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Elementis PLC (ELM)

  Print      Mail a friend       Annual reports

Thursday 27 February, 2003

Elementis PLC

Final Results

Elementis PLC
27 February 2003


27 February 2003



•  Sales on continuing operations down 7 per cent to £364.9 million (2001:
   £392.9 million)

•  Operating profit on continuing operations up 63 per cent to £20.5
   million* (2001: £12.6 million*+)

•  Profit before tax up 36 per cent to £19.7 million* (2001: £14.5 million*+)

•  Earnings per share up 17 per cent to 3.4 pence* (2001: 2.9 pence*+)

•  Net year end borrowings down 6.5 per cent to £37.4 million (2001: £40.0

•  Net year end gearing 12.0 per cent** (2001: 9.6 per cent**+)

•  Basic (loss)/earnings per share (7.1) pence *** (2001: 1.0 pence***)

*    before goodwill amortisation and exceptionals
**   ratio of net borrowings to shareholders' funds plus net borrowings
***  basic (loss)/earnings per share after goodwill amortisation and 
     exceptionals, primarily in respect of the restructuring charge for Corpus 
     Christi previously announced in November 2002 
+    results of prior periods restated to reflect adoption of FRS17 'Retirement 
     Benefits' and FRS19 'Deferred Tax'

Geoff Gaywood, Chief Executive of Elementis plc, said:

'For Elementis, 2002 was a year of strategic action.  Aggressive cost management
and the successful Six Sigma programme delivered systematic cost reduction and
three non-core businesses were exited.  Investments for growth were made in a
new ERP system, in Pigments & Specialties plants in the strategically important
Chinese market, and in our Specialties business development capabilities.
Structural over-capacity in the chromium industry was addressed through the
rationalisation of our US chromium site and the acquisition of OxyChem's
chromium business.

'In a year of flat demand and broad competitive pressure, Elementis improved its
financial performance considerably and installed key strategic profit growth
drivers; operating profit before goodwill amortisation and exceptionals
increased 63 per cent.  The ability to maintain strong cash generation and a
healthy balance sheet in an economic downturn has been demonstrated and the
process of transforming Elementis into a leading specialty chemicals company is

'Given the uncertain global economic outlook and continuing pressure on chromium
chemicals pricing, Elementis nevertheless expects to improve its cost base
further and strengthen its market positions'.

- Ends -

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

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


The Board is pleased to report an operating profit, before goodwill amortisation
and exceptionals, on continuing businesses of £20.5 million, an improvement of
63 per cent on 2001.  Earnings per share on the same basis increased 17 per cent
to 3.4 pence.

This has been accomplished, despite a 7 per cent decline in sales from
continuing operations to £364.9 million, by systematic cost management and
higher productivity, helped by lower energy costs.  While overall volumes have
been maintained, lower prices for chromium chemicals and the effect of currency
movements caused most of the sales decline.

Operating cash flow was marginally ahead of last year at £38.0 million and net
borrowings were reduced by £2.6 million to £37.4 million.  This was achieved
after taking account of acquisition expenditure of £28.2 million.  The Elementis
Six Sigma programme has delivered benefits exceeding £3.0 million during 2002,
and expectations are that this will continue in 2003.  Capital expenditure was
down 26 per cent to £12.4 million, excluding £3.8 million expenditure on the
Enterprise Resource Planning (ERP) programme, at 68 per cent of depreciation.
Exceptional items were £40.4 million mainly attributable to the restructuring
charge for the rationalisation of the chromium operations in Corpus Christi,
Texas, as previously announced.  As a result, basic earnings per share, after
goodwill amortisation and exceptionals in 2002 was a loss of 7.1 pence (2001:
earnings of 1.0 pence).

Safety performance improved modestly in 2002, but not to the satisfaction of the
Board or management, and additional emphasis is being given to bring performance
up to the level of the industry's leaders.  Environmental non-compliances were
reduced substantially.

The ERP programme, which will provide a platform for operational excellence,
best practice business processes and knowledge transfer, was authorised and is
progressing as planned towards its first business implementation in the second
half of 2003. The total investment will be £13.0 million, with annualised cost
saving benefits amounting to £3.5 million by the time implementation is complete
in all businesses in mid 2004.

2002 has been a year of strategic action, with good progress made in the
implementation of the growth strategy outlined in the 2001 Annual Report and
further elaborated at the half year.  Three non-core businesses were exited.
Investments for growth were made in the new ERP system, in Pigments &
Specialties plants in the strategically important Chinese market, and in our
Specialties business development capabilities.  Structural over-capacity in the
chromium industry was addressed through the rationalisation of our US chromium
site and the acquisition of the chromium chemicals business of Occidental
Chemicals Corporation (OxyChem).

Dividends and issue of redeemable B shares

The Board did not declare an interim dividend and, similarly, is not proposing a
final dividend.  Instead, it will continue with the programme, started in 2000,
of issuing and redeeming redeemable B shares.  The total nominal value of
redeemable B shares issued to shareholders during 2002 was 2.1 pence per
ordinary share.

The Board intends to issue further redeemable B shares to ordinary shareholders
on the register on 28 April 2003, such that they receive redeemable B shares
with a total nominal value of 1.1 pence for each ordinary share held.  This
compares with 1.0 pence for the comparable issue last year.  This will be
coupled with an offer to redeem these new shares for cash at their nominal value
on 2 May 2003.  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 2
May 2003.

By not paying dividends on ordinary shares in 2002, Elementis has recovered £1.5
million of advance corporation tax previously paid.


Given the uncertain global economic outlook and continuing pressure on chromium
chemicals pricing, Elementis nevertheless expects to improve its cost base
further and strengthen its market positions.

Business review

Divisional highlights
For the year ended 31 December 2002
                                                      2002                                    2001
                                                                                         Operating      Operating
                                                 Operating     Operating                    profit         profit
                                                    profit        profit                    before          after
                                                    before         after                  goodwill       goodwill
                                                  goodwill      goodwill              amortisation   amortisation
                                              amortisation  amortisation                       and            and
                                                       and           and              exceptionals   exceptionals
                                       Sales  exceptionals  exceptionals       Sales     restated*      restated*
Continuing operations
Chromium                               109.0           3.7        (35.8)       126.9           2.6            2.6
Pigments & Specialties                 225.0          18.7           0.7       228.0          10.8          (3.2)
Specialty Rubber                        37.8         (2.0)         (2.7)        46.0         (0.9)          (1.4)
Associates                                 -           0.1           0.1           -           0.1            0.1
Group                                      -             -             -           -             -          (4.6)
Inter-group                            (6.9)             -             -       (8.0)             -              -
                                 -----------   -----------   ----------- -----------   -----------    -----------
                                       364.9          20.5        (37.7)       392.9          12.6          (6.5)
                                 ===========   ===========   =========== ===========   ===========    =========== 

* results of prior period restated to reflect adoption of FRS17 'Retirement
Benefits' and FRS19 'Deferred Tax'


Global demand for chromium chemicals in the first half of the year was flat
compared to the average of 2001, but declined in the second half due to a severe
down-turn in demand for gas turbine engines and steel mill refractories.  Demand
from the wood treatment sector held up as expected. Elementis maintained its
market share, improving its position in higher return sectors.  Competition was
fierce, driving prices down almost 10 per cent, particularly in the second half
of the year.  Three competitors closed down their plants in 2002, in addition to
the rationalisation of the Elementis Corpus Christi, Texas operation, reducing
global production capacity by around 13 per cent.

Sales contracted by 14 per cent to £109.0 million, on 2 per cent lower
dichromate equivalent tonnage. Lower chromium chemicals prices reduced sales by
£12.6 million and the balance of the sales decline was due to currency movements
and volume.  The specially developed granular chromic acid product CA21 was
recognised with the Queen's Award for Innovation in May, and continued to show
strong growth in global markets.

Operating profit before exceptionals grew 42 per cent to £3.7 million due to
strong cost reduction performance. Offsetting the negative impacts of pricing
and volume, energy cost savings contributed £4.6 million, the Six Sigma
efficiency programme £2.0 million and other operating efficiencies £3.5 million.

As previously stated, in February 2002 the EPA announced restrictions on the use
of CCA as a wood preservative for consumer use in the US, to be effective by
2004.  Elementis Chromium supplies chromic acid, which acts primarily as a
binding agent, to producers of CCA. As expected, this announcement did not
affect sales in 2002, and the EPA has not yet announced its final position.

In response to the market situation created by the EPA's actions, Elementis
acquired the chromium chemicals business of OxyChem, the only other US producer,
for £26.9 million cash and up to £3.8 million deferred consideration depending
on future business performance.  The transaction was completed on 6 December
2002.  The manufacturing facility acquired at Castle Hayne, North Carolina, US
is the world's second largest after Elementis Chromium's plant at Eaglescliffe,
UK, and is a first class operation in every respect. As a result of the EPA's
actions, Elementis Chromium estimates that global sales of the combined business
could be adversely affected by around 13 per cent by 2004 compared to an
estimate of 15 per cent prior to the acquisition.

Rationalisation of the Elementis Chromium Corpus Christi, Texas, US site was
undertaken shortly after completion of the transaction for a one-time
restructuring charge of £5.1 million.  The chromic acid plant was closed and the
dichromate unit mothballed with the loss of around 60 jobs and an impairment
charge of £35.4 million was recorded against the net book value of existing
assets.  Annualised operational savings are now expected to be at least £13.0
million, of which at least half is expected to be achieved in 2003.

The transaction and integration of the business was completed with minimal
disruption and has responded to the adverse effects of the EPA's announced
restrictions on CCA's by creating a single low cost North American producer able
to compete more effectively against low cost imports in North and South America.

Pigments & Specialties

Elementis continues to report the financial performance of its Pigments &
Specialties businesses combined in order to avoid publishing data of potential
value to its major competitors, none of whom report the performance of those
businesses separately.

Sales in Pigments & Specialties fell by just over 1 per cent to £225.0 million.
Currency movements and the exit from non-core businesses reduced sales by around
4 per cent.  This offset organic growth of 3 per cent, which was due to modest
improvement in the North American coatings sector and strong performance in

Operating profit before goodwill amortisation and exceptionals increased by 73
per cent to £18.7 million as a result of comprehensive management of fixed and
variable costs, including £1.0 million from the Six Sigma programme,  £1.6
million in reduced energy costs and £4.2 million from operating efficiencies.

Demand for iron oxide pigments in the coatings and construction sectors served
by Elementis Pigments grew at around 3 per cent in North America and in
Asia-Pacific, while the European market was flat.  Demand for metal carboxylate
driers grew in line with the coatings market, but zinc oxide use in the UK
declined as the tyre industry continued to migrate to Eastern Europe.

Elementis Pigments staged a strong recovery from the previous year, raising iron
oxide pigment sales volume by 5 per cent by improving its share of higher margin
products and showing strong growth in Asia-Pacific, while prices declined by 2
per cent.  The plant in Shenzhen, China, achieved record production levels and
an investment of £0.6 million was authorised to raise capacity there by an
additional 60 per cent.  Carboxylate sales grew 13 per cent, while zinc oxide
declined by 6 per cent.  At constant currencies, sales excluding the anhydrous
aluminium chloride (AAC) business, which was sold during the year, increased by
3 per cent.

The operating loss reported last year, which was exacerbated by temporary plant
closures, was eliminated.  The 2002 result benefited from continued improvement
in costs, including Six Sigma benefits, labour productivity, purchasing and
energy savings, and a shift in manufacturing mix towards Shenzhen production.

A strategic review of the Birtley, UK facility was completed, resulting in the
decision to cease iron oxide milling and commodity zinc oxide production on the
site, with the loss of around 65 jobs.  An exceptional charge of £4.5 million
was taken in 2002, and the closures have been completed. Production of zinc
oxide nano-particles and metal carboxylates will continue as will sales,
technical services and distribution of iron oxide pigments, and the site is
expected to return to profitability in 2003.

In a further move to refine the Elementis Pigments product portfolio, the non-
core AAC business was sold in October for £1.7 million and an exceptional loss
of £2.1 million was recorded.

An investment of £10.0 million in a world-scale particle manufacturing and
finishing facility to be built at a new site in Taicang, near Shanghai, China,
was announced in December.  The new wholly owned plant will produce technically
advanced products for the Asia-Pacific and European markets. Construction will
start this year and commissioning is expected in 2004.

Demand for rheological additives in the coatings sectors served by Elementis
Specialties grew in line with global GDP, with aqueous based product
applications continuing to outgrow non-aqueous. The inks market stabilised after
a steep decline in 2001, but continues to move away from organoclays towards
aqueous products.  Global demand in drilling muds fell, despite firmer oil and
gas prices.  The drilling rig count, a rough measure of oil field activity,
decreased 19 per cent from 2001, but deep water and deep well drilling, which
require high performance additives of the type produced by Elementis
Specialties, continued to grow.  Demand in the personal care sector recovered
well, but household products remained flat. In other industrial sectors served
by Elementis Specialties, adhesives, sealants, construction and
telecommunications markets declined, whereas pressure sensitive adhesives
continued to grow.

Elementis Specialties delivered a 3 per cent volume increase in rheological
additives overall, outperforming the market in aqueous coatings, oil field and
consumer markets, partially offset by withdrawal from unprofitable business in
inks.  At constant currencies, sales excluding the paint business sold during
the year, increased by 2 per cent.

Operating profit improved over the previous year mainly due to Six Sigma
benefits and tight cost control.

Innovation, R&D, licensing and business development resources have been
significantly expanded with a view to achieving substantially higher organic
growth in the future.  The Innovation Board, which comprises external academic
and business experts who will identify and drive innovative technologies, is now
in place.

A new venture to produce organoclays for the rapidly expanding Chinese and Asian
markets has been established in Changxing, near Nanjing, China.  The plant,
which is being acquired from a local producer of raw materials, is already in
production and currently nearing completion of upgrading and expansion work.

The Elementis Specialties portfolio was refined in July by the sale of its small
non-core paint business for £0.4 million, resulting in an exceptional loss on
sale of £0.8 million.

Among the new products introduced in 2002 were Bentone(R) 42, a proprietary heat
resistant thickener for use in high temperature well sites and Benathix(R) Plus,
a specialty organoclay exhibiting superior sag resistance and ease of dispersion
for the polyester laminating resin market.  Both products secured commercial
sales during the year.

Specialty Rubber

Demand for abrasion resistant rubber linings in heavy equipment for the global
mining industry, the staple market for Linatex, fell in 2002 as investment
declined, most notably in North America.  Demand for Linatex products in the
sand and gravel handling sector of the construction industry also fell, with the
exception of China.  Other industrial applications were also generally weak.

Sales reduced by 18 per cent to £37.8 million, with the exit from the equipment
engineering business undertaken in 2001 contributing £4.3 million (52 per cent)
of the decline.  Sales in all regions declined except Australia, where the
acquisition made last year of a hose manufacturer generated £0.9 million of
profitable sales growth and is proving to be a strong base for innovative

Operating loss before exceptionals increased from £0.9 million in 2001 to £2.0
million as a result of the volume decline.  This was partially offset by fixed
cost reductions mainly from labour productivity and the Six Sigma programme.

Management of the Specialty Rubber business was taken over by Greg McClatchy in
July.  Sales have since stabilised and action has been taken to streamline the
organisation and improve focus.  The closure of the service centres in Phoenix,
Arizona, US and Gent, Belgium were completed and the transfer of high labour
content fabrication operations from the US and Europe to Malaysia has

Commissioning of the continuous press in Malaysia, which uses leading-edge
technology, has taken longer than planned due to the complexity of the project
but transfer of all production grades is expected to take place shortly.  No
sales have been lost as a result of the delay.

Partnerships with OEM equipment producers have grown, with joint investments
enabling the production of an expanded range of large moulded rubber components,
a particular strength of Linatex.  New product introductions have progressed
with particular emphasis on grades tailored for the quality requirements of
specific markets.  Recently developed extruded Linatex is replacing high cost
hand-fabricated components, and foamed products are also attracting attention in
specialised markets.


Operating exceptionals of £44.7 million included the costs of restructuring the
chromium business following the acquisition from OxyChem in December 2002.  As a
result of the acquisition, the chromic acid plant at Corpus Christi, Texas, was
closed and the dichromate unit was mothballed with US production being
consolidated into Castle Hayne, North Carolina.  The total cost of the
restructuring was £40.5 million of which £35.4 million represented an impairment
charge against the assets at Corpus Christi.  Other operating exceptionals were
the closure of the zinc business at Birtley at a cost of £4.5 million and
restructuring the Specialty Rubber business in the US and Europe, (£0.7

Non operating exceptionals comprised a profit of £4.3 million in relation to
business and property disposals.  A detailed analysis of exceptionals is
provided in note 3 of this release.


Net interest payable increased by £0.3 million to £0.8 million (2001: £0.5
million) in the year.  Interest payable on net borrowings fell by £2.3 million
in the year to £1.9 million due to lower average borrowings and lower interest
rates.  Increased pension liabilities reduced the amount that is recognised
under FRS17 by £3.6 million and a charge of £1.0 million was incurred to unwind
the discount implicit in environmental provisions.  Interest of £2.0 million
(2001: £nil) was received following the resolution of historical UK taxation
issues.  Interest cover, based on total net interest payable and before goodwill
amortisation and exceptionals, was 25.6 times (2001: 25.2 times) and 10.8 times
(2001: 3.6 times) if based solely on interest in respect of net borrowings.


The tax credit for the year was £3.5 million (2001: £8.0 million) which
comprised a charge of £4.9 million on profits before goodwill amortisation and
exceptionals, a credit of £4.8 million in respect of goodwill amortisation and a
credit of £3.6 million on exceptionals.

The effective rate of tax on profit before goodwill amortisation and
exceptionals was 25 per cent (2001: 10 per cent).  This rate is lower than the
standard UK corporate tax rate due primarily to the utilisation of surplus
advance corporation tax.  Given the current difficult trading conditions and the
general uncertainty surrounding the future economic environment, potential
deferred tax assets arising mostly from the restructuring at Corpus Christi,
Texas, US in 2002 of £12.7 million have not been recognised.

Cash flow and balance sheet

Net cash flow from operating activities increased by £0.1 million in the year to
£38.0 million (2001: £37.9 million).  An increase in earnings from continuing
businesses before interest, tax, depreciation and amortisation of 18 per cent
contributed to the uplift.  Following the inventory reduction initiatives in
2001, a further cash inflow of £4.9 million (2001: £9.8 million) was achieved in
the current year from strong working capital management.

The net cash flow from operating activities together with proceeds from property
disposals of £9.4 million (2001: £nil) and other inflows from business
disposals, interest, taxation and currency movements resulted in a total cash
inflow in 2002 of £56.6 million (2001: £41.8 million).

Cash outflows included capital expenditure of £16.2 million (2001: £16.8
million) and compares with depreciation of £18.3 million (2001: £18.8 million).
In 2003 capital expenditure, excluding the strategic initiatives of the ERP
project and the Pigment plant in China, is expected to be less than

Other cash outflows comprised acquisition expenditure of £28.2 million (2001:
£0.3 million) primarily in respect of the chrome chemicals business acquired
from OxyChem and £9.6 million (2001: £23.1 million) paid for the redemption of B
shares.  Total cash outflows amounted to £54.0 million (2001: £40.1 million)
which resulted in a reduction in net borrowings of £2.6 million to £37.4 million
(2001: £40.0 million).  Net gearing at 31 December 2002 was 12.0 per cent (2001:
9.6 per cent).

Pensions and other post retirement benefits

Following the adoption of FRS17, the net pension liability reflected on the
balance sheet, increased from £25.3 million at 31 December 2001 to £58.0 million
at 30 June 2002 and £63.6 million at the end of the year.  Total contributions
to pension and other post-retirement schemes were £7.7 million (2001: £3.7
million) and the amount charged to operating profit was £5.4 million (2001: £6.5

The market value of assets held in pension and post-retirement benefit schemes
at the year end was £337.6 million (2001: £454.3 million) which after deducting
scheme liabilities gives a gross liability at 31 December 2002 of £94.1 million
(2001: £39.3 million).  The net pension liability is after deducting deferred
tax of £30.5 million (2001: £14.0 million).

In order to reduce the net pension liability, the Board has agreed to increase
pension contributions in 2003 to approximately £13.1 million.   The charge in
2003 to the profit and loss account is expected to be around £9.9 million.

Consolidated profit & loss account
for the year ended 31 December 2002

                                             amortisation        Goodwill                                        2001
                                           & exceptionals    amortisation    Exceptionals          2002     restated*
                                                 £million        £million        £million      £million      £million
Continuing operations:
Ongoing                                             361.4               -               -         361.4         392.9
Acquisitions                                          3.5               -               -           3.5             -
                                              -----------     -----------     -----------   -----------   -----------
                                                    364.9               -               -         364.9         392.9
Discontinued operations:                                -               -               -             -         137.5
                                              -----------     -----------     -----------   -----------   -----------
Group turnover                                      364.9               -               -         364.9         530.4
                                              -----------     -----------     -----------   -----------   -----------
Operating profit/(loss)
Continuing operations
Ongoing                                              20.7               -               -          20.7          12.5
Acquisitions                                        (0.3)               -               -         (0.3)             -
Goodwill amortisation                                   -          (13.5)               -        (13.5)        (14.0)
Exceptionals                                            -               -          (44.7)        (44.7)         (5.1)
                                              -----------     -----------     -----------   -----------   -----------
                                                     20.4          (13.5)          (44.7)        (37.8)         (6.6)
Discontinued operations                                 -               -               -             -           2.4
                                              -----------     -----------     -----------   -----------   -----------
                                                     20.4          (13.5)          (44.7)        (37.8)         (4.2)
Associates                                            0.1               -               -           0.1           0.1
                                              -----------     -----------     -----------   -----------   -----------
Total operating profit/(loss)                        20.5          (13.5)          (44.7)        (37.7)         (4.1)
Profit on disposal of properties -                      -               -             4.8           4.8             -
continuing operations
Profit on disposal of properties -                      -               -             1.4           1.4             -
discontinued operations
Loss on disposal of businesses - continuing             -               -           (2.9)         (2.9)             -
Profit on disposal of businesses -                      -               -             1.0           1.0           1.3
discontinued operations
                                              -----------     -----------     -----------   -----------   -----------
Profit/(loss) on ordinary activities before          20.5          (13.5)          (40.4)        (33.4)         (2.8)
Net interest payable                                (0.8)               -               -         (0.8)         (0.5)
Profit/(loss) on ordinary activities before
Before goodwill amortisation and                     19.7               -               -          19.7          14.5
Goodwill amortisation                                   -          (13.5)               -        (13.5)        (14.0)
Exceptionals                                            -               -          (40.4)        (40.4)         (3.8)
                                              -----------     -----------     -----------   -----------   -----------
                                                     19.7          (13.5)          (40.4)        (34.2)         (3.3)
Tax on profit/(loss) on ordinary activities         (4.9)             4.8             3.6           3.5           8.0
                                              -----------     -----------     -----------   -----------   -----------
Profit/(loss) on ordinary activities after           14.8           (8.7)          (36.8)        (30.7)           4.7
Minority interests - equity                         (0.1)               -               -         (0.1)         (0.1)
                                              -----------     -----------     -----------   -----------   -----------
Profit/(loss) for the financial year                 14.7           (8.7)          (36.8)        (30.8)           4.6
Dividends - non-equity                                  -               -               -             -         (0.1)
                                              -----------     -----------     -----------   -----------   -----------
Amount transferred (from)/to reserves                14.7           (8.7)          (36.8)        (30.8)           4.5
                                              ===========     ===========     ===========   ===========   =========== 

(Loss)/earnings per ordinary share
Basic and diluted                                                                                (7.1)p          1.0p
Basic and diluted before goodwill                                                                  3.4p          2.9p
amortisation and exceptionals                                                                      

* results of prior period restated to reflect adoption of FRS17 'Retirement
  Benefits' and FRS19 'Deferred Tax'

Balance sheet
at 31 December 2002

                                                                                        2002                 2001
                                                                                    £million             £million
Fixed assets
Goodwill                                                                               187.9                219.2
Tangible fixed assets                                                                  161.9                192.0
Investments                                                                              3.6                  3.8
                                                                                  ----------           ----------
                                                                                       353.4                415.0
                                                                                  ----------           ----------
Current assets
Stocks                                                                                  60.8                 56.3
Debtors                                                                                 76.6                 83.6
Cash at bank and in hand                                                                44.4                 39.5
                                                                                  ----------           ----------
                                                                                       181.8                179.4
                                                                                  ----------           ----------
Creditors: amounts falling due within one year
Borrowings                                                                             (5.0)                (5.8)
Creditors                                                                             (78.0)               (73.1)
                                                                                  ----------           ----------
                                                                                      (83.0)               (78.9)
                                                                                  ----------           ----------
Net current assets/(liabilities)                                                        98.8                100.5
                                                                                  ----------           ----------
Total assets less current liabilities                                                  452.2                515.5
                                                                                  ----------           ----------
Creditors: amounts falling due after more than one year
Borrowings                                                                            (76.8)               (73.7)
Government grants                                                                      (1.5)                (0.8)
                                                                                  ----------           ----------
                                                                                      (78.3)               (74.5)
Provisions for liabilities and charges                                                (33.1)               (34.5)
                                                                                  ----------           ----------
                                                                                     (111.4)              (109.0)
                                                                                  ----------           ----------
Net assets excluding net pension liability                                             340.8                406.5
                                                                                  ----------           ----------
Net pension liability                                                                 (63.6)               (25.3)
                                                                                  ----------           ----------
Net assets including net pension liability                                             277.2                381.2
                                                                                  ----------           ----------

Capital and reserves
Called up share capital                                                                 23.4                 23.9
Share premium                                                                            1.2                  1.2
Capital redemption reserve                                                              52.9                 43.4
Profit and loss account                                                                197.8                310.0
                                                                                  ----------           ----------
Shareholders' funds                                                                    275.3                378.5
Minority interests                                                                       1.9                  2.7
                                                                                  ----------           ----------
                                                                                       277.2                381.2
                                                                                  ==========           ==========     

Shareholders' funds
Equity                                                                                 273.5                376.2
Non-equity                                                                               1.8                  2.3
                                                                                  ----------           ----------
                                                                                       275.3                378.5
                                                                                  ==========           ==========     

Cash flow statement
for the year ended 31 December 2002
                                                                                       2002                   2001
                                                                                   £million               £million

Net cash inflow from operating activities                                              38.0                   37.9
Returns on investments and servicing of finance
Interest received                                                                       5.0                    6.7
Interest paid                                                                         (4.5)                 (11.5)
                                                                                 ----------             ----------
                                                                                        0.5                  (4.8)
Taxation                                                                                1.7                  (7.2)
Capital expenditure and financial investment
Purchase of fixed assets (less grants received)                                      (16.2)                 (16.8)
Disposal of fixed assets                                                                0.9                    0.8
Disposal of properties - exceptional                                                    9.4                      -
                                                                                 ----------             ----------
                                                                                      (5.9)                 (16.0)
Acquisitions and disposals
Acquisition of businesses                                                            (28.2)                  (0.3)
Disposal of businesses                                                                  3.5                   16.6
                                                                                 ----------             ----------
                                                                                     (24.7)                   16.3
                                                                                 ----------             ----------
Cash inflow before use of liquid resources and financing                                9.6                   26.2
Issue of ordinary shares                                                                  -                    0.1
Redemption of B shares                                                                (9.6)                 (23.1)
Decrease in borrowings repayable within one year                                      (0.8)                  (0.7)
Increase/(decrease) in borrowings repayable after one year                              7.4                 (12.7)
                                                                                 ----------             ----------
                                                                                      (3.0)                 (36.4)
Management of liquid resources
Repayment of cash deposits                                                              4.1                   18.3
                                                                                 ----------             ----------
Increase in cash                                                                       10.7                    8.1
                                                                                 ==========             ==========

Movement in net borrowings
for the year ended 31 December 2002

                                                                                         2002                2001
                                                                                     £million            £million
Change in net borrowings resulting from cash flows:
Increase in cash                                                                         10.7                 8.1
(Increase)/decrease in borrowings                                                       (6.6)                13.4
Decrease in liquid resources                                                            (4.1)              (18.3)
                                                                                   ----------          ----------
                                                                                            -                 3.2
Currency translation differences                                                          2.6               (1.5)
                                                                                   ----------          ----------
Decrease in net borrowings                                                                2.6                 1.7
Net borrowings at beginning of the financial year                                      (40.0)              (41.7)
                                                                                   ----------          ----------
Net borrowings at end of the financial year                                            (37.4)              (40.0)
                                                                                   ==========          ==========

Statement of total recognised gains and losses
for the year ended 31 December 2002

                                                                                       2002                   2001
                                                                                   £million               £million

(Loss)/profit for the financial year                                                 (30.8)                    4.6
Actuarial loss on pension and other post-retirement schemes                          (59.4)                 (86.2)
Deferred tax associated with pension and other post-retirement schemes                 18.2                   26.9
Currency translation differences                                                     (25.7)                    4.8
Taxation on currency translation differences on foreign currency borrowings             1.5                  (1.0)
                                                                                 ----------             ----------
Total recognised losses for the year                                                 (96.2)                 (50.9)
Prior year adjustments                                                               (19.0)             ==========
Total recognised since last Annual Report                                           (115.2)

Reconciliation of movements in shareholders' funds
for the year ended 31 December 2002
                                                                                       2002                   2001
                                                                                   £million               £million

(Loss)/profit for the financial year                                                 (30.8)                    4.6
Dividends - redeemable B shares                                                           -                  (0.1)
                                                                                 ----------             ----------
Amounts transferred to reserves                                                      (30.8)                    4.5
Redemption of redeemable B shares (including issue costs)                             (9.6)                 (23.1)
Share option scheme allotments                                                            -                    0.1
Goodwill on businesses disposed                                                         2.6                    0.7
Actuarial loss on pension and other post-retirement schemes                          (59.4)                 (86.2)
Deferred tax associated with pension and other post-retirement schemes                 18.2                   26.9
Currency translation differences                                                     (25.7)                    4.8
Taxation on currency translation differences on foreign currency borrowings             1.5                  (1.0)
                                                                                 ----------             ----------
Net decrease in shareholders' funds                                                 (103.2)                 (73.3)
At beginning of the financial year as restated*                                       378.5                  451.8
                                                                                 ----------             ----------
At end of the financial year                                                          275.3                  378.5
                                                                                 ==========             ==========

*Shareholders' funds at beginning of period
As originally stated                                                                  397.5                  411.2
Prior year adjustments                                                               (19.0)                   40.6
                                                                                 ----------             ----------
As restated                                                                           378.5                  451.8
                                                                                 ==========             ==========

Notes to the financial statements

1  Preparation of preliminary announcement

The financial information in this statement does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.  The
financial information for the year ended 31 December 2001 has been extracted
from the financial statements for that year which have been delivered to the
Registrar of Companies.  The report of the auditors on those financial
statements was unqualified and did not contain a statement under Section 237 of
the Companies Act 1985.  The Group has fully adopted FRS17 'Retirement Benefits'
and FRS19 'Deferred Taxation' for the year ended 31 December 2002 and has
restated comparatives accordingly.  Otherwise the financial information is
presented on the basis of accounting policies set out in the financial
statements for the year ended 31 December 2001.

2  Segmental information
                                             Group turnover  Group operating profit/(loss)              Net assets
                                           2002        2001           2002         2001         2002          2001
                                                                               restated                   restated
                                       £million    £million       £million     £million     £million      £million
Analysis by activity
Before exceptionals                       109.0       126.9            3.7          2.6         95.4         118.0
Inter-group turnover                      (6.9)       (8.0)              -            -            -             -
Exceptionals                                  -           -         (39.5)            -            -             -
                                       --------    --------     ----------     --------     --------     ---------
                                          102.1       118.9         (35.8)          2.6         95.4         118.0
                                       --------    --------     ----------     --------     --------     ---------

Pigments & Specialties
Before goodwill amortisation and          225.0       228.0           18.7         10.8        284.6         330.7
Goodwill amortisation                         -           -         (13.5)       (14.0)            -             -
Exceptionals                                  -           -          (4.5)            -            -             -
                                       --------    --------     ----------     --------     --------     ---------
                                          225.0       228.0            0.7        (3.2)        284.6         330.7
                                       --------    --------     ----------     --------     --------     ---------

Specialty Rubber
Before exceptionals                        37.8        46.0          (2.0)        (0.9)         19.9          22.9
Exceptionals                                  -           -          (0.7)        (0.5)            -             -
                                       --------    --------     ----------     --------     --------     ---------
                                           37.8        46.0          (2.7)        (1.4)         19.9          22.9
                                       --------    --------     ----------     --------     --------     ---------
Group exceptionals                            -           -              -        (4.6)            -             -
                                       --------    --------     ----------     --------     --------     ---------

Total - continuing operations
Before goodwill amortisation and          364.9       392.9           20.4         12.5        399.9         471.6
Goodwill amortisation                         -           -         (13.5)       (14.0)            -             -
Exceptionals                                  -           -         (44.7)        (5.1)            -             -
                                       --------    --------     ----------     --------     --------     ---------
                                          364.9       392.9         (37.8)        (6.6)        399.9         471.6
Total - discontinued operations               -       137.5              -          2.4            -             -
Unallocated liabilities                       -           -              -            -      (122.7)        (90.4)
                                       --------    --------     ----------     --------     --------     ---------
                                          364.9       530.4         (37.8)        (4.2)        277.2         381.2
                                       ========    ========     ==========     ========     ========     ========= 
                                             Group turnover  Group operating profit/(loss)              Net assets
                                           2002        2001           2002         2001         2002          2001
                                                                               restated                   restated
                                       £million    £million       £million     £million     £million      £million
Analysis by area of operations
Continuing operations:
North America                             191.1       213.3         (39.4)        (3.4)        278.1         334.8
Europe                                    151.4       156.7          (1.0)        (4.6)        105.9         122.6
Rest of the World                          22.4        22.9            2.6          1.4         15.9          14.2
                                       --------    --------     ----------     --------     --------     ---------
                                          364.9       392.9         (37.8)        (6.6)        399.9         471.6
Discontinued operations:
North America                                 -       137.5              -          2.4            -             -
Unallocated liabilities                       -           -              -            -      (122.7)        (90.4)
                                       --------    --------     ----------     --------     --------     ---------
                                          364.9       530.4         (37.8)        (4.2)        277.2         381.2
                                       ========    ========     ==========     ========     ========     =========

Unallocated liabilities comprise:
                                                                                     2002                    2001
                                                                                 £million                £million

Net borrowings                                                                     (37.4)                  (40.0)
Taxation and dividends                                                              (7.9)                  (11.2)
Post retirement benefits and government grants                                     (65.0)                  (26.1)
Other                                                                              (12.4)                  (13.1)
                                                                                 --------                --------
                                                                                  (122.7)                  (90.4)
                                                                                 ========                ========

                                     Continuing operations     Discontinued operations             Total
                                         2002         2001           2002          2001          2002         2001
                                     £million     £million       £million      £million      £million     £million

Group turnover analysed by 
geographical markets
North America                           175.3        197.0              -         137.5         175.3        334.5
Europe                                  129.6        134.6              -             -         129.6        134.6
Rest of the World                        60.0         61.3              -             -          60.0         61.3
                                     --------     --------       --------      --------      --------     --------
                                        364.9        392.9              -         137.5         364.9        530.4
                                     ========     ========       ========      ========      ========     ========

3  Exceptionals
                                                                                    2002                 restated
                                                                                £million                 £million
Operating exceptionals:
Impairment charge against Chromium assets                                           35.4                        -
Restructuring of combined Chromium businesses                                        5.1                        -
Restructuring of Linatex business                                                    0.7                      0.5
Restructuring of Pigments & Specialties Birtley operation                            4.5                        -
Chromium insurance recovery                                                        (1.0)                        -
Costs of preparing company for sale                                                    -                      4.6
                                                                                --------                 --------
                                                                                    44.7                      5.1
Non-operating exceptionals:
Profit on disposal of properties - continuing operations                           (4.8)                        -
Profit on disposal of properties - discontinued operations                         (1.4)                        -
Loss on disposal of businesses - continuing operations                               2.9                        -
Profit on disposal of businesses - discontinued operations                         (1.0)                    (1.3)
                                                                                --------                 --------
                                                                                   (4.3)                    (1.3)
                                                                                --------                 --------
                                                                                    40.4                      3.8
Tax credit on exceptionals                                                         (3.6)                    (4.9)
                                                                                --------                 --------
                                                                                    36.8                    (1.1)
                                                                                ========                 ========

The profit on disposal of businesses from discontinued operations includes 
£1.9 million in respect of a business disposed in 1987.

4  Net interest payable
                                                                                   2002                 restated
                                                                               £million                 £million
Interest payable:
On bank loans                                                                       3.2                     10.1
On other loans                                                                      0.2                      0.3
Unwinding of discount on environmental provisions                                   1.0                        -
                                                                               --------                 --------
                                                                                    4.4                     10.4
Interest receivable:
On bank deposits                                                                  (1.5)                    (6.2)
On pension and post-retirement liabilities                                        (0.1)                    (3.7)
Other finance income                                                              (2.0)                        -
                                                                               --------                 --------
                                                                                  (3.6)                    (9.9)
                                                                               --------                 --------
                                                                                    0.8                      0.5
                                                                               ========                 ========

Other finance income represents interest receivable in respect of refunds of
corporation tax.

5  Taxation
                                                                                   2002                  restated
                                                                               £million                  £million
Current tax:
UK corporation tax at 30.0%                                                         2.2                       6.9
Double tax relief                                                                     -                     (0.8)
Overseas corporation tax                                                            1.4                       0.8
Adjustments in respect of prior years                                             (1.0)                     (9.2)
Recoverable ACT                                                                   (1.5)                     (4.5)
                                                                               --------                  --------
Total current tax                                                                   1.1                     (6.8)
Deferred tax:
United Kingdom                                                                      0.3                       0.5
Overseas                                                                          (7.6)                     (7.9)
Adjustments in respect of prior periods                                             2.3                       6.2
Recoverable ACT                                                                     0.4                         -
                                                                               --------                  --------
Total deferred tax                                                                (4.6)                     (1.2)
                                                                               --------                  --------
Tax credit                                                                        (3.5)                     (8.0)
                                                                               ========                  ========

6  (Loss)/earnings per ordinary share
                                                                   2002                                      2001
                                      Loss                                      Profit
                                   for the       Weighted                      for the      Weighted
                                 financial        average      Earnings      financial       average     Earnings
                                     year*     number  of     per share          year*     number of    per share
                                                   shares                     restated        shares     restated
                                  £million        million         pence       £million       million        pence

Basic (loss)/earnings per share     (30.8)          431.6         (7.1)            4.5         431.5          1.0
Share options                            -            3.5             -              -           3.6            -
                                  --------       --------      --------       --------      --------     --------
Diluted (loss)/earnings per         (30.8)          435.1         (7.1)            4.5         435.1          1.0
                                  --------       --------      --------       --------      --------     --------

Basic (loss)/earnings per share     (30.8)          431.6         (7.1)            4.5         431.5          1.0
Goodwill amortisation net of           8.7              -           2.0            9.0             -          2.1
Exceptionals net of taxation          36.8              -           8.5          (0.7)             -        (0.2)
                                  --------       --------      --------       --------      --------     --------
Basic earnings per share before
Goodwill amortisation and
exceptionals                          14.7          431.6           3.4           12.8         431.5          2.9
Share options                            -            3.5             -              -           3.6            -
Diluted earnings per share
goodwill amortisation and
exceptionals                      --------       --------      --------       --------      --------     --------
                                      14.7          435.1           3.4           12.8         435.1          2.9
                                  ========       ========      ========       ========      ========     ========

*after non-equity dividends

Earnings per share before goodwill amortisation and exceptionals provides a
measure of the underlying financial performance of the Group on a comparable
basis with many other groups.

7  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.

8  Annual General Meeting

The Annual General Meeting of Elementis plc will be held on 24 April 2003 at
11am at The Lincoln Centre, 18 Lincoln's Inn Fields, London WC2A 3ED.

                      This information is provided by RNS
            The company news service from the London Stock Exchange