1. Accounting policies

Basis of preparation The financial information for the first six months of 2001 and 2000, which is unaudited but has been reviewed by the Company’s auditors, does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and it is presented on the basis of accounting policies set out in the financial statements of Elementis plc for the year ended 31 December 2000.

2. Exchange rates

For the six months to 30 June 2001, the average sterling exchange rate was $1.44 and 1.61EUR (2000: $1.57 and 1.64EUR, year to 31 December 2000: $1.52 and 1.64EUR). The sterling exchange rate at 30 June 2001 was $1.41 and 1.66EUR (2000: $1.51 and 1.58EUR, 31 December 2000: $1.49 and 1.59EUR).

3. Segmental information

	Group turnover		Group operating profit
	2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec	2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec
	£million	£million	£million	£million	£million	£million
Analysis by activity
Chromium
Before exceptionals	68.2	65.8	131.7	4.2	12.0	23.7
Inter-group turnover	(3.8)	(3.4)	(6.9)	-	-	-
Exceptionals	-	-	-	-	-	0.7
	64.4	62.4	124.8	4.2	12.0	24.4
Pigments & Specialties
Before goodwill amortisation and exceptionals	119.7	118.7	234.9	10.5	15.6	31.1
Goodwill amortisation	-	-	-	(6.9)	(6.4)	(13.3)
Exceptionals	-	-	-	-	(1.4)	(1.4)
	119.7	118.7	234.9	3.6	7.8	16.4
Chemical Distribution	87.3	78.7	160.0	1.9	3.0	6.0
Specialty Rubber
Before exceptionals	25.3	28.2	54.1	0.9	1.6	2.6
Exceptionals	-	-	-	(0.5)	(1.4)	(2.3)
	25.3	28.2	54.1	0.4	0.2	0.3
Group exceptionals	-		-	(4.6)	-	-
Total
Before goodwill amortisation and exceptionals	296.7	288.0	573.8	(17.5)	32.2	63.4
Goodwill amortisation	-	-	-	(6.9)	(6.4)	(13.3)
Exceptionals			-	(5.1)	(2.8)	(3.0)
	296.7	288.0	573.8	5.5	23.0	47.1
Analysis by area of operations
North America	200.5	194.5	389.0	6.2	17.6	33.4
Europe	84.7	83.1	163.4	(1.1)	4.6	12.2
Rest of the World	11.5	10.4	21.4	0.4	0.8	1.5
	296.7	288.0	573.8	5.5	23.0	47.1

Group turnover and operating profit are derived from continuing operations.
Group exceptionals comprise costs incurred in preparing and marketing the Company for sale.

				2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec
				£million	£million	£million
Group turnover analysed by geographical markets
North America				191.5	183.7	368.3
Europe				72.4	72.9	143.0
Rest of World				32.8	31.4	62.5
				296.7	288.0	573.8

4. Taxation

The tax charge of £2.1 million (2000: £5.3 million) is based on an estimated effective tax rate on profit before goodwill amortisation and exceptionals for the year to 31 December 2001 of 14 per cent (2000: 18 per cent). The rate is lower than the standard UK corporation tax rate for a number of reasons including tax relief on purchased US goodwill and the utilisation of surplus ACT. Tax on exceptional charges was £nil million (2000: £0.2 million credit).

5. Earnings per ordinary share

				2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec
				pence per share	pence per share	pence per share
Basic earnings per ordinary share				0.2	3.5	7.9
Goodwill amortisation				1.6	1.5	3.1
Exceptionals net of taxation				1.2	0.6	0.6
Basic earnings per ordinary share before goodwill amortisation and exceptionals				3.0	5.6	11.6

Basic earnings per ordinary share are based on profit for the period of £0.9 million (2000: £15.1 million, year to 31 December 2000: £34.1 million) and on the weighted average number of ordinary shares in issue during the period of 431.5 million (2000: 431.5 million, year to 31 December 2000: 431.5 million). Basic earnings per ordinary share before goodwill amortisation and exceptionals are based on earnings of £12.9 million (2000: £24.1 million, year to 31 December 2000: £50.0 million).

Diluted earnings per ordinary share are based on an adjusted weighted average number of shares of 435.0 million (2000: 433.5 million, year to 31 December 2000: 434.1 million).

6. Financing and management of liquid resources

				2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec
				£million	£million	£million
Redemption of B shares (including issue costs)				(13.4)	(11.9)	(20.7)
Increase/(decrease) in net borrowings				24.1	5.5	(15.0)
				10.7	(6.4)	(35.7)

Redeemable B shares, of nominal value £14.2 million,were issued for nil consideration during the period (2000: £13.3 million; year to 31 December 2000 £22.4 million).

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

	2001 Six months to 30 June	2000 Six months to 30 June	2000 Year to 31 Dec
	£million	£million	£million
Change in net borrowings resulting from cash flows:
Decrease in cash in the period	(3.9)	(1.2)	(3.3)
(Increase)/decrease in borrowings	(5.0)	0.7	40.4
Decrease in liquid resources	(19.1)	(6.2)	(25.4)
	(28.0)	(6.7)	11.7
Currency translation differences	(2.8)	(5.5)	(7.9)
(increase)/decrease in net borrowings	(30.8)	(12.2)	3.8
Net borrowings at beginning of the financial period	(41.7)	(45.5)	(45.5)
Net borrowings at end of the financial period	(72.5)	(57.7)	(41.7)

8. 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. 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.