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Elementis PLC (ELM)

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Wednesday 31 July, 2002

Elementis PLC

Interim Results


PRESS INFORMATION

31 July 2002

ELEMENTIS plc

INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2002

>  Sales on continuing operations £194.5 million (2001: £209.4 million)

>  Operating profit on continuing operations £14.5 million* 
   (2001: £13.8 million* restated†)

>  Profit before tax £13.3 million* (2001: £15.1 million* restated†)

>  Earnings per share 2.4 pence* (2001: 2.9 pence* restated†)

>  Net cash inflow from continuing operations £13.3 million (2001: £0.4 million)

>  Net borrowings £37.1 million (2001: £72.5 million)

>  Net gearing 9.9 per cent** (2001: 14.7 per cent** restated†)


*  before goodwill amortisation and exceptionals

** ratio of net borrowings to shareholders' funds plus net borrowings

†  results of prior periods restated to reflect adoption of FRS17 `Retirement
   Benefits' and FRS19 `Deferred Tax'

Geoff Gaywood, Chief Executive of Elementis plc, said:

'Focus on short-term trading resulted in a considerable improvement in profit
performance compared to the second half of 2001, driven by better sales mix and
cost management.

'Market conditions are currently stable but no improvement in underlying demand
is expected in the near future. The outlook for the US economy, and the
resulting impact on the global economy, remains the most significant factor in
determining the short-term prospects for Elementis.

'Favourable cost trends are expected to continue in the second half of 2002.
While sales in the second half are typically lower than the first half due to
seasonal effects, a repeat of the extreme levels of customer destocking that
took place in the last quarter of 2001 is not anticipated.

'We are confidently putting the business on a growth footing focusing on
Elementis Specialties.'

                                  - Ends -

    An interview with Geoff Gaywood in video/audio format can be viewed on
          www.elementis.com and www.cantos.com from 0700 hours GMT.

Enquiries

Elementis                                           01784 224212
Geoff Gaywood       Chief Executive                             
Brian Taylorson     Finance Director                            
Anna Passey         Head of Corporate                           
                    Communications                              
                                                                

Brunswick                                          020 7404 5959
Andrew Fenwick                                                  
Fiona Fong                                                      



Overview

I am pleased to report an operating profit before goodwill amortisation and
exceptionals on continuing operations for the first half of the year of £14.5
million. While this is a long way below the level recorded prior to the global
economic downturn in 2001, it represents a big improvement on the second half
of last year and is similar to the results for the first half of last year. The
results have benefited from a determined effort, led by the Chief Executive, to
focus on the short-term trading position and tightly control costs. He has also
taken firm measures to conserve cash; as a consequence net borrowings were down
to £37.1 million from £72.5 million a year earlier. Sales on continuing
operations decreased by 7 per cent on the first half of 2001 to £194.5 million,
reflecting the lower economic activity and the weakening of the US dollar.

The Group will continue its efforts at cost control. Fortunately, the high
energy costs which plagued us during 2001 have now reduced. Further, our Six
Sigma programme is yielding excellent benefits and there is more to come from
this source.

Strategy

The Annual Report 2001 outlined the strategy to put Elementis on a growth
footing. This has now been further refined and the direction for each business
clarified. Elementis Chromium will strengthen and leverage its market
leadership. Elementis Pigments will build on its globally competitive cost base
in Asia Pacific to drive growth. Elementis Specialties will leverage
technology, markets and acquisitions to drive significant growth, and Specialty
Rubber will streamline fabrication and use its low cost base, product
innovation and quality to accelerate performance improvement.

Implementation of the growth strategy will include acquisitions that generate
synergies with the existing portfolio, with an emphasis on Elementis
Specialties. Such acquisitions will meet the rigorous capital disciplines set
by management and be financed from available debt and cash resources. A new
corporate finance analysis and execution team has been appointed to lead this
effort. The team operates in conjunction with the existing, business-specific,
strategic development resources.

We need to improve our business processes across the Group and to this end have
authorised a £13.0 million investment in an Enterprise Resource Planning (ERP)
system. Approximately £4.5 million will be spent in 2002 and at least £3.5
million of annual efficiency savings are expected to result. There will be
additional benefits, including enhanced customer service.

Programmes addressing opportunities for step change financial performance
improvement are being implemented in Elementis Pigments and Specialty Rubber. A
strategic review of the facility at Birtley, near Durham, UK was initiated in
February and will be completed and actioned in the second half of 2002. In
Specialty Rubber, the ongoing programme to improve manufacturing structure has
resulted in a decision to close the Phoenix, US, service centre, which will
also be completed in the second half of 2002. In addition, further streamlining
of manufacturing is planned, with the fabrication of high labour content
products being moved from the US and Europe to Malaysia.

Dividends and issue of redeemable B shares

The Board has not declared an interim ordinary dividend. Instead, it will
continue with the programme, started in 2000, of issuing and redeeming
redeemable B shares. The Board intends to issue further redeemable B shares to
ordinary shareholders on the register on 28 October 2002, such that they
receive redeemable B shares with a total nominal value of 1.1 pence for each
ordinary share held. The Board believes that this is appropriate for the
business, taking into account the current trading environment and the stated
strategy to focus on growth. The nominal value of any further issue of
redeemable B shares is currently anticipated to increase as our strategy
delivers value, albeit at a rate that may not match the Group's underlying
growth rate.

The issue will be coupled with an offer to redeem the new shares for cash at
their nominal value on 4 November 2002. A further offer will also be made to
existing holders of redeemable B shares to redeem these shares for cash at
their nominal value on the same date.

A circular providing full details of the issue and redemption of redeemable B
shares will be posted to all ordinary shareholders on 27 September 2002.

The Board

Brian Taylorson was appointed Finance Director on 2 April 2002, replacing
George Fairweather who left to take up a similar position at Alliance UniChem
Plc.

Chromated copper arsenate

On 12 February 2002, the US Environmental Protection Agency (EPA) announced
restrictions, from 2004, on the use of chromated copper arsenate (CCA) as a
wood preservative in the US, affecting CCA treated timber for consumer use.
Elementis Chromium supplies chromic acid which is used in the manufacture of
CCA and, in view of this ruling, and as previously announced, its global sales
of chromium chemicals could be adversely affected by around 15 per cent by
2004.

Elementis did not experience any adverse impact on sales in the first half of
2002 from this EPA ruling and does not expect its sales in 2002 as a whole to
be materially affected. Following the public consultation period, the EPA is
now considering its final position.

Current trading and outlook

Market conditions are currently stable but no improvement in underlying demand
is expected in the near future. The outlook for the US economy, and the
resulting impact on the global economy, remains the most significant factor in
determining the short-term prospects for Elementis.

Favourable cost trends are expected to continue in the second half of 2002.
While sales in the second half are typically lower than the first half due to
seasonal effects, a repeat of the extreme levels of customer destocking that
took place in the last quarter of 2001 is not anticipated.

Review of operations
for the six months to 30 June 2002

                                 2002        2002      2001        2001
                                                                       
                                Sales   Operating     Sales   Operating
                                          profit*               profit*
                                                               restated
                                                                       
                             £million    £million  £million    £million
                                                                       
Continuing operations                                                  
                                                                       
Chromium                         59.5         5.2      68.2         3.4
                                                                       
Pigments & Specialties          119.7        10.2     119.7         9.7
                                                                       
Specialty Rubber                 19.7       (0.9)      25.3         0.7
                                                                       
Inter-group                     (4.4)           -     (3.8)           -
                             ------------------------------------------                                            
                                194.5        14.5     209.4        13.8
                             ==========================================

*before goodwill amortisation and exceptionals

Financial results

With effect from the current financial year, Elementis has adopted Financial
Reporting Standards FRS17 `Retirement Benefits' and FRS19 `Deferred Tax' and
the results of previous periods have been restated accordingly. There has been
no impact on the Group's underlying performance.

Sales on continuing operations decreased in sterling terms by 7 per cent on the
first half of 2001 to £194.5 million, reflecting the lower economic activity
and the weakening of the US dollar. On a constant currency basis, sales
declined by 6 per cent.

Operating profit before goodwill amortisation and exceptionals on continuing
operations was £14.5 million, compared to £13.8 million (restated) in the first
half, and a loss of £1.3million (restated) in the second half, of 2001. Lower
energy costs favourably impacted operating profit by £3.3 million versus the
first half of 2001 on a comparable basis. Other cost initiatives, including Six
Sigma and people reductions, also had a favourable impact on operating profit.
Operating profit before goodwill amortisation and exceptionals for the first
half of 2001 was impacted by a restructuring charge of £2.3 million at Corpus
Christi, Texas. Currency effects were minimal.

Profit before goodwill amortisation, exceptionals and tax was £13.3 million
compared to £15.1 million (restated) in the first half of 2001 and a loss of 
£0.6 million (restated) in the second half. Basic earnings per share before
goodwill amortisation and exceptionals were 2.4 pence (2001: 2.9 pence
restated).

Chromium

Elementis Chromium recovered sharply from the decline in the second half of
2001, improving sales mix, reducing costs and generating strong cashflow.

Global demand for chromium chemicals is estimated by Elementis to be about the
same as in the first half of 2001, with the overriding market characteristic
being one of intense competition.

Operating profit before exceptionals was £5.2 million, compared to £3.4 million
(restated) in the first half of 2001, on sales down 13 per cent to £59.5
million. On a constant currency basis, sales decreased by approximately 12 per
cent.

Sales volumes were down by 4 per cent, largely as a result of manufacturing
problems in the UK in June, which have now been resolved; otherwise modest
volume growth in most downstream products was offset by lower dichromate sales.
Increased sales volumes to Europe and Asia Pacific were offset by lower sales
volumes to North America and the rest of the world.

Lower energy costs favourably impacted operating profit by £2.6 million versus
the first half of 2001. Operating profit before exceptionals in the first half
of 2001 was impacted by a one-off cost of £2.3 million related to restructuring
at Corpus Christi, Texas. The cost benefits of this, together with £1.2 million
lower raw material costs and benefits from Six Sigma projects, were also a
significant factor in controlling costs in the first half of 2002. The project
to link the Corpus Christi site to a steam and electricity co-generation plant
being constructed at an adjacent oil refinery, will be fully on-stream in
August, further reducing energy costs.

In May, Elementis Chromium was honoured with the Queen's Award for Enterprise
in the Innovation category for the development of CA21™.

On 12 February 2002, the US Environmental Protection Agency (EPA) announced
restrictions, from 2004, on the use of chromated copper arsenate (CCA) as a
wood preservative in the US, affecting CCA treated timber for consumer use.
Elementis Chromium supplies chromic acid which is used in the manufacture of
CCA and acts primarily as a binding agent. As previously indicated, Elementis
estimates that as a result of the EPA's decision, the global and US demand for
chromium chemicals would reduce by around 5 and 30 per cent respectively.

Elementis Chromium's sales for industrial applications of CCA, such as utility
poles, rail sleepers and marine pilings are relatively strong and are not
affected by the EPA ruling. Nevertheless, its global sales of chromium
chemicals could be adversely affected by around 15 per cent by 2004. Elementis
Chromium did not experience any adverse impact on sales in the first half of
2002 from this EPA ruling and does not expect its sales in 2002 as a whole to
be materially affected. Following the public consultation period, the EPA is
now considering its final position.

Pigments & Specialties

Operating profit before goodwill amortisation was £10.2 million compared to 
£9.7 million (restated) in the first half of 2001, on flat sales of £119.7
million. On a constant currency basis sales increased by approximately one per
cent.

Elementis Pigments' performance improved significantly compared to the prior
six months as a result of increases in volume, effective cost management and
high production levels.

In Elementis Pigments sales of iron oxide pigments were higher than the first
half of 2001 offset by lower sales of zinc oxide. Sales into coatings and
chemicals applications showed some improvement over the first half of 2001,
offset by lower sales into the construction market.

Some modest improvement in demand in the North American coatings market was
evident in the period, while the global construction market remained highly
competitive. Sales of construction grade Ferrispec granular product
nevertheless continued to show strong growth. Sales volumes improved in both
North America and Asia Pacific but declined in Europe. Sales into global
markets from the Shenzhen manufacturing facility in China reached record levels
and this facility is being further expanded.

Underlying operating profit for Elementis Pigments improved over the same
period last year.

The operating loss at the carboxylates and zinc businesses at the Birtley site
in Durham, UK, were reduced as a result of improving contribution margins. As
announced earlier in the year, a strategic review of the site was launched in
February 2002 and will be completed and actioned during the second half of
2002.

In July, an agreement was signed to sell the anhydrous aluminium chloride
business in Allentown, US, for £1.7 million. As a result, a provision for loss
on sale of £2.1 million has been taken as an exceptional item in the first half
of 2002 (including an adjustment related to goodwill previously written off to
reserves).

Elementis Specialties' sales and operating profit recovered quickly from the
year end downturn, driven by restored volume and improved sales mix.

Sales at Elementis Specialties in the first half of 2002 were flat compared to
the prior year. There was no net currency impact. Improved sales for coatings
applications, due to modest improvements in demand, were offset by lower sales
to the inks market. Sales to the oilfield market grew at a more modest rate
than in the first half of 2001 due to reduced drilling activity in North
America. Compared to the first half of 2001, sales in Asia Pacific showed
strong gains, helped by greater focus and the allocation of additional
resource, while trading in North America and Europe was relatively stable.

Operating profit before goodwill amortisation at Elementis Specialties improved
over the first half of 2001. Tight control on costs, savings from Six Sigma
programmes and lower energy costs contributed to this improvement.

A new colourant system, TINT-AYD® NV, was launched. This new product line
satisfies a leading global coating manufacturer's requirement for a low
volatile, low heavy metal content colourant and meets demanding performance
needs for use in the oil and transport sectors.

A new structure to support accelerated innovation and drive a sustainable, high
rate of growth within Elementis Specialties has been approved by the Board.
This new structure is based on a stage gate process, a widely used model
emanating from the pharmaceutical industry. New capabilities to expedite
internal research and development and to identify and import new technologies
and commercial opportunities from external sources are being put in place.
Opportunities to expand operations in China are also being pursued.

Elementis Specialties launched a new website in May which enables customers to
make sample requests and place orders on-line. Over 1,000 customers have
registered so far and internal productivity has increased significantly as the
system replaces manual processes.

In July, the Elementis Specialties' portfolio was refined by the sale of its
small, non-core paint business in the Netherlands. As a result, a provision for
loss on sale of £0.8 million has been taken as an exceptional item in the first
half of 2002 (including an adjustment related to goodwill previously written
off to reserves).

Specialty Rubber

Operating loss before exceptionals was £0.9 million, compared to a profit of 
£0.7 million (restated) in the first half of 2001, on sales down 22 per cent to
£19.7 million. Excluding sales for the engineering systems business, which was
exited during 2001, sales fell by 12 per cent.

Sales declined in North America primarily as a result of the continued downturn
in the mining sector, which is experiencing weak metal prices and high levels
of metal stocks. In Europe, sales into the sand and gravel market fell as a
result of weakness in the construction market. Sales to Australia, China and
South Africa continued to show good growth offset by currency devaluations in
South Africa.

The operating loss before exceptionals was principally driven by the fall in
sales. This was partially mitigated by cost improvements from headcount
reductions in the US, lower raw material costs, benefits from Six Sigma
projects and the positive impact of the exit from the engineering systems
business in 2001.

A decision has been taken to close the Phoenix, US service centre, which will
be completed in the second half of 2002, and an exceptional charge of £0.5
million has been taken in respect of this in the first half of 2002. In
addition, further streamlining of manufacturing is planned, with fabrication of
high labour content products being moved from the US and Europe to Malaysia.

Commissioning of the £4.0 million continuous rubber sheet press in Malaysia
will be completed in August. This will further reduce operating costs and
enable Linatex sheet to be produced within tighter thickness tolerances for new
applications and with enhanced bonding capabilities.

In July, the Linatex management team was strengthened by the appointment of a
new Managing Director.

Six Sigma

Six Sigma is an integral part of the manufacturing process in Elementis and is
being extended to commercial and supply chain processes. In total, over 50 Six
Sigma projects have been either completed or are still in progress and have
generated savings in the first half of 2002 of £1.8 million. Programme momentum
continues with 14 `blackbelts' and 25 `greenbelts' in place and a further 20
`greenbelts' commence training in the Autumn.

Health, safety and the environment

Compared to the first half of 2001, lost time accident frequency for continuing
operations reduced by 47 per cent, further reflecting the increased focus in
this area. Non-compliance with environmental consents declined substantially
from 18 to 3 incidents.

Interest

The Group net interest charge was £1.2 million (2001: £0.6 million restated).
In the current period, as a result of the adoption of FRS17 `Retirement
Benefits', other finance charges of £0.2 million (2001: income of £1.8 million
restated) have been recognised; this represents the expected return on defined
benefit pension scheme assets less the expected increase in the present value
of defined benefit pension and other post retirement liabilities.

Exceptionals

Net exceptional charges before tax were £1.7 million (2001: £5.1 million)
comprising:

>  £1.0 million insurance recovery in Chromium in respect of an historic legal
   settlement previously taken through exceptionals

>  £0.5 million of costs in respect of the Linatex restructuring in the US

>  £1.4 million profit in respect of property disposals

>  £2.9 million provision for loss on the sale of two Pigments & Specialties
   businesses in the second half of 2002 including the write back of goodwill
   previously written off to reserves

>  £0.7 million additional costs incurred in respect of historic business
   disposals.

In July, agreements were signed for the sale of two surplus properties in the
UK. Proceeds will amount to £8.5 million and an exceptional profit on sale of
approximately £5.9 million will be recorded in the second half.

Cash flow and balance sheet

Net cash inflow from operating activities was £13.3 million, compared to £0.4
million in the first half of 2001, the increase largely reflecting the
continued strong control over the working capital position.

Working capital outflow was £11.3 million, compared to £21.0 million in the
first half of 2001 as a result of the continued management drive to reduce
working capital levels despite normal seasonal effects. Inventories increased
by £1.1 million over the half year. Debtors increased by £9.2 million, with
trade debtor days increasing by three days. Creditors decreased by £1.0
million.

Cash expenditure on fixed assets totalled £5.0 million (2001: £7.5 million) net
of grants received of £0.7 million (2001: nil), compared with depreciation of 
£9.6 million (2001: £9.4 million). Major projects included infrastructure to
access steam and electricity from a co-generation plant being constructed at an
oil refinery adjacent to Elementis Chromium's Corpus Christi plant and the
Linatex continuous sheet press in Malaysia, which will be fully commissioned by
August 2002. Capital expenditure for the full year, excluding the ERP
programme, is still expected to be below depreciation.

Elementis has adopted early the new accounting standard FRS17 `Retirement
Benefits', under which the net pension liability, now reflected in the balance
sheet, was £58.0 million at the end of June compared to £25.3 million at the
end of December 2001. The movement in the liability is principally accounted
for by an actuarial loss arising from the downturn in equity markets and a
revision of actuarial assumptions, partially offset by deferred tax thereon.
The total charge against operating profit before goodwill amortisation and
exceptionals for pensions and post-retirement medical benefits in the first
half of 2002 was £2.9 million (2001: £3.4 million restated).

FRS19 `Deferred Tax' has also been adopted, under which deferred tax is now
provided in full for the future tax effect of past transactions. As a result,
the Group's tax charge takes full account of the impact of accounting losses
arising in the US.

Net borrowings at the end of June were £37.1 million compared to £72.5 million
at June 2001 and £40.0 million at the end of December 2001. Shareholders' funds
at the half year were £338.3 million compared to £420.3 million (restated) at
June 2001 and £378.5 million (restated) at the end of December 2001. Net
gearing (the ratio of net borrowings to shareholders' funds plus net
borrowings) was 9.9 per cent compared to 14.7 per cent (restated) at June 2001
and 9.6 per cent (restated) at the end of December 2001.

Consolidated profit & loss account
for the six months to 30 June 2002

                                                                               2001
                                 Before                               2002      Six     2001
                               goodwill                                Six   months     Year
                           amortisation                             months    to 30    to 31
                                      &     Goodwill                 to 30     June      Dec
                           exceptionals amortisation Exceptionals     June restated restated
                                                                                            
                      Note     £million     £million     £million £million £million £million
                                                                                            
Turnover                                                                                    
                                                                                            
Continuing operations             194.5            -            -    194.5    209.4    392.9
                                                                                            
Discontinued                          -            -            -        -     87.3    137.5
operations                                                                                  
                          ------------------------------------------------------------------ 
                                                                                           
Group turnover           3        194.5           -             -    194.5    296.7    530.4
                                                                                            
Group operating                                                                             
profit/(loss)                                                                               
--------------------------------------------------------------------------------------------                                                                                            
Continuing operations                                                                       
                                                                                            
Before goodwill                    14.5           -             -     14.5     13.8     12.5
amortisation and                                                                            
exceptionals                                                                                
                                                                                            
Goodwill amortisation                 -       (7.0)             -    (7.0)    (6.9)   (14.0)
                                                                                            
Exceptionals                          -           -           0.5      0.5    (5.1)    (5.1)
--------------------------------------------------------------------------------------------                                                                 
                         3         14.5       (7.0)           0.5      8.0      1.8    (6.6)
                                                                                            
Discontinued                          -           -             -        -      1.9      2.4
operations                                                                                  
                           -----------------------------------------------------------------                                                                                            
                                   14.5       (7.0)           0.5      8.0      3.7    (4.2)
                                                                                            
Associates                            -           -             -        -        -      0.1
                           -----------------------------------------------------------------                                                                                            
Operating profit/                  14.5       (7.0)           0.5      8.0      3.7    (4.1)
(loss)                                                                                      
                           -----------------------------------------------------------------                                                                                            
Profit on disposal of                 -           -           1.4      1.4        -        -
properties                                                                                  
                                                                                            
Provision for loss on                 -           -         (2.9)    (2.9)        -        -
disposal of                                                                                 
businesses -                                                                                
   continuing operations                                                                       
                                                                                            
Profit/(loss) on                      -           -         (0.7)    (0.7)        -      1.3
disposal of business                                                                        
 - discontinued                                                                              
   operations                                                                                  
                           -----------------------------------------------------------------                                                                                            
Profit/(loss) on                   14.5       (7.0)         (1.7)      5.8      3.7    (2.8)
ordinary activities                                                                         
before interest                                                                             
                                                                                            
Net interest payable     4        (1.2)           -             -    (1.2)    (0.6)    (0.5)
                           -----------------------------------------------------------------                                                                                            
Profit/(loss) on                                                                            
ordinary activities                                                                         
before tax                                                                                  
--------------------------------------------------------------------------------------------                                                                                            
Before goodwill                    13.3           -             -     13.3     15.1     14.5
amortisation and                                                                            
exceptionals                                                                                
                                                                                            
Goodwill amortisation                 -       (7.0)             -    (7.0)    (6.9)   (14.0)
                                                                                            
Exceptionals                          -           -         (1.7)    (1.7)    (5.1)    (3.8)
--------------------------------------------------------------------------------------------                                                                                            
                                   13.3       (7.0)         (1.7)      4.6      3.1    (3.3)
                                                                                            
Tax on profit/(loss)     5        (2.6)         2.5             -    (0.1)        -      8.0
on ordinary                                                                                 
activities                                                                                  
                            ----------------------------------------------------------------                                                                                            
Profit on ordinary                 10.7       (4.5)         (1.7)      4.5      3.1      4.7
activities after tax                                                                        
                                                                                            
Minority interests -              (0.1)           -             -    (0.1)    (0.1)    (0.1)
  equity                                                                                      
                            ----------------------------------------------------------------                                                                                            
Profit for the                     10.6       (4.5)         (1.7)      4.4      3.0      4.6
financial period                                                                            
                                                                                            
Dividends -                           -           -             -        -        -    (0.1)
  non-equity                                                                                  
                             ---------------------------------------------------------------                                                                                            
Amount transferred to              10.6       (4.5)         (1.7)      4.4      3.0      4.5
reserves                                                                                    
                             ===============================================================                                                                                            
Earnings per ordinary    6                                                                  
share                                                                                       
                                                                                            
Basic and diluted                                                     1.0p     0.7p    1.0p 
                                                                                            
Basic and diluted                                                     2.4p     2.9p    2.9p 
before goodwill                                                                             
amortisation and                                                                            
exceptionals                                                                                
                                                                                            


Consolidated balance sheet
at 30 June 2002

                                                            
                                                        2002     2001     2001
                                                     30 June  30 June   31 Dec
                                                             restated restated
                                                                              
                                                    £million £million £million
                                                                              
Fixed assets                                                                  
                                                                              
Goodwill                                               204.7    233.5    219.2
                                                                              
Tangible assets                                        182.1    195.7    192.0
                                                                              
Investment in associated undertakings                    3.6      2.1      3.8
                                                    --------------------------                                                                                                                                                                                                      
                                                       390.4    431.3    415.0
                                                    --------------------------                                                                              
Current assets                                                                
                                                                              
Stocks                                                  56.1     84.6     56.3
                                                                              
Debtors                                                 81.3    118.6     83.6
                                                                              
Cash at bank and in hand                                42.2     28.3     39.5
                                                     -------------------------                                                                             
                                                       179.6    231.5    179.4
                                                     -------------------------                                                                              
Creditors: amounts falling due within one year                                
                                                                              
Borrowings                                             (4.9)   (12.1)    (5.8)
                                                                              
Creditors                                             (58.4)   (99.6)   (73.1)
                                                     -------------------------                                                                              
                                                      (63.3)  (111.7)   (78.9)
                                                     -------------------------                                                                              
Net current assets                                     116.3    119.8    100.5
                                                     -------------------------                                                                              
Total assets less current liabilities                  506.7    551.1    515.5
                                                     -------------------------                                                                              
Creditors: amounts falling due after more than one                            
year                                                                          
                                                                              
Borrowings                                            (74.4)   (88.7)   (73.7)
                                                                              
Government grants                                      (1.5)    (0.6)    (0.8)
                                                     -------------------------                                                                             
                                                      (75.9)   (89.3)   (74.5)
                                                                            
Provisions for liabilities and charges                (32.6)   (33.3)   (34.5)
                                                     -------------------------                                                                              
                                                     (108.5)  (122.6)  (109.0)
                                                     -------------------------                                                                              
Net assets excluding net pension liability             398.2    428.5    406.5
                                                                               
Net pension liability                                 (58.0)    (5.6)   (25.3)
                                                     -------------------------                                                                             
Net assets including net pension liability             340.2    422.9    381.2
                                                     =========================                                                                              
Capital and reserves                                                          
                                                                              
Called up share capital                                 23.6     24.4     23.9
                                                                              
Share premium                                            1.2      1.1      1.2
                                                                              
Capital redemption reserve                              48.0     33.8     43.4
                                                                              
Profit and loss account                                265.5    361.0    310.0
                                                     -------------------------                                                                              
Shareholders' funds                                    338.3    420.3    378.5
                                                                              
Minority interests                                       1.9      2.6      2.7
                                                     -------------------------                                                                              
                                                       340.2    422.9    381.2
                                                     =========================                                                                              
Shareholders' funds                                                           
                                                                              
Equity                                                 336.3    417.5    376.2
                                                                              
Non-equity                                               2.0      2.8      2.3
                                                     -------------------------                                                                              
                                                       338.3    420.3    378.5
                                                     =========================                                                                              

Net borrowings                                        (37.1)   (72.5)   (40.0)
                                                     =========================


Cash flow statement
for the six months to 30 June 2002

                                                               
                                                         2002     2001     2001     
                                                          Six      Six  Year to 
                                                       months   months   31 Dec
                                                           to       to restated      
                                                      30 June  30 June   
                                                              restated 
                                                                               
                                                Note £million £million £million
                                                                              
Net cash inflow from operating activities                                      
                                                                               
Continuing operations                                    13.3      1.2     37.1
                                                                               
Discontinued operations                                     -    (0.8)      0.8
                                                                               
Returns on investments and servicing of finance                                
                                                                               
Interest received                                         0.4      3.7      6.7
                                                                               
Interest paid                                           (1.1)    (6.5)   (11.5)
                                                                               
Taxation                                                (1.8)    (4.6)    (7.2)
                                                                               
Capital expenditure and financial investment                                   
                                                                               
Purchase of fixed assets (less grants received)         (5.0)    (7.5)   (16.8)
                                                                               
Disposal of fixed assets                                  1.4      0.1      0.8
                                                                               
Acquisitions and disposals                                                     
                                                                               
Acquisition of businesses in prior periods              (1.3)        -        -
                             
Disposal of businesses in prior periods                   1.1    (0.2)     16.3
                                                      -------------------------                                                                           
Cash inflow/(outflow) before use of liquid                7.0   (14.6)     26.2
resources and financing                                                        
                                                                               
Financing and management of liquid resources      7    (12.0)     10.7   (18.1)

                                                      -------------------------                         
(Decrease)/increase in cash                       8     (5.0)    (3.9)      8.1
                                                      =========================
                                                                               

Reconciliation of operating profit/(loss)
to net cash inflow from operating activities

for the six months to 30 June 2002
                                                         2002     2001     2001
                                                          Six      Six  Year to   
                                                       months   months   31 Dec
                                                        to 30    to 30 restated
                                                         June     June  
                                                              restated         
                                                                               
                                                     £million £million £million
                                                                               
Operating profit/(loss)                                   8.0      3.7    (4.1)
                                                                               
Goodwill amortisation                                     7.0      6.9     14.0
                                                                               
Depreciation (less grants credited)                       9.6      9.4     18.8
                                                                               
Share of profits of associated undertakings                 -        -    (0.1)
                                                                               
Profit on disposal of fixed assets                          -        -        -
                                                                               
Exceptionals in operating profit                        (0.5)      5.1      5.1
                                                                               
Cash inflow/(outflow) on exceptionals                     1.0    (4.3)    (5.2)
                                                                               
(Increase)/decrease in stocks                           (1.1)    (5.1)      6.6
                                                                               
(Increase)/decrease in debtors                          (9.2)    (9.5)     13.5
                                                                               
Decrease in creditors                                   (1.0)    (6.4)   (10.3)
                                                                               
Decrease in provisions                                  (1.7)    (1.5)    (2.3)
                                                                               
Increase in net pensions liability                        1.2      2.1      1.9
                                                       ------------------------                                                                               
Net cash inflow from operating activities                13.3      0.4     37.9
                                                       ========================                                                                               

Statement of total recognised gains and losses
for the six months to 30 June 2002

                                                        2002      2001     2001
                                                         Six       Six  Year to
                                                   months to months to   31 Dec       
                                                     30 June   30 June restated
                                                              restated         
                                                                               
                                                     £million £million £million
                                                                               
Profit for the financial period                           4.4      3.0      4.6
                                                                               
Actuarial loss on pension and other post               (48.0)   (53.4)   (86.2)
retirement schemes                                                             
                                                                               
Deferred tax associated with pension and other           14.6     16.8     26.9
post retirement schemes                                                        
                                                                               
Currency translation differences                       (10.6)     16.8      4.8
                                                                               
Taxation on currency translation differences on           1.3    (1.3)    (1.0)
foreign currency borrowings                                                    
                                                    ---------------------------                                                                              
Total recognised losses for the financial              (38.3)   (18.1)   (50.9)
period                                                                         
                                                                ===============                                                                               
Prior period adjustment - adoption of FRS17/FRS19      (19.0)                  
                                                                          
                                                    ---------                                                                               
Total recognised losses since last Annual Reoprt       (57.3)                  
                                                                     
                                                    =========                                                                              

Reconciliation of movements in shareholders' funds

for the six months to 30 June 2002
                                                         2002     2001     2001
                                                          Six      Six  Year to 
                                                       months   months   31 Dec
                                                        to 30    to 30 restated 
                                                         June     June   
                                                              restated         
                                                                               
                                                     £million £million £million
                                                                               
Profit for the financial period                           4.4      3.0      4.6
                                                                               
Dividends - redeemable B shares                             -        -    (0.1)
                                                     --------------------------                          
Amounts transferred to reserves                           4.4      3.0      4.5
                                                                               
Redemption of redeemable B shares (including            (4.7)   (13.4)   (23.1)
issue costs)                                                                   
                                                                               
Share option scheme allotments                              -        -      0.1
                                                                               
Goodwill on businesses acquired prior to                  2.8        -      0.7
1 January 1998 charged to profit and loss account                                
                                                                               
Actuarial loss on pension and other post               (48.0)   (53.4)   (86.2)
retirement schemes                                                             
                                                                               
Deferred tax associated with pension and other           14.6     16.8     26.9
post retirement schemes                                                        
                                                                               
Currency translation differences                       (10.6)     16.8      4.8
                                                                               
Taxation on currency translation differences on           1.3    (1.3)    (1.0)
foreign currency borrowings                                                    
                                                     --------------------------                          
Net decrease in shareholders' funds                    (40.2)   (31.5)   (73.3)
                                                                               
At beginning of the financial period as                 378.5    451.8    451.8
restated*                                                                      
                                                     --------------------------                          
At end of the financial period                          338.3    420.3    378.5
                                                     ==========================                          

*Shareholders' funds at beginning of period                                    
                                                                               
As originally stated                                    397.5    411.2    411.2
                                                                               
Prior period adjustment - adoption of FRS17/           (19.0)     40.6     40.6
FRS19                                                --------------------------                          
                                                                               
As restated                                             378.5    451.8    451.8
                                                     ==========================                                                                               

Notes to the financial statements

1. Accounting policies

Basis of preparation. The financial information for the first six months of
2002 and 2001, which is unaudited but has been reviewed by the Company's
auditors, does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985 and, except for the changes set out below, it is
presented on the basis of accounting policies set out in the financial
statements of Elementis plc for the year ended 31 December 2001.

Elementis has adopted early FRS17 `Retirement Benefits', which replaces SSAP24
`Accounting for Pension Costs'. In accordance with FRS17, the Group includes
the assets and liabilities of its defined benefit pension and post-retirement
medical benefit schemes in the financial statements. Current service costs,
curtailment and settlement gains and losses, and financial returns are included
in the profit and loss account in the period to which they relate. Actuarial
gains and losses are recorded through the statement of total recognised gains
and losses. A prior period adjustment of £13.8 million is the cumulative prior
period effect of this change of pension accounting policy and has been charged
against reserves.

In accordance with FRS19 `Deferred Tax', which is effective for accounting
periods ending on or after 23 January 2002, deferred tax is accounted for on a
full provision basis recognising in total the potential future tax effects of
past transactions. No discounting has been applied. A prior period adjustment
of £5.2 million is the cumulative prior period effect of this change of
deferred tax accounting policy and has been charged against reserves.

Comparatives have been restated accordingly for these changes in accounting
policy.

2. Exchange rates

For the six months to 30 June 2002, the average sterling exchange rate was
$1.45 and €1.61 (2001: $1.44 and €1.61, year to 31 December 2001: $1.45 and 
€1.61). The sterling exchange rate at 30 June 2002 was $1.52 and €1.54 
(2001: $1.41 and €1.66, 31 December 2001: $1.46 and €1.63).

3. Segmental information

                           Group turnover         Group operating profit/  
                                                             (loss)           
                                                                              
                                                                  
                            2002     2001     2001     2002      2001     2001
                             Six      Six     Year      Six       Six     Year    
                          months   months    to 31   months    months    to 31
                           to 30    to 30      Dec    to 30     to 30      Dec
                            June     June              June      June restated
                                                             restated
                 
                        £million £million £million £million  £million £million
                                                                              
Analysis by activity                                                          
                                                                              
Chromium                                                                      
                                                                              
Before exceptionals         59.5     68.2    126.9      5.2       3.4      2.6
                                                                              
Exceptionals                   -        -        -      1.0         -        -
                                                                              
Inter-group turnover       (4.4)    (3.8)    (8.0)        -         -        -
                        ------------------------------------------------------                                                                         
                            55.1     64.4    118.9      6.2       3.4      2.6
                        ------------------------------------------------------                                                                              
Pigments & Specialties                                                        
                                                                              
Before goodwill            119.7    119.7    228.0     10.2       9.7     10.8
amortisation                                                                  
                                                                              
Goodwill amortisation          -        -        -    (7.0)     (6.9)   (14.0)
                        ------------------------------------------------------                                                                              
                           119.7    119.7    228.0      3.2       2.8    (3.2)
                        ------------------------------------------------------                                                                              
Specialty Rubber                                                              
                                                                              
Before exceptionals         19.7     25.3     46.0    (0.9)       0.7    (0.9)
                                                                              
Exceptionals                   -        -        -    (0.5)     (0.5)    (0.5)
                        ------------------------------------------------------                                                                              
                            19.7     25.3     46.0    (1.4)       0.2    (1.4)
                        ------------------------------------------------------                                                                              
Group exceptionals             -        -        -        -     (4.6)    (4.6)
                        ------------------------------------------------------                                                                              
Total - continuing                                                            
operations                                                                    
                                                                              
Before goodwill            194.5    209.4    392.9     14.5      13.8     12.5
amortisation and                                                              
exceptionals                                                                  
                                                                              
Goodwill amortisation          -        -        -    (7.0)     (6.9)   (14.0)
                                                                              
Exceptionals                   -        -        -      0.5     (5.1)    (5.1)
                         -----------------------------------------------------                                                                              
                           194.5    209.4    392.9      8.0       1.8    (6.6)
                                                                              
Total - discontinued           -     87.3    137.5        -       1.9      2.4
operations                                                                    
                         -----------------------------------------------------                                                                              
                           194.5    296.7    530.4      8.0       3.7    (4.2)
                         =====================================================                                                                              


                             Group turnover       Group operating profit/(loss)
                                                                               
                           2002     2001     2001      2002      2001      2001             
                            Six      Six     Year       Six       Six      Year
                         months   months       to    months    months        to 
                             to       to   31 Dec     to 30     to 30    31 Dec
                        30 June  30 June               June      June  restated                       
                                                             restated
                  
                       £million £million £million  £million  £million  £million
                                                                               
Analysis by area of                                                            
operations                                                                     
                                                                               
Continuing operations                                                          
                                                                               
North America             103.1    113.2    213.3       3.4       3.4     (3.4)
                                                                               
Europe                     79.8     84.7    156.7       3.0     (2.0)     (4.6)
                                                                               
Rest of the World          11.6     11.5     22.9       1.6       0.4       1.4
                       --------------------------------------------------------                                                        
                          194.5    209.4    392.9       8.0       1.8     (6.6)
                                                                               
Discontinued                                                                   
operations                                                                     
                                                                               
North America                 -     87.3    137.5         -       1.9       2.4
                       --------------------------------------------------------                                                                               
                          194.5    296.7    530.4       8.0       3.7     (4.2)
                       ========================================================                                                                               
                                                       2002      2001      2001
                                                        Six       Six   Year to
                                                  months to months to    31 Dec
                                                    30 June   30 June 
                                                   £million  £million  £million        
                                                                               
Group turnover analysed by geographical markets                                
                                                                               
North America                                          94.3     104.2     197.0
                                                                               
Europe                                                 68.7      72.4     134.6
                                                                               
Rest of World                                          31.5      32.8      61.3
                                                  -----------------------------                             
                                                      194.5     209.4     392.9
                                                                               
Discontinued operations                                                        
                                                                               
North America                                             -      87.3     137.5
                                                  -----------------------------                                                                               
                                                      194.5     296.7     530.4
                                                  =============================                                                                               

4. Net interest payable
                                                       2002      2001      2001
                                                        Six       Six      Year
                                                  months to months to to 31 Dec
                                                    30 June   30 June  restated
                                                             restated  
                                                   £million  £million  £million        
                                                                               
Interest payable                                      (1.5)     (5.6)    (10.4)
                                                                               
Interest receivable                                     0.5       3.2       6.2
                                                                               
Other finance (charges)/income                        (0.2)       1.8       3.7
                                                  -----------------------------                             
                                                      (1.2)     (0.6)     (0.5)
                                                  =============================

Other finance (charges)/income represents the interest charge on accrued
pension and other post-retirement liabilities offset by a credit equivalent to
the Group's long term return on assets based on the market value of the defined
benefit pension scheme assets at the start of the period.

5. Taxation

The tax charge of £2.6 million (2001: £2.5 million restated) is based on an
estimated effective tax rate on profit before goodwill amortisation and
exceptionals for the year to 31 December 2002 of 20 per cent (2001: 17 per cent
restated) after taking account of a deferred tax credit of £1.0 million (2001:
£2.1 million restated) under FRS19. The rate is lower than the standard UK
corporation tax rate primarily due to the utilisation of surplus ACT. Tax on
exceptional charges was £nil (2001: £ nil).

6. Earnings per ordinary share
                                                       2002      2001     2001
                                                        Six       Six  Year to
                                                     months months to   31 Dec
                                                      to 30   30 June restated
                                                       June  restated    pence 
                                                      pence     pence      per
                                                        per       per    share
                                                      share     share                       
                                                                              
Basic earnings per ordinary share                       1.0       0.7      1.0
                                                                              
Goodwill amortisation (net of taxation)                 1.0       1.0      2.1
                                                                              
Exceptionals net of taxation                            0.4       1.2    (0.2)
                                                   ---------------------------                                                                              
Basic earnings per ordinary share before goodwill       2.4       2.9      2.9
amortisation and exceptionals                                                 
                                                   ===========================                                                                              

Basic earnings per ordinary share are based on profit for the period of £4.4
million (2001: £3.0 million restated, year to 31 December 2001: £4.5 million
restated) and on the weighted average number of ordinary shares in issue during
the period of 431.6 million (2001: 431.5 million, year to 31 December 2001:
431.5 million). Basic earnings per ordinary share before goodwill amortisation
and exceptionals are based on earnings of £10.6 million (2001: £12.5 million restated,
year to 31 December 2001: £12.7 million restated).

Diluted earnings per ordinary share are based on an adjusted weighted average
number of shares of 434.0 million (2001: 435.0 million, year to 31 December 2001: 435.1 million).


7. Financing and management of liquid resources
                                                         2002     2001     2001
                                                          Six      Six     Year  
                                                       months   months       to   
                                                           to       to   31 Dec
                                                      30 June  30 June          
                                                                          
                                                     £million £million £million   
                                                                               
                                                                       
                                                                               
Issue of ordinary share capital - share                     -        -      0.1
options                                                                        
                                                                               
Redemption of B shares (including issue                 (4.7)   (13.4)   (23.1)
costs)                                                                         
                                                                               
(Decrease)/increase in net borrowings                   (7.3)     24.1      4.9
                                                    ---------------------------                                                                               
                                                       (12.0)     10.7   (18.1)
                                                    ===========================                                                                               

Redeemable B shares, of nominal value £4.3 million, were issued for nil
consideration during the period (2001: £14.2 million, year to
31 December 2001: £23.3 million).

8. Reconciliation of net cash flow to movement in net borrowings

                                                     
                                                               
                                                                  
                                                        2002      2001     2001            
                                                         Six       Six  Year to
                                                   months to months to   31 Dec
                                                     30 June   30 June        
                                                    
                                                    £million  £million £million
                                                                               
Change in net borrowings resulting from cash                                   
flows:                                                                         
                                                                               
(Decrease)/increase in cash in the period              (5.0)     (3.9)      8.1
                                                                               
(Increase)/decrease in borrowings                      (1.1)     (5.0)     13.4
                                                                               
Increase/(decrease) in liquid resources                  8.4    (19.1)   (18.3)
                                                  -----------------------------                             
                                                         2.3    (28.0)      3.2
                                                  
Currency translation differences                         0.6     (2.8)    (1.5)
                                                  -----------------------------                             
Decrease/(increase) in net borrowings                    2.9    (30.8)      1.7
                                                                               
Net borrowings at beginning of the financial          (40.0)    (41.7)   (41.7)
period                                            -----------------------------                             
                                                                               
Net borrowings at end of the financial period         (37.1)    (72.5)   (40.0)
                                                  =============================                                                                               

9. Contingent liabilities

The Group was notified of a potential warranty claim in 1998, under the
contract for the sale of Pauls Malt Limited, relating to export refunds from
the Intervention Board for Agricultural Produce (now the Rural Payments
Agency). Should such a claim materialise, this will be vigorously defended and,
in any event, in the opinion of the directors, this will not have a significant
effect on the financial position of the Group.

Independent review report to Elementis plc

Introduction

We have been instructed by the Company to review the financial information for
the six months ended 30 June 2002, which comprises the consolidated profit and
loss account, balance sheet, cash flow statement, statement of total recognised
gains and losses, reconciliation of movements in shareholders' funds and
related notes. We have read the other information contained in the Interim
Report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.

Directors' responsibilities

The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual financial statements
except where any changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/
4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.

Review conclusion

On the basis of our review, we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.

PricewaterhouseCoopers, London

Chartered Accountants

31 July 2002