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

	2005		2005		2005		2004		2004		2004
	Revenue		Operating profit before exceptional items		Operating profit/(loss) after exceptional items		Revenue		Operating profit/(loss) before exceptional items		Operating profit/(loss) after exceptional items
	£million		£million		£million		£million		£million		£million
Specialties	92.9		6.4		6.6		64.0		7.1		7.1
Pigments	46.6		0.3		(7.0	)	40.0		-		-
Chromium	62.0		1.1		0.7		53.1		(1.3	)	(2.3	)
Specialty Rubber	24.0		0.3		0.2		22.7		(0.2	)	(0.2	)
Inter-group	(1.9	)	-		-		(3.0	)	-		-
	223.6		8.1		0.5		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 1.0 pence (2004: 0.7 pence) 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 0.5 pence (2004: earnings of 0.6 pence).

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