FOR IMMEDIATE RELEASE
Windlesham, 13 November 2003
‘Another solid performance with good growth in Asia and
strong cash flow’
|
|
Year 2003 |
Year 2002 |
4th qtr 2003 |
4th qtr 2002 |
|
Turnover |
£4,017.9m |
£1,141.8m |
£1,044.1m |
|
|
Operating profit |
£481.8m |
£425.6m |
£122.7m |
£91.6m |
|
Adjusted operating profit (1) |
£505.6m |
£500.1m |
£131.9m |
£133.9m |
|
Earnings per share |
49.8p |
41.4p |
13.1p |
8.3p |
|
Adjusted earnings per share (1) |
52.9p |
14.4p |
15.5p |
· Group turnover increased by 9 per cent for the year and 5 per cent for the fourth quarter. Adjusted operating profit was up 1 per cent for the year but down 6 per cent for the quarter. Adjusted earnings per share declined 6 per cent for the year and 11 per cent for the quarter. (2)
· Turnover increased in Process Gas Solutions in the fourth quarter but there was a small decline in adjusted operating profit because of charges relating to the closure of a customer’s plant in south east Asia.
·
Acquisitions contributed to higher turnover in
Industrial and Special Products for the fourth quarter. A weak performance in
the US adversely affected profit. Excluding the US and a non-recurrent gain in
Asia in the fourth quarter of 2002, adjusted operating profit was up 1 per
cent.
·
BOC Edwards’ adjusted operating profit for the fourth
quarter was better than the previous quarter but less than a year ago.
1 ‘Adjusted’ means excluding exceptional items
2 Comparisons are made with the same period a year ago at constant
exchange rates.
3 This preliminary
announcement is unaudited.
Chief Executive, Tony Isaac said,
‘We achieved good profit growth in the UK, South Africa and most parts of Asia.
BOC has been notably successful in winning new business in China and this will
help to support our future growth objectives. However weak manufacturing
activity coupled with delayed investment by semiconductor manufacturers held
back profit growth in some of our businesses. Cash flow was at a record level
in the fourth quarter, ensuring that we met our target of positive cash flow
before acquisitions for the third year in succession.’
Summary of
BOC results for the quarter and year to 30 September 2003
|
|
2003 |
2002 |
Change as
reported |
Change at
constant exchange rates (2) |
Year to 30
September
|
|
|
|
|
|
Turnover |
£4,323.2m |
£4,017.9m |
+8% |
+9% |
|
Operating profit |
£481.8m |
£425.6m |
+13% |
+13% |
|
Adjusted operating profit |
£505.6m |
£500.1m |
+1% |
+1% |
|
Profit before tax |
£395.1m |
£335.3m |
+18% |
+15% |
|
Adjusted profit before tax |
£418.9m |
£430.0m |
-3% |
-4% |
|
49.8p |
41.4p |
+20% |
+19% |
|
|
Adjusted earnings per share |
52.9p |
55.9p |
-5% |
-6% |
|
Return on capital employed (5) |
11.9% |
10.5% |
|
|
|
Adjusted return on capital employed (5) |
12.5% |
12.3% |
|
|
|
3 months to 30 September |
|
|
|
|
|
Turnover |
£1,141.8m |
£1,044.1m |
+9% |
+5% |
|
Operating profit |
£122.7m |
£91.6m |
+34% |
+25% |
|
Adjusted operating profit |
£131.9m |
£133.9m |
-1% |
-6% |
|
Profit before tax |
£103.2m |
£70.1m |
+47% |
+34% |
|
Adjusted profit before tax |
£112.4m |
£114.8m |
-2% |
-7% |
|
Earnings per share |
13.1p |
8.3p |
+58% |
+45% |
|
Adjusted earnings per share |
14.4p |
15.5p |
-7% |
-11% |
Notes
|
1 |
Figures
shown as adjusted exclude exceptional items. Other figures shown are prepared
under UK Generally Accepted Accounting Principles and therefore include
exceptional items. |
|
2 |
Results
are also compared to previous periods on a constant currency basis. This
eliminates the impact of changes between periods in the rates of exchange
used to translate the results of overseas businesses into sterling. |
|
3 |
Adjusted
figures and constant currency comparisons are presented to provide a more
meaningful indication of underlying business performance and trends, and are
those used by management to review business performance. |
|
4 |
Full
statutory results are shown on pages 10 to 19. |
|
5 |
Return
on capital employed is based on operating profit as a percentage of average
capital employed. |
Group turnover increased for the year and for the fourth
quarter, while adjusted operating profit increased for the year but declined
for the quarter. The principal reasons for this decline were comparison against
a stronger quarter a year ago in BOC Edwards and a weak result from Industrial
and Special Products in the US. The reduced net pension credit, arising
principally from lower equity valuations, had a negative impact on comparisons
of profit before tax and earnings per share.
Unless stated otherwise,
- all comparisons that follow are on the basis of constant exchange rates;
- adjusted operating profit excludes exceptional items (see also note 3 on page 16);
- comparisons are made with the same period a year ago;
- the fourth quarter means the fiscal quarter to 30 September.
|
|
Year to 30 September 2003
|
Fiscal fourth quarter
|
||||||
|
Business segments |
Turnover |
Turnover |
Adjusted operating profit |
|||||
|
|
|
|
|
|
||||
|
Process Gas Solutions |
1,242.7 |
+8% |
184.0 |
+3% |
333.4 |
+8% |
46.4 |
- 4% |
|
Industrial and Special
Products |
1,751.2 |
+9% |
242.7 |
- 3% |
469.7 |
+7% |
62.8 |
- 7% |
|
BOC Edwards |
684.1 |
+4% |
18.5 |
- 26% |
170.5 |
- 7% |
5.3 |
- 39% |
|
Afrox hospitals |
353.4 |
+16% |
46.1 |
+31% |
103.7 |
+15% |
15.4 |
+32% |
|
Gist |
291.8 |
+10% |
29.2 |
+13% |
64.5 |
- 5% |
5.9 |
- 3% |
|
Corporate |
|
|
(14.9) |
|
|
|
(3.9) |
|
|
Group total |
4,323.2 |
+9% |
505.6 |
+1% |
1,141.8 |
+5% |
131.9 |
- 6% |
PROCESS GAS SOLUTIONS (PGS)
Turnover was up 8 per cent for both the fourth quarter and the year. It was
boosted as a result of the combination of BOC Process Plants with Linde in the
US and by the acquisition of the EMC water services company. Turnover was
further helped in the fourth quarter by higher natural gas prices that raised
turnover in BOC’s associated company supplying nitrogen to the Cantarell
oilfield in Mexico but did not impact profit. The combination of acquisitions
and higher natural gas prices added 4 per cent to turnover in the fourth
quarter. Adjusted operating profit was down 4 per cent for the quarter and up 3
per cent for the year. The decline in the quarter is attributable to an asset
impairment charge following the closure of a customer’s plant in south east
Asia.
UK merchant liquid volumes improved further in the fourth quarter and were 6
per cent higher than in the previous quarter. Adjusted operating profit for the
UK was higher than a year ago in the fourth quarter, mainly because of
successful business efficiency programmes. Results from Ireland were depressed
by weak economic conditions but turnover increased in Poland as a result of
organic growth and following the acquisition of Praxair Polska’s business with
effect from February 2003.
North American turnover in the fourth quarter was lower than a year ago but
this reflected business lost with two significant customers as previously
reported. Adjusted operating profit for the fourth quarter was better. Costs
were reduced and, in the merchant market, price trends were positive. In the
tonnage business, demand from the steel sector began to improve but chemical
sector demand was flat. Merchant liquid oxygen and nitrogen volumes as well as
carbon dioxide volumes increased over the previous quarter.
A new plant supplying hydrogen for the production of clean fuels at Citgo’s
refinery at Lemont, Illinois, began production at the end of October 2003.
Turnover declined slightly in the south Pacific region during the fourth
quarter. Tonnage revenues were slightly better but sales volumes declined in
the merchant market. Liquefied gases price increases were insufficient to
offset fully the effect of lower volumes on turnover. Adjusted operating profit
in the quarter was similar to a year ago despite the decline in volumes.
Profit in south east Asia was affected during the quarter by a charge for asset
impairment following the closure of a customer’s plant in the Philippines.
Turnover for the fourth quarter was up in north Asia as a whole, with rapid
growth in north China. The key factors behind this growth were BOC’s joint
venture plant in Nanjing and additional business on the Suzhou science park
near Shanghai.
In October 2003 BOC announced that, together with its joint venture partners,
it would invest some US$ 100 million in developing three gases supply schemes
in China at Taiyuan, Suzhou and in the Pearl River region. The Taiyuan Iron and
Steel Company is a major stainless steel manufacturer and BOC’s joint venture
company is to supply an additional 2,700 tonnes a day of oxygen to support a
major expansion of steel production.
INDUSTRIAL AND SPECIAL PRODUCTS (ISP)
Turnover and adjusted operating profit in north America continued to be
adversely affected by a weak manufacturing economy in the US through much of
the fourth quarter but, towards the end of the quarter, US sales began to pick
up. In Canada modest underlying sales growth coupled with the positive effects
of the acquisition of the Air Products packaged gas business fuelled strong
growth in sales and profits. The
integration of this acquisition has proceeded smoothly.
In the US there was good growth in special gases, helium and bulk medical gas
but industrial products, particularly equipment sales, remained relatively
depressed throughout much of the quarter. Costs related to the introduction of
a new business system reduced further in the fourth quarter.
In the UK, strong sales of special gases, medical products and Sureflow
hospitality products more than offset the continued decline of demand for
industrial products in the fourth quarter. Adjusted operating profit increased
overall reflecting these turnover trends. Price trends were positive and
cylinder rental income also increased.
There was some increase in turnover in Ireland despite the weakness of the
economy. This was largely due to price increases.
Poland benefited from the acquisition of the Praxair Polska business with
effect from February 2003, and from improving sales of medical gases and
welding products.
Profit growth in the south Pacific region during the fourth quarter was again
driven by firmer prices and a more favourable product mix. In addition, Elgas,
BOC’s joint venture company selling LPG in Australia enjoyed a good fourth
quarter. Sales volumes were higher than a year ago as a result of colder
weather and margins were better.
In South Africa the stronger rand began to affect mining and manufacturing
output in the fourth quarter leading to lower sales volumes. Despite this
turnover was similar to a year ago and adjusted operating profit was higher,
helped by better margins for LPG.
BOC EDWARDS
Turnover in the fourth quarter was down 7 per cent overall. Gases sales
increased but progress billings for gas equipment installations were lower.
Sales of vacuum and exhaust management equipment and chemical management
systems were also lower than a year ago.
Turbomolecular pumps were a positive exception to the semiconductor equipment
sales pattern as original equipment manufacturers began to rebuild their supply
chains. Bulk gases and electronic materials both showed an improvement with the
largest increase in Japan, where fourth quarter sales were significantly better
than in the previous quarter. Adjusted operating profit for the quarter was
also down compared with a year ago but was better than the previous quarter.
Rising capacity utilisation in the semiconductor industry and signs of
improving order intake in September and October are encouraging - although the
benefits will not show through in profit before the end of calendar 2003.
BOC Edwards routinely takes forward cover for a portion of its expected future
foreign currency revenues. Recent movements in US dollar exchange rates will
give rise to a less favourable position in 2004 by some £7 million compared
with 2003.
AFROX HOSPITALS
Turnover and adjusted operating profit increased in the fourth quarter.
Hospital acquisitions had less impact on the comparisons for the fourth quarter
but continuing integration benefits resulted in increased revenues and margins
in spite of cost increases.
BOC’s subsidiary, African Oxygen Limited ("Afrox"), announced in July
2003 that it was in the process of considering its strategic options with
regard to its shareholding in Afrox Healthcare Limited. This may or may not
lead to a change in the shareholding of Afrox in Afrox Healthcare Limited.
GIST
Improved turnover for the year came from both new contracts and increased
volumes with existing customers. The increase in adjusted operating profit for
the year reflects a one-off benefit arising from the termination of operations
for the Marks & Spencer General Merchandise business, as reported with the
results for the third quarter.
Adjusted operating profit for the fourth quarter was similar to a year ago
despite lower turnover. The decrease in turnover was because Gist ceased
operations for the Marks & Spencer General Merchandise business in July.
New business with Carlsberg-Tetley was insufficient to offset this fully. Gist
continues to handle Marks & Spencer’s chilled and ambient food distribution
in the UK. Operations on behalf of Carlsberg-Tetley, Budgens and Ocado
increased in the fourth quarter.
LITIGATION
Manganese in welding fumes
On 29 October 2003, BOC announced that it was one of three defendants that
received an adverse verdict from a jury in a welding fumes lawsuit in Madison
County, Illinois. This lawsuit resulted from a claim that welding fumes from
rods containing manganese had caused the plaintiff’s injury, which was
diagnosed as idiopathic Parkinson’s disease. BOC believes that the verdict
reached by that jury is inconsistent with the decisions rendered by juries in
previous cases and is not supported by the scientific evidence. For these
reasons, BOC respectfully disagrees with the verdict and intends to pursue an
appeal.
BOC currently is a party to approximately 150 cases in the US, involving
approximately 9,700 plaintiffs, alleging neurological injury through exposure
to manganese in welding fumes. These include a single case that was recently
filed in West Virginia state court, which alleges claims on behalf of more than
3,700 claimants. Many of these cases are currently in federal court, and have
been consolidated for pre-trial purposes in the federal court in Cleveland,
Ohio, in a multi-district litigation (MDL) proceeding. Other cases remain in the state courts of
different states, and are at different procedural stages. None of these cases
is currently set for trial before March 2004.
BOC will continue to defend itself vigorously against such assertions. The
Group has historically purchased significant amounts of liability insurance. BOC also notes that it has not manufactured
welding rods in the US since 1986, although it does sell welding rods
manufactured by others.
US retirement benefit plan
As previously reported, an action was filed in the US District Court for the
Southern District of Illinois against The BOC Group Cash Balance Retirement
Plan (the Plan). The plaintiffs allege
that the Plan improperly calculated lump sum distributions from the Plan. Both
sides have filed motions for summary judgement, which are scheduled to be heard
by the Court on 21 November 2003.
The Plan is contesting the action. At
this stage, it is not possible to estimate reliably the amount of loss, if any,
which might result from this action. However, should the Court rule against the
Plan, the maximum potential liability could reach US$ 116 million. If the
action is successful, any award would be paid out of Plan assets. Under UK accounting principles (FRS17), any
such payment would be recognised as a charge in the profit and loss account of
the Group.
Fluorogas
BOC believes that the adverse jury verdict in Texas reflects a misunderstanding
of the law and does not reflect the facts of any loss that may have been
suffered by the plaintiffs. BOC continues to challenge the verdict through the
appropriate appeals process in the US.
Further details of litigation are given in note 8 on page 18.
IMPACT OF EXCHANGE RATES
The comparisons above are on a constant exchange rate basis. In aggregate
exchange rate movements had a favourable impact on the translation of overseas
results into sterling during the fourth quarter but remained adverse for the
year as a whole. Exchange rate movements for the South African rand and the
Australian dollar were favourable and movements for the US dollar and some Asian
currencies were adverse. In aggregate, exchange rate movements favourably
affected the turnover comparison by £46.3 million and the adjusted operating
profit comparison by £6.6 million in the quarter.
CASH FLOW, BORROWINGS AND TAX
Operating cash flow for the fourth quarter was a record £291.6 million. One
of the main contributory factors to this improved performance was a strong
inflow resulting from the lower level of working capital. All lines of business
produced positive cash flows from working capital movements in the quarter.
For the year, operating cash flow was lower because BOC’s Japanese gases
business was accounted for as a joint venture instead of a subsidiary and
because BOC resumed cash contributions to its UK pension fund in 2003.
In January 2003, BOC’s gases business in Japan was merged with part of Air
Liquide Japan to form a joint venture company, Japan Air Gases, in which BOC
has a 45 per cent economic interest. With effect from the start of the second
fiscal quarter, BOC accounted for its economic share of Japan Air Gases on an
equity basis. BOC no longer consolidates operating cash flow but consolidates
dividends received.
For the year to date, this had a negative impact of some £49 million on the
Group operating cash flow compared with a year ago. In the fourth quarter, the
first dividend was received from Japan Air Gases. This was the main reason for
the increase in dividends received from joint ventures and associates compared
with the same quarter last year.
The resumption of cash contributions to the UK pensions scheme reduced
operating cash flow by some £36 million in 2003. BOC has decided to increase
its cash contributions to the UK pension scheme by a further £30 million to £66
million a year for each of the next two years. Contributions will be reviewed
in the light of the next actuarial funding valuation in 2005.
Capital expenditure and financial investment in the quarter was well below that
of the fourth quarter last year. The total for the quarter, and for the full
year, reflects the continuing benefit of capital discipline and the relatively
low level of expenditure on new investment projects through the current
economic cycle. The majority of the year-on-year decline was in the Process Gas
Solutions line of business.
There were no significant acquisitions in the fourth quarter. For the year, the
main acquisitions were the Canadian packaged gas and related welding equipment
business of Air Products, the US water services company EMC, the business of
Praxair Polska in Poland and the former Celanese HyCO operations at Clear Lake,
Texas.
Net borrowings at 30 September 2003 were £1,368.1 million. This was an increase
of £42.5 million compared with 30 September 2002. With net cash flow producing
a small inflow of £6 million, the other main factors in the net borrowings
movement were foreign exchange (adverse £21 million) and the impact of
portfolio changes, mainly arising from the formation of Japan Air Gases
(adverse £31 million).
Net interest on net debt was covered 5.0 times by operating profit (5.3 times
by adjusted operating profit). This is an improvement over the same measures
last year (4.1 and 4.9 times respectively).
Gearing ratios at 30 September 2003 were 36.7 per cent for net debt / capital
employed and 70.6 per cent for net debt / equity compared with 36.9 per cent
and 73.6 per cent respectively at 30 September 2002. Adjusted return on capital
for the year was 12.5 per cent compared with 12.3 per cent in 2002. Return on
capital for the year was 11.9 per cent compared with 10.5 per cent in 2002.
The effective rate of tax on adjusted profit was 29 per cent in 2003 compared
with 30 per cent in 2002. The total rate of tax was 28.7 per cent in 2003
compared with 31.7 per cent in 2002.
Under the FRS17 accounting standard used by the Group, the increase in equity
valuations at the end of September will result in an increase in the expected
return on pension scheme assets during 2004. This will be partly offset by an
increase in the interest on pension scheme liabilities arising from longevity
expectations and a lower discount rate. In aggregate an increase of some £9
million in the net pension credit is expected for 2004.
DIVIDENDS
Ordinary shareholders
A first interim dividend for 2004 of 15.5p will be paid on 2 February 2004
to shareholders on the register on 5 January 2004 and the shares will be quoted
‘ex dividend’ on 31 December 2003. The BOC Dividend Reinvestment Plan will be
available to shareholders whose applications have been received by Lloyds TSB
Registrars by 12 January 2004. Any revocations must be received by the same
date.
American Depositary Receipt (ADR) holders
The first interim dividend will be paid on 9 February 2004 to holders of
sponsored ADRs registered on 5 January 2004. The ADRs will be quoted ‘ex
dividend’ on the New York Stock Exchange on 31 December 2003. The Global Invest
Direct plan will be available to ADR holders.
OUTLOOK FOR 2004
The future growth of gases revenues will benefit from the positive trends
in the majority of the existing PGS and ISP businesses together with the
expansion of PGS tonnage schemes in China. These trends, together with
generally favourable pricing developments, the delivery of savings from
business efficiency programmes and the benefits of acquisitions, underpin BOC’s
confidence in the future growth of its gases business.
Rising capacity utilisation in the semiconductor industry and improving order
intake are encouraging for the medium term. BOC Edwards is in a very strong
position to benefit from renewed investment in semiconductors as well as the
growth of flat panel display manufacturing.
Cash flow has been strong and net borrowings have reduced since March 2003. The
current financial year will see an improvement in the net pension credit of
approximately £9 million following the recovery in equity markets up to 30
September 2003.
Notes for editors
The BOC Group is one of the largest and most global of the
world's leading gases companies. Serving two million customers in more than 50
countries, BOC employs some 44,500 people and had annual sales of over £4.3
billion in 2003.
BOC is organised into three global lines of business – aligning our
organisation directly to our customers.
Process Gas Solutions (PGS) provides tailored solutions to the
process needs of our largest customers, primarily in industries such as oil
refining, chemicals and steel. The result is the dedicated supply of gases by
pipeline (tonnage), from on-site production units, or in liquid form by tanker
(merchant market). PGS works globally, wherever the world’s largest companies
do business.
Industrial and Special Products (ISP)
serves customers who need smaller volumes of gas, mostly delivered in
cylinders. It offers a range of gases, products and services for cutting and
welding metals, and for a host of customers in the medical, hospitality and
scientific markets. ISP also has a significant liquefied petroleum gas (LPG)
business in certain countries.
BOC Edwards is synonymous with
the semiconductor industry, supplying gases, equipment and services to one of
the world’s most challenging industries. The chemical, metallurgical and
scientific instrument markets are increasingly important to BOC Edwards’
general vacuum business.
In addition BOC has two specialised operations:
Gist, a logistics company
specialising in a range of supply chain solutions, which serves a number of
major customers including Marks & Spencer.
Afrox hospitals, the largest
supplier of private health care in southern Africa.
Print quality images of Tony Isaac, chief executive of The BOC Group and René
Médori, finance director, may be downloaded directly from our photo library on
the NewsCast website at: http://www.newscast.co.uk To access the library, simply register your details with that
website.
More detailed presentation material will be made available on The BOC Group
investor relations website www.boc.com/investors
under Annual and Quarterly Reports.
|
Contact: |
Christopher Marsay, Director, Investor Relations, The BOC Group |
|
|
Tel. 07771 730530 before 12.30pm |
|
|
Or 01276 477222 (International +44 1276 477222) thereafter. |
|
|
|
|
|
Amanda Martyr, The Maitland Consultancy |
|
|
Tel. 020 7379 5151 |
GROUP RESULTS
YEAR TO 30 SEPTEMBER 2003
|
|
Year to 30 Sep 2003 |
Year to 30 Sep 2002 |
||||
|
Before exceptional items |
Exceptional items |
After exceptional items |
Before exceptional items |
Exceptional items |
After exceptional items |
|
|
£million |
£million |
£million |
£million |
£million |
£million |
|
|
TURNOVER, including share of joint ventures and associates |
4,323.2 |
- |
4,323.2 |
4,017.9 |
- |
4,017.9 |
|
Less: Share of joint ventures |
544.3 |
- |
544.3 |
324.1 |
- |
324.1 |
|
Share of associates |
60.6 |
- |
60.6 |
36.1 |
- |
36.1 |
|
Turnover |
3,718.3 |
- |
3,718.3 |
3,657.7 |
- |
3,657.7 |
|
Operating profit of subsidiary undertakings |
407.4 |
(17.0) |
390.4 |
425.6 |
(74.0) |
351.6 |
|
Share of operating profit of joint ventures |
86.8 |
(6.8) |
80.0 |
63.8 |
(0.5) |
63.3 |
|
Share of operating profit of associates |
11.4 |
- |
11.4 |
10.7 |
- |
10.7 |
|
Total operating profit including share of joint ventures and associates |
505.6 |
(23.8) |
481.8 |
500.1 |
(74.5) |
425.6 |
|
Loss on termination/disposal of businesses |
- |
- |
- |
- |
(20.2) |
(20.2) |
|
Profit before interest |
505.6 |
(23.8) |
481.8 |
500.1 |
(94.7) |
405.4 |
|
Interest on net debt |
(96.1) |
- |
(96.1) |
(103.1) |
- |
(103.1) |
|
Interest on pension scheme liabilities |
(110.2) |
- |
(110.2) |
(106.1) |
- |
(106.1) |
|
Expected return on pension scheme assets |
119.6 |
- |
119.6 |
139.1 |
- |
139.1 |
|
Other net financing income |
9.4 |
- |
9.4 |
33.0 |
- |
33.0 |
|
PROFIT
ON ORDINARY ACTIVITIES BEFORE TAX |
418.9 |
(23.8) |
395.1 |
430.0 |
(94.7) |
335.3 |
|
Tax (note 5) |
(121.4) |
7.9 |
(113.5) |
(129.0) |
22.8 |
(106.2) |
|
Profit on ordinary activities after tax |
297.5 |
(15.9) |
281.6 |
301.0 |
(71.9) |
229.1 |
|
Minority interests |
(36.8) |
0.4 |
(36.4) |
(26.7) |
0.5 |
(26.2) |
|
PROFIT FOR THE YEAR |
260.7 |
(15.5) |
245.2 |
274.3 |
(71.4) |
202.9 |
|
Dividends |
(192.1) |
- |
(192.1) |
(186.6) |
- |
(186.6) |
|
Retained profit for the year |
68.6 |
(15.5) |
53.1 |
87.7 |
(71.4) |
16.3 |
|
Earnings per share (note 6) |
|
|
|
|
|
|
|
- basic |
52.9p |
|
49.8p |
55.9p |
|
41.4p |
|
- diluted |
52.9p |
|
49.8p |
55.7p |
|
41.2p |
GROUP RESULTS
3 MONTHS TO 30 SEPTEMBER 2003
|
|
3 months to 30 Sep 2003 |
3 months to 30 Sep 2002 |
||||
|
Before exceptional items |
Exceptional items |
After exceptional items |
Before exceptional items |
Exceptional items |
After exceptional items |
|
|
£million |
£million |
£million |
£million |
£million |
£million |
|
|
TURNOVER, including share of joint ventures and associates |
1,141.8 |
- |
1,141.8 |
1,044.1 |
- |
1,044.1 |
|
Less: Share of joint ventures |
164.3 |
- |
164.3 |
85.6 |
- |
85.6 |
|
Share of associates |
21.2 |
- |
21.2 |
10.0 |
- |
10.0 |
|
Turnover |
956.3 |
- |
956.3 |
948.5 |
- |
948.5 |
|
Operating profit of subsidiary undertakings |
101.3 |
(8.2) |
93.1 |
113.3 |
(42.0) |
71.3 |
|
Share of operating profit of joint ventures |
26.5 |
(1.0) |
25.5 |
17.6 |
(0.3) |
17.3 |
|
Share of operating profit of associates |
4.1 |
- |
4.1 |
3.0 |
- |
3.0 |
|
Total operating profit including share of joint ventures and associates |
131.9 |
(9.2) |
122.7 |
133.9 |
(42.3) |
91.6 |
|
Loss on termination/disposal of businesses |
- |
- |
- |
- |
(2.4) |
(2.4) |
|
Profit before interest |
131.9 |
(9.2) |
122.7 |
133.9 |
(44.7) |
89.2 |
|
Interest on net debt |
(21.9) |
- |
(21.9) |
(24.3) |
- |
(24.3) |
|
Interest on pension scheme liabilities |
(27.6) |
- |
(27.6) |
(28.9) |
- |
(28.9) |
|
Expected return on pension scheme assets |
30.0 |
- |
30.0 |
34.1 |
- |
34.1 |
|
Other net financing income |
2.4 |
- |
2.4 |
5.2 |
- |
5.2 |
|
PROFIT
ON ORDINARY ACTIVITIES BEFORE TAX |
112.4 |
(9.2) |
103.2 |
114.8 |
(44.7) |
70.1 |
|
Tax (note 5) |
(29.4) |
2.4 |
(27.0) |
(31.2) |
9.0 |
(22.2) |
|
Profit on ordinary activities after tax |
83.0 |
(6.8) |
76.2 |
83.6 |
(35.7) |
47.9 |
|
Minority interests |
(11.7) |
- |
(11.7) |
(7.2) |
0.3 |
(6.9) |
|
PROFIT FOR THE PERIOD |
71.3 |
(6.8) |
64.5 |
76.4 |
(35.4) |
41.0 |
|
Earnings per share (note 6) |
|
|
|
|
|
|
|
- basic |
14.4p |
|
13.1p |
15.5p |
|
8.3p |
|
- diluted |
14.4p |
|
13.1p |
15.5p |
|
8.3p |
GROUP BALANCE SHEET
AT 30 SEPTEMBER 2003
|
|
At 30 Sep 2003 |
At 30 Sep 2002 |
|
£million |
£million |
|
|
Fixed Assets |
|
|
|
- Intangible assets |
198.3 |
150.7 |
|
- Tangible assets |
2,913.4 |
3,027.4 |
|
- Joint ventures, associates and other investments |
664.5 |
468.6 |
|
|
3,776.2 |
3,646.7 |
|
Current assets |
1,104.9 |
1,246.4 |
|
Creditors: amounts falling due within one year |
(1,168.2) |
(1,247.9) |
|
Net current liabilities |
(63.3) |
(1.5) |
|
Total assets less current liabilities |
3,712.9 |
3,645.2 |
|
Creditors: amounts falling due after more than one year |
(1,133.1) |
(1,179.0) |
|
Provisions for liabilities and charges |
(376.6) |
(407.5) |
|
Total net assets excluding pension assets and liabilities |
2,203.2 |
2,058.7 |
|
Pension assets |
75.8 |
54.3 |
|
Pension liabilities |
(341.8) |
(311.0) |
|
Total net assets including pension assets and liabilities |
1,937.2 |
1,802.0 |
|
Shareholders’ capital and reserves |
1,759.9 |
1,684.1 |
|
Minority shareholders’ interests |
177.3 |
117.9 |
|
Total capital and reserves |
1,937.2 |
1,802.0 |
GROUP CASH FLOW STATEMENT
YEAR TO 30 SEPTEMBER 2003
|
|
Year to |
Year to |
|
£million |
£million |
|
|
TOTAL OPERATING PROFIT before exceptional items |
505.6 |
500.1 |
|
Depreciation and amortisation |
333.4 |
330.9 |
|
Net retirement benefits charge less contributions |
5.6 |
49.9 |
|
Operating profit before exceptional items of joint ventures |
(86.8) |
(63.8) |
|
Operating profit before exceptional items of associates |
(11.4) |
(10.7) |
|
Changes in working capital and other items |
(18.0) |
20.2 |
|
Exceptional cash flows |
(28.3) |
(67.3) |
|
NET CASH INFLOW FROM OPERATING ACTIVITIES |
700.1 |
759.3 |
|
DIVIDENDS FROM JOINT VENTURES AND ASSOCIATES |
35.0 |
33.9 |
|
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE |
(94.4) |
(90.7) |
|
TAX PAID |
(90.7) |
(96.2) |
|
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT |
(233.3) |
(324.5) |
|
ACQUISITIONS AND DISPOSALS |
(118.3) |
(215.5) |
|
EQUITY DIVIDENDS PAID |
(192.1) |
(186.6) |
|
NET CASH INFLOW /(OUTFLOW) BEFORE USE OF LIQUID RESOURCES AND FINANCING |
6.3 |
(120.3) |
GROUP CASH FLOW STATEMENT
3 MONTHS TO 30 SEPTEMBER 2003
|
|
3 months to |
3 months to |
|
£million |
£million |
|
|
TOTAL OPERATING PROFIT before exceptional items |
131.9 |
133.9 |
|
Depreciation and amortisation |
86.6 |
84.2 |
|
Net retirement benefits charge less contributions |
0.7 |
12.2 |
|
Operating profit before exceptional items of joint ventures |
(26.5) |
(17.6) |
|
Operating profit before exceptional items of associates |
(4.1) |
(3.0) |
|
Changes in working capital and other items |
109.7 |
77.7 |
|
Exceptional cash flows |
(6.7) |
(29.9) |
|
NET CASH INFLOW FROM OPERATING ACTIVITIES |
291.6 |
257.5 |
|
DIVIDENDS FROM JOINT VENTURES AND ASSOCIATES |
22.9 |
9.8 |
|
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE |
(15.8) |
(1.8) |
|
TAX PAID |
(38.0) |
(20.6) |
|
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT |
(42.6) |
(89.1) |
|
ACQUISITIONS AND DISPOSALS |
(2.3) |
(14.4) |
|
EQUITY DIVIDENDS PAID |
(115.7) |
(110.8) |
|
NET CASH INFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING |
100.1 |
30.6 |
TOTAL RECOGNISED GAINS AND LOSSES
YEAR TO 30 SEPTEMBER 2003
|
|
Year to |
Year to |
|
£million |
£million |
|
|
Profit for the year |
245.2 |
202.9 |
|
Actuarial loss recognised on the pension schemes |
(17.5) |
(431.2) |
|
Movement on deferred tax relating to actuarial loss on pensions |
2.0 |
134.0 |
|
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 |
7.1 |
(8.1) |
|
- foreign currency net investments |
23.4 |
(128.2) |
|
Total recognised gains and losses for the year |
268.4 |
(242.1) |
There were no material differences between reported profits and losses and historical cost profits and losses on ordinary activities before tax for any of the above years.
MOVEMENT IN SHAREHOLDERS’ FUNDS
YEAR TO 30 SEPTEMBER 2003
|
|
Year to |
Year to |
|
£million |
£million |
|
|
Profit for the year |
245.2 |
202.9 |
|
Dividends |
(192.1) |
(186.6) |
|
|
53.1 |
16.3 |
|
Other recognised gains and losses |
23.2 |
(445.0) |
|
Reversal of goodwill credit in total recognised gains and losses on disposal of a subsidiary |
(4.2) |
- |
|
Shares issued |
3.7 |
24.6 |
|
Credit in relation to share options |
- |
2.0 |
|
Net increase/(decrease) in shareholders’ funds for the year |
75.8 |
(402.1) |
|
Shareholders’ funds - at 1 October |
1,684.1 |
2,086.2 |
|
Shareholders’ funds - at 30 September |
1,759.9 |
1,684.1 |
NOTES TO THE ACCOUNTS
|
1 |
Basis of preparation
The results for the year to 30 September 2003 have been
prepared on an accounting basis consistent with that applied in the financial
year to 30 September 2002. |
|
2 |
Exchange rates
The majority of the Group’s operations are located outside
the UK and operate in currencies other than sterling. Profit and loss and other period
statements of the Group’s overseas operations are translated at average rates
of exchange for the year. Assets and
liabilities denominated in foreign currencies are translated at the rates of
exchange ruling at the financial year end. |
|
|
|
Year to |
Year to |
|
|
Average rates: |
|
|
|
|
- US dollar |
1.60 |
1.47 |
|
|
- Australian dollar |
2.77 |
|
|
|
- Japanese yen |
191.01 |
184.34 |
|
|
- South African rand |
13.24 |
15.64 |
|
|
Year end rates: |
|
|
|
|
- US dollar |
1.66 |
1.57 |
|
|
- Australian dollar |
2.45 |
2.89 |
|
|
- Japanese yen |
185.60 |
191.45 |
|
|
- South African rand |
11.57 |
16.58 |
|
3 |
Segmental information
a) Turnover, adjusted operating profit and operating profit, by business and by region, were as follows: |
|
|
Year to 30 Sep 2003 |
Year to 30 Sep 2002 |
|||||
|
Turnover |
Adjusted operating profit |
Operating profit |
Turnover |
Adjusted operating profit |
Operating profit |
||
|
|
Business analysis: |
£million |
£million |
£million |
£million |
£million |
£million |
|
|
Process Gas Solutions |
1,242.7 |
184.0 |
177.1 |
1,200.6 |
185.2 |
161.2 |
|
|
Industrial and Special Products |
1,751.2 |
242.7 |
238.2 |
1,605.3 |
248.0 |
229.3 |
|
|
BOC Edwards |
18.5 |
7.9 |
688.2 |
26.1 |
(1.4) |
|
|
|
Afrox hospitals |
46.1 |
46.1 |
259.0 |
29.7 |
29.7 |
|
|
|
Gist |
291.8 |
29.2 |
29.2 |
264.8 |
25.5 |
25.5 |
|
|
Corporate |
- |
(14.9) |
(16.7) |
- |
(14.4) |
(18.7) |
|
|
Continuing operations |
4,323.2 |
505.6 |
481.8 |
4,017.9 |
500.1 |
425.6 |
|
|
Regional analysis: |
|
|
|
|
|
|
|
|
Europe |
1,154.4 |
144.3 |
137.0 |
1,069.6 |
155.2 |
116.8 |
|
|
Americas |
1,238.8 |
91.8 |
85.9 |
1,291.8 |
121.3 |
113.2 |
|
|
Africa |
585.5 |
85.0 |
85.0 |
441.0 |
56.7 |
56.3 |
|
|
Asia/Pacific |
1,344.5 |
184.5 |
173.9 |
1,215.5 |
166.9 |
139.3 |
|
|
Continuing operations |
4,323.2 |
505.6 |
481.8 |
4,017.9 |
500.1 |
425.6 |
|
|
b) |
Turnover, adjusted operating profit and operating profit, by business and by region, for the 3 months to 30 September 2003 were as follows: |
|
|
3 months to 30 Sep 2002 |
||||||
|
Turnover |
Adjusted operating profit |
Operating profit |
Turnover |
Adjusted operating profit |
Operating profit |
||
|
|
Business analysis: |
£million |
£million |
£million |
£million |
£million |
£million |
|
|
Process Gas Solutions |
333.4 |
46.4 |
42.9 |
306.5 |
48.0 |
31.0 |
|
|
Industrial and Special Products |
469.7 |
62.8 |
61.8 |
415.7 |
63.8 |
50.8 |
|
|
BOC Edwards |
170.5 |
5.3 |
1.5 |
185.8 |
9.0 |
(2.4) |
|
|
Afrox hospitals |
103.7 |
15.4 |
15.4 |
68.1 |
8.9 |
9.0 |
|
|
Gist |
64.5 |
5.9 |
5.9 |
68.0 |
5.7 |
5.8 |
|
|
Corporate |
- |
(3.9) |
(4.8) |
- |
(1.5) |
(2.6) |
|
|
Continuing operations |
1,141.8 |
131.9 |
122.7 |
1,044.1 |
133.9 |
91.6 |
|
|
Regional analysis: |
|
|
|
|
|
|
|
|
Europe |
286.9 |
34.8 |
29.1 |
276.3 |
41.5 |
27.7 |
|
|
Americas |
330.1 |
20.8 |
18.9 |
319.1 |
30.2 |
26.6 |
|
|
Africa |
168.1 |
24.2 |
24.2 |
112.6 |
14.3 |
14.3 |
|
|
Asia/Pacific |
356.7 |
52.1 |
50.5 |
336.1 |
47.9 |
23.0 |
|
|
Continuing operations |
1,141.8 |
131.9 |
122.7 |
1,044.1 |
133.9 |
91.6 |
|
4 |
Exceptional items
|
Year to |
Year to |
|
|
|
£million |
£million |
|
|
Restructuring costs |
(23.8) |
(47.2) |
|
|
Write-down and impairment of assets |
- |
(21.2) |
|
|
Costs of proposed takeover |
(6.1) |
|
|
|
Total operating exceptional items |
(23.8) |
(74.5) |
|
|
Closure of businesses – continuing operations |
- |
(21.3) |
|
|
Profit on disposal of businesses – continuing operations |
- |
1.1 |
|
|
- |
(20.2) |
|
5 |
Tax
|
Year to |
Year to |
|
|
|
£million |
£million |
|
|
Subsidiary undertakings |
(95.0) |
(100.3) |
|
|
Share of joint ventures |
(16.0) |
(3.6) |
|
|
Share of associates |
(2.5) |
(2.3) |
|
|
Tax on profit on ordinary activities |
(113.5) |
(106.2) |
|
|
Overseas tax included in the tax on profit on ordinary activities above was: |
(86.9) |
(73.9) |
|
|
The tax charge includes the following credit in respect of exceptional items: |
|
|
|
|
Operating exceptional items |
7.9 |
15.3 |
|
|
Non-operating exceptional items |
- |
7.5 |
|
|
Tax on exceptional items |
7.9 |
22.8 |
|
6 |
Earnings per share
|
Year to |
Year to |
|
|
|
£million |
£million |
|
|
Amounts used in computing the earnings per share: |
|
|
|
|
Earnings attributable to ordinary shareholders for the year |
245.2 |
202.9 |
|
|
Adjustment for exceptional items |
15.5 |
71.4 |
|
|
Adjusted earnings before exceptional items |
260.7 |
274.3 |
|
|
|
|
Year to |
|
|
|
£million |
|
|
|
|
|
|
|
|
Average issued share capital |
497.5 |
496.0 |
|
|
Less: average own shares held in trust |
(5.0) |
(5.6) |
|
|
Basic |
492.5 |
490.4 |
|
|
Add: dilutive share options |
0.2 |
1.8 |
|
|
Diluted |
492.7 |
492.2 |
|
7 |
Reconciliation of net cash flow
to movement in net debt
|
Year to 30 |
Year to |
|
|
|
£million |
£million |
|
|
Net borrowings and finance leases – at 1 October |
(1,272.1) |
|
|
|
Net cash inflow/(outflow) |
6.3 |
(120.3) |
|
|
Issue of shares |
3.7 |
25.0 |
|
|
Net borrowings assumed at acquisition |
(0.8) |
(0.5) |
|
|
Net liquid resources eliminated on disposal |
(31.0) |
- |
|
|
Inception of finance leases |
- |
(0.4) |
|
|
Exchange adjustment |
(20.7) |
42.7 |
|
|
Net borrowings and finance leases – at 30 September |
(1,368.1) |
(1,325.6) |
|
8 |
Contingent liabilities
|
|
|
|
a) |
BOC has been named in numerous lawsuits in the US alleging
injury from exposure to welding fumes.
Many of these cases were filed during 2003. 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 still at an early stage.
The MDL proceeding is a vehicle for co-ordinating pre-trial
proceedings in cases pending in different federal district courts in the
US. In addition to the cases in
federal court, BOC 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. |
|
|
|
BOC believes that it has strong defences to the claims asserted in these various proceedings related to alleged injury from exposure to welding fumes and intends to defend vigorously such claims. Based on BOC’s experience to date, together with BOC’s current assessment of the merits of the claims being asserted, and applicable insurance, BOC believes that continued defence and resolution of these proceedings will not have a material adverse effect on its financial condition or profitability and no provision has been made. |
|
|
b) |
In February 2003, the company was notified that a jury
verdict in the US District Court for the Western District of Texas was
obtained for US$132 million against Fluorogas Limited, The BOC Group Inc and
The BOC Group plc. The verdict arises
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. |
|
|
c) |
An action has been filed in the US District Court for the
Southern District of Illinois 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. Both sides have filed motions
for summary judgement which are scheduled to be heard by the Court on
21 November 2003. |
|
|
d) |
At 30 September 2002, BOC had guaranteed a portion of the
borrowings of its joint venture company in Mexico. The amount of the guarantee was £116.7 million and it was shown
as a contingent liability in the Group’s Report and Accounts at that
date. In March 2003, as a result of
certain conditions being met by the joint venture company, BOC’s guarantee
has been released and no contingent liability remains at 30 September 2003. |
|
|
e) |
No other events have occurred that materially change the level of other contingent liabilities since 30 September 2002. |
|
9 |
The preliminary announcement of the results for the year to 30 September 2003 is unaudited and was approved by the finance committee of the board of directors on 13 November 2003. |
|