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Elementis PLC (ELM)

  Print      Mail a friend       Annual reports

Thursday 28 July, 2005

Elementis PLC

Interim Results

Elementis PLC
28 July 2005

PRESS INFORMATION

28 July 2005

                                 Elementis plc

              INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2005

  • Sales £223.6 million (2004: £176.8 million); $421.5 million (2004: $321.6
    million)
  • Operating profit before exceptional items £8.1 million (2004: £5.6
    million)
  • Profit before tax and exceptional items £4.5 million (2004: £3.0 million)
  • Earnings per share before exceptional items 1.0 pence (2004: 0.7 pence)
  • Net exceptional items £7.6 million (2004: £1.0 million)
  • Operating profit £0.5 million (2004: £4.6 million), loss before tax £3.1
    million (2004: profit of £2.0 million), loss per share 0.5 pence (2004:
    earnings of 0.6 pence)

  • 26 per cent sales growth from Servo acquisition and price increases
  • 45 per cent higher operating profit before exceptional items
  • Chromium prices up 17 per cent on first half 2004 - further increases
    announced
  • Coatings volume down on soft consumer demand and slowing of Chinese growth
  • New TaiCang Pigments plant on stream, East St Louis operations scaling
    down
  • Servo rationalisation and head office reorganisation - benefits in second
    half



Geoff Gaywood, Chief Executive of Elementis plc, said:

'All four Elementis businesses delivered good sales growth in the first half of
2005 compared to last year, despite softer demand for pigments and additives in
the coatings sector.  The Servo acquisition added £40.5 million in sales and
£2.0 million in operating profit, while better Chromium pricing, net of strong
ongoing variable cost inflation, generated a £2.4 million operating profit
improvement.  Higher volumes in Specialty Rubber delivered a £0.5 million
operating profit uplift.

'Elementis will begin to benefit in the second half from cost reductions related
to the scaling down of the East St Louis pigments plant, the Servo
rationalisation and a Head Office reorganisation, all of which have been
previously announced.

'However, external inflationary cost pressures of the kind that significantly
impacted 2004 performance, particularly energy and raw materials, remain a
concern, and a recovery of demand in the coatings sector is unlikely in the
short term.'

                                    - 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 plc                                           Tel: +44 (0)1784 227 000
Geoff Gaywood                                           Chief Executive
Brian Taylorson                                         Finance Director

Financial Dynamics                                      Tel +44 (0) 20 7831 3113
Deborah Scott
Greg Quine




Chairman's Statement

Overview

Sales for the first half of 2005 rose by £46.8 million compared to the same
period of last year to £223.6 million, due to the acquisition of Sasol Servo on
30 June 2004 and improved pricing, particularly in chromium chemicals.  Soft
global demand in the coatings sector and unfavourable currency movements
negatively impacted sales by £8.0 million.

Operating profit for the period, before exceptional items, was £8.1 million, an
improvement of £2.5 million, as a result of the Servo acquisition and prices
moving ahead of raw material and energy cost inflation. There was a net charge
of £7.6 million for exceptional items, which comprised £4.6 million from the
sale of the Hardman adhesives business completed in June, offset by charges of
£7.1 million for the rationalisation of the East St Louis pigments plant, £4.0
million for the rationalisation of the Servo operations, and a £1.1 million head
office restructuring charge.

The newly constructed pigments production facility in TaiCang, China, is now
producing a full range of products, and operations at the East St Louis plant
will be scaled down during the second half of the year as production is
transferred to other manufacturing sites including TaiCang.  The Company expects
that these moves will result in an improvement in margins for its pigments
business in 2006 when they will have been implemented fully.

Dividends and issue of redeemable B shares

The Board has not declared an interim ordinary dividend.  Instead it will
continue with its programme of issuing and redeeming redeemable B shares.  The
Board intends to issue further redeemable B shares to ordinary shareholders on
the register on 27 October 2005, such that they receive redeemable B shares with
a total nominal share value of 1.1 pence for each ordinary share held.  The
issue will be coupled with an offer to redeem the new shares for cash at their
nominal value on 2 November 2005.  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
22 September 2005.

Current trading and outlook

The Board of Elementis, which was reconstituted in June 2005, is reviewing the
Company's strategy and the operations of each of its business units.  The
Company will provide an update of the plans resulting from this process during
the second half.  Excluding any changes that may result from the Board's review,
the Company's current trading performance is in line with its expectations for
continued improvement in the second half of the year.

Edward Bramson
Chairman
28 July 2005



Chief Executive's Strategic and Operating Review

Strategic progress report

All four Elementis businesses delivered good sales growth in the first half of
2005 compared to the same period last year, with most of the 26 per cent
improvement coming from the Servo acquisition and recovery in the chromium
chemicals business.

A 45 per cent improvement in operating profit before exceptional items was
largely driven by continued progress in the restoration of chromium chemicals
pricing.  Inflationary cost pressure has continued, but the effects have been
offset by improved pricing in all businesses.  The demand for pigments and
specialty additives in decorative paints was estimated to be 5 - 6 per cent
below prior year due to weaker consumer demand in the US and Europe, and the
effects of Chinese government action to halt speculation in the construction
sector.  There was good growth in sales of Servo products and to other targeted
Specialties markets.  Specialty Rubber has continued to show good top line
growth, and further improvement in operating profit.

Specialties

Sales net of the Servo acquisition declined by 6 per cent due to soft demand in
the coatings sector.  The Servo acquisition, which is now fully integrated,
added £33.0 million of sales and £1.3 million of operating profit, and related
cost rationalisation measures previously announced will begin to take effect in
the second half of 2005.  Overall operating profit before exceptional items
declined by 10 per cent due to the coatings volume shortfall and an increased
overhead cost allocation. Growth was good in the oilfield and personal care
markets, and progress in the introduction of new technologies and product
platforms continues in line with expectations.

Pigments
The soft coatings market caused Elementis Pigments sales in this sector to
decline by 5 per cent compared to the prior year.  However, improved pricing and
the benefits of the additional sales of driers from the Servo acquisition offset
the downside, so that overall sales rose by 17 per cent, and operating profit
for the period improved.  Sales to the construction industry have been flat,
while production of a new range of pigments for the plastics sector has
commenced.  Start-up of the new world scale plant at TaiCang, China, has
proceeded as expected, and a full range of pigments is now being manufactured
there in accordance with specifications. Production at the Elementis Pigments
East St Louis plant will be scaled down in the second half of the year, as
production increases at other facilities, including TaiCang.

Chromium

Chromium chemicals pricing in US Dollars rose by 19 per cent compared to the
same period in 2004, and US Dollar sales grew by 21 per cent, which translates
to a 17 per cent increase in Sterling.  Global production capacity
rationalisation in the Far East progressed further, while demand remained good
in all market sectors.  Prices were increased in January, April and July, and
will be selectively increased again on 1 October.  Cost inflation from freight,
energy and raw materials has continued, but the tightening supply/demand
situation is supporting progressive operating profit recovery.

Specialty Rubber

Sales of Linatex brand rubber products to the mining and construction materials
industries have continued to grow strongly in the first half of the year in all
market sectors, and operating profit has risen accordingly.  A new joint venture
started up in Chile, further adding to growth momentum.  This business is
currently under strategic review.

Safety and environmental

Corporate safety performance, as measured by recordable incidents and lost time
accidents, has continued on a favourable trend, and is now at the level of the
top quartile of the world's chemical companies.

Board changes

I am delighted to welcome Edward Bramson as the new Chairman of Elementis plc,
and his fellow non-executive directors Matthew Peacock, Ken Minton and Ian
Brindle.  The new Board is highly experienced and has a fine track record of
delivering shareholder value, which creates a favourable environment for the
enhancement of performance at Elementis.

Geoff Gaywood
Chief Executive
28 July 2005


Financial review of operations
for the six months ended 30 June 2005


                                                                   2005               2005               2005
                                                                Revenue          Operating          Operating
                                                                                    profit      profit/(loss)
                                                                                    before              after
                                                                               exceptional        exceptional
                                                                                     items              items
                                                               £million           £million           £million
                                                                 ______             ______             ______

Specialties                                                        92.9                6.4                6.6
Pigments                                                           46.6                0.3              (7.0)
Chromium                                                           62.0                1.1                0.7
Specialty Rubber                                                   24.0                0.3                0.2
Inter-group                                                       (1.9)                  -                  -
                                                                 ______             ______             ______
                                                                  223.6                8.1                0.5
                                                                 ______             ______             ______

(Continued from table above)

                                                                   2004              2004              2004
                                                                Revenue         Operating         Operating
                                                                            profit/(loss)     profit/(loss)
                                                                                   before             after
                                                                              exceptional       exceptional
                                                                                    items             items
                                                               £million          £million          £million
                                                                 ______            ______            ______

Specialties                                                        64.0               7.1               7.1
Pigments                                                           40.0                 -                 -
Chromium                                                           53.1             (1.3)             (2.3)
Specialty Rubber                                                   22.7             (0.2)             (0.2)
Inter-group                                                       (3.0)                 -                 -
                                                                 ______            ______            ______
                                                                  176.8               5.6               4.6
                                                                 ______            ______            ______


IFRS

The consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) in issue and expected to
be endorsed by the European Union by 31 December 2005.  Comparative results for
2004 have been restated accordingly.

As allowed by IFRS, significant transactions primarily in relation to
restructuring and business disposals have been separately identified in the
financial statements to enable users to understand these items and the business
results excluding these significant items.  These significant transactions have
collectively been described as exceptional items.

Financial results

Revenue in the first half of 2005 was £46.8 million higher than the same period
in 2004 at £223.6 million.  The acquisition of the Servo business in June 2004
added £40.5 million to revenue, while currency movements reduced sales by 2 per
cent.  On a constant currency basis and excluding acquisitions and disposals,
revenue increased by 6 per cent, with Chromium up 19 per cent, Specialty Rubber
up 5 per cent, Specialties lower by 2 per cent and Pigments essentially flat.

Sales volumes were 2 per cent lower with increases in Chromium and Specialty
Rubber offset by declines in Specialties and Pigments.  In terms of geography,
volumes in North America were higher than the previous year, with strong sales
in Chromium to the industrial CCA and refractory markets more than offsetting
soft demand in coatings.  Volumes in Asia Pacific were generally lower due to a
slowdown in the Chinese construction sector and a softer coatings market,
although volumes sold to Japan by Chromium increased due to plant closures
there.  European volumes were more or less flat.

Operating profit before exceptional items was £2.5 million higher than last year
at £8.1 million.  The Servo acquisition contributed £2.0 million and price
increases, particularly in Chromium, contributed close to £14.0 million.  Energy
costs increased by £3.3 million while other costs, particularly raw materials
and freight, increased by around £9.0 million with much of the inflation in
costs having taken place during the second half of 2004.

Profit before tax and exceptional items was £4.5 million compared to £3.0
million in the first half of 2004.  Basic earnings per share before exceptional
items increased to 1.0p (2004: 0.7p) due to the increase in operating profits,
partly offset by higher finance costs and taxation.

Exceptional items were a net charge before tax of £7.6 million giving an overall
loss before tax of £3.1 million (2004: profit of £2.0 million). Earnings per
share after exceptional items was a loss of 0.5p (2004: earnings of 0.6p).

Specialties

Revenue at Specialties was £28.9 million higher than the previous year at £92.9
million.  The Servo acquisition added £33.0 million to revenue while currency
movements reduced it by £2.2 million. Excluding the effects of currency and
acquisitions, revenue was 2 per cent lower than the previous year.  Prices
improved by 4 per cent versus the first half of 2004, but volumes were around 6
per cent lower due to softer demand in the coatings sector in both Europe and
North America.

Operating profit before exceptional items was £0.7 million lower than the first
half of 2004 at £6.4 million.  Lower sales volumes were compensated by higher
prices and the Servo acquisition added £1.3 million to operating profit.  In
addition, the revaluation of Hectorite ore at its mine in California contributed
£0.8 million to its result in the first half of 2005.  Fixed costs were higher
than the previous year and this will be addressed in the second half of 2005 by
the announced rationalisation at Servo and the reduction in central
administration costs.

                                        2004                                                                2005
                                     Revenue                                                             Revenue
                                  Six months        Effect of                                         Six months
                                       ended         exchange    Acquisitions/        Increase/            ended
                                     30 June            rates        disposals       (decrease)          30 June
                                    £million         £million         £million         £million         £million
                                      ______           ______           ______           ______           ______

Specialties                             64.0            (2.2)             32.3            (1.2)             92.9
Pigments                                40.0            (0.6)              7.5            (0.3)             46.6
Chromium                                53.1            (1.3)                -             10.2             62.0
Specialty Rubber                        22.7              0.1                -              1.2             24.0
Inter-company                          (3.0)              0.1                -              1.0            (1.9)
                                      ______           ______           ______           ______           ______
                                       176.8            (3.9)             39.8             10.9            223.6
                                      ______           ______           ______           ______           ______

Pigments

Revenue at Pigments for the first half of 2005 was £6.6 million higher than the
previous year at £46.6 million.  Excluding the Servo acquisition, which added
£7.5 million of sales and the effects of currency, revenue was essentially flat.
Prices improved by around 6 per cent but were offset by lower volumes due to
softer demand in the coatings sector in both Europe and North America.

Operating profit before exceptional items was £0.3 million higher than the first
half of 2004 at £0.3 million.  Higher selling prices more than offset the
effects of lower volumes, but energy and raw material cost inflation, which was
particularly evident in the second half of 2004, had a dampening effect.  The
Servo acquisition contributed around £0.7 million to operating profit.

Chromium

Revenue at Chromium increased by £8.9 million versus the first half of 2004 to
£62.0 million, largely driven by strong selling price momentum that increased
sales by 17 per cent.  Volumes were up 2 per cent with increases in most higher
margin products, offset by reduced volumes in lower margin dichromate and chrome
sulphate. Overall, revenues on a constant currency basis were 19 per cent higher
than the first half of 2004.

Operating profit before exceptional items improved by £2.4 million versus the
first half of 2004 to £1.1 million.  Improvements in pricing and volumes were
offset by an increase of £2.4 million in energy costs and other cost increases
of £4.4 million, mostly in raw materials, freight and maintenance.

Specialty Rubber

Revenue at Specialty Rubber increased by £1.3 million versus the first half of
2004 to £24.0 million.  The improvement came in equal amounts from increased
volumes and higher prices.  Volume increases were particularly prominent in
Europe and also in Chile, where a new joint venture was recently formed to serve
that market.

Operating profit before exceptional items was £0.3 million versus a loss of £0.2
million in the first half of 2004.  Improved sales more than offset cost
inflation.

Exceptional items

IFRS requires separate disclosure of material items of income and expense.
These items are considered to be most appropriately described as exceptional.

                                                                                                 2005
                                                                                             £million
Rationalisation of East St Louis pigments plant                                                 (7.1)
Rationalisation of Servo business                                                               (4.0)
Central restructuring costs                                                                     (1.1)
Sale of Hardman business                                                                          4.6
Total                                                                                           (7.6)
                                                                                               ______


The Group announced on 30 June 2005 that the majority of its Pigments plant at
East St Louis would cease operation and that production would be transferred to
other sites, including the newly constructed facility at TaiCang.  The charge of
£7.1 million comprises an asset impairment of £4.8 million and redundancy and
decommissioning costs of £2.3 million.

The charge of £4.0 million in respect of the Servo business comprises
redundancies and the cost of transferring the Group's Oosterhout plant to the
Servo plant at Delden, Netherlands.

In addition, as part of management's continued focus on cost control and due to
the significant progress that the Group has made in resolving legacy legal
issues, a central restructuring has been implemented at a cost of £1.1 million.

The sale of the Group's Hardman epoxy and urethane products business was
completed on 13 June 2005 for a cash consideration of £7.8 million, which
resulted in a gain on disposal of £4.6 million.

Interest

£million                                                                      2005               2004
                                                                            ______             ______
On net borrowings                                                              2.8                1.7
Pension finance charge                                                         0.5                0.4
Discount on provisions                                                         0.3                0.5
Total                                                                          3.6                2.6
                                                                            ______             ______

Interest payable on net borrowings was £1.1 million higher than the previous
year due to increased borrowings following the acquisition of Servo in June
2004.

Interest cover (the ratio of operating profit before exceptional items to
interest on net borrowings) was 3.1 times (2004: 7.1 times)

Taxation

Tax (charge)/credit                                                       £million     Effective rate
                                                                            ______             ______
Before exceptional items                                                     (0.1)               2.6%
Exceptional items                                                              1.3              17.1%
Total                                                                          1.2                  -
                                                                            ______             ______


The Group's tax rate on profit before exceptional items was 2.6 per cent and is
lower than the standard UK corporation tax rate primarily due to the utilisation
of brought forward losses and the resolution of open issues from prior periods.

Earnings per share

Earnings per share before exceptional items was 1.0 pence (2004: 0.7 pence) due
to the £2.5 million increase in operating profit, which was partially offset by
increased finance costs and taxation.  Earnings per share after exceptional
items was a loss of 0.5 pence (2004: earnings of 0.6  pence).

Cash flow

Net borrowings increased by £10.9 million in the period to 30 June 2005 to
£101.1 million.  This included £2.5 million in relation to B shares which, due
to their preferential rights, have been transferred to net borrowings in
accordance with IAS 39.

Working capital increased by £9.0 million (2004: £18.8 million) reflecting
seasonal trading.  The increase is less than the same period last year due to
improvements in working capital following the implementation of the Group's ERP
system in three of the businesses and the creation of Shared Service Centres in
North America and Europe.  Currency fluctuations also caused borrowings to
increase by £4.7 million.

The cash flow is summarised below:
                                                                   2005             2004
                                                               £million         £million
                                                                _______          _______
Earnings before interest, exceptionals,
depreciation and amortisation                                      16.9             12.6
Change in working capital                                         (9.0)           (18.8)
Other                                                             (5.8)            (4.5)
Capital expenditure                                               (9.0)            (9.7)
                                                                _______          _______
                                                                  (6.9)           (20.4)
Redemption of B shares                                            (4.6)            (4.6)
Acquisitions and disposals                                          7.8           (34.8)
Reclassification of B shares                                      (2.5)                -
Currency translation on net borrowings                            (4.7)              0.5
                                                                _______          _______
                                                                 (10.9)           (59.3)
Net borrowings at start of period                                (90.2)           (46.9)
Net borrowings at end of period                                 (101.1)          (106.2)
                                                                _______          _______

Capital expenditure

Capital expenditure on fixed assets was £8.7 million (2004: £9.7 million).  This
included £1.3 million on the construction of the Pigments plant in TaiCang,
China.  Excluding this project capital expenditure was 84 per cent of
depreciation (2004: 84 per cent).

Balance sheet

                                                                            2005                2004
                                                                        £million            £million
                                                                          ______              ______
Tangible fixed assets                                                      174.2               171.8
Other net assets                                                           151.5               183.5
                                                                          ______              ______
                                                                           325.7               355.3
                                                                          ______              ______
Equity attributable to parent                                              224.6               249.1
Net borrowings                                                             101.1               106.2
                                                                          ______              ______
                                                                           325.7               355.3
                                                                          ______              ______
Gearing1                                                                     31%                 30%
                                                                          ______              ______

1 the ratio of net borrowings to equity attributable to parent plus net
borrowings

Equity attributable to the parent was lower than at 30 June 2004 due to changes
in deferred tax and actuarial losses associated with pension and other post
retirement schemes of £13.6 million and the redemption of B shares totalling
£9.2 million.

The main sterling currency exchange rates in the period were:

                                    2005                  2005                  2004                  2004
                                 30 June               Average               30 June               Average
                                  ______                ______                ______                ______
US dollar                           1.79                  1.87                  1.81                  1.82
Euro                                1.48                  1.45                  1.49                  1.48
                                  ______                ______                ______                ______

There was no significant impact on the Group's balance sheet as a result of
changes in the period end exchange rates.  In terms of average exchange rates
for the first six months of 2005 and the equivalent period last year, the Euro
was 2 per cent stronger against the Pound Sterling in the current period, while
the US Dollar was 3 per cent weaker.  Average exchange rate movements in the
first six months of 2005 caused revenue to be £3.9 million lower than last year
and operating profit to be £1.1 million higher than last year.

Working capital

Inventories were £7.6 million higher than at the same time last year.  This was
primarily due to a strategic inventory build in the Pigments business in
anticipation of the closure and transfer of production from the East St Louis
plant.  Debtor days at the end of the period were 56 compared to 61 days at 30
June 2004 and creditor days had increased by 8 days to 69 (2004: 61).

Pensions and other post retirement benefits

The pension liability was £81.8 million at 30 June 2005 compared to £81.4
million at 31 December 2004.  The pension schemes were not revalued at 30 June
2005 and the net liability calculated by the Group's actuaries at 31 December
2004 has been updated for contributions paid and amounts expensed in the six
months ended 30 June 2005.

In the first half £3.4 million (2004: £3.0 million) was charged to the profit
and loss account including £0.5 million (2004: £0.4 million) of finance charges
and £5.1 million (2004: £3.9 million) was paid in contributions.

Brian Taylorson
Finance Director
28 July 2005

Consolidated interim income statement
for the six months ended 30 June 2005
                                                                              Six months ended 30 June 2005
                                                                 Before                               After
                                                            exceptional       Exceptional       exceptional
                                                 Note             items            items*             items
                                                               £million          £million          £million
                                                                 ______            ______            ______
Revenue                                             3             223.6                 -             223.6
Cost of sales                                                   (154.8)                 -           (154.8)
                                                                 ______            ______            ______
Gross profit                                                       68.8                 -              68.8
Other operating income                                                -               4.6               4.6
Distribution costs                                               (35.2)                 -            (35.2)
Administrative expenses                                          (25.4)            (12.2)            (37.6)
Share of loss of associates                                       (0.1)                 -             (0.1)
                                                                 ______            ______            ______
Operating profit                                    3               8.1             (7.6)               0.5
Net finance costs                                   4             (3.6)                 -             (3.6)
                                                                 ______            ______            ______
Profit/(loss) before income tax                                     4.5             (7.6)             (3.1)
Tax                                                 6             (0.1)               1.3               1.2
                                                                 ______            ______            ______
Profit for the period                                               4.4             (6.3)             (1.9)
                                                                 ______            ______            ______
Attributable to:
Equity holders of the parent                                        4.2             (6.3)             (2.1)
Minority interests                                                  0.2                 -               0.2
                                                                 ______            ______            ______
                                                                    4.4             (6.3)             (1.9)
                                                                 ______            ______            ______
Earnings per share
Basic and diluted                                   7               1.0                               (0.5)
                                                                 ______                              ______

(Continued from table above)
                                                      Six months ended
                                                          30 June 2004
                                                                Before                                 After
                                                           exceptional        Exceptional        exceptional
                                               Note              items             items*              items
                                                              £million           £million           £million
                                                                ______             ______             ______
Revenue                                           3              176.8                  -              176.8
Cost of sales                                                  (117.8)                  -            (117.8)
                                                                ______             ______             ______
Gross profit                                                      59.0                  -               59.0
Other operating income                                               -                  -                  -
Distribution costs                                              (30.5)                  -             (30.5)
Administrative expenses                                         (22.9)              (1.0)             (23.9)
Share of loss of associates                                          -                  -                  -
                                                                ______             ______             ______
Operating profit                                  3                5.6              (1.0)                4.6
Net finance costs                                 4              (2.6)                  -              (2.6)
                                                                ______             ______             ______
Profit/(loss) before income tax                                    3.0              (1.0)                2.0
Tax                                               6                0.2                0.2                0.4
Profit for the period                                              3.2              (0.8)                2.4
                                                                ______             ______             ______
Attributable to:                                                                                         2.4

Equity holders of the parent                                       3.2              (0.8)
Minority interests                                                   -                  -                  -
                                                                   3.2              (0.8)                2.4
Earnings per share

Basic and diluted                                 7                0.7                                   0.6


* IFRS requires separate disclosure of items of income and expense which are
material by virtue of their nature and amount. These items are considered to be
most appropriately disclosed as exceptional (see note 5).

Consolidated interim income statement (continued)
                                                                                Year ended 31 December 2004
                                                                 Before                               After
                                                            Exceptional       Exceptional       exceptional
                                                 Note             items             items             items
                                                               £million          £million          £million
                                                                 ______            ______            ______
Revenue                                             3             389.2                 -             389.2
Cost of sales                                                   (264.1)                 -           (264.1)
                                                                 ______            ______            ______
Gross profit                                                      125.1                 -             125.1
Other operating income                                                -               2.6               2.6
Distribution costs                                               (66.5)                 -            (66.5)
Administrative expenses                                          (47.1)             (5.2)            (52.3)
                                                                 ______            ______            ______
Operating profit                                    3              11.5             (2.6)               8.9
Net finance costs                                   4             (5.6)                 -             (5.6)
                                                                 ______            ______            ______
Profit before income tax                                            5.9             (2.6)               3.3
Tax                                                 6             (0.1)               0.2               0.1
                                                                 ______            ______            ______
Profit for the period                                               5.8             (2.4)               3.4
                                                                 ______            ______            ______
Attributable to:
Equity holders of the parent                                        5.8             (2.4)               3.4
Minority interests                                                    -                 -                 -
                                                                 ______            ______            ______
                                                                    5.8             (2.4)               3.4
                                                                 ______            ______            ______
Earnings per share
Basic and diluted                                   7               1.3                                 0.8
                                                                 ______                              ______


Consolidated interim statement of recognised income and expense
for the six months ended 30 June 2005

                                                                 2005              2004               2004
                                                           Six months        Six months
                                                                ended             ended         Year ended
                                                              30 June           30 June        31 December
                                                             £million          £million           £million
                                                               ______            ______             ______
Exchange differences on translation of foreign
operations                                                       11.6             (1.1)             (11.8)
                                                                 
Actuarial loss on pension and other post retirement
schemes                                                             -                 -              (4.7)
                                                                    
Deferred tax associated with pension and other post
retirement schemes                                                  -                 -              (8.9)
                                                               ______            ______             ______
Net income/(expense) recognised in equity                        11.6             (1.1)             (25.4)
(Loss)/profit for the period                                    (2.1)               2.4                3.4
                                                               ______            ______             ______
Total recognised income and expense for the period                9.5               1.3             (22.0)
                                                               ______            ______             ______
Attributable to:
Equity holders of the parent                                      9.3               1.3             (22.0)
Minority interests                                                0.2                 -                  -
                                                               ______            ______             ______
                                                                  9.5               1.3             (22.0)
                                                               ______            ______             ______


Consolidated interim statement of changes in equity
for the six months ended 30 June 2005

                                                                 2005              2004               2004
                                                           Six months        Six months
                                                                ended             ended         Year ended
                                                              30 June           30 June        31 December
                                                             £million          £million           £million
                                                               ______            ______             ______
Total recognised income and expense for the period                9.5               1.3             (22.0)
Transfer of B shares from equity to non-current
liabilities                                                     (2.5)                 -                  -
Issue of shares                                                   0.6                 -                  -
Recognition of share-based payments                               0.3               0.1                0.2
Redemption of redeemable B shares                               (4.6)             (4.6)              (9.2)
                                                               ______            ______             ______
Net increase/(decrease) in equity attributable to
the parent                                                        3.3             (3.2)             (31.0)
At beginning of financial period                                221.3             252.3              252.3
                                                               ______            ______             ______
At end of financial period                                      224.6             249.1              221.3
                                                               ______            ______             ______


Consolidated interim balance sheet
at 30 June 2005

                                                                 2005              2004               2004
                                                              30 June           30 June        31 December
                                                             £million          £million           £million
                                                               ______            ______             ______
Non-current assets
Goodwill                                                        164.1             163.2              155.1
Intangible assets                                                 0.5               0.6                0.6
Property, plant and equipment                                   174.2             171.8              173.0
Interests in associates and other investments                     2.2               3.8                1.9
Deferred tax assets                                              17.6              26.0               16.9
                                                               ______            ______             ______
Total non-current assets                                        358.6             365.4              347.5
                                                               ______            ______             ______

Current assets
Inventories                                                      73.9              66.3               68.3
Trade and other receivables                                      95.6              91.9               84.0
Cash and cash equivalents                                        12.6              32.4               11.5
Assets classified as held for sale                                  -               6.7                3.7
                                                               ______            ______             ______
Total current assets                                            182.1             197.3              167.5
                                                               ______            ______             ______
Total assets                                                    540.7             562.7              515.0
                                                               ______            ______             ______

Current liabilities
Bank overdrafts and loans                                       (6.2)             (8.7)              (4.4)
Trade and other payables                                       (84.5)            (65.4)             (79.8)
Provisions                                                      (7.6)             (1.3)              (0.8)
Liabilities classified as held for sale                             -             (1.3)              (1.3)
                                                               ______            ______             ______
Total current liabilities                                      (98.3)            (76.7)             (86.3)
                                                               ______            ______             ______

Non-current liabilities
Bank loans                                                    (107.5)           (129.9)             (97.3)
Retirement benefit obligations                                 (81.8)            (79.7)             (81.4)
Deferred tax liabilities                                        (1.8)             (0.9)              (2.9)
Provisions                                                     (21.9)            (22.1)             (21.6)
Government grants                                               (2.3)             (2.4)              (2.4)
                                                               ______            ______             ______
Total non-current liabilities                                 (215.3)           (235.0)            (205.6)
                                                               ______            ______             ______
Total liabilities                                             (313.6)           (311.7)            (291.9)
                                                               ______            ______             ______
Net assets                                                      227.1             251.0              223.1
                                                               ______            ______             ______


Equity
Share capital                                                    22.1              23.6               23.8
Share premium                                                     1.2               1.2                1.2
Other reserves                                                   75.9              65.8               59.7
Retained earnings                                               125.4             158.5              136.6
                                                               ______            ______             ______
Equity attributable to equity holders of
the parent                                                      224.6             249.1              221.3
Minority equity interests                                         2.5               1.9                1.8
                                                               ______            ______             ______
Total equity and reserves                                       227.1             251.0              223.1
                                                               ______            ______             ______


Consolidated interim cash flow statement
for the six months ended 30 June 2005

                                                                       2005             2004             2004
                                                                 Six months       Six months             Year
                                                                      ended            ended            ended
                                                                    30 June          30 June      31 December
                                                      Note         £million         £million         £million
                                                                     ______           ______           ______

Cash flow from operating activities                      8              1.3           (11.0)             13.5
                                                                     ______           ______           ______
Investing activities
Interest received                                                       0.3              0.3              1.4
Disposal of property, plant and equipment                                 -                -              5.8
Purchase of property, plant and equipment                             (9.0)            (9.7)           (22.0)
Acquisition of business                                                   -           (34.8)           (36.3)
Disposal of businesses                                                  7.8                -                -
                                                                     ______           ______           ______
Net cash used in investing activities                                 (0.9)           (44.2)           (51.1)

Financing activities
Issue of shares                                                         0.6                -                -
Redemption of B shares                                                (4.6)            (4.6)            (9.2)
(Decrease) in borrowings due within one year                          (3.0)            (0.6)            (0.8)
Increase in borrowings repayable after one year                         2.7             65.6             35.8
Repayments of obligations under finance leases                        (0.2)                -            (0.2)
                                                                     ______           ______           ______
Net cash (used in)/from financing activities                          (4.5)             60.4             25.6
                                                                     ______           ______           ______
Net (decrease)/increase in cash and cash                              (4.1)              5.2           (12.0)
equivalents
Cash and cash equivalents at beginning of period                       10.3             22.6             22.6
Foreign exchange                                                        0.2            (0.8)            (0.3)
                                                                     ______           ______           ______
Cash and cash equivalents at end of period                              6.4             27.0             10.3
                                                                     ______           ______           ______



Notes to the interim financial statements
for the six months ended 30 June 2005

1          General Information

The comparative figures for the year ended 31 December 2004 are not the
Company's statutory accounts for that financial year.  Those accounts, which
were prepared under UK Generally Accepted Accounting Practices, have been
reported on by the Company's auditor and delivered to the Registrar of
Companies.  The auditor's report  was unqualified and did not contain statements
under section 237 (2) or (3) of the Companies Act 1985.

2          Accounting policies

Statement of compliance  The consolidated interim financial statements of the
Company comprise the Company and its subsidiaries (the 'Group') and the Group's
interest in associates.  European Union (EU) law requires that the next annual
consolidated financial statements of the Company, for the year ending 31
December 2005, be prepared in accordance with International Financial Reporting
Standards (IFRS) adopted for use in the EU ('adopted IFRS').  This interim
financial information has been prepared on the basis of the recognition and
measurement requirements of IFRS in issue that either are endorsed by the EU and
effective at 30 June 2005 or are expected to be endorsed and effective at 31
December 2005, the Group's first annual reporting date at which it is required
to use adopted IFRSs.  Based on these adopted and unadopted IFRSs, the directors
have made assumptions about the accounting policies expected to be applied,
which are as set out below, when the first annual IFRS financial statements are
prepared for the year ending 31 December 2005.

In particular, the directors have assumed that the following IFRS issued by the
International Accounting Standards Board  will be adopted by the EU in
sufficient time that it will be available for use in the annual IFRS financial
statements for the year ending 31 December 2005:

Amendment to International Accounting Standard IAS 19 Employee Benefits:
Acturial Gains and Losses, Group Plans and Disclosures

In addition, the adopted IFRSs that will be effective in the annual financial
statements for the year ending 31 December 2005 are still subject to change and
to additional interpretations and therefore cannot be determined with certainty.
Accordingly, the accounting policies for that annual period will be determined
finally only when the annual financial statements are prepared for the year
ending 31 December 2005.

An explanation of how the transition to IFRS has affected the reported financial
position, financial performance and cash flows of the Group was published by the
Company on 31 March 2005 and is available on its website at www.elementis.com.

3          Segment reporting

Segment information is presented in the consolidated interim financial
statements in respect of the business segments that reflect the Group's
management and internal reporting structure.


                                                                             Six months ended 30 June 2005
                                                        External         Eliminations                Total
                                                        £million             £million             £million
                                                          ______               ______               ______
Revenue
Specialties                                                 92.9                    -                 92.9
Pigments                                                    46.6                    -                 46.6
Chromium                                                    62.0                (1.9)                 60.1
Speciality Rubber                                           24.0                    -                 24.0
Inter-segment sales                                        (1.9)                  1.9                    -
                                                          ______               ______               ______
                                                           223.6                    -                223.6
                                                          ______               ______               ______

(Continued from table above)
                                                                             Six months ended 30 June 2004
                                                        External         Eliminations                Total
                                                        £million             £million             £million
                                                          ______               ______               ______
Revenue
Specialties                                                 64.0                    -                 64.0
Pigments                                                    40.0                    -                 40.0
Chromium                                                    53.1                (3.0)                 50.1
Speciality Rubber                                           22.7                    -                 22.7
Inter-segment sales                                        (3.0)                  3.0                    -
                                                          ______               ______               ______
                                                           176.8                    -                176.8
                                                          ______               ______               ______


                                                                            Six months ended 30 June 2005
                                                          Before                                    After
                                                     exceptional         Exceptional          exceptional
                                                           items               items                items
                                                        £million            £million             £million
                                                          ______              ______               ______
Segment result
Specialties                                                  6.4                 0.2                  6.6
Pigments                                                     0.3               (7.3)                (7.0)
Chromium                                                     1.1               (0.4)                  0.7
Speciality Rubber                                            0.3               (0.1)                  0.2
                                                          ______              ______               ______
                                                             8.1               (7.6)                  0.5
Net finance costs                                                                                   (3.6)
                                                                                                   ______
(Loss)/profit before tax                                                                            (3.1)
                                                                                                   ______


(Continued from table above)
                                                                            Six months ended 30 June 2004
                                                          Before                                    After
                                                     exceptional         Exceptional          exceptional
                                                           items               items                items
                                                        £million            £million             £million
                                                          ______              ______               ______
Segment result
Specialties                                                  7.1                   -                  7.1
Pigments                                                       -                   -                    -
Chromium                                                   (1.3)               (1.0)                (2.3)
Speciality Rubber                                          (0.2)                   -                (0.2)
                                                          ______              ______               ______
                                                             5.6               (1.0)                  4.6
Net finance costs                                                                                   (2.6)
(Loss)/profit before tax                                                                              2.0
                                                                                                   ______


                                                                               Year ended 31 December 2004
                                                                                                   Revenue
                                                        External         Eliminations                Total
                                                        £million             £million             £million
                                                          ______               ______               ______
Specialties                                                159.5                    -                159.5
Pigments                                                    78.7                    -                 78.7
Chromium                                                   110.5                (5.4)                105.1
Speciality Rubber                                           45.9                    -                 45.9
Inter-segment sales                                        (5.4)                  5.4                    -
                                                           389.2                    -                389.2
Net finance costs
Profit before tax



(Continued from table above)
                                                                               Year ended 31 December 2004
                                                                                            Segment result
                                                          Before                                     After
                                                     exceptional          Exceptional          exceptional
                                                           items                items                items
                                                        £million             £million             £million
                                                          ______               ______               ______
Specialties                                                 14.9                (3.9)                 11.0
Pigments                                                     0.1                    -                  0.1
Chromium                                                   (3.8)                (1.3)                (5.1)
Speciality Rubber                                            0.3                  2.6                  2.9
Inter-segment sales                                            -                    -                    -
                                                          ______               ______               ______
                                                            11.5                (2.6)                  8.9
Net finance costs                                                                                    (5.6)
                                                                                                    ______
Profit before tax                                                                                      3.3
                                                                                                    ______


4          Net finance costs
                                                                     2005             2004              2004
                                                               Six months       Six months
                                                                    ended            ended        Year ended
                                                                  30 June          30 June       31 December
                                                                 £million        £ million          £million
                                                                   ______           ______            ______
a)         Net interest payable:
            Interest payable                                        (2.9)            (2.0)             (4.5)
            Interest receivable - bank                                0.2              0.3               0.7
            Interest on corporation tax refunds/                    (0.1)                -               0.2
            (payments)
                                                                   ______           ______            ______
            Net interest payable                                    (2.8)            (1.7)             (3.6)

b)         Other finance charges:
            Pension and post-retirement liabilities                 (0.5)            (0.4)             (1.1)
            Unwind of discount on provisions                        (0.3)            (0.5)             (0.9)
                                                                   ______           ______            ______
            Other finance charges                                   (0.8)            (0.9)             (2.0)
                                                                   ______           ______            ______
            Total finance costs                                     (3.6)            (2.6)             (5.6)
                                                                   ______           ______            ______


5          Exceptional items
                                                                       2005               2004               2004
                                                                 Six months         Six months               Year
                                                                      ended              ended              ended
                                                                    30 June            30 June        31 December
                                                                   £million           £million           £million
                                                                     ______             ______             ______
Central restructuring charge                                          (1.1)                  -                  -
Pigments East St Louis rationalisation                                (7.1)                  -                  -
Restructure of Chromium                                                   -              (1.0)              (1.3)
Rationalisation of Servo business                                     (4.0)                  -              (1.6)
Impairment of joint venture                                               -                  -              (2.3)
Profit on disposal of property                                            -                  -                2.6
Profit on disposal of business                                          4.6                  -                  -
                                                                     ______             ______             ______
                                                                      (7.6)              (1.0)              (2.6)
Tax credit on exceptional items                                         1.3                0.2                0.2
                                                                     ______             ______             ______
                                                                      (6.3)              (0.8)              (2.4)
                                                                     ______             ______             ______

6          Tax

The tax charge on profit before exceptional items of £0.1 million (2004: credit
of £0.2 million) is based on an estimated effective tax rate on profit before
exceptional items for the year to 31 December 2005 of 2.6 per cent (2004: 21.0
per cent).  The rate is lower than the standard UK corporation tax rate
primarily due to the utilisation of losses and the resolution of open issues
from prior periods.  Tax on exceptional items was a credit of £1.3 million
(2004: £0.2 million).

7          Earnings per share

                                                                     2005             2004              2004
                                                               Six months       Six months              Year
                                                                    ended            ended             ended
                                                                  30 June          30 June       31 December
                                                                 £million         £million          £million
                                                                   ______           ______            ______
Earnings for the purposes of basic earnings per share               (2.1)              2.4               3.4
Exceptional items net of tax                                          6.3              0.8               2.4
                                                                   ______           ______            ______
Adjusted earnings                                                     4.2              3.2               5.8
                                                                   ______           ______            ______

                                                                Number(m)        Number(m)         Number(m)
Weighted average number of shares for the purposes of
basic earnings per share                                            433.0            431.8             431.9
Effect of dilutive share options                                      8.1              6.7               6.4
                                                                   ______           ______            ______
Weighted average number of share for the purposes of                441.1            438.5             438.3
diluted earnings per share
                                                                   ______           ______            ______


Basic and diluted earnings per share                                Pence            Pence             Pence
(Loss)/earnings per share                                           (0.5)              0.6               0.8
Earnings per share before exceptional items                           1.0              0.7               1.3



8          Net cash flow from operating activities
                                                                     2005             2004              2004
                                                               Six months       Six months              Year
                                                                    ended            ended             ended
                                                                  30 June          30 June       31 December
                                                                 £million         £million          £million
                                                                   ______           ______            ______
Operating profit                                                      0.5              4.6               8.9
Adjustments for:
Depreciation of property, plant and equipment                         8.8              6.9              15.4
Amortisation of intangible assets                                     0.1                -               0.1
Decrease in provisions                                              (1.5)            (1.4)             (2.4)
Pension contributions net of current service cost                   (1.8)            (0.9)             (4.6)
Share-based payments                                                  0.3              0.1               0.2
Exceptional items charged net of cash outflow                         7.7              1.0               0.6
                                                                   ______           ______            ______
Operating cash flows before movements in working capital             14.1             10.3              18.2
Increase in inventories                                             (3.7)            (4.1)             (7.2)
Increase in debtors                                                (12.1)           (12.9)             (3.4)
Decrease/(increase) in creditors                                      6.8            (1.8)               5.5
                                                                   ______           ______            ______
Cash generated by operations                                          5.1            (8.5)              13.1
Income taxes (paid)/received                                        (0.7)            (0.5)               4.5
Interest paid                                                       (3.1)            (2.0)             (4.1)
                                                                   ______           ______            ______
Net cash flow from operating activities                               1.3           (11.0)              13.5
                                                                   ______           ______            ______


9          Movement in net borrowings
                                                                     2005             2004              2004
                                                               Six months       Six months              Year
                                                                    ended            ended             ended
                                                                  30 June          30 June       31 December
                                                                 £million         £million          £million
                                                                   ______           ______            ______
Change in net borrowings resulting from cash flows
(Decrease)/increase in cash and cash equivalents                    (4.1)              5.2            (12.0)
Decrease/(increase) in borrowings                                     0.4           (65.0)            (34.8)
                                                                   ______           ______            ______
                                                                    (3.7)           (59.8)            (46.8)
Transfer of B shares from equity                                    (2.5)                -                 -
Currency translation differences                                    (4.7)              0.5               3.5
Increase in net borrowings                                         (10.9)           (59.3)            (43.3)
Net borrowings at beginning of period                              (90.2)           (46.9)            (46.9)
                                                                   ______           ______            ______
Net borrowings at end of period                                   (101.1)          (106.2)            (90.2)
                                                                   ______           ______            ______


10         Contingent liabilities

Particulars of Claim were served on the Company on 2 April 2004 alleging
breaches of warranties under the contract for the sale of Pauls Malt Limited,
relating to the repayment of export refunds to the Department for Environment,
Food and Rural Affairs.  Elementis was notified on 20 July 2005 that the
Commercial Court had ruled against the Company on a number of preliminary issues
in relation to the claim.  The Company intends to appeal against this ruling and
intends to continue to vigourously defend the claim, which amounts to
approximately £5.2 million.


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            The company news service from the London Stock Exchange         PUUCGMUPAGBM