Continued

23 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 the repayment of export refunds to the Intervention Board for Agricultural Produce (now the Rural Payments Agency). The Group has recently been informed that the amount of the repayment has been agreed between Pauls Malt Limited and the Rural Payments Agency. Should a warranty 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.

24 Cash flow statement
(a) Net cash inflow from operating activities

	2003		2002
	£million		£million
Operating profit/(loss)	10.9		(37.7	)
Operating exceptionals	1.2		44.7
Goodwill amortisation	12.4		13.5
Depreciation (less grants credited)	15.6		18.3
Earnings before interest, tax, depreciation and amortisation	40.1		38.8
Share of profits of associated undertakings	(0.1	)	(0.1	)
Cash inflow on exceptionals	0.2		0.3
Decrease/(increase) in stocks	4.8		(3.0	)
(Increase)/decrease in debtors	(2.8	)	0.6
(Decrease)/increase in creditors	(4.9	)	7.3
Provisions movement	(8.7	)	(2.6	)
Pension contributions net of current service cost	(10.3	)	(3.3	)
	18.3		38.0

(b) Reconciliation of cash flow before use of liquid resources and financing to movements in net borrowings

	2003		2002
	£million		£million
Cash inflow before use of liquid resources and financing	(4.4	)	9.6
Redemption of B shares (including issue costs)	(9.5	)	(9.6	)
Currency translation differences	5.0		2.6
New finance leases	(0.6	)	-
(Increase)/decrease in net borrowings	(9.5	)	2.6

Redeemable B shares of nominal value £9.5 million were issued for nil consideration during the year (2002: £9.0 million).

(c) Analysis of changes in net (borrowings)/cash during the year

	1 January 2003 £million		Cash flow £million		Other non cash changes £million		Currency translation differences £million		31 December 2003 £million
Net cash repayable on demand	29.9		(6.4	)	-		0.3		23.8
Cash deposits refundable within one year	14.5		(14.5	)	-		-		-
Borrowings repayable within one year	(5.0	)	(0.2	)	-		0.1		(5.1	)
Borrowings repayable after one year	(76.8	)	7.0		-		4.6		(65.2	)
Finance leases	-		0.2		(0.6	)	-		(0.4	)
Net (borrowings)/cash	(37.4	)	(13.9	)	(0.6	)	5.0		(46.9	)

(d) (Borrowings)/cash repayable on demand

					Change
	2003		2002		in year
	£million		£million		£million
Cash at bank and in hand	23.8		44.4		(20.6	)
Bank borrowings repayable within one year	(1.2	)	(0.7	)	(0.5	)
Other borrowings repayable within one year	(4.1	)	(4.3	)	0.2
	18.5		39.4		(20.9	)
Borrowings and deposits repayable within one year not repayable on demand:
Bank deposits	-		(14.5	)	14.5
Bank borrowings	1.2		0.7		0.5
Other borrowings	4.1		4.3		(0.2	)
Net cash repayable on demand	23.8		29.9		(6.1	)
Currency translation differences					(0.3	)
Decrease in cash per cash flow statement					(6.4	)

25 Principal trading investments

Subsidiary undertakings		Country of incorporation and operation
Elementis Chromium LLP	Chromium chemicals	United Kingdom
Elementis UK Limited trading as:		United Kingdom
Elementis Pigments	Synthetic iron oxide pigments, chromic oxide pigments, carboxylates
Elementis Specialties	Rheological additives, colourants, waxes, other specialty additives
Linatex Limited (with fellow Linatex subsidiaries trading in the Netherlands, Malaysia, South Africa, Australia and Belgium)	Abrasion-resistant rubber: sheet, mouldings, fabricated products, linings, screens	United Kingdom
Elementis Chromium LP	Chromium chemicals	United States of America
Elementis Pigments Inc	Synthetic iron oxide pigments, chromic oxide pigments	United States of America
Elementis Specialties Inc	Rheological additives, colourants, waxes, other specialty additives	United States of America
Linatex Corporation of America Inc	Abrasion-resistant rubber: sheet, mouldings, fabricated products, linings, screens	United States of America

Notes:
1 None of the undertakings are held directly by the Company.
2 Equity capital is in ordinary shares, wholly-owned and voting rights equate to equity ownership.
3 All undertakings listed above have accounting periods ending 31 December.
4 Undertakings operating in the United Kingdom are incorporated in Great Britain and registered in England and Wales. In the case of corporate undertakings other than in the United Kingdom their country of operation is also their country of incorporation.
5 All undertakings listed above have been included in the consolidated financial statements of the Group for the year.