1 Accounting policies

Basis of preparation The financial information for the first six months of 2002 and 2001, 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, except for the changes set out below, it is presented on the basis of accounting policies set out in the financial statements of Elementis plc for the year ended 31 December 2001.

Elementis has adopted early FRS17 'Retirement Benefits', which replaces SSAP24 'Accounting for Pension Costs'. In accordance with FRS17, the Group includes the assets and liabilities of its defined benefit pension and post-retirement medical benefit schemes in the financial statements. Current service costs, curtailment and settlement gains and losses, and financial returns are included in the profit and loss account in the period to which they relate. Actuarial gains and losses are recorded through the statement of total recognised gains and losses. A prior period adjustment of £13.8 million is the cumulative prior period effect of this change of pension accounting policy and has been charged against reserves.

In accordance with FRS19 'Deferred Tax', which is effective for accounting periods ending on or after 23 January 2002, deferred tax is accounted for on a full provision basis recognising in total the potential future tax effects of past transactions.No discounting has been applied. A prior period adjustment of £5.2 million is the cumulative prior period effect of this change of deferred tax accounting policy and has been charged against reserves.

Comparatives have been restated accordingly for these changes in accounting policy.

2 Exchange rates

For the six months to 30 June 2002, the average sterling exchange rate was $1.45 and €1.61 (2001: $1.44 and €1.61, year to 31 December 2001: $1.45 and €1.61). The sterling exchange rate at 30 June 2002 was $1.52 and €1.54 (2001: $1.41 and €1.66, 31 December 2001: $1.46 and €1.63).

3 Segmental information

		Group turnover				Group operating profit/(loss)
			2001		2001		2002
	2002 Six months to 30 June £million		2001 Six months to 30 June to £million		Year to 31 Dec £million		2002 Six months to 30 June £million		Six months to 30 June restated £million		Year to 31 Dec restated £million
Analysis by activity
Chromium
Before exceptionals	59.5		68.2		126.9		5.2		3.4		2.6
Exceptionals	-		-		-		1.0		-		-
Inter-group turnover	(4.4	)	(3.8	)	(8.0	)	-		-		-
	55.1		64.4		118.9		6.2		3.4		2.6
Pigments & Specialties
Before goodwill amortisation	119.7		119.7		228.0		10.2		9.7		10.8
Goodwill amortisation	-		-		-		(7.0	)	(6.9	)	(14.0	)
	119.7		119.7		228.0		3.2		2.8		(3.2	)
Specialty Rubber
Before exceptionals	19.7		25.3		46.0		(0.9	)	0.7		(0.9	)
Exceptionals	-		-		-		(0.5	)	(0.5	)	(0.5	)
	19.7		25.3		46.0		(1.4	)	0.2		(1.4	)
Group exceptionals	-		-		-		-		(4.6	)	(4.6	)
Total - continuing operations
Before goodwill amortisation and exceptionals	194.5		209.4		392.9		14.5		13.8		12.5
Goodwill amortisation	-		-		-		(7.0	)	(6.9	)	(14.0	)
Exceptionals	-		-		-		0.5		(5.1	)	(5.1	)
	194.5		209.4		392.9		8.0		1.8		(6.6	)
Total - discontinued operations	-		87.3		137.5		-		1.9		2.4
	194.5		296.7		530.4		8.0		3.7		(4.2	)
Analysis by area of operations
Continuing operations
North America	103.1		113.2		213.3		3.4		3.4		(3.4	)
Europe	79.8		84.7		156.7		3.0		(2.0	)	(4.6	)
Rest of the World	11.6		11.5		22.9		1.6		0.4		1.4
	194.5		209.4		392.9		8.0		1.8		(6.6	)
Discontinued operations
North America	-		87.3		137.5		-		1.9		2.4
	194.5		296.7		530.4		8.0		3.7		(4.2	)
Group turnover analysed by geographical markets
North America							94.3		104.2		197.0
Europe							68.7		72.4		134.6
Rest of the World							31.5		32.8		61.3
							194.5		209.4		392.9
Discontinued operations
North America							-		87.3		137.5
							194.5		296.7		530.4

4 Net interest payable

	2002 Six months to 30 June £million		2001 Six months 30 June to restated £million		2001 Year to 31 Dec restated £million
Interest payable	(1.5	)	(5.6	)	(10.4	)
Interest receivable	0.5		3.2		6.2
Other finance (charges)/income	(0.2	)	1.8		3.7
	(1.2	)	(0.6	)	(0.5	)

Other finance (charges)/income represents the interest charge on accrued pension and other post-retirement liabilities offset by a credit equivalent to the Group’s long-term return on assets based on the market value of the defined benefit pension scheme assets at the start of the period.