | 100.7 | 26.4 | 246.0 | ||||||||||||||||||||||||
2004 | 2003 | |||||||||||||||
Fixed rate financial assets | Fixed rate financial assets | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
Weighted | period for | Weighted | period for | |||||||||||||
average | which rate | average | which rate | |||||||||||||
interest rate | is fixed | interest rate | is fixed | |||||||||||||
% | years | % | years | |||||||||||||
US dollar | 8.2 | 3.5 | 7.2 | 4.5 | ||||||||||||
Other | 5.2 | 0.3 | – | – | ||||||||||||
115 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
21. Financial instrumentscontinued
ii) Financial liabilities
2004 | 2003 | |||||||||||||||||||||||||||||||
Financial | Financial | |||||||||||||||||||||||||||||||
liabilities on | liabilities on | |||||||||||||||||||||||||||||||
Floating rate | Fixed rate | which no | Total | Floating rate | Fixed rate | which no | Total | |||||||||||||||||||||||||
financial | financial | interest | financial | financial | financial | interest | financial | |||||||||||||||||||||||||
liabilities | liabilities | is paid | liabilities | liabilities | liabilities | is paid | liabilities | |||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||||||||
Sterling | (120.7 | ) | 296.8 | 2.5 | 178.6 | (13.2 | ) | 300.2 | 4.0 | 291.0 | ||||||||||||||||||||||
US dollar | 99.3 | 279.1 | 4.8 | 383.2 | 155.0 | 303.6 | 9.2 | 467.8 | ||||||||||||||||||||||||
Australian dollar | 92.0 | 0.1 | – | 92.1 | 97.6 | 1.1 | – | 98.7 | ||||||||||||||||||||||||
South African rand | 101.8 | 38.0 | – | 139.8 | 33.0 | 40.7 | – | 73.7 | ||||||||||||||||||||||||
Japanese yen | 5.0 | 151.7 | 0.7 | 157.4 | 75.4 | 163.3 | 0.8 | 239.5 | ||||||||||||||||||||||||
Canadian dollar | 18.9 | 22.8 | – | 41.7 | 33.9 | 22.3 | 0.9 | 57.1 | ||||||||||||||||||||||||
Thai baht | – | 54.9 | 10.9 | 65.8 | 11.0 | 58.3 | 13.0 | 82.3 | ||||||||||||||||||||||||
Other | 108.3 | 53.1 | 7.9 | 169.3 | 131.7 | 42.3 | 9.2 | 183.2 | ||||||||||||||||||||||||
Total | 304.6 | 896.5 | 26.8 | 1,227.9 | 524.4 | 931.8 | 37.1 | 1,493.3 | ||||||||||||||||||||||||
2004 | 2003 | |||||||||||||||
Fixed rate financial liabilities | Fixed rate financial liabilities | |||||||||||||||
Weighted | Weighted | |||||||||||||||
average | average | |||||||||||||||
Weighted | period for | Weighted | period for | |||||||||||||
average | which rate is | average | which rate is | |||||||||||||
interest rate | fixed | interest rate | fixed | |||||||||||||
% | years | % | years | |||||||||||||
Sterling | 9.2 | 11.9 | 8.3 | 12.9 | ||||||||||||
US dollar | 5.8 | 2.0 | 5.8 | 3.0 | ||||||||||||
Australian dollar | 5.7 | 1.8 | 6.2 | 3.0 | ||||||||||||
South African rand | 12.8 | 3.3 | 12.2 | 4.9 | ||||||||||||
Japanese yen | 0.9 | 1.9 | 0.9 | 2.9 | ||||||||||||
Canadian dollar | 4.7 | 4.0 | 4.7 | 1.0 | ||||||||||||
Thai baht | 3.7 | 1.4 | 3.9 | 1.8 | ||||||||||||
Other | 6.0 | 2.6 | 6.9 | 3.0 | ||||||||||||
22. Provisions for liabilities and charges
Deferred | ||||||||||||||||||||||||
tax | Other provisions | |||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||
and other | ||||||||||||||||||||||||
employee | Uninsured | |||||||||||||||||||||||
provisions | losses | Environmental | Other | Total | ||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
At 1 October 2003 | 279.2 | 26.1 | 21.8 | 19.7 | 29.8 | 97.4 | ||||||||||||||||||
Exchange adjustment | (4.1 | ) | (1.7 | ) | (1.7 | ) | (1.6 | ) | (0.8 | ) | (5.8 | ) | ||||||||||||
Provided in the year | – | 3.9 | 0.8 | 6.0 | 10.3 | 21.0 | ||||||||||||||||||
Released in the year | (14.8 | ) | – | – | – | (1.2 | ) | (1.2 | ) | |||||||||||||||
Utilised in the year | – | (5.9 | ) | (0.2 | ) | (4.8 | ) | (9.9 | ) | (20.8 | ) | |||||||||||||
Acquisitions/(disposals) of businesses | – | – | – | 3.1 | – | 3.1 | ||||||||||||||||||
Other movements1 | (7.3 | ) | (1.2 | ) | – | – | (0.3 | ) | (1.5 | ) | ||||||||||||||
At 30 September 2004 | 253.0 | 21.2 | 20.7 | 22.4 | 27.9 | 92.2 | ||||||||||||||||||
1. | The other movements in deferred tax relate mainly to the net profit and loss charge on pensions which, for balance sheet purposes, is included within the corresponding net pension asset/(liability) in accordance with FRS17. |
116 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
22. Provisions for liabilities and chargescontinued
23. Share capital
Number of shares | ||||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
i) Analysis at 30 September | million | million | £ million | £ million | ||||||||||||
Equity capital: | ||||||||||||||||
Issued capital — Ordinary shares of 25p each, called up and fully paid | 498.8 | 497.7 | 124.7 | 124.4 | ||||||||||||
Unissued capital — unclassified shares of 25p each | 91.2 | 92.3 | 22.8 | 23.1 | ||||||||||||
Authorised | 147.5 | 147.5 | ||||||||||||||
Number | ||||
ii) Share issues | million | |||
Issues of Ordinary shares of 25p each during the year were: | ||||
Under the savings related share option scheme | 0.7 | |||
Under the senior executives share option scheme | 0.4 | |||
24. Reserves
a) Group
Share | Joint | |||||||||||||||||||||||||||||||
premium | Revaluation | Profit and | Pensions’ | ventures’ | Associates’ | Own | ||||||||||||||||||||||||||
account | reserves | loss account | reserves | reserves | reserves | shares | Total | |||||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||||||||
At 1 October 2003 – previously reported | 366.0 | 30.8 | 1,198.4 | (291.1 | ) | 273.3 | 33.0 | – | 1,610.4 | |||||||||||||||||||||||
Prior year adjustment (see note 31) | – | – | 0.7 | – | – | – | (48.8 | ) | (48.1 | ) | ||||||||||||||||||||||
At 1 October 2003 – restated | 366.0 | 30.8 | 1,199.1 | (291.1 | ) | 273.3 | 33.0 | (48.8 | ) | 1,562.3 | ||||||||||||||||||||||
Total recognised gains and losses for the year | – | (0.7 | ) | 198.9 | – | (35.3 | ) | (7.0 | ) | – | 155.9 | |||||||||||||||||||||
Transfers in relation to pensions | – | – | (37.5 | ) | 37.5 | – | – | – | – | |||||||||||||||||||||||
Reversal of goodwill on disposal of a business | – | – | 15.3 | – | – | – | – | 15.3 | ||||||||||||||||||||||||
Consideration received for the sale of own shares held in an ESOP trust | – | – | – | – | – | – | 2.5 | 2.5 | ||||||||||||||||||||||||
Credit in respect of employee share schemes | – | – | 3.5 | – | – | – | – | 3.5 | ||||||||||||||||||||||||
Dividends | – | – | (197.3 | ) | – | – | – | – | (197.3 | ) | ||||||||||||||||||||||
Premium on share issues (net) | 8.9 | – | (0.5 | ) | – | – | – | – | 8.4 | |||||||||||||||||||||||
At 30 September 2004 | 374.9 | 30.1 | 1,181.5 | (253.6 | ) | 238.0 | 26.0 | (46.3 | ) | 1,550.6 | ||||||||||||||||||||||
117 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
24. Reservescontinued
b) Parent company
Share | Profit | |||||||||||||||||||
premium | Other | and loss | Own | |||||||||||||||||
account | reserves | account | shares | Total | ||||||||||||||||
£ million | £ million | £ million | £ million | £ million | ||||||||||||||||
At 1 October 2003 - previously reported | 366.0 | 336.4 | 853.3 | – | 1,555.7 | |||||||||||||||
Prior year adjustment (see note 31) | – | – | 0.7 | (43.2 | ) | (42.5 | ) | |||||||||||||
At 1 October 2003 - restated | 366.0 | 336.4 | 854.0 | (43.2 | ) | 1,513.2 | ||||||||||||||
Profit for the financial year | – | – | 11.4 | – | 11.4 | |||||||||||||||
Dividends | – | – | (197.4 | ) | – | (197.4 | ) | |||||||||||||
Premium on share issues (net) | 8.9 | – | (0.5 | ) | – | 8.4 | ||||||||||||||
Credit in respect of employee share schemes | – | – | 3.5 | – | 3.5 | |||||||||||||||
Net increase in investment in own shares | – | – | – | (2.6 | ) | (2.6 | ) | |||||||||||||
At 30 September 2004 | 374.9 | 336.4 | 671.0 | (45.8 | ) | 1,336.5 | ||||||||||||||
25. Financial commitments
a) Annual operating lease commitments
2004 | 2003 | |||||||||||||||
Other | Other | |||||||||||||||
Property | operating | Property | operating | |||||||||||||
leases | leases | leases | leases | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
On leases expiring: | ||||||||||||||||
Within one year | 2.1 | 2.1 | 2.3 | 3.3 | ||||||||||||
Between one and two years | 2.2 | 5.6 | 1.8 | 5.6 | ||||||||||||
Between two and five years | 5.4 | 11.0 | 6.3 | 10.7 | ||||||||||||
Over five years | 14.9 | 3.2 | 16.5 | 8.9 | ||||||||||||
24.6 | 21.9 | 26.9 | 28.5 | |||||||||||||
Operating | ||||
leases | ||||
£ million | ||||
Rentals are due under operating leases from 1 October 2004 to completion as follows: | ||||
Year to 30 September 2005 | 46.5 | |||
Year to 30 September 2006 | 39.4 | |||
Year to 30 September 2007 | 31.6 | |||
Year to 30 September 2008 | 26.0 | |||
Year to 30 September 2009 | 23.2 | |||
Thereafter | 115.3 | |||
282.0 | ||||
b) Other commitments
Year ending 30 September | £ million | |||
2005 | 57.9 | |||
2006 | 66.3 | |||
2007 | 65.0 | |||
2008 | 65.8 | |||
2009 | 60.5 | |||
Thereafter | 418.8 | |||
734.3 | ||||
118 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
26. Contingent liabilities and legal proceedings
a) Contingent liabilities
Group | Parent | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Guarantees of joint ventures’ borrowings | 8.9 | 2.8 | 8.9 | 2.8 | ||||||||||||
Guarantees of subsidiaries’ borrowings | – | – | 289.5 | 387.6 | ||||||||||||
Other guarantees | 32.9 | 24.0 | 18.0 | 10.5 | ||||||||||||
41.8 | 26.8 | 316.4 | 400.9 | |||||||||||||
b) Legal proceedings
Welding fumes litigation
Fluorogas litigation
ERISA litigation
119 The BOC Group plcAnnual report and accounts 2004
Table of Contents
Notes to the financial statements
27. Cash flow
a) Net cash inflow from operating activities
2004 | 2003 | 2002 | ||||||||||||||
Notes | £ million | £ million | £ million | |||||||||||||
Total operating profit before exceptional items | 576.9 | 505.6 | 500.1 | |||||||||||||
Depreciation and amortisation | 324.0 | 333.4 | 330.9 | |||||||||||||
Net retirement benefits charge less contributions | (15.9 | ) | 5.6 | 49.9 | ||||||||||||
Operating profit before exceptional items of joint ventures | (99.4 | ) | (86.8 | ) | (63.8 | ) | ||||||||||
Operating profit before exceptional items of associates | (13.1 | ) | (11.4 | ) | (10.7 | ) | ||||||||||
Change in stocks | (25.0 | ) | (16.6 | ) | 13.7 | |||||||||||
Change in debtors | (35.1 | ) | 2.5 | (38.4 | ) | |||||||||||
Change in creditors | 44.0 | 10.8 | 57.3 | |||||||||||||
Exceptional cash flows | (11.9 | ) | (28.3 | ) | (67.3 | ) | ||||||||||
Other | 14.0 | (14.7 | ) | (12.4 | ) | |||||||||||
Net cash inflow from operating activities | 758.5 | 700.1 | 759.3 | |||||||||||||
b) Reconciliation of net cash flow to movement in net debt | ||||||||||||||||
(Increase)/decrease in cash | (150.1 | ) | 102.5 | (21.4 | ) | |||||||||||
(Decrease)/increase in debt | 27 | (d) | (180.7 | ) | (128.7 | ) | 64.1 | |||||||||
(Increase)/decrease in liquid resources | (20.8 | ) | 16.2 | 52.6 | ||||||||||||
Change in net debt resulting from cash flows | (351.6 | ) | (10.0 | ) | 95.3 | |||||||||||
Net borrowings assumed at acquisition | 4.7 | 0.8 | 0.5 | |||||||||||||
Net liquid resources eliminated on disposal | – | 31.0 | – | |||||||||||||
Inception of finance leases | 0.2 | – | 0.4 | |||||||||||||
Exchange adjustment | (59.0 | ) | 20.7 | (42.7 | ) | |||||||||||
Movement in net debt in the year | (405.7 | ) | 42.5 | 53.5 | ||||||||||||
Net debt at 1 October | 1,368.1 | 1,325.6 | 1,272.1 | |||||||||||||
Net debt at 30 September | 962.4 | 1,368.1 | 1,325.6 | |||||||||||||
c) Analysis of net debt
Acquisitions/ | ||||||||||||||||||||||||
disposals | ||||||||||||||||||||||||
At | (excluding | Other | At | |||||||||||||||||||||
1 October | cash and | non-cash | Exchange | 30 September | ||||||||||||||||||||
2003 | Cash flow | overdrafts) | changes | adjustment | 2004 | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Cash at bank and in hand due within one year | 77.5 | 153.5 | – | – | (2.8 | ) | 228.2 | |||||||||||||||||
Borrowings and finance leases due within one year | (360.9 | ) | 230.6 | (4.6 | ) | (146.1 | ) | 18.9 | (262.1 | ) | ||||||||||||||
Borrowings and finance leases due beyond one year | (1,084.7 | ) | (32.5 | ) | (0.1 | ) | 145.9 | 42.9 | (928.5 | ) | ||||||||||||||
Net borrowings and finance leases | (1,368.1 | ) | 351.6 | (4.7 | ) | (0.2 | ) | 59.0 | (962.4 | ) | ||||||||||||||
d) (Decrease)/increase in debt
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
6.75% Bonds 2004 | (125.0 | ) | – | – | ||||||||
6 1/4% Notes 2002 | – | (38.2 | ) | – | ||||||||
5 7/8 % Bonds 2009 | – | – | 200.0 | |||||||||
7 1/4% Notes 2002 | – | – | (150.0 | ) | ||||||||
Medium-term notes | 74.8 | 93.7 | 59.7 | |||||||||
European Investment Bank loans | – | (72.4 | ) | (5.0 | ) | |||||||
Pollution Control and Industrial Bonds | – | – | (18.5 | ) | ||||||||
(Repayment)/net issues of commercial paper | (42.6 | ) | (90.7 | ) | 59.5 | |||||||
Other (net) | (87.9 | ) | (21.1 | ) | (81.6 | ) | ||||||
(Decrease)/increase in debt | (180.7 | ) | (128.7 | ) | 64.1 | |||||||
120 The BOC Group plcAnnual report and accounts 2004
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Notes to the financial statements
28. Acquisitions and disposals
a) Cash flow
2004 | 2003 | 2002 | ||||||||||||||||||||||
Acquisitions | Disposals | Acquisitions | Disposals | Acquisitions | Disposals | |||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | |||||||||||||||||||
Cash flow arising on the acquisition and disposal of businesses | ||||||||||||||||||||||||
Goodwill | – | 4.6 | – | – | – | – | ||||||||||||||||||
Intangible fixed assets | – | – | (2.4 | ) | – | (0.5 | ) | 0.2 | ||||||||||||||||
Tangible fixed assets | (3.7 | ) | 102.3 | (61.5 | ) | 0.8 | (85.7 | ) | 1.3 | |||||||||||||||
Joint ventures, associates and other investments | (80.6 | ) | 10.2 | (4.8 | ) | 1.1 | (12.4 | ) | 0.2 | |||||||||||||||
Stocks | (0.5 | ) | 16.2 | (2.7 | ) | 0.1 | (20.9 | ) | 2.4 | |||||||||||||||
Debtors | (5.3 | ) | 25.2 | (15.3 | ) | 0.1 | (37.5 | ) | 0.7 | |||||||||||||||
Cash at bank and in hand | (2.8 | ) | – | – | 0.2 | (13.5 | ) | – | ||||||||||||||||
Creditors including taxation | 2.5 | 3.8 | 7.8 | (0.1 | ) | 55.7 | (1.2 | ) | ||||||||||||||||
Borrowings | 4.7 | – | 0.8 | – | 21.4 | – | ||||||||||||||||||
Minorities | (0.8 | ) | 0.2 | (2.2 | ) | 0.3 | (8.6 | ) | 7.8 | |||||||||||||||
Net assets (acquired)/disposed of | (86.5 | ) | 162.5 | (80.3 | ) | 2.5 | (102.0 | ) | 11.4 | |||||||||||||||
Goodwill on acquisitions of subsidiaries1 | (2.9 | ) | – | (46.7 | ) | – | (112.3 | ) | – | |||||||||||||||
Goodwill on acquisitions of joint ventures and associates | 41.5 | – | (8.0 | ) | – | – | – | |||||||||||||||||
Goodwill in reserves written off on disposals | – | 15.3 | – | – | – | – | ||||||||||||||||||
(Deficits)/surplus over book value on disposals | – | (79.5 | ) | – | (0.7 | ) | – | 2.5 | ||||||||||||||||
(Acquisition)/disposal price | (47.9 | ) | 98.3 | (135.0 | ) | 1.8 | (214.3 | ) | 13.9 | |||||||||||||||
Deferred (payments)/receipts2 | (3.0 | ) | – | (0.5 | ) | 2.1 | 7.0 | (3.3 | ) | |||||||||||||||
(50.9 | ) | 98.3 | (135.5 | ) | 3.9 | (207.3 | ) | 10.6 | ||||||||||||||||
1. | Goodwill on acquisition of subsidiaries comprises £3.9 million in respect of acquisitions in 2004 and an adjustment of £1.0 million relating to prior year acquisitions. See note 11 a). | |
2. | Deferred payments and receipts include amounts for current years and payments and/or receipts in respect of prior years. |
In September 2004, BOC acquired an additional 30 per cent ownership interest in Compania de Nitrogeno de Cantarell (CNC) from Duke Energy, increasing BOC’s overall stake in CNC to 65 per cent. This followed a decision by Duke Energy that a sale of their interest was more in line with their long-term strategy. BOC continues to account for CNC as a joint venture as, in accordance with UK GAAP FRS9 (Associates and joint ventures), it is a company jointly controlled by BOC and another party.
b) Fair value of acquisitions
Total book | ||||||||||||
value of | ||||||||||||
CNC | Other | businesses | ||||||||||
book value | book value | acquired | ||||||||||
£ million | £ million | £ million | ||||||||||
Tangible fixed assets | – | (3.7 | ) | (3.7 | ) | |||||||
Joint ventures, associates and other investments | (74.1 | ) | (6.5 | ) | (80.6 | ) | ||||||
Stocks | – | (0.5 | ) | (0.5 | ) | |||||||
Debtors | – | (5.3 | ) | (5.3 | ) | |||||||
Cash at bank and in hand | – | (2.8 | ) | (2.8 | ) | |||||||
Creditors including taxation | – | 2.5 | 2.5 | |||||||||
Borrowings | – | 4.7 | 4.7 | |||||||||
Minorities | – | (0.8 | ) | (0.8 | ) | |||||||
Net (assets) acquired | (74.1 | ) | (12.4 | ) | (86.5 | ) | ||||||
Payment | 32.6 | 18.3 | 50.9 | |||||||||
Deferred payment | – | (3.0 | ) | (3.0 | ) | |||||||
Consideration | 32.6 | 15.3 | 47.9 | |||||||||
Goodwill on acquisitions of subsidiaries | – | (2.9 | ) | (2.9 | ) | |||||||
Goodwill on acquisitions of joint ventures and associates | 41.5 | – | 41.5 | |||||||||
74.1 | 12.4 | 86.5 | ||||||||||
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28. Acquisitions and disposalscontinued
Air Products | ||||||||||||||||||||||||||||
Canada | Total book | Total fair | ||||||||||||||||||||||||||
EMC | Praxair | packaged | value of | value of | ||||||||||||||||||||||||
Water Services | Polska | gases business | Other | businesses | Total | businesses | ||||||||||||||||||||||
book value | book value | book value | book value | acquired | adjustments | acquired | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
Intangible assets | – | – | – | (2.4 | ) | (2.4 | ) | – | (2.4 | ) | ||||||||||||||||||
Tangible fixed assets | (0.6 | ) | (17.1 | ) | (13.3 | ) | (24.6 | ) | (55.6 | ) | (5.9 | ) | (61.5 | ) | ||||||||||||||
Joint ventures, associates and other investments | – | – | – | (4.8 | ) | (4.8 | ) | – | (4.8 | ) | ||||||||||||||||||
Stocks | – | (0.6 | ) | (1.9 | ) | (0.2 | ) | (2.7 | ) | – | (2.7 | ) | ||||||||||||||||
Debtors | (3.9 | ) | (3.4 | ) | (6.0 | ) | (2.0 | ) | (15.3 | ) | – | (15.3 | ) | |||||||||||||||
Creditors including taxation | 3.8 | 2.0 | 0.6 | 1.4 | 7.8 | – | 7.8 | |||||||||||||||||||||
Borrowings | 0.1 | – | – | 0.7 | 0.8 | – | 0.8 | |||||||||||||||||||||
Minorities | – | – | – | (2.2 | ) | (2.2 | ) | – | (2.2 | ) | ||||||||||||||||||
Net (assets) acquired | (0.6 | ) | (19.1 | ) | (20.6 | ) | (34.1 | ) | (74.4 | ) | (5.9 | ) | (80.3 | ) | ||||||||||||||
Payment | 31.1 | 29.2 | 25.6 | 49.6 | 135.5 | – | 135.5 | |||||||||||||||||||||
Deferred payment | 1.0 | – | 0.9 | (2.4 | ) | (0.5 | ) | – | (0.5 | ) | ||||||||||||||||||
Consideration | 32.1 | 29.2 | 26.5 | 47.2 | 135.0 | – | 135.0 | |||||||||||||||||||||
Goodwill on acquisitions of subsidiaries | (31.5 | ) | (10.1 | ) | – | (5.1 | ) | (46.7 | ) | – | (46.7 | ) | ||||||||||||||||
Goodwill on acquisitions of joint ventures and associates | – | – | – | (8.0 | ) | (8.0 | ) | – | (8.0 | ) | ||||||||||||||||||
0.6 | 19.1 | 26.5 | 34.1 | 80.3 | – | 80.3 | ||||||||||||||||||||||
The fair value adjustments were all in respect of the acquisition of the Canadian packaged gases business of Air Products.
The fair value of acquisitions in 2002 were:
Unique | ||||||||||||||||||||||||||||
Gas and | ||||||||||||||||||||||||||||
Petrochemicals | Seiko | Total book | Total fair | |||||||||||||||||||||||||
Smiths | Public | Instruments | value of | value of | ||||||||||||||||||||||||
Group | Company Ltd | Inc | Other | businesses | Total | businesses | ||||||||||||||||||||||
book value | book value | book value | book value | acquired | adjustments | acquired | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
Intangible assets | – | – | (0.5 | ) | – | (0.5 | ) | – | (0.5 | ) | ||||||||||||||||||
Tangible fixed assets | (9.0 | ) | (25.3 | ) | (2.9 | ) | (44.9 | ) | (82.1 | ) | (3.6 | ) | (85.7 | ) | ||||||||||||||
Joint ventures, associates and other investments | – | (0.6 | ) | (0.1 | ) | (12.3 | ) | (13.0 | ) | 0.6 | (12.4 | ) | ||||||||||||||||
Stocks | (11.5 | ) | (1.5 | ) | (9.2 | ) | (3.8 | ) | (26.0 | ) | 5.1 | (20.9 | ) | |||||||||||||||
Debtors | (12.6 | ) | (9.7 | ) | (4.6 | ) | (11.1 | ) | (38.0 | ) | 0.5 | (37.5 | ) | |||||||||||||||
Cash at bank and in hand | – | (11.7 | ) | (1.3 | ) | (0.5 | ) | (13.5 | ) | – | (13.5 | ) | ||||||||||||||||
Creditors including taxation | 12.4 | 35.8 | 3.8 | 9.2 | 61.2 | (5.5 | ) | 55.7 | ||||||||||||||||||||
Borrowings | 7.7 | 0.3 | 0.1 | 13.3 | 21.4 | – | 21.4 | |||||||||||||||||||||
Minorities | – | 0.2 | – | (8.8 | ) | (8.6 | ) | – | (8.6 | ) | ||||||||||||||||||
Net (assets) acquired | (13.0 | ) | (12.5 | ) | (14.7 | ) | (58.9 | ) | (99.1 | ) | (2.9 | ) | (102.0 | ) | ||||||||||||||
Payment | 6.6 | 39.7 | 72.1 | 88.9 | 207.3 | – | 207.3 | |||||||||||||||||||||
Deferred payment | – | – | 2.4 | 4.6 | 7.0 | – | 7.0 | |||||||||||||||||||||
Consideration | 6.6 | 39.7 | 74.5 | 93.5 | 214.3 | – | 214.3 | |||||||||||||||||||||
Goodwill on acquisitions of subsidiaries | – | (17.5 | ) | (60.2 | ) | (34.6 | ) | (112.3 | ) | – | (112.3 | ) | ||||||||||||||||
6.6 | 22.2 | 14.3 | 58.9 | 102.0 | – | 102.0 | ||||||||||||||||||||||
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28. Acquisitions and disposalscontinued
Unique | ||||||||||||||||
Gas and | ||||||||||||||||
Petrochemicals | Seiko | |||||||||||||||
Smiths | Public | Instruments | Total | |||||||||||||
Group | Company Ltd | Inc | adjustments | |||||||||||||
£ million | £ million | £ million | £ million | |||||||||||||
Valuations | ||||||||||||||||
Tangible fixed assets | – | (0.6 | ) | – | (0.6 | ) | ||||||||||
Joint ventures, associates and other investments | – | 0.6 | – | 0.6 | ||||||||||||
Alignment of accounting policies | ||||||||||||||||
Tangible fixed assets | 1.5 | (4.5 | ) | – | (3.0 | ) | ||||||||||
Stocks | 4.8 | – | 0.3 | 5.1 | ||||||||||||
Debtors | 0.1 | 0.4 | – | 0.5 | ||||||||||||
Taxation | – | 2.2 | – | 2.2 | ||||||||||||
Other | ||||||||||||||||
Creditors | – | (7.8 | ) | 0.1 | (7.7 | ) | ||||||||||
6.4 | (9.7 | ) | 0.4 | (2.9 | ) | |||||||||||
c) Exchange of business
Total | ||||
book value | ||||
of business | ||||
disposed | ||||
Value of assets disposed | £ million | |||
Tangible fixed assets | 169.3 | |||
Joint ventures, associates and other investments | 3.0 | |||
Stocks | 10.3 | |||
Debtors | 69.2 | |||
Net liquid resources | 30.9 | |||
Creditors including taxation | (86.5 | ) | ||
Minorities | (3.1 | ) | ||
193.1 | ||||
Adjustment to reflect retention of 45 per cent share | (86.9 | ) | ||
Net assets disposed | 106.2 | |||
Air Liquide | Air Liquide | |||||||||||||||||||
Japan | Japan | OSK | Total fair | |||||||||||||||||
assets | assets | assets | value of | |||||||||||||||||
contributed | Valuation | contributed | contributed | combined | ||||||||||||||||
book value | adjustments | at fair value | at fair value | business | ||||||||||||||||
Value of assets acquired | £ million | £ million | £ million | £ million | £ million | |||||||||||||||
Tangible fixed assets | 185.0 | 40.8 | 225.8 | 169.3 | 395.1 | |||||||||||||||
Joint ventures, associates and other investments | 10.7 | – | 10.7 | 3.0 | 13.7 | |||||||||||||||
Stocks | 19.4 | – | 19.4 | 10.3 | 29.7 | |||||||||||||||
Debtors | 141.6 | – | 141.6 | 69.2 | 210.8 | |||||||||||||||
Net (borrowings)/liquid resources | (37.9 | ) | – | (37.9 | ) | 30.9 | (7.0 | ) | ||||||||||||
Creditors including taxation | (129.0 | ) | 0.2 | (128.8 | ) | (86.5 | ) | (215.3 | ) | |||||||||||
Minorities | (9.2 | ) | – | (9.2 | ) | (3.1 | ) | (12.3 | ) | |||||||||||
180.6 | 41.0 | 221.6 | 193.1 | 414.7 | ||||||||||||||||
BOC Group share of assets (45 per cent) | 186.6 | |||||||||||||||||||
Value of OSK retained by the Group (45 per cent) | (86.9 | ) | ||||||||||||||||||
Fair value of assets acquired | 99.7 | |||||||||||||||||||
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Notes to the financial statements
28. Acquisitions and disposalscontinued
Total | ||||
adjustments | ||||
£ million | ||||
Valuations | ||||
Tangible fixed assets | 40.8 | |||
Provisions | 9.3 | |||
Alignment of accounting policies | ||||
Pension liabilities | (9.1 | ) | ||
41.0 | ||||
Unrealised gain on disposal | £ million | |||
Consideration, fair value of assets acquired | 99.7 | |||
Net assets disposed | (106.2 | ) | ||
(6.5 | ) | |||
Negative goodwill credited on disposal of a subsidiary | 14.7 | |||
Unrealised profit on disposal of a subsidiary | 8.2 | |||
29. Related party transactions
30. US accounting information
a) Summary of differences between UK and US generally accepted accounting principles and other US accounting information
Goodwill and other intangible assets
Impairment of goodwill
Profit or loss on the partial disposal of Group companies
Deferred tax
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Notes to the financial statements
30. US accounting informationcontinued
Revaluation of fixed assets
Impairment of tangible fixed assets
Restructuring costs
Pensions
Post retirement medical costs
Securities investments
Contingent consideration
Financial instruments
Accounting for swaps
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Notes to the financial statements
30. US accounting informationcontinued
Share of results and net assets of joint ventures and associates
Sale and leaseback transactions
Comprehensive income
b) Income statement in US GAAP format
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Revenue | 3,885.4 | 3,718.3 | 3,657.7 | |||||||||
Operating expenses | ||||||||||||
Payroll costs | (1,015.6 | ) | (1,037.8 | ) | (957.9 | ) | ||||||
Depreciation and amortisation | (324.0 | ) | (333.4 | ) | (330.9 | ) | ||||||
Other operating expenses | (2,060.9 | ) | (1,908.5 | ) | (1,963.5 | ) | ||||||
Total operating expenses | (3,400.5 | ) | (3,279.7 | ) | (3,252.3 | ) | ||||||
Net operating income | 484.9 | 438.6 | 405.4 | |||||||||
Other income, net | 15.8 | 9.4 | 33.0 | |||||||||
Net interest expense | (88.4 | ) | (96.1 | ) | (103.1 | ) | ||||||
Income taxes | (101.7 | ) | (96.4 | ) | (106.2 | ) | ||||||
Minority interests | (46.6 | ) | (36.4 | ) | (26.2 | ) | ||||||
Net income | 264.0 | 219.1 | 202.9 | |||||||||
Earnings per share – basic | 53.5p | 44.5p | 41.4p | |||||||||
Earnings per share — diluted | 53.5p | 44.5p | 41.2p | |||||||||
c) Reconciliation of net profit
2004 | 2003 | 2002 | ||||||||||
Years ended 30 September | £ million | £ million | £ million | |||||||||
Net profit as reported in the Group profit and loss account under UK GAAP | 264.0 | 219.1 | 202.9 | |||||||||
Pensions | 7.5 | 62.5 | 35.4 | |||||||||
Post retirement medical costs | (2.4 | ) | – | 0.3 | ||||||||
Revaluations realised on asset disposals | – | 1.1 | 5.8 | |||||||||
Write-down of previously revalued assets | – | – | 20.5 | |||||||||
Depreciation of revalued fixed assets | 0.2 | 0.1 | 0.7 | |||||||||
Amortisation of goodwill previously charged to reserves | – | – | (7.2 | ) | ||||||||
Non-amortisation of goodwill under SFAS142 | 14.0 | 13.9 | 3.5 | |||||||||
Amortisation of other intangibles | (0.5 | ) | (0.5 | ) | – | |||||||
Unrealised profit on disposal of subsidiary | – | 8.2 | – | |||||||||
Other adjustments on profit on disposal of subsidiary | – | (20.7 | ) | – | ||||||||
Share of results of joint ventures and associates | 0.3 | 0.6 | – | |||||||||
Interest rate swaps | 1.6 | 1.7 | 1.9 | |||||||||
Financial instruments | (15.7 | ) | (2.8 | ) | 19.5 | |||||||
Adjustment on disposal of the US packaged gas business | 39.9 | – | – | |||||||||
ESOPs and other share options | 3.5 | 1.7 | (3.4 | ) | ||||||||
Sale and leaseback | 0.1 | 0.1 | 0.2 | |||||||||
Taxation effect of above adjustments | (14.8 | ) | (20.7 | ) | (24.7 | ) | ||||||
Net income under US GAAP | 297.7 | 264.3 | 255.4 | |||||||||
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Notes to the financial statements
30. US accounting informationcontinued
2004 | 2003 | 2002 | ||||||||||
Average number of 25p Ordinary shares | million | million | million | |||||||||
Basic | 493.0 | 492.5 | 490.4 | |||||||||
Diluted | 493.8 | 492.7 | 492.2 | |||||||||
2004 | 2003 | 2002 | ||||||||||
pence | pence | pence | ||||||||||
Earnings per share | ||||||||||||
Basic | 60.4 | 53.7 | 52.1 | |||||||||
Diluted | 60.3 | 53.6 | 51.9 | |||||||||
d) Reconciliation of shareholders’ funds
2003 | ||||||||
2004 | (restated) | |||||||
At 30 September | £ million | £ million | ||||||
Shareholders’ funds reported in the Group balance sheet under UK GAAP | 1,675.3 | 1,686.7 | ||||||
UK minority interests | 202.8 | 177.3 | ||||||
1,878.1 | 1,864.0 | |||||||
Pensions | 154.7 | 48.8 | ||||||
Post retirement medical costs | (12.2 | ) | (12.5 | ) | ||||
Revaluations of fixed assets | (36.8 | ) | (37.7 | ) | ||||
Goodwill previously charged to reserves | 62.7 | 65.7 | ||||||
Non-amortisation of goodwill under SFAS142 | 31.4 | 17.4 | ||||||
Amortisation of other intangibles | (1.0 | ) | (0.5 | ) | ||||
Goodwill on fair value adjustments | – | 1.8 | ||||||
Interest rate swaps | (2.7 | ) | (4.6 | ) | ||||
Share of net assets of joint ventures and associates | 17.6 | 4.5 | ||||||
Securities investments | 7.3 | 39.8 | ||||||
Consolidation of variable interest entity under FIN46 | (29.7 | ) | – | |||||
Goodwill on disposal | 4.4 | – | ||||||
Fixed asset impairments | 13.3 | – | ||||||
Restructuring provisions | 6.5 | – | ||||||
Financial instruments | (2.0 | ) | 13.7 | |||||
Provision for executive share schemes | 0.9 | 0.9 | ||||||
Sale and leaseback | (1.9 | ) | (2.2 | ) | ||||
Deferred tax | 10.2 | 49.6 | ||||||
Minority interests | (180.7 | ) | (176.2 | ) | ||||
Shareholders’ funds under US GAAP | 1,920.1 | 1,872.5 | ||||||
e) Movements in shareholders’ funds on a US GAAP basis | ||||||||
Shareholders’ funds at 1 October | 1,872.5 | 2,061.0 | ||||||
Net income for the year | 297.7 | 264.3 | ||||||
Dividends | (197.3 | ) | (192.1 | ) | ||||
Shares issued | 8.7 | 3.7 | ||||||
Movement in treasury stock | 2.5 | (6.3 | ) | |||||
Pensions | 53.3 | (291.8 | ) | |||||
Exchange adjustment | (98.1 | ) | 30.6 | |||||
Other movements | (19.2 | ) | 3.1 | |||||
Shareholders’ funds at 30 September | 1,920.1 | 1,872.5 | ||||||
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Notes to the financial statements
30. US accounting informationcontinued
f) Consolidated cash flow statement
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Net cash provided by operating activities | 673.5 | 562.4 | 620.2 | |||||||||
Net cash used by investing activities | (45.2 | ) | (389.2 | ) | (550.6 | ) | ||||||
Net cash used by financing activities | (413.0 | ) | (292.7 | ) | (112.1 | ) | ||||||
Net increase/(decrease) in cash and cash equivalents | 215.3 | (119.5 | ) | (42.5 | ) | |||||||
Cash and cash equivalents at 1 October | 76.4 | 181.9 | 259.0 | |||||||||
Exchange and other movements | (2.0 | ) | 14.0 | (34.6 | ) | |||||||
Cash and cash equivalents at 30 September | 289.7 | 76.4 | 181.9 | |||||||||
g) Stock-based compensation
2004 | 2003 | 2002 | ||||||||||
£ million | £ million | £ million | ||||||||||
Reported net income | 297.7 | 264.3 | 255.4 | |||||||||
Add stock compensation expense recognised in accordance with APB25 (net of related tax) | – | – | 2.5 | |||||||||
Deduct stock compensation expense determined in accordance with SFAS123 (net of related tax) | (5.7 | ) | (7.1 | ) | (6.9 | ) | ||||||
Pro forma net income | 292.0 | 257.2 | 251.0 | |||||||||
2004 | 2003 | 2002 | ||||||||||
pence | pence | pence | ||||||||||
Earnings per share: | ||||||||||||
Basic – as reported | 60.4 | 53.7 | 52.1 | |||||||||
Basic – pro forma | 59.2 | 52.2 | 51.2 | |||||||||
Diluted – as reported | 60.3 | 53.6 | 51.9 | |||||||||
Diluted – pro forma | 59.1 | 52.2 | 51.0 | |||||||||
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Notes to the financial statements
30. US accounting informationcontinued
h) Goodwill
Industrial | ||||||||||||||||||||||||||||
Process | and Special | BOC | Afrox | |||||||||||||||||||||||||
Gas Solutions | Products | Edwards | hospitals | Gist | Corporate | Total | ||||||||||||||||||||||
£ million | £ million | £ million | £ million | £ million | £ million | £ million | ||||||||||||||||||||||
Balance at 1 October | 59.5 | 82.7 | 121.0 | 11.6 | 0.7 | 2.7 | 278.2 | |||||||||||||||||||||
Acquired during year | – | 0.6 | – | 3.3 | – | – | 3.9 | |||||||||||||||||||||
Adjustments related to prior year acquisitions | – | – | (2.9 | ) | 0.4 | – | – | (2.5 | ) | |||||||||||||||||||
Impairments in year | – | – | (2.5 | ) | – | – | – | (2.5 | ) | |||||||||||||||||||
Exchange adjustment | (3.7 | ) | (4.2 | ) | (6.6 | ) | (0.3 | ) | – | (0.2 | ) | (15.0 | ) | |||||||||||||||
Balance at 30 September | 55.8 | 79.1 | 109.0 | 15.0 | 0.7 | 2.5 | 262.1 | |||||||||||||||||||||
i) Recently issued accounting pronouncements implemented in the year
FIN46 (revised) – Consolidation of variable interest entities
EITF01–8 – Determining whether an arrangement contains a lease
j) Recently issued accounting pronouncements not yet implemented
k) Other information
31. Comparative information
The prior year adjustment of £48.1 million (Parent: £42.5 million) comprises:
The restatement impact is shown in the relevant notes: 13 (Fixed assets – investments) and 24 (Reserves).
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GROUP UNDERTAKINGS
A list of the Group’s major operating undertakings, certain financing undertakings and undertakings in which the Group has a material interest is detailed below. All holdings shown are Ordinary shares. Undertakings are held either by The BOC Group plc directly (where indicated by*) or through other operating undertakings or through undertakings formed for the convenient holding of shares in certain subsidiaries, joint ventures or associates. The Group holding percentages shown below represent the ultimate interest of The BOC Group plc. All companies are incorporated and registered in the country in which they operate as listed below.
Principal | Group holding | |||||||
activity | % | |||||||
Aruba | ||||||||
BOC Gases Aruba NV | m | 100 | ||||||
Australia | ||||||||
BOC Ltd3 | nm | 100 | ||||||
Elgas Ltd5 | m | 50 | ||||||
Bangladesh | ||||||||
BOC Bangladesh Ltd | m | 60 | * | |||||
Belgium | ||||||||
SA BOC Edwards NV | l | 100 | ||||||
Bermuda | ||||||||
Priestley Company Ltd | u | 100 | ||||||
The Hydrogen Company of Paraguana Ltd | n | 100 | ||||||
Brazil | ||||||||
BOC Edwards Brasil Ltda | lu | 100 | ||||||
BOC Gases do Brasil Ltda | n | 100 | ||||||
Brunei | ||||||||
Brunei Oxygen Sdn Bhd(a),5 | m | 25 | ||||||
Canada | ||||||||
BOC Canada Ltd | m | 100 | ||||||
Hibon Inc | l | 100 | ||||||
Chile | ||||||||
Compania de Hidrogeno de Talcahuano Ltda5 | n | 100 | ||||||
Indura S.A., Industria y Comercio5 | m | 41 | ||||||
Colombia | ||||||||
Gases Industriales de Colombia SA5 | nm | 74 | ||||||
Czech Republic | ||||||||
BOC Edwards s.r.o. | l | 100 | ||||||
Gist Czech Republic s.r.o.5 | 4 | 100 | ||||||
England | ||||||||
BOC Edwards Chemical Management Europe Ltd | l | 100 | * | |||||
BOC Holdings1, 3 | u | 100 | * | |||||
BOC Ltd | nml | 100 | ||||||
BOC Netherlands Holdings Ltd | u | 100 | * | |||||
BOC Overseas Finance Ltd | u | 100 | * | |||||
Edwards High Vacuum International Ltd | l | 100 | ||||||
Fluorogas Ltd8 | l | 100 | * | |||||
Gist Ltd | 4 | 100 | ||||||
Leengate Welding Group Ltd | m | 100 | ||||||
Welding Products Holdings Ltd | m | 100 | * | |||||
Fiji | ||||||||
BOC Fiji Ltd | m | 90 | ||||||
Principal | Group holding | |||||||
activity | % | |||||||
France | ||||||||
Cryostar SAS | n | 100 | ||||||
Edwards SAS | l | 100 | ||||||
Hibon International SA | l | 100 | ||||||
Hibon SAS | l | 100 | ||||||
Société de Mécanique Magnétique | l | 87 | ||||||
Germany | ||||||||
BOC Edwards GmbH | l | 100 | ||||||
BOC Gase Deutschland GmbH | n | 100 | ||||||
Wilhelm Klein GmbH | l | 100 | ||||||
Hong Kong | ||||||||
Hong Kong Oxygen & Acetylene Co Ltd | nm | 50 | ||||||
The BOC Group Ltd | lu | 100 | ||||||
India | ||||||||
BOC India Ltd5 | nm | 55 | * | |||||
Indonesia | ||||||||
PT BOC Gases Indonesia | nm | 100 | ||||||
PT Gresik Gases Indonesia | n | 90 | ||||||
PT Gresik Power Indonesia | n | 90 | ||||||
Ireland | ||||||||
BOC Gases Ireland Ltd3 | nm | 100 | ||||||
Priestley Dublin Reinsurance Company Ltd | u | 100 | ||||||
Italy | ||||||||
BOC Edwards SpA | l | 100 | ||||||
Japan | ||||||||
BOC Japan Ltd | u | 98 | ||||||
BOC Edwards Japan Ltd | l | 100 | ||||||
Japan Air Gases Ltd5,9 | nml | 44 | ||||||
Kenya | ||||||||
BOC Kenya Ltd | m | 65 | ||||||
Korea | ||||||||
BOC Gases Korea Co Ltd | n | 100 | ||||||
Songwon Edwards Ltd | l | 97 | ||||||
Luxembourg | ||||||||
BOC Luxembourg No. 1 Sarl | u | 100 | ||||||
BOC Luxembourg No. 2 Sarl | u | 100 | ||||||
Malawi | ||||||||
BOC Malawi Ltd(c) | m | 42 | ||||||
Malaysia | ||||||||
Malaysian Oxygen Bhd(a),4 | nml | 23 | ||||||
MOX Gases Sdn Bhd | m | 23 | ||||||
Mauritius | ||||||||
Les Gaz Industriels Ltee(b) | m | 21 | ||||||
Mexico | ||||||||
BOC Gases de Mexico, SA de CV5 | n | 100 | ||||||
Compania de Nitrogeno de Cantarell, SA de CV5,10 | n | 65 | ||||||
130 The BOC Group plcAnnual report and accounts 2004
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Group undertakings
Principal | Group holding | |||||||
activity | % | |||||||
Namibia | ||||||||
IGL Properties (Pty) Ltd | m | 56 | ||||||
Netherlands | ||||||||
BOC Edwards Pharmaceutical Systems BV | l | 100 | ||||||
Gist BV | 4 | 100 | ||||||
The BOC Group BV3 | u | 100 | ||||||
Netherlands Antilles | ||||||||
BOC Gases Curaçao NV | m | 100 | ||||||
New Zealand | ||||||||
BOC Ltd | nm | 100 | ||||||
Nigeria | ||||||||
BOC Gases Nigeria plc | m | 60 | ||||||
Pakistan | ||||||||
BOC Pakistan Ltd | nm | 60 | * | |||||
Papua New Guinea | ||||||||
BOC Papua New Guinea Pty Ltd | m | 74 | ||||||
Peoples’ Republic of China | ||||||||
BOC (China) Holdings Co Ltd3,5 | n | 100 | ||||||
BOC Gases (North) Co Ltd5 | n | 100 | ||||||
BOC Gases (Shanghai) Corporation Ltd5 | n | 100 | ||||||
BOC Gases (Suzhou) Co Ltd5 | n | 100 | ||||||
BOC Gases (Tianjin) Co Ltd5 | n | 100 | * | |||||
BOC Gases (Wuhan) Co Ltd5 | n | 100 | ||||||
BOC TISCO Gases Co Ltd5 | n | 50 | * | |||||
BOC Trading (Shanghai) Co Ltd5 | l | 100 | ||||||
Edwards Tianli (Beijing) Pharmaceutical Systems Co Ltd5 | l | 50 | ||||||
Nanjing BOC-YPC Gases Co Ltd5 | n | 50 | ||||||
Shanghai BOC Industrial Gases Co Ltd5 | n | 50 | * | |||||
Philippines | ||||||||
Consolidated Industrial Gases Inc | nml | 100 | ||||||
Southern Industrial Gases Philippines Inc | m | 100 | ||||||
Poland | ||||||||
BOC Gazy Sp. z o.o. | nm | 98 | ||||||
Samoa | ||||||||
BOC Samoa Ltd | m | 96 | ||||||
Singapore | ||||||||
BOC Gases Pte Ltd | u | 100 | * | |||||
Singapore Oxygen Air Liquide Pte Ltd | nml | 50 | ||||||
Solomon Islands | ||||||||
BOC Gases Solomon Islands Ltd | m | 100 | ||||||
Principal | Group holding | |||||||
activity | % | |||||||
South Africa | ||||||||
African Oxygen Ltd3 | nmp | 56 | ||||||
Afrox Healthcare Ltd(c),3 | p | 38 | ||||||
Afrox Ltd | nm | 56 | ||||||
BOC Edwards South Africa (Pty) Ltd | l | 100 | ||||||
Switzerland | ||||||||
BOC AG | n | 100 | ||||||
Taiwan | ||||||||
Asia Union Electronic Chemical Corporation5 | l | 50 | ||||||
BOC Lienhwa Industrial Gases Co Ltd | nml | 50 | ||||||
Thailand | ||||||||
MIG Production Company Ltd | n | 54 | ||||||
Thai Industrial Gases Public Co Ltd3 | nml | 99 | ||||||
TIG HyCO Ltd | n | 99 | ||||||
Unique Gas and Petrochemical Public Co Ltd | m | 99 | ||||||
US | ||||||||
BOC, Inc | u | 100 | ||||||
Environmental Management Corporation | n | 100 | ||||||
Linde BOC Process Plants LLC(a)5 | n | 30 | ||||||
The BOC Group, Inc3 | nmlu | 100 | ||||||
US Virgin Islands | ||||||||
BOC Gases Virgin Islands Inc5 | n | 100 | ||||||
Venezuela | ||||||||
BOC Gases de Venezuela, C.A. | nm | 100 | ||||||
Vietnam | ||||||||
North Vietnam Industrial Gases Ltd5 | n | 40 | ||||||
Zambia | ||||||||
BOC Gases Zambia plc(c) | m | 39 | ||||||
Zimbabwe | ||||||||
BOC Zimbabwe (Pvt) Ltd | m | 100 | ||||||
1. | Unlimited company having share capital with registered office at the same address as The BOC Group plc. | |||
2. | Businesses where the Group percentage ownership is 50 per cent or less are accounted for as joint ventures, except as follows: (a) accounted for as associates, (b) accounted for as investment or (c) accounted for as subsidiary (controlled through partly owned intermediate undertaking). See also accounting policies on pages 83 and 84. | |||
3. | Group undertakings which made acquisitions or investments during the year. | |||
4. | Group holding for dividend purposes is 28 per cent. | |||
5. | Group undertakings with financial year ends other than 30 September. | |||
6. | The principal activity of each undertaking is indicated as follows: | |||
n | Process Gas Solutions | |||
m | Industrial and Special Products | |||
l | BOC Edwards | |||
p | Afrox hospitals | |||
4 | Gist | |||
u | Corporate/holding company | |||
7. | * | Indicates where investment is held directly by The BOC Group plc. | ||
8. | In administration. | |||
9. | BOC Japan Ltd holds 45 per cent of Japan Air Gases Ltd. | |||
10. | Accounted for as joint venture. |
131 The BOC Group plcAnnual report and accounts 2004
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SHAREHOLDER INFORMATION
Dividends
Ordinary shares
The table below sets out, in UK pence, the total of the cash amounts of the dividends per share.
Pence per Ordinary share | ||||||||||||||||
$ per | ||||||||||||||||
First | Second | Ordinary | ||||||||||||||
interim paid | interim paid | Total | share total | 1 | ||||||||||||
2000 | 15.50 | 19.50 | 35.00 | 0.54 | ||||||||||||
2001 | 15.50 | 21.50 | 37.00 | 0.53 | ||||||||||||
2002 | 15.50 | 22.50 | 38.00 | 0.57 | ||||||||||||
2003 | 15.50 | 23.50 | 39.00 | 0.63 | ||||||||||||
2004 | 15.50 | 24.50 | 40.00 | 0.73 | ||||||||||||
1. | The dollar equivalents of the dividend per Ordinary share are based on the exchange rate at the date of payment of the dividend. |
12 1/4% Unsecured Loan Stock 2012/2017
American Depositary Shares
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||
First interim | 0.56 | 0.51 | 0.44 | 0.45 | 0.50 | |||||||||||||||
Second interim | 0.89 | 0.75 | 0.70 | 0.61 | 0.58 | |||||||||||||||
Nature of trading market
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||||||||||||||||
Financial year | High | Low | High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||||||||
quarter | pence | pence | pence | pence | pence | pence | pence | pence | pence | pence | ||||||||||||||||||||||||||||||
First quarter | 906.5 | 791.5 | 947.0 | 818.0 | 1108.0 | 907.0 | 1050.0 | 850.5 | 1336.0 | 1242.0 | ||||||||||||||||||||||||||||||
Second quarter | 948.0 | 841.0 | 904.0 | 670.0 | 1100.0 | 988.0 | 1076.0 | 909.0 | 1376.0 | 1132.0 | ||||||||||||||||||||||||||||||
Third quarter | 949.0 | 875.5 | 828.5 | 755.0 | 1088.0 | 999.0 | 1114.0 | 928.0 | 1245.0 | 901.0 | ||||||||||||||||||||||||||||||
Fourth quarter | 943.0 | 867.0 | 912.5 | 767.5 | 1035.0 | 836.0 | 1060.0 | 780.0 | 1020.0 | 871.0 | ||||||||||||||||||||||||||||||
2004 | May | June | July | August | September | October | ||||||||||||||||||
High pence | 909.0 | 949.0 | 943.0 | 933.5 | 900.0 | 906.5 | ||||||||||||||||||
Low pence | 875.5 | 890.5 | 896.0 | 870.0 | 867.0 | 870.0 | ||||||||||||||||||
132 The BOC Group plcAnnual report and accounts 2004
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Shareholder information
The table below sets out the highest and lowest reported sales prices for the company’s ADSs as reported on the NYSE as notified by the depositary for the periods indicated.
2004 | 2003 | 2002 | 2001 | 2000 | ||||||||||||||||||||||||||||||||||||
Financial year | ||||||||||||||||||||||||||||||||||||||||
quarter | High $ | Low $ | High $ | Low $ | High $ | Low $ | High $ | Low $ | High $ | Low $ | ||||||||||||||||||||||||||||||
First quarter | 31.09 | 27.60 | 29.11 | 25.69 | 31.76 | 26.60 | 31.25 | 24.31 | 43.81 | 41.00 | ||||||||||||||||||||||||||||||
Second quarter | 36.15 | 31.00 | 29.31 | 22.00 | 31.60 | 27.83 | 32.75 | 26.70 | 44.75 | 35.87 | ||||||||||||||||||||||||||||||
Third quarter | 35.13 | 31.15 | 27.30 | 24.19 | 31.74 | 29.75 | 31.50 | 26.05 | 40.18 | 26.81 | ||||||||||||||||||||||||||||||
Fourth quarter | 34.95 | 31.67 | 29.63 | 25.86 | 31.80 | 26.02 | 30.24 | 22.50 | 30.00 | 25.06 | ||||||||||||||||||||||||||||||
2004 | May | June | July | August | September | October | ||||||||||||||||||
High $ | 33.30 | 35.13 | 34.95 | 34.57 | 32.54 | 33.06 | ||||||||||||||||||
Low $ | 31.15 | 32.97 | 33.40 | 32.37 | 31.67 | 31.53 | ||||||||||||||||||
Analysis of shareholdings
a) Substantial holdings — at 18 November 2004
Number | ||||||||
of shares | % of issued | |||||||
million | capital | |||||||
Ordinary shares of 25p each | ||||||||
Legal & General Investment Management Limited | 15.00 | 3.02 | ||||||
b) By size of holding — at 30 September 2004
% of | Number of | % | ||||||||||||||
Number of | total number | 25p shares | of ordinary | |||||||||||||
accounts | of accounts | Size of holding 25p shares | million | capital | ||||||||||||
19,259 | 46 | 1 – 500 | 4.9 | 1 | ||||||||||||
11,221 | 26 | 501 – 1,000 | 8.3 | 2 | ||||||||||||
10,310 | 24 | 1,001 – 5,000 | 20.2 | 4 | ||||||||||||
1,300 | 3 | 5,001 – 50,000 | 18.9 | 4 | ||||||||||||
551 | 1 | 50,001 – 1,000,000 | 129.1 | 26 | ||||||||||||
81 | 0 | Over 1,000,000 | 317.4 | 63 | ||||||||||||
42,722 | 100 | 498.8 | 100 | |||||||||||||
c) By investor type — at 30 September 2004
% of | Number of | % | ||||||||||||||
Number of | total number | 25p shares | of ordinary | |||||||||||||
accounts | of accounts | Type of investor | million | capital | ||||||||||||
31,778 9,987 957 | 75 23 2 | Individuals Institutional investors Other corporate investors | 28.0 460.6 10.2 | 6 92 2 | ||||||||||||
42,722 | 100 | 498.8 | 100 | |||||||||||||
d) Close company status
e) Stock ownership of management
133 The BOC Group plcAnnual report and accounts 2004
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Shareholder information
Taxation
UK shareholders
Taxation of capital gains
Taxation of dividends
Stamp duty
Inheritance tax
US holders
134 The BOC Group plcAnnual report and accounts 2004
Table of Contents
Shareholder information
Taxation of dividends
Taxation of capital gains
US information reporting and backup withholding
Stamp duty
Estate and gift tax
Exchange controls and other limitations affecting security holders
135 The BOC Group plc Annual report and accounts 2004
Table of Contents
Shareholder information
Payment of dividends
Overseas dividend payments
Share dealing services
Lloyds TSB Registrars also offer a postal share dealing service. For further information contact:
Share Dealing Services
Lloyds TSB Registrars
PO Box 1357
The Causeway, Worthing
West Sussex, BN99 6UB
England
American Depositary Shares
JPMorgan Chase Bank
JPMorgan Service Center,
PO Box 43013, Providence, RI 02940-3013, USA
Telephone: +1 781 575 4328
Website: www.adr.com/shareholder
A dividend reinvestment plan is available through JPMorgan Chase Bank as depositary for holders of ADSs. All enquiries regarding this plan should be addressed to:
Global Invest Direct,
JPMorgan Chase Bank
PO Box 43013, Providence, RI 02940-3013, USA
Telephone, toll free: JPMorgan Service Center on +1 800 749 1687 or +1 800 428 4237
US report filings
Agent for service of process in the US
CT Corporation System
111 Eighth Avenue, New York, New York 10011, USA
ShareGift
Unsolicited mail
Special needs
137 The BOC Group plcAnnual report and accounts 2004
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CROSS REFERENCE TO FORM 20-F
The information in this document that is referred to in the following table shall be deemed to be filed with the US Securities and Exchange Commission for all purposes.
Item | Page | |||||
1 | Identity of directors, senior management and advisers | n/a | ||||
2 | Offer statistics and expected timetable | n/a | ||||
3 | Key information | |||||
Selected financial data | 12-13, 54-55, 126-128, 132 | |||||
Capitalization and indebtedness | n/a | |||||
Reasons for the offer and use of proceeds | n/a | |||||
Risk factors | 32-33, 50 | |||||
4 | Information on the company | |||||
History and development of the company | 1, 14-22, 34-48, 137, outside back cover | |||||
Business overview | 1, 14-22, 25-31, 34-48 | |||||
Organizational structure | 130-131 | |||||
Property, plants and equipment | 14-22, 105-106 | |||||
5 | Operating and financial review and prospects | |||||
Operating results | 1, 34-55 | |||||
Critical accounting policies | 53 | |||||
Liquidity and capital resources | 36, 49-51, 55, 106, 111-118, 128 | |||||
Research and development, patents and licenses, etc | 30-31 | |||||
Trend information | 36-48 | |||||
Off-balance sheet arrangements | 51, 119 | |||||
Tabular disclosure of contractual obligations | 51, 118 | |||||
6 | Directors, senior management and employees | |||||
Directors and senior management | 8-11 | |||||
Compensation | 64-75 | |||||
Board practices | 8-11, 56-61, 64-75 | |||||
Employees | 13, 23, 93 | |||||
Share ownership | 24, 65-75 | |||||
7 | Major shareholders and related party transactions | |||||
Major shareholders | 132-133 | |||||
Related party transactions | 54, 124 | |||||
Interests of experts and counsel | n/a | |||||
8 | Financial information | |||||
Consolidated statements and other financial information | 52, 78-129, 132, | |||||
see Item 18 of the company's Form 20-F filing with the Securities and Exchange Commission | ||||||
Significant changes | n/a | |||||
Item | Page | |||||
9 | The offer and listing | |||||
Offer and listing details | 132-133 | |||||
Plan of distribution | n/a | |||||
Markets | 132 | |||||
Selling shareholders | n/a | |||||
Dilution | n/a | |||||
Expenses of the issue | n/a | |||||
10 | Additional information | |||||
Share capital | n/a | |||||
Memorandum and articles of association | see Item 10 of the company's Form 20-F filing with the Securities and Exchange Commission | |||||
Material contracts | n/a | |||||
Exchange controls | 135 | |||||
Taxation | 134-135 | |||||
Dividends and paying agents | n/a | |||||
Statement by experts | n/a | |||||
Documents on display | 137 | |||||
Subsidiary information | n/a | |||||
11 | Quantitative and qualitative disclosures about market risk | 50, 84, 112-116 | ||||
12 | Description of securities other than equity securities | n/a | ||||
13 | Defaults, dividend arrearages and delinquencies | n/a | ||||
14 | Material modifications to the rights of security holders and use of proceeds | n/a | ||||
15 | Controls and procedures | 60-61 | ||||
16A | Audit committee financial expert | 58 | ||||
16B | Code of ethics | 23, 25 | ||||
16C | Principal accountant fees and services | 90 | ||||
16D | Exemptions from the Listings Standards for audit committees | n/a | ||||
16E | Purchases of equity securities by the issuer and affiliated purchasers | see Item 16E of the company's Form 20-F filing with the Securities and Exchange Commission | ||||
17 | Financial statements | n/a | ||||
18 | Financial statements | 78-129, | ||||
see Item 18 of the company's Form 20-F filing with the Securities and Exchange Commission | ||||||
19 | Exhibits | n/a | ||||
138 The BOC Group plcAnnual report and accounts 2004
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GLOSSARY OF TERMS
Terms used in the report and accounts | US equivalent or brief description | |
Acquisition accounting | Purchase accounting | |
Associate | Equity investment | |
Capital allowances | Tax term equivalent to US tax depreciation allowances | |
Cash at bank | Cash | |
Creditors | Payables | |
Debtors | Receivables | |
Finance lease | Capital lease | |
Financial year | Fiscal year | |
Freehold | Ownership with absolute rights in perpetuity | |
Interest receivable | Interest income | |
Interest payable | Interest expense | |
Joint venture | Equity investment | |
Net asset value | Book value | |
Own shares | Treasury stock | |
Profit | Income | |
Profit and loss account | Income statement | |
Profit and loss account reserves | Retained earnings | |
Profit for the financial year | Net income | |
Provisions | Reserves | |
Called up share capital | Ordinary shares, capital stock or common stock issued and fully paid | |
Scrip dividend | Stock dividend | |
Secured loan | Collateralised loan | |
Shareholders’ funds | Shareholders’ equity | |
Share premium account | Additional paid-up capital or paid-in capital (not distributable) | |
Shares issued | Stock outstanding | |
Stocks | Inventories | |
Tangible fixed assets | Property, plant and equipment | |
Turnover | Revenue | |
139 The BOC Group plcAnnual report and accounts 2004
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INDEX
Item | Page | |||
A | ||||
Accounting policies | 83 | |||
Acquisitions | 121 | |||
American Depositary Shares (ADSs) | 132 | |||
Annual General Meeting | 62 | |||
Auditors’ remuneration | 90 | |||
Auditors’ report | 77 | |||
Audit committee | 58 | |||
B | ||||
Balance sheets | 79, 82 | |||
Board committees | 58 | |||
Board of directors | 8 | |||
Borrowings facilities | 49, 112 | |||
C | ||||
Capital expenditure | 36 | |||
Cash flow statement | 80 | |||
Cautionary statement | 1 | |||
Chairman’s statement | 4 | |||
Charitable donations | 63 | |||
Chief executive’s review | 6 | |||
Commitments | 51, 118 | |||
Contact information | 136 | |||
Contingent liabilities | 52, 119 | |||
Corporate governance | 56 | |||
Creditors | 110 | |||
Critical accounting policies | 53 | |||
Cross reference to Form 20-F | 138 | |||
D | ||||
Debtors | 109 | |||
Depreciation | 105 | |||
Directors’ interests | 71 | |||
Directors’ remuneration (see Remuneration) | 93 | |||
Directors’ report | 2 | |||
Directors’ responsibilities statement | 76 | |||
Directors’ service contracts | 69 | |||
Disposals | 121 | |||
Dividend reinvestment plan (DRIP) | 136 | |||
Dividends | 103 | |||
Donations (see Charitable donations) | 63 | |||
E | ||||
Earnings per share | 103 | |||
Employees | 23, 93 | |||
Employment policies and principles | 23 | |||
Environment (see Social, environmental and ethical performance) | 28 | |||
Exceptional items | 34, 49, 89 | |||
Exchange rates | 55 | |||
Executive management board | 10 | |||
F | ||||
Fair value of acquisitions | 122 | |||
Financial calendar | 136 | |||
Financial highlights | 2 | |||
Financial instruments | 112 | |||
Financial review | 49 | |||
Five year record | 12 | |||
G | ||||
Glossary of terms | 139 | |||
Going concern | 55 | |||
Goodwill | 103 | |||
Group profile | 14 | |||
Group undertakings | 130 |
Item | Page | |||
H | ||||
Health (see Social, environmental and ethical performance) | 27 | |||
I | ||||
Information technology | 31 | |||
Intangible fixed assets | 103 | |||
Interest | 90 | |||
Internal controls | 60 | |||
J | ||||
Joint ventures and associates | 107 | |||
L | ||||
Leases | 105, 118 | |||
Legal proceedings | 52, 119 | |||
Liquid resources | 80 | |||
M | ||||
Minority interests | 78 | |||
Movement in shareholders’ funds | 81 | |||
N | ||||
Notes to the financial statements | 85 | |||
O | ||||
Operating review | 34 | |||
Operating review – Process Gas Solutions | 36 | |||
Operating review – Industrial and Special Products | 39 | |||
Operating review – BOC Edwards | 41 | |||
Operating review – Afrox hospitals | 42 | |||
Operating review – Gist | 42 | |||
P | ||||
Pensions and retirement benefits | 95 | |||
Profit and loss account | 78 | |||
Provisions for liabilities and charges | 116 | |||
R | ||||
Ratios | 49 | |||
Registered office | outside back cover | |||
Registrars | 136 | |||
Related party transactions | 124 | |||
Remuneration | 93 | |||
Report on remuneration | 64 | |||
Research and development | 30 | |||
Reserves | 117 | |||
Risk | 32 | |||
S | ||||
Safety (see Social, environmental and ethical performance) | 27 | |||
Segmental information | 85 | |||
Share option and incentive schemes | 94 | |||
Share price | 132 | |||
Shareholder analysis | 133 | |||
Shareholder information | 132 | |||
Social, environmental and ethical performance | 25 | |||
Statement of total recognised gains and losses | 81 | |||
Stocks | 108 | |||
Substantial shareholdings | 133 | |||
Supplier payment policy | 55 | |||
T | ||||
Tangible fixed assets | 105 | |||
Taxation | 90 | |||
Total shareholder return | 65, 67 | |||
U | ||||
US GAAP information and reconciliations | 124 | |||
US investor information | 134 | |||
W | ||||
Website | 136 |
140 The BOC Group plcAnnual report and accounts 2004
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©The BOC Group plc 2004. Designed and produced by Radley Yeldar (London) using RingMaster®. Photography by Keith Waldegrave. Printed by CTD Printers Limited. |
Table of Contents
The BOC Group plc Registered office: Chertsey Road,Windlesham, Surrey GU20 6HJ, England Tel: 01276 477222 Fax: 01276 471333 Registered in England No. 22096 Website: www.boc.com |