FOR IMMEDIATE RELEASE
Windlesham, 13 November 2003
Results for the fourth quarter and year to 30 September 2003
'Another solid performance with good growth in Asia and strong cash flow'
Year 2003 Year 2002 4th qtr 2003 4th qtr 2002
Turnover �4,323.2m �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 55.9p 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 Change at constant
reported 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 �505.6m �500.1m +1% +1%
profit
Profit before tax �395.1m �335.3m +18% +15%
Adjusted profit before �418.9m �430.0m -3% -4%
tax
Earnings per share 49.8p 41.4p +20% +19%
Adjusted earnings per 52.9p 55.9p -5% -6%
share
Return on capital 11.9% 10.5%
employed 5
Adjusted return on 12.5% 12.3%
capital employed 5
3 months to 30 September
Turnover �1,141.8m �1,044.1m +9% +5%
Operating profit �122.7m �91.6m +34% +25%
Adjusted operating �131.9m �133.9m -1% -6%
profit
Profit before tax �103.2m �70.1m +47% +34%
Adjusted profit before �112.4m �114.8m -2% -7%
tax
Earnings per share 13.1p 8.3p +58% +45%
Adjusted earnings per 14.4p 15.5p -7% -11%
share
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 RESULTS
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.
BUSINESS SEGMENT RESULTS
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 Adjusted Turnover Adjusted
�million operating profit operating profit
Process Gas Solutions 1,242.7 +8% 184.0 +3% 333.4 +8% 46.4 - 4%
Industrial and Special 1,751.2 +9% 242.7 - 3% 469.7 +7% 62.8 - 7%
Products
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 was up 7 per cent for the fourth quarter and up 9 per cent for the
year, mainly because of the acquisitions of the Air Products packaged gas
business in Canada and the Praxair Polska business in Poland. Together
acquisitions added 3 per cent to turnover in the quarter and 4 per cent for the
year. Adjusted operating profit was down 7 per cent for the quarter and down 3
per cent for the year, reflecting a profit on asset disposals in India in the
year ago comparison, as well as poor market conditions and provisions for bad
debts in the US. Excluding the US business and the asset disposals, adjusted
operating profit would have increased by 1 per cent for the quarter and 4 per
cent for the year. Business developed well in South Africa and in Latin
America, and sales of helium, liquefied petroleum gas (LPG), medical gases and
packaged chemicals improved in most markets. The LPG business benefited from
good demand in the fourth quarter coupled with strong pricing leading to better
margins.
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 Ren�
M�dori, 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/ir 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 After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items items items items
�million �million �million �million �million �million
TURNOVER,
including 4,323.2 - 4,323.2 4,017.9 - 4,017.9
share of
joint
ventures and
associates
Less: Share 544.3 - 544.3 324.1 - 324.1
of joint
ventures
60.6 - 60.6 36.1 - 36.1
Share of
associates
Turnover 3,718.3 - 3,718.3 3,657.7 - 3,657.7
Operating
profit of 407.4 (17.0) 390.4 425.6 (74.0) 351.6
subsidiary
undertakings
Share of 86.8 (6.8) 80.0 63.8 (0.5) 63.3
operating
profit of
joint
ventures
Share of 11.4 - 11.4 10.7 - 10.7
operating
profit of
associates
Total
operating 505.6 (23.8) 481.8 500.1 (74.5) 425.6
profit
including
share of
joint
ventures and
associates
Loss on - - - - (20.2) (20.2)
termination/
disposal of
businesses
Profit 505.6 (23.8) 481.8 500.1 (94.7) 405.4
before
interest
Interest on (96.1) - (96.1) (103.1) - (103.1)
net debt
Interest on (110.2) - (110.2) (106.1) - (106.1)
pension
scheme
liabilities
Expected 119.6 - 119.6 139.1 - 139.1
return on
pension
scheme
assets
Other net 9.4 - 9.4 33.0 - 33.0
financing
income
PROFIT ON
ORDINARY 418.9 (23.8) 395.1 430.0 (94.7) 335.3
ACTIVITIES
BEFORE TAX
Tax (note 5) (121.4) 7.9 (113.5) (129.0) 22.8 (106.2)
Profit on 297.5 (15.9) 281.6 301.0 (71.9) 229.1
ordinary
activities
after tax
Minority (36.8) 0.4 (36.4) (26.7) 0.5 (26.2)
interests
PROFIT FOR 260.7 (15.5) 245.2 274.3 (71.4) 202.9
THE YEAR
Dividends (192.1) - (192.1) (186.6) - (186.6)
Retained 68.6 (15.5) 53.1 87.7 (71.4) 16.3
profit for
the year
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 After Before Exceptional After
exceptional items exceptional exceptional items exceptional
items items items items
�million �million �million �million �million �million
TURNOVER, 1,141.8 - 1,141.8 1,044.1 - 1,044.1
including
share of
joint
ventures and
associates
Less: Share 164.3 - 164.3 85.6 - 85.6
of joint
ventures
21.2 - 21.2 10.0 - 10.0
Share of
associates
Turnover 956.3 - 956.3 948.5 - 948.5
Operating
profit of 101.3 (8.2) 93.1 113.3 (42.0) 71.3
subsidiary
undertakings
Share of 26.5 (1.0) 25.5 17.6 (0.3) 17.3
operating
profit of
joint
ventures
Share of 4.1 - 4.1 3.0 - 3.0
operating
profit of
associates
Total
operating 131.9 (9.2) 122.7 133.9 (42.3) 91.6
profit
including
share of
joint
ventures and
associates
Loss on - - - - (2.4) (2.4)
termination/
disposal of
businesses
Profit 131.9 (9.2) 122.7 133.9 (44.7) 89.2
before
interest
Interest on (21.9) - (21.9) (24.3) - (24.3)
net debt
Interest on (27.6) - (27.6) (28.9) - (28.9)
pension
scheme
liabilities
Expected 30.0 - 30.0 34.1 - 34.1
return on
pension
scheme
assets
Other net 2.4 - 2.4 5.2 - 5.2
financing
income
PROFIT ON
ORDINARY 112.4 (9.2) 103.2 114.8 (44.7) 70.1
ACTIVITIES
BEFORE TAX
Tax (note 5) (29.4) 2.4 (27.0) (31.2) 9.0 (22.2)
Profit on 83.0 (6.8) 76.2 83.6 (35.7) 47.9
ordinary
activities
after tax
Minority (11.7) - (11.7) (7.2) 0.3 (6.9)
interests
PROFIT FOR 71.3 (6.8) 64.5 76.4 (35.4) 41.0
THE PERIOD
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 At 30 Sep
2003 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 (1,133.1) (1,179.0)
year
Provisions for liabilities and charges (376.6) (407.5)
Total net assets excluding pension assets and 2,203.2 2,058.7
liabilities
Pension assets 75.8 54.3
Pension liabilities (341.8) (311.0)
Total net assets including pension assets and 1,937.2 1,802.0
liabilities
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
30 Sep 30 Sep
2003 2002
�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 6.3 (120.3)
AND FINANCING
GROUP CASH FLOW STATEMENT
3 MONTHS TO 30 SEPTEMBER 2003
3 months 3 months
to to
30 Sep 30 Sep
2003 2002
�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 (26.5) (17.6)
ventures
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 100.1 30.6
FINANCING
TOTAL RECOGNISED GAINS AND LOSSES
YEAR TO 30 SEPTEMBER 2003
Year to Year to
30 Sep 30 Sep
2003 2002
�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 2.0 134.0
pensions
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
30 Sep 30 Sep
2003 2002
�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.
Financial information for the year to 30 September 2002 has been based on the
full Group accounts for that period. The 2002 accounts received an unqualified
audit report and have been delivered to the Registrar of Companies. The
auditors' report on the financial statements for the year to 30 September 2003
has yet to be signed.
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.
The rates of exchange to sterling for the currencies which principally affected
the Group's results were as follows:
Year to Year to
30 Sep 2003 30 Sep 2002
Average rates:
- US dollar 1.60 1.47
- Australian dollar 2.62 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 Turnover Adjusted Operating
operating profit operating profit
profit profit
�million �million �million �million �million �million
Business
analysis:
Process Gas 1,242.7 184.0 177.1 1,200.6 185.2 161.2
Solutions
Industrial and
Special 1,751.2 242.7 238.2 1,605.3 248.0 229.3
Products
BOC Edwards 684.1 18.5 7.9 688.2 26.1 (1.4)
Afrox 353.4 46.1 46.1 259.0 29.7 29.7
hospitals
Gist 291.8 29.2 29.2 264.8 25.5 25.5
Corporate - (14.9) (16.7) - (14.4) (18.7)
Continuing 4,323.2 505.6 481.8 4,017.9 500.1 425.6
operations
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 4,323.2 505.6 481.8 4,017.9 500.1 425.6
operations
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 2003 3 months to 30 Sep 2002
Turnover Adjusted Operating Turnover Adjusted Operating
operating profit operating profit
profit profit
�million �million �million �million �million �million
Business
analysis:
Process Gas 333.4 46.4 42.9 306.5 48.0 31.0
Solutions
Industrial and
Special 469.7 62.8 61.8 415.7 63.8 50.8
Products
BOC Edwards 170.5 5.3 1.5 185.8 9.0 (2.4)
Afrox 103.7 15.4 15.4 68.1 8.9 9.0
hospitals
Gist 64.5 5.9 5.9 68.0 5.7 5.8
Corporate - (3.9) (4.8) - (1.5) (2.6)
Continuing 1,141.8 131.9 122.7 1,044.1 133.9 91.6
operations
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 1,141.8 131.9 122.7 1,044.1 133.9 91.6
operations
4 Exceptional items Year to Year to
30 Sep 30 Sep
2003 2002
�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 - 1.1
operations
Total non-operating exceptional items - (20.2)
5 Tax Year to Year to
30 Sep 30 Sep
2003 2002
�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 (86.9) (73.9)
activities above was:
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
30 Sep 30 Sep
2003 2002
�million �million
Amounts used in computing the earnings per share:
Earnings attributable to ordinary shareholders for the 245.2 202.9
year
Adjustment for exceptional items 15.5 71.4
Adjusted earnings before exceptional items 260.7 274.3
Year to Year to
30 Sep 30 Sep
2003 2002
million million
Average number of 25p ordinary shares:
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 Year to 30 Year to
debt Sep 2003 30 Sep 2002
�million �million
Net borrowings and finance leases - at 1 October (1,325.6) (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.
From the time it purchased Airco in 1978 until this year, BOC had never had an
adverse jury verdict returned against it in a case alleging injury from
exposure to welding fumes. On 28 October 2003, a jury in Madison County,
Illinois, rendered a verdict against BOC and two co-defendants. The jury
awarded US$1 million to Mr Elam, a former labourer who asserted that his
idiopathic Parkinson's disease was attributable to his exposure to welding
fumes over a period of years. BOC believes that the verdict is inconsistent
with the decisions rendered by juries in previous cases, is not supported by
the existing scientific evidence and intends to pursue vigorously its
post-trial and appeal rights.
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.
The company believes that the jury's verdict reflects a misunderstanding of the
law and does not reflect the facts of any loss that may have been suffered by
the plaintiffs. The company is challenging the verdict through the appropriate
appeals process in the US and hence no provision has been made. In addition,
Fluorogas Limited was placed in administration under the Insolvency Act of 1986
pursuant to an order of the English courts. In a related proceeding in a US
Bankruptcy Court, the UK administrators have obtained injunctive relief
preventing the plaintiff in the Fluorogas litigation from commencing or
continuing any action or proceeding enforcing any judgement against Fluorogas
Limited in the US.
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.
The Plan is contesting the action. At this stage in the litigation, it is not
possible to estimate reliably the amount of loss, if any, that might result
from this action and accordingly no provision has been made. 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.
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.
END