Half Yearly Report

RNS Number : 4203I

Cookson Group PLC

25 July 2012

COOKSON GROUP PLC

2012 HALF YEAR FINANCIAL REPORT

HIGHLIGHTS

· Satisfactory overall performance in H1 2012 (versus H1 2011)

o Revenue of £1,300m, down 4% on underlying basis¹

o Trading profit of £141.2m, down £4.7m (3%)

o Return on sales¹ of 10.9% (H1 2011: 10.3%)

· Good trading profit improvement in the Performance Materials and Precious Metals Processing divisions; Engineered Ceramics division (excluding Fused Silica) marginally ahead; £4m adverse foreign exchange translation impact

· Fused Silica H1 2012 loss of £5m (H1 2011: trading profit of £8m); Czech Republic Solar Crucible™ production closed on 1 July 2012

· Continued progress towards our return on sales margin target of 12% by 2013 (assuming constant metals prices) - H1 2012: 11.3%

· Interim dividend declared of 7.50p per share (2011: interim - 7.25p; final - 14.50p)

· Strong financial position with net debt of £451m giving a leverage ratio (net debt to EBITDA) of 1.3 times

· Further de-risking of the UK pension plan through pension insurance buy-in agreement with Pension Insurance Corporation covering c.60% of total UK liabilities

· 'Bolt-on' acquisition of Metallurgica completed on 29 March 2012; disposal of the US operations of the Precious Metals Processing division completed on 1 May 2012

· Strategic review announced on 17 May 2012 is proceeding as planned. The Board expects to update shareholders on the outcome before year end


	First half		Inc/(dec) vs H1 2011		Full year
	2012	2011	Reported rates	Constant rates	2011

Revenue	£1,300m	£1,421m	(8)%	(7)%	£2,826m
Trading profit	£141.2m	£145.9m	(3)%	-	£290.2m
Return on sales¹	10.9%	10.3%	0.6pts	0.7pts	10.3%
Profit before tax - headline¹	£127.6m	£132.1m	(3)%		£261.5m
- basic	£93.5m	£119.7m	(22)%		£211.6m
Tax rate - headline²	23.5%	24.0%	(0.5)pts		23.5%
Earnings per share - headline¹	34.3p	35.2p	(3)%		70.4p
- basic	23.0p	31.6p	(27)%		53.2p
Dividends per share³	7.50p	7.25p	3%		21.75p
Free cash flow¹	£(20.1)m	£(29.3)m	down £9.2m		£90.1m
Net debt¹	£450.5m	£428.8m	up £21.7m		£363.9m

¹ Refer to Note 16 of the attached condensed financial statements for definitions
² Tax rate on headline profit before tax (before share of post-tax loss of joint ventures)
³ Dividends are presented on an "as declared" basis

Commenting on the Group's results and outlook, Nick Salmon, Chief Executive, said:

"These results reflect a satisfactory first half performance in our main businesses, with a particularly strong profit improvement in the Performance Materials and Precious Metals Processing divisions. Whilst the Engineered Ceramics division saw marginal improvement in its three largest businesses, trading conditions in its smaller Fused Silica business continue to be very difficult and its resultant losses have impacted the Group's overall performance. Decisive action has been taken to restructure this business.

"We continue to enhance the overall quality of our businesses. We have disposed of two low margin businesses - the US Precious Metals Processing operations and a refractory lining installation business in Australia - and we have integrated the recently acquired Metallurgica into the Engineered Ceramics division. We continue to invest selectively in the emerging markets capacity and R&D capabilities of Performance Materials and Engineered Ceramics. Our financial position remains strong, and we have taken further steps to significantly de-risk the Group's pension arrangements.

"Looking to the second half, we expect Performance Materials to benefit from its normal seasonal weighting, and Precious Metals Processing should maintain its good performance. Recent signs of a general weakening in the global economy and slowing industrial production point to somewhat softer demand in Engineered Ceramics' main end-markets and, in response, we are taking the necessary management actions.

"Overall, we continue to make progress towards the three year performance targets set out in January 2011, and the recently announced strategic review of options to further enhance performance and unlock shareholder value is proceeding as planned."

INTERIM MANAGEMENT REPORT

The Directors submit their Interim Management Report ("IMR"), together with condensed financial statements of the Group, for the six months ended 30 June 2012.

This IMR has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to Cookson Group plc and its subsidiaries when viewed as a whole.

SUMMARY OF GROUP PERFORMANCE

Trading performance

Group revenue in the first half of 2012 of £1,300m was 8% lower than the same period last year on an as reported basis and 4% lower on an underlying basis. The main differences between the reported and underlying figures were the pass through to customers of lower commodity metals prices in the Performance Materials division, the disposal of the US Precious Metals Processing business on 1 May 2012, and the acquisitions of SERT and Metallurgica in November 2011 and March 2012 respectively. The underlying decline in revenue reflects the strategy to exit lower margin business in both Advanced Refractories and Performance Materials together with the significant reduction in Fused Silica revenue.

Trading profit of £141.2m was £4.7m (3%) lower than that reported in the first half of 2011 with good improvements in the Performance Materials and Precious Metals Processing divisions offset by losses in the Engineered Ceramics division's Fused Silica business and adverse foreign exchange translation. The Group's return on sales margin improved to 10.9% (H1 2011: 10.3%).

The Engineered Ceramics division's revenue of £819m was £32m (4%) lower than that reported in the same period last year with the Fused Silica business's revenue of £23m being £24m below the prior period figure. The division's trading profit of £86.6m was £11.9m (12%) below the same period last year with the three principal businesses (Steel Flow Control, Advanced Refractories and Foundry Technologies) combined marginally ahead, but with the Fused Silica business recording a loss of £5m compared with a profit of £8m in the same period last year and a £1m loss in the second half of 2011. The Fused Silica business has been impacted by the marked downturn in the global solar industry which started in mid-2011 and has proved deeper and more extended than previously anticipated. Further cost reduction plans have recently been implemented involving the closure of the Solar Crucible™ production facility at Moravia in the Czech Republic with effect from 1 July 2012.

The Performance Materials division continued to deliver the anticipated strong performance improvement with further penetration of higher growth market segments, such as smartphones and tablets, based on innovative, higher margin products. The division's revenue of £362m was £55m (13%) lower than that reported in the first half of 2011 but this partially reflected the impact of passing through to customers lower commodity tin, silver and gold prices. Excluding the impact of these commodity metals, underlying revenue was 7% lower, reflecting the continuing strategy of exiting sales of more commoditised, lower margin products while growing sales of the higher margin products referred to above. As a result, trading profit of £50.0m was £5.0m higher than the first half of 2011 and the return on net sales value increased to 24.4% (H1 2011: 21.8%).

The Precious Metals Processing division benefited from the disposal of the US operations, completed on 1 May 2012, and continuing high levels of reclaim business offsetting weakness in retail markets in Europe. In the four months up to disposal, the US business recorded net sales value of £15m and a trading profit of £1.7m. The European operations recorded net sales value of £40m and a trading profit of £7.9m, in line with the prior year. Overall, the division recorded net sales value of £55m (H1 2011: £65m) and trading profit of £9.6m, an increase of £2.9m (43%).

Exceptional items

A net charge, pre-tax, of £34.1m was incurred in the first half of 2012 (H1 2011: £12.4m) due to charges principally relating to amortisation of intangible assets (£8.8m), restructuring charges (£18.2m - the main item being fixed asset write offs in relation to the closure of the Moravia, Czech Republic Solar Crucible™ production facility), and the loss on disposal of continuing operations and acquisition-related costs (£7.1m - principally the disposal of the US operations of the Precious Metals Processing division).

Of the total net charge, £6m is cash related and £28m is non-cash related.

Portfolio changes

In addition to the sale of the US operations of the Precious Metals Processing division reported above, the following transactions have been completed since the start of 2012.

The acquisition of Metallurgica, one of the world's leading suppliers of mould flux used in the enclosed continuous steel casting process, was completed on 29 March. The business has been integrated into the Engineered Ceramics division's Steel Flow Control business. In 2011, Metallurgica had revenue of €48m (£42m) and a trading profit of €4.6m (£4.0m).

On 24 July, the Engineered Ceramics division's refractory lining installation operation based in Australia (named Andreco-Hurll) was sold to Veolia Environmental Services for a cash consideration of Aus$8m (£5m). In the first half of 2012, Andreco-Hurll had revenue of Aus$17m (£11m) and a trading profit of Aus$0.7m (£0.4m).

Taxation

The tax charge on ordinary activities was £30.1m on a headline profit before tax of £127.6m, an effective tax rate (before share of post-tax loss of joint ventures) of 23.5%. The effective tax rate in the full year 2011 was also 23.5%.

Attributable profits and earnings

Headline attributable profit for the first half of 2012 was £94.9m (first half 2011: £97.1m) and headline earnings per share was 34.3p (H1 2011: 35.2p).

After taking account of all items excluded from headline profit before tax noted above (net of the related tax impact), the Group recorded a profit of £63.6m for the first half of 2012 (first half 2011: £87.3m).

Dividend

Consistent with our stated target of growing dividends per share at least in line with earnings, the Board is declaring an interim dividend of 7.50p per share (2011: interim dividend - 7.25p)

Pensions

The net pension deficit at 30 June 2012 was £81m (31 December 2011: £59m). The increase arose as a result of a reduction in the applicable interest rates used to value liabilities.

The offer of enhanced transfer values to deferred members of the UK defined benefit pension plan ("the UK Plan"), launched last year, was successfully completed in the first half of 2012. In total 550 members took advantage of the scheme and, as a result, longevity and investment risk has been eliminated in respect of £50m (c.10%) of Cookson's total UK pension liabilities.

On 19 July 2012, the Trustee of the Plan and Pension Insurance Corporation announced that they had signed a pension insurance buy-in agreement covering all of the pensioner members of the UK Plan. This eliminates inflation, interest rate, investment and longevity risk in respect of around 60% of Cookson's total UK pension liabilities.

Both the enhanced transfer offer and pensioner insurance buy-in are further steps in the on-going strategy of de-risking the Group's defined benefit pension arrangements.

Financial position

In line with expectations, net debt at 30 June 2012 was £451m compared with £429m at 30 June 2011 and £364m at 31 December 2011. Working capital increased by £90m in line with normal seasonal trends, whereby working capital increases towards mid-year and then reduces through the second half of the year.

On 2 May 2012, US$190m (£117m) of US Private Placement loan notes dating from 2000, which had an interest rate of 8.1%, were repaid on their scheduled maturity date. Following this repayment, the Group's committed debt facilities now comprise the £600m five year Revolving Credit facility agreed in April 2011 and US$250m (£159m) of US Private Placement loan notes that were issued in December 2010 with an average weighted interest rate of 4.67%. The average weighted remaining duration of the Group's debt facilities is 4.5 years.

At 30 June 2012, the ratio of net debt to EBITDA was 1.3 times (as compared with not more than 3.0 times for bank covenant purposes) and is expected to decline further by year-end in line with the normal seasonality of cash generation. Hence the Group's financial position is strong with a good level of liquidity under long-term financing arrangements.

STRATEGIC REVIEW

On 17 May 2012, the Board announced the initiation of a review of the strategic portfolio options for the Group, believing that there remains considerable scope further to enhance performance of the individual businesses and unlock further shareholder value. These options include a potential demerger or separation of Cookson's main divisions, given the limited operational or end-market overlap between the Engineered Ceramics and the Performance Materials divisions. The review is proceeding as planned and the Board expects to be able to update shareholders on the outcome of the review before year-end.

DIRECTORATE

Steve Corbett, the Chief Executive of the Performance Materials division, joined the Board as an executive Director on 1 May 2012.

Christer Gardell joined the Board as a non-executive Director on 1 June 2012. Christer Gardell is Managing Partner of Cevian Capital which currently owns just over 20% of Cookson's issued share capital.

GROUP TARGETS

On 26 January 2011, targets were set for performance improvement over the three years ending 31 December 2013 and the strategy for achieving those targets. The following table sets out those targets and the continuing progress achieved to date.

3 year Targets for 2013

Progress to date

• Average annual revenue growth to exceed 1.5 times global GDP growth

• Return on sales margin of 12% by 2013 (assuming constant metals prices)

• Double digit average annual headline earnings growth

• Dividend growth at least in line with earnings growth

• Return on investment ('ROI') increasingly ahead of Group WACC

• Maintaining a strong financial position with net debt to EBITDA leverage ratio not more than 1.5 times at year end and 1.75 times at mid-year

• H1 2012 revenue versus H1 2010: +6% as reported; +7% underlying

• H1 2012 margin restated at average 2010 metals prices: 11.3% versus 10.9% in FY2011 and 9.9% in FY2010

• H1 2012 headline earnings versus H1 2010: +27%

• 2012 interim dividend 7.50p, +3% on 2011 (2011 final dividend: +26% on 2010)

• H1 2012 ROI: 9.8% (10.3% in FY 2011 and 9.6% in FY 2010)

• Net debt:EBITDA ratio at 30 June 2012 of 1.3 times

Achievement of these targets is being underpinned by:

• leading global market positions, supplying consumables to essential industries - steel, foundry and electronics;

• a track record of market share gains with new, enhanced technology, higher margin products - increased R&D capability and spending;

• significant developing market exposure (c.50% of revenue and trading profit);

• considerable further recovery potential in mature markets where the cost base has been significantly reduced

• opportunities to leverage further organic growth through bolt-on acquisitions; and

• the maintenance of strong cash flow conversion.

OUTLOOK

The global macro-economic environment is increasingly uncertain. Following the improving trends up to the middle of the second quarter, there have been more recent signs of general weakening in the global economy and slowing industrial production, most notably in Europe.

As a consequence, we now expect the Engineered Ceramics division's main steel production and foundry casting markets to be somewhat softer in the second half of the year than in the first half. Following the recent further restructuring of the Fused Silica business, we expect a significantly lower level of trading losses from this business in the second half even if its end-markets do not improve.

We expect the Performance Materials division to benefit from the normal seasonal strengthening in its end-markets in the second half, and for the Precious Metals Processing division to maintain its current good performance.

REVIEW OF OPERATIONS

Group


	First half		Inc/(dec) vs H1 2011		Full year
	2012	2011	Reported rates	Constant rates	2011

Revenue	£1,300m	£1,421m	(8)%	(7)%	£2,826m
Trading profit	£141.2m	£145.9m	(3)%	-	£290.2m
Return on sales	10.9%	10.3%	0.6pts	0.7pts	10.3%

Group revenue in the first half of 2012 of £1,300m was 8% lower than the same period in 2011, partially reflecting the pass-through to customers of lower metal prices in the Performance Materials division and the disposal, on 1 May 2012, of the US operations of the Precious Metals Processing division. On an underlying basis (being revenue at constant exchange rates, and adjusted for differences in commodity metal prices, acquisitions and disposals), revenue was 4% lower. The underlying decline in revenue reflects the strategy to exit lower margin business in both Advanced Refractories and Performance Materials together with the significant fall in Fused Silica revenue. Demand in the Group's key end-markets of steel production, foundry castings and electronics has been stable overall during the period with generally weaker demand in Europe offset by continued growth in the Americas and Asia-Pacific, although towards the end of the period there have been further signs of slowing global industrial production. Revenue for the Group was well balanced geographically with 34% coming from sales to customers in Europe, 31% from Asia-Pacific, 25% from NAFTA and 10% from the Rest of the World.

Trading profit in the first half of 2012 of £141.2m was unchanged compared to the same period last year at constant exchange rates, but marginally (3%) lower at reported exchange rates. Whilst trading profit improved in the Performance Materials and Precious Metals Processing divisions, and in the three principal businesses of the Engineered Ceramics division, the latter's profitability was negatively impacted by the Fused Silica business which made a £5m loss in the first half of 2012 having made a trading profit of £8m in the first half of 2011 and a £1m loss in the second half of 2011.

The return on sales margin in the first half of 2012 was 10.9%, continuing the improvement seen in 2011 (10.3% in both the first and second halves of 2011). This improvement reflected both the impact of lower metal prices (notably for silver and tin), which reduced reported revenue in the Performance Materials and Precious Metals Processing divisions without any impact on profitability, and the return to profitability of the US operations of the Precious Metals Processing division prior to their disposal in May 2012. The return on sales margin in the first half of 2012 would have been 11.3% if metal prices had remained at 2010 average levels.

Note: in the divisional and product line narrative analysis below, all of the financial information is presented at constant currency, unless indicated otherwise.

Engineered Ceramics division

Trading under the Vesuvius and Foseco brand names, the Engineered Ceramics division is the world leader in the supply of advanced consumable products and systems to the global steel industry (which accounts for a little over half of revenue) and the global foundry industry (approximately one third of revenue) and is a leading supplier of speciality products to the glass and solar industries.


	First half		Inc/(dec) vs H1 2011		Full year
	2012	2011	Reported rates	Constant rates	2011
		As reported			As reported

Revenue	£819m	£851m	(4)%	(1)%	£1,686m
Trading profit	£86.6m	£98.5m	(12)%	(9)%	£193.2m
Return on sales	10.6%	11.6%	(1.0)pts	(0.8)pts	11.5%

The Engineered Ceramics division in the first half of 2012 experienced overall stable demand in its principal end-markets of steel production and foundry castings, but very weak demand in the solar end-market which significantly impacted demand for the division's Solar Crucible™ products. Revenue of £819m was £11m (1%) lower than the first half of 2011. Revenue for the Fused Silica business was £23m, half of the total for the first half of 2011 and £9m below the second half of 2011. On an underlying basis (being revenue at constant exchange rates and adjusted for the acquisitions of SERT in November 2011 and Metallurgica in March 2012), revenue was 3% lower. Excluding the Fused Silica business, underlying revenue for the remainder of the division was unchanged.

Trading profit for the division's three principal businesses (Steel Flow Control, Advanced Refractories and Foundry Technologies, together comprising around 97% of the division's revenue) was 3% higher than the first half of 2011. As expected, the trading losses in the Fused Silica business (of which Solar Crucibles™ now represents around one-third of revenue), which started in the second half of 2011, continued into 2012. The Fused Silica business incurred trading losses of £5m in the first half of 2012 compared to a trading profit of £8m in the first half of 2011 (trading loss of £1m in the second half of 2011). Therefore, due to the weaker performance of the Fused Silica business, the division's overall trading profit in the first half of 2012 of £86.6m was £8.2m (9%) lower than the first half of 2011 (12% at reported exchange rates).

The return on sales margin in the first half of 2012 was 10.6% (first half 2011: 11.4%). Excluding the Fused Silica business, the return on sales margin for the remaining Engineered Ceramics division was 11.5% in the first half of 2012 (first half 2011: 11.1%).

As previously outlined, the Engineered Ceramics division expects to double its R&D spend over the next four years and, as part of this initiative, investments in land and facilities for R&D centres are being made in Pittsburgh, US and Visag, India.

Steel Flow Control

The Steel Flow Control business provides a full range of consumable products, systems and technical services to control, regulate and protect the flow of steel in the enclosed continuous casting process. Products include VISO™ and VAPEX™ products, slide-gate and tube changer systems and refractories, gas purging and temperature control devices, and mould and tundish fluxes.

Global steel production represents almost 100% of the end-market for Steel Flow Control products and services. According to the World Steel Association ("WSA"), global steel production in the first half of 2012 was 1% higher than the first half of 2011 (unchanged for the world excluding China), with the EU (27 countries) 5% lower, NAFTA 7% higher, and China 2% higher. This reflects a continuation of the generally weaker trends seen in the latter months of 2011, particularly in Europe and China.

Revenue of £278m was 6% higher compared to the first half of 2011. On an underlying basis (being revenue at constant exchange rates and adjusted for the acquisitions of SERT in November 2011 and Metallurgica in March 2012), revenue was unchanged.

During 2011, the cost of the key raw materials used in Steel Flow Control products rose significantly, notably for graphite and zirconia. Compensating price increases were agreed with our customers throughout 2011 and these have benefitted the first half of 2012. Raw material prices have stabilised somewhat in the first half of 2012. The Steel Flow Control results have been negatively impacted by a reserve for a potential bad debt of £2m relating to one of its US customers, RG Steel, which filed for Chapter Eleven bankruptcy protection in May 2012.

The acquisition of Metallurgica was completed on 29 March 2012. Metallurgica is one of the world's leading suppliers of mould flux used alongside refractory products in the enclosed continuous steel casting process. The business has been integrated into the Steel Flow Control business and made a positive contribution in the second quarter of 2012, in line with expectations. In 2011, Metallurgica had revenue of €48m (£42m) and a trading profit of €4.6m (£4.0m).

The second phase of the project to double the capacity of the existing facility in Trinec, Czech Republic to service more effectively the Eastern Europe and CIS steel market is progressing well and is expected to be completed by the end of the year. A new facility is being built in Brazil to improve the efficiency of raw material processing.

Advanced Refractories

Advanced Refractories includes products and services that enable customers' plants to withstand the effects of extreme temperatures or erosive chemical attack and reduce energy consumption and carbon emissions. The business manufactures castables, gunning materials, ramming mixes, pre-cast shapes, tap hole clay, bricks, mortars, and provides construction and installation services.

Global iron and steel production represents more than 75% of the end-market for Advanced Refractory's products and services with the remainder arising from a variety of non-steel markets including the cement, lime, aluminium, power generation, petrochemical and waste incineration industries.

Revenue of £252m represented a 4% decrease compared to the first half of 2011. The decrease in revenue was wholly due to a reduction in revenue in Andreco-Hurll, the refractory lining installation operation based in Australia. As part of the division's strategy of exiting low margin businesses, on 24 July 2012, Andreco-Hurll was sold to Veolia Environmental Services for a cash consideration of approximately Aus$8m (£5m). In the first half of 2012, Andreco-Hurll had revenue of Aus$17m (£11m) and a trading profit of Aus$0.7m (£0.4m). Excluding the Andreco-Hurll business, revenue in the first half of 2012 increased 2% on the same period last year. While the installation market has been exited, a refractories manufacturing and sales business has been retained in Australia.

As with Steel Flow Control, raw material prices, notably for magnesite - the single most important raw material for Advanced Refractories - stabilised somewhat in the first half of 2012 following large increases in 2011.

The construction of a new monolithic lining facility in Ras Al Khaimah, United Arab Emirates at a total cost of £4m is progressing well, with completion expected by the end of 2012. The fast growing Middle East market is currently being served from existing facilities in the UK and Malaysia. Local production should facilitate greater penetration of the linings market in this region which is growing strongly due to significant capacity expansion particularly in the steel, cement and aluminium industries.

Foundry Technologies

The Foundry Technologies business is a leading supplier of consumable products and technical services to the foundry industry worldwide and trades under the Foseco brand name. Products include feeding systems, filters, metal treatments, metal transfer systems, crucibles, stoppers, sand binders, coatings and moulding materials used in the production of metal castings. These products improve quality and yields whilst reducing energy consumption and production costs.

The global foundry industry produces castings which are used in a wide variety of engineered products. Approximately 40% of castings (and therefore a similar percentage of the revenue for the Foundry product line) are produced for the vehicle sector, being 25% for cars and light trucks ('automotive') and 15% for heavy trucks. Other end-markets for foundry castings include construction, agriculture and mining machinery; power generation equipment, pipes and valves; railroad, and general engineering equipment.

Revenue of £266m represented a 3% increase compared to the first half of 2011. Foundry casting end-market conditions have been mixed with good levels of activity in North America and Northern Europe (notably Germany and Scandinavia), but relative softness in Southern Europe, South Korea, China and Japan. Generally end-market conditions have weakened in the second quarter compared to a relatively strong first quarter, particularly in Europe.

The Foundry Technologies facility in Ping Tung, Taiwan is in the process of being extended and refurbished for completion by the end of 2012. In anticipation of strong growth in the Chinese foundry castings end-market over the next few years, approval has recently been given for the construction of a new production facility for coatings and feeding systems in Changzhou, 55 miles north-west of Shanghai. In addition, filter and metal treatment production capacity will be installed at the existing foundry crucible facility in Wei Ting, near Suzhou. The total investment in these new facilities is around £13m spread over the next two and a half years.

Fused Silica

The principal products in the Fused Silica business are Solar Crucibles™ used in the manufacture of photovoltaic ("solar") panels and tempering rollers used in the glass industry.

The Fused Silica business represents less than 3% of revenue in the Engineered Ceramics division (and less than 2% of total Group revenue). Revenue of £23m represented a 50% decrease compared to the first half of 2011. Solar Crucible™ revenue, which now represents around one-third of total Fused Silica revenue, decreased by 78% compared to the first half of 2011. Whilst the prospects for the solar industry in the medium to long-term remain very promising, since mid-2011 customers have, as previously reported, significantly cut production in response to excess global inventories of finished solar panels. In particular, REC, the business's largest customer in Europe, announced in April 2012 the permanent closure of its Norwegian production facilities. Whilst a recovery in the market was previously anticipated for the second half of 2012, this is now looking increasingly unlikely.

For glass tempering rollers and other speciality products used in the manufacture of glass, revenue decreased 8% compared to the first half of 2011.

The reduction in demand for Solar Crucibles™ has led to the trading losses in the Fused Silica business in the second half of 2011 continuing into 2012. The business incurred trading losses of £5m in the first half of 2012 compared to a trading profit of £8m in the first half of 2011 (trading loss of £1m in the second half of 2011).

Steps were taken during the period to adapt to these market conditions by removing temporary workers and adopting some short-time working arrangements in Europe, and by some permanent workforce reductions in the Chinese operations. A number of technological innovations have been developed both to improve product quality and also to significantly reduce production costs, and hence improve competitiveness. Most recently, and consistent with the contingency planning outlined in May, the Solar Crucible™ production facility in Moravia in the Czech Republic was closed. This restructuring, which involved a headcount reduction of approximately 100, was completed in July and has resulted in cash-related redundancy costs of £0.6m and a non-cash asset write-off of £14m.

The resultant cost savings are expected to enable the Fused Silica business to significantly reduce its trading losses in the second half of the year compared to the first half even assuming end-market demand remains at current depressed levels.

Whilst a strong recovery in the solar panel manufacturing market is anticipated, the precise timing remains uncertain and it is expected to be centred on Asian producers, notably in China, with more limited recovery in Europe. The Group retains two Solar Crucible™ production facilities in China and one in Poland.

Performance Materials division

The Performance Materials division is a world leading supplier of electronic assembly materials and advanced surface treatment and plating chemicals. The electronic equipment production end-market accounts for approximately three-quarters of revenue with the other quarter being direct applications (non-electronics) in automotive and industrial production. The division comprises two businesses; Joining Technologies, which is a supplier of solder, fluxes, adhesives, and related products, and Surface Chemistries, which is a supplier of electro-plating chemicals.


	First half		Inc/(dec) vs H1 2011		Full year
	2012	2011	Reported rates	Constant rates	2011
		As reported			As reported

Revenue	£362m	£418m	(13)%	(13)%	£814m
Net sales value	£205m	£207m	(1)%	2%	£418m
Trading profit	£50.0m	£45.0m	11%	11%	£99.6m
Return on sales	13.8%	10.8%	3.0pts	2.9pts	12.2%
Return on net sales value	24.4%	21.8%	2.6pts	1.8ps	23.8%

Electronics end-markets have been reasonably stable during the half year with a continued strong performance in the Americas and Asia-Pacific more than offsetting weaker end-market conditions in Europe. According to recent estimates from Henderson Ventures, global production of electronic equipment (measured in US dollars at constant currency) is forecast to grow 4.7% in 2012 (6.3% in 2013) driven, in particular, by strong growth in tablets and smartphones. Henderson Ventures expects tablet sales to nearly double from 67m units in 2011 to around 120m units in 2012. Mobile phone unit sales are expected to grow around 5% in 2012, but with the more technically sophisticated smartphones increasing by around 37%. Automotive and industrial markets have been generally strong in the Americas and Asia-Pacific but weaker in Europe, particularly in the second quarter.

Revenue of £362m was 13% lower than the first half of 2011 (13% lower at reported exchange rates). This partially reflected the 'pass through' to customers of lower tin and silver prices, both major raw materials for Joining Technologies, and lower palladium prices in the Surface Chemistries business. In the first half of 2012, the average prices of tin, silver and palladium were respectively 27%, 14% and 16% lower than the same period last year, such that approximately £27m of the division's revenue decrease was as a result of these lower metal prices. Excluding the impact of these commodity metals, underlying revenue was 7% lower compared to the first half of 2011. Asia-Pacific, the division's largest region, accounted for 44% of revenue in the first half of 2012 (by location of customer).

The negative revenue growth reflects the continuing strategy of exiting more commoditised products (particularly bar solder and proprietary chemicals) offset by the continued market penetration of innovative, higher margin, products such as advanced solder pastes, copper damascene, 'tape and reel' packaged solder pre-forms, and plating-on-plastics chemicals.

In the first half of 2012, the division's revenue included £78m of tin, £48m of silver and £32m of gold and palladium. Net sales value (which excludes these amounts from revenue) in the first half of 2012 was £205m (first half 2011: £200m).

As a result of the improving mix in the profitability of revenue, trading profit for the first half of 2012 rose significantly to £50.0m (first half 2011: £45.2m), a 11% increase (11% higher at reported exchange rates).

The return on sales margin in the first half of 2012 was 13.8%, well ahead of the 10.9% achieved in the first half of 2011. The pass through to customers of the lower tin and precious metals commodity prices discussed above decreased revenue by some £27m but had no material impact on trading profit. The return on sales margin in the first half of 2012 would have been 15.1% if metal prices had remained at average 2010 levels.

The return on net sales value in the first half of 2012 was 24.4%, ahead of the first half of 2011 (22.6%). Management believe this measure, which eliminates the impact of the pass through of commodity metals, is an important measure of the underlying profitability of the division.

The division normally sees a slightly stronger second half compared to the first due to the third quarter peak in electronic equipment production ahead of Thanksgiving and Christmas consumer spending.

Joining Technologies

Joining Technologies is a leading global supplier of materials to assemblers of printed circuit boards ("PCBs") and the semi-conductor packaging industry and to certain non-electronics markets such as automotive and water treatment. Its principal brand name is Alpha and products include solder (in bar, wire, paste, powder and sphere form) and fluxes, adhesives, cleaning chemicals and stencils.

Revenue of £224m was 17% lower than the first half of 2011 (both at constant and reported exchange rates). Excluding the impact of passing through lower tin and silver prices, on an underlying basis revenue was 9% lower than the first half of 2011. This reflects the continuation of the successful strategy to focus on higher margin, enhanced technology products, and exiting more commoditised products such as bar solder. For solder products, which account for three-quarters of Joining Technologies revenue, sales of higher margin solder pastes were unchanged by weight compared to the first half of 2011 while bar solder was down 14%, partially reflecting the continuing shift from wave soldering to surface mount technology for the production of PCBs. Sales of tape-and-reel packaged pre-forms, which are manufactured shapes of solder used in joining applications requiring high physical strength, grew by 9% driven, in particular, by smartphone applications. The recycling, reclaim business in the US and China, in which scrap solder generated by our customers' production processes is reclaimed back into solder alloys for sale to third parties or for reuse within the business, also performed well in the period, notwithstanding lower metal prices.

Net sales value (which excludes the value of tin and silver from revenue) in the first half of 2012 was £98m (first half 2011: £90m).

The business continues to focus on new product development and on penetrating new markets, including LED, solar and power electronics. These new products include Ready Ribbon™, a pre-fluxed, solder coated, copper ribbon used for connecting solar cells within a solar panel, and nano-silver die attach products for use in the manufacture of LED lights and power electronics. Both products are currently being trialled at a significant number of customers and commercial sales are expected to commence shortly.

Surface Chemistries

The Surface Chemistries business manufactures and supplies speciality electro-plating chemicals under the trade name Enthone. Approximately 45% of sales are to the electronics industry and 55% to industrial and automotive applications.

Revenue of £138m for the first half of 2012 was 5% lower than the first half of 2011 (6% lower at reported exchange rates). Net sales value (which excludes the value of gold and palladium from revenue) in the first half of 2012 was £107m (first half 2011: £110m). Compared to the first half of 2011, sales of plating-on-plastics and corrosion and wear resistant products for automotive and industrial applications were up 1%, whilst sales of surface coating products serving the PCB fabrication market were down 4%. Copper damascene sales into the semi-conductor market were up 2% compared to the first half of 2011, with sales of products to customers for their recently launched 22 nanometre node semi-conductors commencing in the period.

The construction of the new £14m Chemistry facility in Shanghai, to serve China's growing electronic materials, automotive and industrial end-markets, is expected to be completed by the end of 2012. Currently the Chinese market is served from Cookson facilities in Shenzhen, Tianjin and Singapore.

Precious Metals Processing division

The Precious Metals Processing division is a leading supplier of fabricated precious metals (primarily gold, silver and platinum) to the jewellery industry in the UK, France and Spain, and also has significant precious metal recycling operations.


	First half		Inc/(dec) vs H1 2011		Full year
	2012	2011	Reported rates	Constant rates	2011
		As reported			As reported

Revenue	£119m	£152m	(22)%	(21)%	£326m
Net sales value	£55m	£65m	(15)%	(14)%	£132m
Trading profit	£9.6m	£6.7m	43%	55%	£6.2m
Return on net sales value	17.4%	10.3%	7.1pts	7.7pts	4.7%

The Precious Metals division previously operated in two distinct geographic regions; Europe (which is focused on the UK, France and Spain), and the US. On 1 May 2012, the US operations, which were loss-making in 2011, were sold to Richline Group, Inc. (a subsidiary of Berkshire Hathaway Inc.). The net cash consideration is subject to closing balance sheet adjustments but is expected to be sufficient for the exit from the US business to be cash neutral, taking into account the restructuring and other costs incurred in preparing the business for sale. Following the restructuring in 2011, the US operations were restored to profitability, albeit at low levels, in the period prior to its disposal. Included in the divisional results for the first half of 2012 are the following amounts in respect of the US operations prior to their disposal; revenue of £42m; net sales value (being revenue less the precious metal content) of £15m; and trading profit of £1.7m.

The division's European operations are unaffected by the transaction. For these operations, net sales value of £40m in the first half of 2012 was 3% higher compared to the same period last year (1% lower at reported exchange rates). This reflected continuing weak retail jewellery markets being offset by continuing good levels of precious metal recycling, stimulated by the relatively high price of gold.

Trading profit for the European operations in the first half of 2012 at £7.9m was in line with that achieved in both the first and second halves of 2011. The return on net sales value was 19.9%, compared to 20.4% achieved in the first half of 2011.

Group corporate

The Group's corporate costs, being the costs directly related to managing the Group holding company were £5.0m, £0.7m higher than the same period last year.

FINANCIAL REVIEW

Group results highlights

	First half		Full year
	2012	2011	2011
Profit before tax (£m)
- headline	127.6	132.1	261.5
- basic	93.5	119.7	211.6

Earnings per share (pence)
- headline	34.3	35.2	70.4
- basic	23.0	31.6	53.2

Dividends per share (pence)¹
- interim	7.50p	7.25p	7.25p
- final			14.50p

Free cash flow (£m)	(20.1)	(29.3)	90.1
Net debt (£m)	450.5	428.8	363.9

¹ Dividends are presented on an "as declared" basis

Group Income Statement

Headline profit before tax

Headline profit before tax was £127.6m for the first half of 2012, slightly below the £132.1m for the same period in 2011. The change in headline profit before tax arose as follows:

	First half
	2012	2011	Change
	£m	£m	£m
Trading profit:
- at first half 2012 exchange rates	141.2	141.9	(0.7)
- currency exchange rate impact	-	4.0	(4.0)
Trading profit - as reported	141.2	145.9	(4.7)
Net finance charges - ordinary activities	(12.9)	(13.7)	0.8
Post-tax loss from joint ventures	(0.7)	(0.1)	(0.6)
Headline profit before tax	127.6	132.1	(4.5)

The £0.8m lower charge for net finance costs (interest) principally resulted from £1.4m lower pension interest being only partially offset by of £0.6m higher interest on borrowings, due partially to an increase in the average level of borrowings throughout the period. The higher average level of borrowings in the first half of 2012 reflected the impact of acquisitions made since 30 June 2011 and a number of one-off cash outflows in the first half of 2012 which are detailed below.

Items excluded from headline profit before tax

A net charge of £34.1m was incurred in the first half of 2012 (first half 2011: £12.4m) for the following items excluded from headline profit before tax:

Amortisation of intangible assets: costs of £8.8m (first half 2011: £8.9m) were incurred in the first half of 2012 relating to the amortisation of intangible assets, being customer relationships, intellectual property rights and the Foseco trade name, arising on the acquisition of Foseco in 2008. These intangible assets are being amortised over lives varying between 10 and 20 years.

Restructuring charges: the £18.2m charged in the first half of 2012 (first half 2011: £1.6m) comprised gross costs of £19.5m, net of associated asset-related gains of £1.3m. Of the net total of £18.2m, £14m related to non-cash related asset write-offs, and £4m to cash-related items, principally headcount reductions. Of the £18.2m, £2.8m arose in the Performance Materials division, mainly in relation to headcount reductions, and £15.7m arose in the Engineered Ceramics division. Of the total for the Engineered Ceramics division, £14.6m relates to the restructuring of the Fused Silica business, including the closure of the production facility in Moravia, Czech Republic and other cost saving initiatives. This latter charge comprised £14.0m of non-cash related asset write-offs and £0.6m of cash-related headcount reductions.

Restructuring charges of around £22m are expected to be incurred in the full year 2012.

Loss on disposal of continuing operations and acquisition-related costs: a net loss of £7.1m (first half 2011: £nil) was incurred in the first half of 2012, of which £6.4m relates to the disposal of the US operations of the Precious Metals Processing division. This business was in the process of being disposed of as at 31 December 2011 and was therefore recorded as held for sale at that date. On being classified as held for sale the net assets of the business were written down to their fair value less costs to sell. On 22 February 2012, an agreement was signed with Richline Group, Inc. (a subsidiary of Berkshire Hathaway Inc.) for it to acquire the Group's interest in this business and the disposal was completed on 1 May 2012. The loss incurred in the first half of 2012 relates mainly to a non-cash charge of £4.6m in respect of cumulative historic net foreign exchange gains and losses previously charged to reserves relating to the businesses disposed of. Under IFRS accounting, these are required to be 'recycled' through the income statement on disposal.

Group profit before tax and after the items noted above was £93.5m for the first half of 2012 compared to a profit before tax of £119.7m in the first half of 2011.

Taxation

Whilst the Group's effective tax rate going forward will be affected by the geographic split of profit before tax, it is currently expected that the effective tax rate for the full year 2012 will be around 23.5%.

Profit attributable to owners of the parent

Headline attributable profit for the first half of 2012 was £94.9m (first half 2011: £97.1m).

A tax credit of £2.8m (first half 2011: £2.6m) arose in relation to all the items excluded from headline profit before tax noted above.

Return on investment ("ROI")

The Group's post-tax ROI in the first half of 2012 was 9.8%, broadly in line with the 10.0% reported in the same period last year.

Earnings per share ("EPS")

Headline EPS, based on the headline profit attributable divided by the average number of shares in issue, amounted to 34.3p per share in the first half of 2012 (first half of 2011: 35.2p). Basic EPS, based on the net profit attributable to owners of the parent, was 23.0p (first half 2011: 31.6p). The average number of shares in issue during the first half of 2012 was 276.7m, 0.7m higher than for the first half of 2011 reflecting shares issued in respect of the award of shares to employees under the Long-Term Incentive Plan.

Dividend and dividend policy

One of the financial targets for the three year period to 2013 is that dividends would grow at least in line with earnings growth.

Consistent with this target, the Board is declaring an interim dividend of 7.50p per share (2011 interim dividend: 7.25p). This interim dividend is to be paid on 15 October 2012 to shareholders on the register on 14 September 2012. Any shareholder wishing to participate in the Cookson Dividend Reinvestment Plan ("DRIP") needs to have submitted their election to do so by 1 October 2012.

Group cash flow

Net cash flows from operating activities

In the first half of 2012, there was a £6.9m net cash inflow from operating activities compared to a £6.5m net cash outflow in the first half of 2011. This change arose from:

	First Half

	2012	2011	Change
	£m	£m	£m

EBITDA	168.7	173.6	(4.9)
Trade and other working capital	(90.5)	(134.9)	44.4
Restructuring charges paid	(23.5)	(7.9)	(15.6)
Additional pension plan funding contributions	(3.5)	(6.6)	3.1
Net interest paid	(13.2)	(3.9)	(9.3)
Taxation paid	(29.5)	(26.8)	(2.7)
Assets held for sale	(1.6)	-	(1.6)
Net cash inflow/(outflow) from operating activities	6.9	(6.5)	13.4

The cash outflow of £90.5m from trade and other working capital principally reflects the Group's normal seasonality, with a build-up of working capital in the first half of the year and some reduction expected during the second half. Whilst the absolute level of trade working capital increased during the first half of 2012 the ratio of average trade working capital to sales in the first half of 2012 of 22.7% remained in line with expectations and compares with 23.2% for the full year 2011.

Cash outflow for restructuring was £23.5m. This principally comprises a payment of £15.8m made in May 2012 to buy-out the property lease relating to the Performance Materials division's operations in Woking, UK. A cash outflow for restructuring of around £27m is expected in the full year 2012.

The cash outflow for additional pension plan funding contributions included the following:

UK defined benefit pension plan ("UK Plan"): payments totalling £3.5m were made into the UK Plan in the first half of 2012. A new funding valuation for the UK Plan as at the end of 2009 was completed in July 2010, based upon which Cookson and the Trustee agreed a new schedule of contributions of £7m per annum commencing in August 2010. The level of 'top-up' payments will be reviewed based on the UK Plan's next triennial valuation as of December 2012, which should be available in mid-2013.

US defined benefit pension plans: no payments were made into the US pension plans in the first half of 2012. However, in line with the previously announced intention to make additional 'top-up' payments of approximately US$10m (£6m) per annum into the plans with effect from the beginning of 2011, payments of approximately US$10m (£6m) are expected to be made into the plans in the second half of 2012.

Net cash flows from investing activities

Capital expenditure: payments to acquire property, plant and equipment in the first half of 2012 were £34.1m, £2.6m higher than the first half of 2011 and representing 124% of depreciation (first half 2011: 114%). A cash outflow for capital expenditure of around £75m is expected in the full year 2012 principally reflecting the expansion of production capacity in China, India, Brazil, Eastern Europe, Japan and Singapore; and customer installations in the Engineered Ceramics and Performance Materials divisions.

Acquisition of subsidiaries: a cash outflow of £26.4m (first half 2011: £0.4m) arose principally relating to the acquisition of Metallurgica, which completed on 29 March 2012.

Disposal of subsidiaries: a cash inflow of £14.8m (first half 2011: outflow of £1.9m) arose principally relating to the disposal of the US operations of the Precious Metals Processing division, which completed on 1 May 2012.

Free cash flow

Free cash flow is defined as net cash flow from operating activities after net outlays for capital expenditure, dividends received from joint ventures and paid to non-controlling shareholders, but before additional funding contributions to Group pension plans.

Free cash outflow for the first half of 2012 was £20.1m, £9.2m lower than the £29.3m outflow in the first half of 2011. This principally reflects the lower outflow from trade and other working capital between periods, as described above.

The Group traditionally experiences lower free cash flows in the first half of the year compared with the second half, due to the seasonality of trade working capital cash flows. Free cash flow is expected to be strongly positive in the second half of 2012. The free cash inflow for the year ended June 2012 was £99.3m (year ended December 2011: £90.1m; year ended June 2011: £49.3m).

Net cash flow before financing

Net cash outflow before financing for the first half of 2012 was £35.1m, £6.4m lower than the first half of 2011 due principally to the increase in cash inflow from operating activities described above.

Cash flow from financing activities

Net cash outflow from financing activities (before movement in borrowings) was £59.1m (first half of 2011: £67.2m), principally comprising the following:

Purchase of treasury shares: a cash outflow of £14.8m (first half 2011: £4.4m) arose relating to the purchase by the Employees Benefit Trust in March 2012 of Cookson Group plc shares in respect of the award of shares to employees under the Group's Long-Term Incentive and Deferred Share plans.

Dividends paid: a cash outflow of £40.3m arose in respect of the payment in June 2012 of the final dividend for 2011 (first half 2011: £31.8m).

Net cash outflow and movement in net debt

Net cash outflow for the first half of 2012 (before movement in borrowings) was £94.2m, £14.5m lower than the first half of 2011.

With an £8.2m positive foreign exchange adjustment and £0.6m in other non-cash movements, this resulted in an increase in net debt from £363.9m at 31 December 2011 to £450.5m at 30 June 2012, an increase of £86.6m. Net debt at 30 June 2011 was £428.8m.

Net debt

The net debt of £450.5m as at 30 June 2012 was primarily drawn on available committed facilities of around £759m. The Group's net debt comprised the following:

	30 June	31 December	30 June
	2012	2011	2011
	£m	£m	£m
US Private Placement loan notes (June 2012: US$250m; June and December 2011: US$440m)	159.2	283.7	273.9
Committed bank facility	415.3	260.5	260.5
Lease financing	4.1	4.1	3.7
Other	6.3	3.7	35.7
Gross borrowings	584.9	552.0	573.8
Cash and short-term deposits	(134.4)	(188.1)	(145.0)
Net debt	450.5	363.9	428.8

In the Capital Markets presentation on 26 January 2011, it was stated as part of the financial targets for the three year period to 2013 that the Group would maintain a strong financial position with a leverage ratio (net debt to EBITDA ratio) of not more than 1.5 times at year end and 1.75 times at the half year. The Group is currently operating very comfortably within this limit and, as at June 2012, the net debt to EBITDA ratio was 1.3 times (as compared with not more than 3.0 times for bank covenant purposes). Also as at 30 June 2012, the ratio of EBITDA to interest on borrowings was 14.4 times (as compared with not less than 4.0 times for bank covenant purposes). Based on these covenant ratios, the Group will pay a margin of 105bps over LIBOR on its borrowings under the committed bank facility.

As at 30 June 2012, the Group had undrawn committed debt facilities totalling around £185m.

Currently around 40% of the Group's current gross borrowings are at fixed interest rates for an average period of just under five years from June 2012. This reflects both the fixed interest rate nature of the US Private Placement loan notes and the Group entering into a number of interest rate swaps. The percentage of gross borrowings that are at fixed interest rates, which reduced following the repayment of US$190m (£117m) of US Private Placement loan notes in May 2012, is likely to be increased going forward in line with normal Group policy.

Currency

In the first half of 2012, the net translation impact of using 2012 rates to translate 2011 first half results was a decrease in first half 2011 revenue and trading profit of £24m and £4m respectively. Between these periods, the average exchange rates for sterling strengthened against the euro by 5%, the Czech koruna by 9%, the Polish zloty by 13% and the Brazilian real by 11%, but weakened against the US dollar by 2% and the Chinese renminbi by 6%.

Currently, around 55% of the Group's gross borrowings are non-sterling denominated, principally in US dollars and euros.

Pension fund and other post-retirement obligations

The Group operates defined contribution and defined benefit pension plans, principally in the UK, the US and Germany. The Group's principal defined benefit pension plans in the UK and the US are closed to new members and to further accruals for existing members.

As at 30 June 2012, a net deficit of £81.4m was recognised in respect of employee benefits. The increase of £22.7m from the net deficit as at 31 December 2011 of £58.7m primarily arose as a result of a reduction in the applicable discount rates used to value liabilities in the UK and US plans.

The total Group net deficit comprises a surplus of £46.2m relating to Cookson's UK defined benefit plan ("the UK Plan"), deficits of £66.6m relating to the Group's defined benefit pension plans in the US, £37.3m to plans in Germany, £14.5m to pension arrangements in other countries, and £9.2m to other, unfunded, post-retirement defined benefit arrangements.

During 2011, the Company offered the deferred members of the UK Plan the opportunity to transfer their benefits out of the UK Plan to another arrangement of their choice at an enhanced value. The offer of enhanced transfer values closed during the first half of 2012. In total some 550 members took up the offer and this has eliminated the inflation, interest rate, investment and longevity risk for Cookson in respect of the £50m of liabilities transferred out of the UK Plan (representing around 10% of total UK Plan liabilities). The impact on the IAS 19 valuation of UK pension liabilities of the transfers agreed up to 31 December 2011, were reflected in the results for 2011 as an exceptional charge of £5.9m. The impact of transfers agreed after 1 January 2012 was a charge of £0.3m and, not being material, has been reported in the first half of 2012 in arriving at trading profit.

The UK Plan assets include a liability-driven investment portfolio of financial derivative contracts which significantly reduces the risk that the Plan's assets will fall materially relative to the value of its projected liabilities for meeting future pension payments (the UK Plan's "economic liabilities").

On 19 July 2012, the UK Plan Trustee announced that it had entered into a pension insurance buy-in agreement with Pension Insurance Corporation ("PIC") to insure approximately 60% of the UK Plan's total liabilities. Under this arrangement, the UK Plan Trustee is paying an insurance premium of approximately £320m to PIC, wholly from the existing assets of the UK Plan, which will secure a stream of income exactly matching future on-going pension payments. The insured liabilities cover the UK Plan's pensioner members, who comprise some 3,350 members out of a total UK Plan membership of 5,900. This arrangement eliminates the inflation, interest rate, investment and longevity risk for Cookson in respect of these liabilities.

For plan funding purposes, the UK Plan's pensioner liabilities are valued using more prudent assumptions than those required under IAS19 for accounting purposes. On a funding basis - sometimes called the 'economic' or 'ongoing' basis - the insurance premium being paid to PIC represents some £10m less than the amount reserved in the UK Plan against these liabilities. This means that the funding level of the UK Plan - the measure which determines the level of additional contributions required to be made by Cookson - improves by some £10m as a result of the buy-in. On an accounting basis, the pensioner liabilities are valued using a higher discount rate (as required by IAS19), which produces a much lower valuation of those liabilities. As a consequence, the accounting surplus of £46m reported as at 30 June 2012 for the UK Plan would have been a deficit of some £10m if the buy-in transaction had, in fact, occurred prior to that date. The Group continues to fund the UK Plan on the basis of the funding valuation.

Both the enhanced transfer value offer and the pensioner buy-in represent further steps in the Group's on-going strategy of de-risking its defined benefit pension arrangements. A further exercise is currently underway in respect of the Group's US defined benefit plans, whereby members are being offered the opportunity to receive a lump sum payment of their accrued benefits, thereby removing their liability from the plans. The member liabilities associated with this offer amount to some £40m. The offer closes in the second half of 2012.

The total charge against trading profit in the income statement in the first half of 2012 for all pension plans (including defined contribution plans) was £10.0m, marginally lower than the first half of 2011. Included within net finance charges was £0.2m (first half 2011: £1.6m). Total pension cash contributions amounted to £17.8m in the first half of 2012 (first half 2011: £18.6m), which included £3.5m (first half 2011: £6.6m) of additional cash funding contributions into the UK and US plans.

RISKS AND UNCERTAINTIES

Throughout its global operations, Cookson faces various risks, both internal and external, which could have a material impact on the Group's long-term performance. Cookson manages the risks inherent in its operations in order to mitigate exposure to all forms of risk, where practical, and to transfer risk to insurers, where cost effective. On pages 29 to 31 of its 2011 Annual Report (a copy of which is available on Cookson's website at www.cooksongroup.co.uk), the Company sets out what the Directors regarded as being the principal risks and uncertainties facing the Group as at 27 February 2012 and which could have a material impact on the Group's long-term performance. The Directors continue to regard these as the principal risks and uncertainties facing the Group which might impact the Group's operations during the remainder of the second half of 2012. These can be summarised as risks associated with:

• Significant weakening in demand in the Group's core end-markets;

• Fluctuations in exchange rates, interest rates and the rate of inflation;

• Loss of customers to competitors if its businesses do not adapt to market developments or protect, maintain and enforce their intellectual property;

• Significant liabilities for any defects of its products or services;

• Adverse political, legal, regulatory and other developments in countries in which the Group operates; and

• Withdrawal or reduction of precious metal consignment arrangements, or increased precious metal prices.

Shareholder/analyst enquiries: Nick Salmon, Chief Executive Mike Butterworth, Group Finance Director	Cookson Group plc Tel: +44 (0)20 7822 0000
Media enquiries: John Olsen/Andrew Jaques/Ian Payne	MHP Communications Tel: +44 (0)20 3128 8100

Copies of the Half Year Financial Report will not be mailed to shareholders. Copies can be obtained from the Cookson website (www.cooksongroup.co.uk), or by contacting the Investor Relations department at the Company's registered office (see below).

Cookson management will make a presentation to analysts on 25 July 2012 at 9.00am (UK time). This will be broadcast live on Cookson's website. An archive version of the presentation will be available on the website later that day.

About Cookson Group plc:

Cookson Group plc is a leading materials science company operating on a worldwide basis in Ceramics, Electronics and Precious Metals markets.

The Engineered Ceramics division is the world leader in the supply of advanced consumable refractory products and systems to the global steel and foundry industries and a leading supplier of speciality ceramic products to the glass and solar industries. It is also a regional leader in the US, UK and Australia in the supply and installation of monolithic refractory linings.

The Performance Materials division is a leading supplier of advanced surface treatment and plating chemicals and assembly materials to the electronics, automotive, industrial and construction markets.

Forward-looking statements

This announcement contains certain forward-looking statements which may include reference to one or more of the following: the Group's financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies or synergies, budgets, capital and other expenditures, competitive positions, growth opportunities for existing products, plans and objectives of management and other matters.

Statements in this announcement that are not historical facts are hereby identified as "forward-looking statements". Such forward-looking statements, including, without limitation, those relating to the future business prospects, revenue, working capital, liquidity, capital needs, interest costs and income, in each case relating to Cookson, wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of Cookson and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. Such forward-looking statements should, therefore, be considered in light of various important factors. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include without limitation: economic and business cycles; the terms and conditions of Cookson's financing arrangements; foreign currency rate fluctuations; competition in Cookson's principal markets; acquisitions or disposals of businesses or assets; and trends in Cookson's principal industries.

The foregoing list of important factors is not exhaustive. When relying on forward-looking statements, careful consideration should be given to the foregoing factors and other uncertainties and events, as well as factors described in documents the Company files with the UK regulator from time to time including its annual reports and accounts.

Such forward-looking statements speak only as of the date on which they are made. Except as required by the Rules of the UK Listing Authority and the London Stock Exchange and applicable law, Cookson undertakes no obligation to update publicly or revise any forward looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this announcement might not occur.

Cookson Group plc, 165 Fleet Street, London EC4A 2AE

Registered in England and Wales No. 251977

www.cooksongroup.co.uk

Directors' responsibility statement

We confirm that to the best of our knowledge:

(a) The condensed financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU; and

(b) This half-yearly financial report includes a fair review of the information required by:

- DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

- DTR 4.2.8R of the Disclosure and Transparency Rules, being related parties' transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period; and any changes in the related parties' transactions described in the last annual report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

On behalf of the Board

Mike Butterworth

Group Finance Director

25 July 2012

Independent review report to Cookson Group plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-year financial report for the six months ended 30 June 2012 which comprises the condensed Group income statement, the condensed Group statement of comprehensive income, the condensed Group statement of cash flows, the condensed Group balance sheet, the condensed Group statement of changes in equity and the related explanatory notes. We have read the other information contained in the half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Paul Korolkiewicz

for and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square

London, E14 5GL

25 July 2012

Condensed Group Income Statement

For the six months ended 30 June 2012

		Half year	Half year	Full year
		2012	2011	2011
	Notes	£m	£m	£m

Revenue	2	1,300.2	1,420.5	2,826.4
Manufacturing costs		(929.2)	(1,036.3)	(2,083.2)
Administration, selling and distribution costs		(229.8)	(238.3)	(453.0)
Trading profit	2	141.2	145.9	290.2
Amortisation of intangible assets	3	(8.8)	(8.9)	(17.8)
Restructuring charges	4	(18.2)	(1.6)	(8.9)
Gains relating to employee benefits plans	5	-	-	15.2
Profit from operations	2	114.2	135.4	278.7
Finance costs - ordinary activities	6	(29.5)	(33.5)	(67.0)
- exceptional items	6	-	(1.9)	(1.9)
Finance income	6	16.6	19.8	38.3
Share of post-tax loss of joint ventures		(0.7)	(0.1)	-
Loss on disposal of continuing operations and acquisition-related costs	7	(7.1)	-	(36.5)
Profit before tax		93.5	119.7	211.6
Income tax costs - ordinary activities	8	(30.1)	(31.7)	(61.4)
- exceptional items	8	2.8	2.6	2.5
Profit for the period		66.2	90.6	152.7

Profit for the period attributable to:
Owners of the parent		63.6	87.3	146.8
Non-controlling interests		2.6	3.3	5.9
Profit for the period		66.2	90.6	152.7



Headline profit before tax
Trading profit		141.2	145.9	290.2
Net finance costs - ordinary activities		(12.9)	(13.7)	(28.7)
Share of post-tax loss of joint ventures		(0.7)	(0.1)	-
Headline profit before tax	16.4	127.6	132.1	261.5
Income tax costs - ordinary activities		(30.1)	(31.7)	(61.4)
Profit attributable to non-controlling interests		(2.6)	(3.3)	(5.9)
Headline profit attributable to owners of the parent		94.9	97.1	194.2


Earnings per share (pence)	9
From profit attributable to owners of the parent:
Basic		23.0	31.6	53.2
Diluted		22.7	31.3	52.3

Condensed Group Statement of Comprehensive Income

For the six months ended 30 June 2012

		Unaudited	Unaudited
		Half year	Half year	Full year
		2012	2011	2011
	Note	£m	£m	£m

Profit for the period		66.2	90.6	152.7

Other comprehensive (loss)/income for the period
Exchange differences on translation of the net assets of foreign operations		(47.0)	16.3	(47.5)
Reclassification of exchange differences on disposal of foreign operation		4.6	-	-
Exchange translation differences arising on net investment hedges		11.2	(2.6)	(3.3)
Change in fair value of cash flow hedges		(0.2)	0.2	(0.2)
Change in fair value of cash flow hedges transferred to profit for the period		(0.2)	-	-
Actuarial gains on employee benefits plans		0.5	19.4	39.6
Actuarial losses on employee benefits plans		(36.9)	(0.2)	(18.4)
Change in fair value of available-for-sale investments		(0.1)	0.7	0.1
Income tax relating to components of other comprehensive income	8	5.3	(4.5)	(11.9)
Other comprehensive (loss)/income net of income tax for the period		(62.8)	29.3	(41.6)

Total comprehensive income for the period		3.4	119.9	111.1

Total comprehensive income for the period attributable to:
Owners of the parent		2.0	116.8	108.7
Non-controlling interests		1.4	3.1	2.4
Total comprehensive income for the period		3.4	119.9	111.1

Condensed Group Statement of Cash Flows

For the six months ended 30 June 2012

		Unaudited	Unaudited
		Half year	Half year	Full year
		2012	2011	2011
	Notes	£m	£m	£m
Cash flows from operating activities
Profit from operations		114.2	135.4	278.7
Adjustments for:
Amortisation of intangible assets		8.8	8.9	17.8
Restructuring charges		18.2	1.6	8.9
Gains relating to employee benefits plans		-	-	(15.2)
Depreciation		27.5	27.7	56.3
EBITDA	16.8	168.7	173.6	346.5
Net increase in trade and other working capital		(90.5)	(134.9)	(86.8)
Net operating outflow related to assets and liabilities classified as held for sale		(1.6)	-	-
Outflow related to restructuring charges	4	(23.5)	(7.9)	(13.2)
Additional funding contributions into Group pension plans	12	(3.5)	(6.6)	(13.2)
Cash generated from operations		49.6	24.2	233.3
Interest paid		(13.8)	(11.1)	(27.6)
Interest received		0.6	7.2	10.0
Income taxes paid		(29.5)	(26.8)	(55.9)
Net cash inflow/(outflow) from operating activities		6.9	(6.5)	159.8

Cash flows from investing activities
Capital expenditure		(34.1)	(31.5)	(85.1)
Proceeds from the sale of property, plant and equipment		3.6	2.1	2.3
Acquisition of subsidiaries and joint ventures, net of cash acquired		(26.4)	(0.4)	(11.3)
Disposal of subsidiaries and joint ventures, net of cash disposed of		14.8	(1.9)	(4.4)
Settlement of closed-out interest rate swaps		(0.5)	(3.3)	(4.0)
Dividends received from joint ventures		1.0	1.2	1.2
Other investing outflows		(0.4)	(1.2)	(2.1)
Net cash outflow from investing activities		(42.0)	(35.0)	(103.4)
Net cash (outflow)/inflow before financing activities		(35.1)	(41.5)	56.4

Cash flows from financing activities
Repayment of borrowings		(117.0)	(252.8)	-
Increase in borrowings		155.6	289.6	41.2
Settlement of forward foreign exchange contracts		(4.9)	(25.5)	(27.6)
Proceeds from the issue of share capital		1.9	-	-
Purchase of treasury shares		(14.8)	(4.4)	(7.8)
Borrowing facility arrangement costs		-	(4.3)	(4.3)
Dividends paid to equity shareholders		(40.3)	(31.8)	(51.8)
Dividends paid to non-controlling shareholders		(1.0)	(1.2)	(1.3)
Net cash outflow from financing activities		(20.5)	(30.4)	(51.6)
Net (decrease)/increase in cash and cash equivalents	11	(55.6)	(71.9)	4.8
Cash and cash equivalents at beginning of period		183.9	181.4	181.4
Effect of exchange rate fluctuations on cash and cash equivalents		(3.3)	-	(2.3)
Cash and cash equivalents at end of period		125.0	109.5	183.9

Free cash flow
Net cash inflow/(outflow) from operating activities		6.9	(6.5)	159.8
Additional funding contributions into Group pension plans		3.5	6.6	13.2
Capital expenditure		(34.1)	(31.5)	(85.1)
Proceeds from the sale of property, plant and equipment		3.6	2.1	2.3
Dividends received from joint ventures		1.0	1.2	1.2
Dividends paid to non-controlling shareholders		(1.0)	(1.2)	(1.3)
Free cash (outflow)/inflow	16.6	(20.1)	(29.3)	90.1

Condensed Group Balance Sheet

As at 30 June 2012

		Unaudited		Unaudited
		30 June	31 December	30 June
		2012	2011	2011
	Notes	£m	£m	£m
Assets
Property, plant and equipment		386.6	399.4	411.7
Intangible assets		1,087.9	1,104.7	1,134.3
Employee benefits - net surpluses	12	46.2	65.6	20.6
Interests in joint ventures		28.2	31.2	27.1
Investments		5.9	5.7	6.3
Income tax recoverable		3.4	3.4	-
Deferred tax assets		20.3	20.8	19.9
Other receivables		22.2	21.7	10.4
Total non-current assets		1,600.7	1,652.5	1,630.3

Cash and short-term deposits		134.4	188.1	145.0
Inventories		304.5	300.2	346.7
Trade and other receivables		557.7	530.0	615.6
Income tax recoverable		1.9	1.9	4.0
Derivative financial instruments		2.3	3.7	2.5
Assets classified as held for sale		2.1	28.8	-
Total current assets		1,002.9	1,052.7	1,113.8
Total assets		2,603.6	2,705.2	2,744.1

Equity
Issued share capital		278.3	276.4	276.4
Share premium account		0.1	0.1	0.1
Other reserves		101.4	131.9	194.1
Retained earnings		879.8	899.3	866.4
Equity attributable to the owners of the parent		1,259.6	1,307.7	1,337.0
Non-controlling interests		25.0	24.6	25.4
Total equity		1,284.6	1,332.3	1,362.4

Liabilities
Interest-bearing borrowings		575.2	421.3	415.8
Employee benefits - net liabilities	12	127.6	124.3	108.9
Other payables		19.3	19.2	22.7
Provisions		37.6	55.7	49.7
Derivative financial instruments		-	-	11.5
Deferred tax liabilities		97.3	106.5	96.8
Total non-current liabilities		857.0	727.0	705.4

Interest-bearing borrowings		9.7	130.7	158.0
Trade and other payables		359.5	409.4	432.9
Income tax payable		55.2	53.6	52.5
Provisions		22.7	24.9	29.6
Derivative financial instruments		14.9	19.6	3.3
Liabilities directly associated with assets classified as held for sale		-	7.7	-
Total current liabilities		462.0	645.9	676.3
Total liabilities		1,319.0	1,372.9	1,381.7
Total equity and liabilities		2,603.6	2,705.2	2,744.1


Net debt
Interest-bearing loans - non-current		575.2	421.3	415.8
- current		9.7	130.7	158.0
Cash and short-term deposits		(134.4)	(188.1)	(145.0)
Net debt	16.11, 11	450.5	363.9	428.8

Condensed Group Statement of Changes in Equity

For the six months ended 30 June 2012

	Issued	Share		Investment-					Non-
	share	premium	Hedging	revaluation	Translation	Retained		Owners of	controlling	Total
	capital	account	reserve	reserve	reserve	earnings		the parent	interests	equity
	£m	£m	£m	£m	£m	£m		£m	£m	£m

As at 1 January 2011	276.4	0.1	(2.0)	(0.2)	181.5	797.8		1,253.6	23.5	1,277.1
Profit for the period	-	-	-	-	-	87.3		87.3	3.3	90.6
Exchange differences on the net assets of foreign operations	-	-	-	-	16.5	-		16.5	(0.2)	16.3
Exchange translation differences arising on net investment hedges	-	-	-	-	(2.6)	-		(2.6)	-	(2.6)
Change in fair value of cash flow hedges	-	-	0.2	-	-	-		0.2	-	0.2
Actuarial gains on employee benefits plans	-	-	-	-	-	19.4		19.4	-	19.4
Actuarial losses on employee benefits plans	-	-	-	-	-	(0.2)		(0.2)	-	(0.2)
Change in fair value of available-for-sale investments	-	-	-	0.7	-	-		0.7	-	0.7
Income tax relating to components of other comprehensive income	-	-	-	-	-	(4.5)		(4.5)	-	(4.5)
Other comprehensive income net of income tax for the period	-	-	0.2	0.7	13.9	14.7		29.5	(0.2)	29.3
Total comprehensive income for the period	-	-	0.2	0.7	13.9	102.0		116.8	3.1	119.9
Purchase of treasury shares	-	-	-	-	-	(4.4)		(4.4)	-	(4.4)
Recognition of share-based payments	-	-	-	-	-	2.8		2.8	-	2.8
Dividends paid (note 10)	-	-	-	-	-	(31.8)		(31.8)	(1.2)	(33.0)
Total transactions with owners for the period	-	-	-	-	-	(33.4)		(33.4)	(1.2)	(34.6)
As at 1 July 2011	276.4	0.1	(1.8)	0.5	195.4	866.4		1,337.0	25.4	1,362.4
Profit for the period	-	-	-	-	-	59.5		59.5	2.6	62.1
Exchange differences on the net assets of foreign operations	-	-	-	-	(60.5)	-		(60.5)	(3.3)	(63.8)
Exchange translation differences arising on net investment hedges	-	-	-	-	(0.7)	-		(0.7)	-	(0.7)
Change in fair value of cash flow hedges	-	-	(0.4)	-	-	-		(0.4)	-	(0.4)
Actuarial gains on employee benefits plans	-	-	-	-	-	20.2		20.2	-	20.2
Actuarial losses on employee benefits plans	-	-	-	-	-	(18.2)		(18.2)	-	(18.2)
Change in fair value of available-for-sale investments	-	-	-	(0.6)	-	-		(0.6)	-	(0.6)
Income tax relating to components of other comprehensive income	-	-	-	-	-	(7.4)		(7.4)	-	(7.4)
Other comprehensive income net of income tax for the period	-	-	(0.4)	(0.6)	(61.2)	(5.4)		(67.6)	(3.3)	(70.9)
Total comprehensive income for the period	-	-	(0.4)	(0.6)	(61.2)	54.1		(8.1)	(0.7)	(8.8)
Purchase of treasury shares	-	-	-	-	-	(3.4)		(3.4)	-	(3.4)
Recognition of share-based payments	-	-	-	-	-	2.2		2.2	-	2.2
Dividends paid (note 10)	-	-	-	-	-	(20.0)		(20.0)	(0.1)	(20.1)
Total transactions with owners for the period	-	-	-	-	-	(21.2)		(21.2)	(0.1)	(21.3)
As at 1 January 2012	276.4	0.1	(2.2)	(0.1)	134.2	899.3		1,307.7	24.6	1,332.3
Profit for the period	-	-	-	-	-	63.6		63.6	2.6	66.2
Exchange differences on the net assets of foreign operations	-	-	-	-	(45.8)	-	-	(45.8)	(1.2)	(47.0)
Reclassification of exchange differences on disposal of foreign operation	-	-	-	-	4.6	-	-	4.6	-	4.6
Exchange translation differences arising on net investment hedges	-	-	-	-	11.2	-	-	11.2	-	11.2
Change in fair value of cash flow hedges	-	-	(0.2)	-	-	-	-	(0.2)	-	(0.2)
Change in fair value of cash flow hedges transferred to profit	-	-	(0.2)	-	-	-	-	(0.2)	-	(0.2)
Actuarial gains on employee benefits plans	-	-	-	-	-	0.5	-	0.5	-	0.5
Actuarial losses on employee benefits plans	-	-	-	-	-	(36.9)	-	(36.9)	-	(36.9)
Change in fair value of available-for-sale investments	-	-	-	(0.1)	-	-	-	(0.1)	-	(0.1)
Income tax relating to components of other comprehensive income	-	-	-	-	-	5.3	-	5.3	-	5.3
Other comprehensive income net of income tax for the period	-	-	(0.4)	(0.1)	(30.0)	(31.1)	-	(61.6)	(1.2)	(62.8)
Total comprehensive income for the period	-	-	(0.4)	(0.1)	(30.0)	32.5	-	2.0	1.4	3.4
Shares issued in the period	1.9	-	-	-	-	-	-	1.9	-	1.9
Purchase of treasury shares	-	-	-	-	-	(14.8)	-	(14.8)	-	(14.8)
Recognition of share-based payments	-	-	-	-	-	3.1	-	3.1	-	3.1
Dividends paid (note 10)	-	-	-	-	-	(40.3)	-	(40.3)	(1.0)	(41.3)
Total transactions with owners for the period	1.9	-	-	-	-	(52.0)	-	(50.1)	(1.0)	(51.1)
As at 30 June 2012	278.3	0.1	(2.6)	(0.2)	104.2	879.8	-	1,259.6	25.0	1,284.6

Notes to the condensed financial statements

1. BASIS OF PREPARATION

1.1 BASIS OF ACCOUNTING

These condensed financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34, Interim Financial Reporting, as adopted by the EU and in accordance with the Disclosure and Transparency Rules of the UK's Financial Services Authority.

Except as noted in 1.4 below, these condensed financial statements have been prepared using the same accounting policies as used in the preparation of the Group's annual financial statements for the year ended 31 December 2011, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011. The financial information presented in this document is unaudited, but has been reviewed by the Company's auditor.

The comparative figures for the financial year ended 31 December 2011 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006. These sections address whether proper accounting records have been kept, whether the Company's accounts are in agreement with those records and whether the auditor has obtained all the information and explanations necessary for the purposes of its audit.

1.2 GOING CONCERN

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and, accordingly, they have continued to adopt the going concern basis in preparing the condensed financial statements for the six months ended 30 June 2012.

1.3 DISCLOSURE OF EXCEPTIONAL ITEMS

IAS 1, Presentation of Financial Statements, provides no definitive guidance as to the format of the income statement, but states key lines which should be disclosed. It also encourages the disclosure of additional line items and the reordering of items presented on the face of the income statement when appropriate for a proper understanding of the entity's financial performance. In accordance with IAS 1, the Company has adopted a policy of disclosing separately on the face of its condensed Group income statement the effect of any components of financial performance considered by the Directors to be exceptional, or for which separate disclosure would assist both in a better understanding of the financial performance achieved and in making projections of future results.

Both materiality and the nature and function of the components of income and expense are considered in deciding upon such presentation. Such items may include, inter alia, amortisation charges relating to intangible assets, the financial effect of major restructuring activity, profits or losses relating to non-current assets, gains or losses relating to employee benefits plans, finance costs, profits or losses arising on business disposals, and other items, including the taxation impact of the aforementioned items, which have a significant impact on the Group's results either due to their size or nature.

1.4 NEW AND REVISED IFRS

During the period the Group has adopted a number of revised and amended standards and interpretations, none of which has had a material impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

2. SEGMENT INFORMATION

For reporting purposes, the Group is organised into three main business segments: Engineered Ceramics, Performance Materials and Precious Metals Processing. It is the Cookson Board which makes the key operating decisions in respect of these segments. The information used by the Cookson Board to review performance and determine resource allocation between the business segments is presented with the Group's activities segmented between the three business segments, Engineered Ceramics, Performance Materials and Precious Metals Processing. Taking into account not only the basis on which the Group's activities are reported to the Cookson Board, but also the nature of the products and services of the product lines within each of these segments, the production processes involved in each and the nature of their end-markets, the Directors believe that these three business segments are the appropriate way to analyse the Group's results. The principal activities of each of these segments are described in the Review of Operations.

Segment revenue represents revenue from external customers (inter-segment revenue is not material) and segment result is equivalent to trading profit excluding corporate costs directly related to managing the parent company, which are reported separately in the tables below. Segment result includes items directly attributable to a segment as well as those items that can be allocated on a reasonable basis.

	Unaudited half year 2012
			Precious
	Engineered	Performance	Metals
	Ceramics	Materials	Processing	Unallocated	Group
	£m	£m	£m	£m	£m

Segment revenue	819.2	362.4	118.6	-	1,300.2
Net sales value (note 16.1)	819.2	204.8	55.1	-	1,079.1

Segment EBITDA (note 16.8)	109.3	54.3	10.0	-	173.6
Segment depreciation	(22.7)	(4.3)	(0.4)	-	(27.4)
Segment result	86.6	50.0	9.6	-	146.2
Corporate costs	-	-	-	(5.0)	(5.0)
Trading profit	86.6	50.0	9.6	(5.0)	141.2
Amortisation of intangible assets	(8.8)	-	-	-	(8.8)
Restructuring charges	(15.7)	(2.8)	0.3	-	(18.2)
Profit from operations	62.1	47.2	9.9	(5.0)	114.2
Finance costs					(29.5)
Finance income					16.6
Share of post-tax loss of joint ventures					(0.7)
Loss on disposal of continuing operations and acquisition-related costs					(7.1)
Profit before tax					93.5

Return on sales (%) (note 16.2)	10.6	13.8	n/a	n/a	10.9
Return on net sales value (%) (note 16.2)	10.6	24.4	17.4	n/a	13.1

	Unaudited half year 2011
			Precious
	Engineered	Performance	Metals
	Ceramics	Materials	Processing	Unallocated	Group
	£m	£m	£m	£m	£m

Segment revenue	851.3	417.7	151.5	-	1,420.5
Net sales value (note 16.1)	851.3	206.6	65.1	-	1,123.0

Segment EBITDA (note 16.8)	120.2	49.2	8.5	-	177.9
Segment depreciation	(21.7)	(4.2)	(1.8)	-	(27.7)
Segment result	98.5	45.0	6.7	-	150.2
Corporate costs	-	-	-	(4.3)	(4.3)
Trading profit	98.5	45.0	6.7	(4.3)	145.9
Amortisation of intangible assets	(8.9)	-	-	-	(8.9)
Restructuring charges	(1.5)	-	(0.1)	-	(1.6)
Profit from operations	88.1	45.0	6.6	(4.3)	135.4
Finance costs - ordinary activities					(33.5)
- exceptional items					(1.9)
Finance income					19.8
Share of post-tax loss of joint ventures					(0.1)
Profit before tax					119.7

Return on sales (%) (note 16.2)	11.6	10.8	n/a	n/a	10.3
Return on net sales value (%) (note 16.2)	11.6	21.8	10.3	n/a	13.0

	Full year 2011
			Precious
	Engineered	Performance	Metals
	Ceramics	Materials	Processing	Unallocated	Group
	£m	£m	£m	£m	£m

Segment revenue	1,685.8	814.4	326.2	-	2,826.4
Net sales value (note 16.1)	1,685.8	417.7	132.3	-	2,235.8

Segment EBITDA (note 16.8)	237.2	108.1	9.9	-	355.2
Segment depreciation	(44.0)	(8.5)	(3.7)	-	(56.2)
Segment result	193.2	99.6	6.2	-	299.0
Corporate costs	-	-	-	(8.8)	(8.8)
Trading profit	193.2	99.6	6.2	(8.8)	290.2
Amortisation of intangible assets	(17.8)	-	-	-	(17.8)
Restructuring charges	(7.0)	(1.9)	-	-	(8.9)
Gains relating to employee benefits plans	-	2.0	-	13.2	15.2
Profit from operations	168.4	99.7	6.2	4.4	278.7
Finance costs - ordinary activities					(67.0)
- exceptional items					(1.9)
Finance income					38.3
Loss on disposal of continuing operations					(36.5)
Profit before tax					211.6

Return on sales margin (%) (note 16.2)	11.5	12.2	n/a	n/a	10.3
Return on net sales value (%) (note 16.2)	11.5	23.8	4.7	n/a	13.0

3. AMORTISATION OF INTANGIBLE ASSETS

Intangible assets other than goodwill arose on the acquisition of Foseco in 2008 and are being amortised on a straight-line basis over their useful lives. The assets acquired and their remaining useful lives are shown below.

		Unaudited
		Net book
		value as at
	Remaining	30 June
	useful life	2012
	years	£m

Customer relationships	15.8	91.4
Trade name	15.8	57.0
Intellectual property rights	5.8	46.2
		194.6

4. RESTRUCTURING CHARGES

In the first half of 2012, restructuring charges of £18.2m were incurred (2011: half year £1.6m; full year £8.9m), comprising gross charges of £19.5m (2011: half year £4.3m; full year £11.7m) offset by profits arising on the sale of vacant properties of £1.3m (2011: half year £2.7m; full year £2.8m). The charges arose in connection with initiatives that included redundancy programmes, the downsizing or closure of facilities, the streamlining of manufacturing processes and the rationalisation of product lines. The net tax credit attributable to these charges was £0.8m (2011: half year £0.5m; full year £1.6m).

A cash outflow of £23.5m (2011: half year £7.9m; full year £13.2m) was incurred in the period in respect of the restructuring initiatives commenced both in 2012 and in prior years, leaving provisions made but unspent of £13.5m as at 30 June 2012 (2011: 30 June £35.8m; 31 December £31.5m) of which £7.5m (2011: 30 June £24.9m; 31 December £24.4m) related to onerous lease provisions in respect of leases terminating between two and fifteen years. Of the total cash outflow in the period of £23.5m, £15.8m related to the Group's purchase of the Woking, UK property and resulted in the close-out of the onerous lease provision which had been established in 2009 in respect of that property.

5. GAINS RELATING TO EMPLOYEE BENEFITS PLANS

No exceptional gains (2011: half year £nil; full year £15.2m) relating to employee benefits plans arose in the first half of 2012. The £15.2m net gain in 2011, comprised a net gain of £13.2m in the UK Plan, arising from the use of the Consumer Price Index instead of the Retail Prices Index to value deferred pension benefits and the impact of an enhanced transfer value exercise, and a gain of £2.0m arising from the closure of two defined benefits pension plans in the Netherlands.

6. FINANCE COSTS AND FINANCE INCOME

6.1 ORDINARY FINANCE COSTS AND FINANCE INCOME

Included within finance costs from ordinary activities is the interest cost associated with the liabilities of the Group's defined benefit pension and other post-retirement benefit plans of £15.6m (2011: half year £17.6m; full year £34.3m) and included within finance income is the expected return on the assets of the Group's defined benefit pension plans of £15.4m (2011: half year £16.0m; full year £32.0m).

6.2 EXCEPTIONAL FINANCE COSTS

No exceptional finance costs (2011: half year £1.9m; full year £1.9m) arose in the first half of 2012. The £1.9m of costs incurred in 2011 resulted from the early write-off of unamortised borrowing costs as a consequence of the Group entering into a new revolving credit facility. The costs written off related to the old facility that had been due to expire in 2012. No tax was attributable to these costs.

7. LOSS ON DISPOSAL OF CONTINUING OPERATIONS AND ACQUISITION-RELATED COSTS

A net loss of £7.1m arose in the first half of 2012 (2011: half year £nil; full year £36.5m). Included in the 2012 total was £6.4m relating to the disposal of the US businesses of the Precious Metals Processing division, being mainly recycled historical foreign exchange differences relating to the businesses sold. The closing balance sheet relating to this disposal is expected to be completed during the second half of 2012, at which time the loss on disposal of the business will be finalised. Other charges made in 2012 were for trailing costs of prior year disposals and costs relating to the acquisition of Metallurgica in the period. No tax was attributable to these losses.

Of the loss on disposal of continuing operations of £36.5m reported in 2011, £29.0m related to the disposal of the US business of the Precious Metals Processing division, and £7.5m related to a number of small business closures in 2011 and trailing costs for disposals in earlier years. A tax credit of £0.4m was attributable to these losses.

8. INCOME TAX COSTS

The Group's total income tax cost of £27.3m (2011: half year £29.1m; full year £58.9m) comprised a tax charge on ordinary activities of £30.1m (2011: half year £31.7m; full year £61.4m), and a credit relating to exceptional items of £2.8m (2011: half year £2.6m; full year £2.5m), which is analysed in the table below.

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	£m	£m	£m
Exceptional tax in relation to:
Amortisation of intangible assets	3.4	3.6	7.2
Restructuring charges	0.8	0.5	1.6
Gains relating to employee benefits plans	-	-	(3.8)
Loss on disposal of continuing operations and acquisition-related costs	-	-	0.4
Deferred tax on goodwill	(1.4)	(1.5)	(2.9)
Total net tax credit relating to exceptional items	2.8	2.6	2.5

The £5.3m of income tax charged in the condensed Group statement of comprehensive income (2011: half year £4.5m charge; full year £11.9m charge) relates to net actuarial gains and losses on employee benefits plans.

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A further reduction to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012.

9. EARNINGS PER SHARE ("EPS")

9.1 PER SHARE AMOUNTS

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	pence	pence	pence

EPS - basic	23.0	31.6	53.2
- diluted	22.7	31.3	52.3
- headline	34.3	35.2	70.4
- diluted headline	33.9	34.8	69.1

9.2 EARNINGS FOR EPS

Basic and diluted EPS are based upon the profit attributable to owners of the parent, as reported in the condensed Group income statement, of £63.6m (2011: half year £87.3m; full year £146.8m); headline and diluted headline EPS are based upon headline profit attributable to owners of the parent of £94.9m (2011: half year £97.1m; full year £194.2m). The table below reconciles these different profit measures, which are both derived entirely from continuing operations.

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	£m	£m	£m

Profit attributable to owners of the parent	63.6	87.3	146.8
Adjustments for exceptional items:
Amortisation of intangible assets	8.8	8.9	17.8
Restructuring charges	18.2	1.6	8.9
Gains relating to employee benefits plans	-	-	(15.2)
Exceptional finance costs	-	1.9	1.9
Loss on disposal of continuing operations and acquisition-related costs	7.1	-	36.5
Tax relating to exceptional items	(2.8)	(2.6)	(2.5)
Headline profit attributable to owners of the parent	94.9	97.1	194.2

9.3 WEIGHTED AVERAGE NUMBER OF SHARES

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	m	m	m

For calculating basic EPS and headline EPS	276.7	276.0	275.7
Adjustment for dilutive potential ordinary shares	2.9	3.1	5.2
For calculating diluted EPS and diluted headline EPS	279.6	279.1	280.9

For the purposes of calculating diluted basic and diluted headline EPS, the weighted average number of ordinary shares is adjusted to include the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares relating to the Company's share-based payment plans. Potential ordinary shares are only treated as dilutive when their conversion to ordinary shares would decrease earnings per share, or increase loss per share, from continuing operations. Other than the ordinary shares shown as being dilutive in the table above, the Company had no other (2011: half year 0.3m; full year 0.2m) outstanding options and share awards that could dilute EPS in the future.

10. DIVIDENDS

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	£m	£m	£m
Amounts recognised as dividends and paid to equity holders during the period
Final dividend for the year ended 31 December 2010 of 11.5p per ordinary share	-	31.8	31.8
Interim dividend for the year ended 31 December 2011 of 7.25p per ordinary share	-	-	20.0
Final dividend for the year ended 31 December 2011 of 14.5p per ordinary share	40.3	-	-
	40.3	31.8	51.8

The Directors have declared an interim dividend of 7.50p (2011: 7.25p) per ordinary share in respect of the year ending 31 December 2012. The dividend will be paid on 15 October 2012 to ordinary shareholders on the register at the close of business on 14 September 2012. Based upon the number of ordinary shares in issue at 30 June 2012, the total cost of the dividend would be £20.9m.

11. BORROWINGS

		Unaudited	Unaudited	Unaudited	Unaudited
	Balance at	Foreign			Balance at
	1 January	exchange	Non-cash		30 June
	2012	adjustment	movements	Cash flow	2012
	£m	£m	£m	£m	£m
Cash and cash equivalents
Short-term deposits	42.1	(0.3)	-	(29.9)	11.9
Cash at bank and in hand	146.0	(3.0)	-	(20.5)	122.5
Bank overdrafts	(4.2)	-	-	(5.2)	(9.4)
				(55.6)

Borrowings, excluding bank overdrafts
Current	(127.7)	2.1	-	124.1	(1.5)
Non-current	(424.4)	9.4	-	(162.7)	(577.7)
Capitalised borrowing costs	4.3	-	(0.6)	-	3.7
				(38.6)

Net debt	(363.9)	8.2	(0.6)	(94.2)	(450.5)

In May 2012, US$190m of long-term US Private Placement loan notes were repaid on their scheduled repayment date, by drawing down on the Group's syndicated bank facility.

12. EMPLOYEE BENEFITS

The net employee benefits balance as at 30 June 2012 of £81.4m (2011: half year £88.3m; full year £58.7m) in respect of the Group's defined benefit pension and other post-retirement benefit obligations, comprised net surpluses of £46.2m (2011: half year £20.6m; full year £65.6) and net liabilities of £127.6m (2011: half year £108.9m; full year £124.3m), and results from an interim actuarial valuation of the Group's defined benefit pension and other post-retirement obligations as at that date.

	Unaudited		Unaudited
	30 June	31 December	30 June
	2012	2011	2011
	£m	£m	£m
Employee benefits - net surpluses
UK defined benefit pension plan	46.2	65.6	20.6

Employee benefits - net liabilities
US defined benefit pension plans	66.6	64.8	48.5
Germany defined benefit pension plans	37.4	35.3	34.9
ROW defined benefit pension plans	14.4	14.5	15.2
Other post-retirement benefit obligations	9.2	9.7	10.3
	127.6	124.3	108.9

The enhanced transfer value offer made to deferred members of the UK Plan in October 2011 successfully concluded in May 2012. In total some 550 members took up the offer (a take-up rate of 24% by deferred liability value) and this has eliminated the inflation, interest rate, investment and longevity risk for Cookson in respect of the £50m of liabilities transferred out of the UK Plan, some 10% of total UK Plan liabilities. The impact on the IAS 19 valuation of UK pension liabilities of the transfers agreed up to 31 December 2011 was reflected in the results for 2011 as an exceptional charge of £5.9m. The adjustment made in 2012 to finalise the accounting for the offer was not material.

On 19 July 2012, the UK Plan Trustee announced that it had entered into a pension insurance buy-in agreement with Pension Insurance Corporation ("PIC") to insure approximately 60% of total UK Plan liabilities. Under this arrangement, the UK Plan Trustee is paying an insurance premium of approximately £320m to PIC, wholly from the existing assets of the UK Plan, which will secure a stream of income exactly matching future on-going pension payments. The insured liabilities cover the UK Plan's pensioner members, who comprise some 3,350 members out of a total UK Plan membership of 5,900. This arrangement eliminates the inflation, interest rate, investment and longevity risk for Cookson in respect of these liabilities.

The total net charges in respect of the Group's defined benefit pension and other post-retirement benefit obligations are shown in the table below.

	Unaudited	Unaudited
	Half year	Half year	Full year
	2012	2011	2011
	£m	£m	£m

In arriving at trading profit - within manufacturing costs	1.0	1.0	2.0
- within administration, selling and distribution costs	0.5	1.5	2.7
In arriving at profit from operations - as exceptional gains relating to employee benefits plans	-	-	(15.2)
In arriving at profit before tax - within ordinary finance costs	15.6	17.6	34.3
- within finance income	(15.4)	(16.0)	(32.0)
Total net charge/(credit)	1.7	4.1	(8.2)

Cash contributions into the Group's defined benefit pension plans amounted to £7.8m (2011: half year £8.9m; full year £19.5m), which included additional funding contributions of £3.5m (2011: half year £6.6m; full year £13.2m).

13. EVENTS AFTER THE BALANCE SHEET DATE

On 24 July 2012, the Group completed the sale of its Andreco-Hurll refractory lining installation business in Australia. As at 30 June 2012, the assets subject to the sale were reported as held for sale. Consideration for the sale was Aus$8m (£5m).

14. CONTINGENT LIABILITIES

The Group has extensive international operations and is subject to various legal and regulatory regimes, including those covering taxation and environmental matters. Legal claims have been brought against certain Group companies by third parties alleging that persons have been harmed by exposure to hazardous materials used by those companies in the manufacture of industrial and consumer products, and further claims may be brought in the future. Certain of the Group's subsidiaries are subject to lawsuits, predominantly in the US, relating to a small number of products containing asbestos manufactured prior to the acquisition of those subsidiaries by the Group. These suits usually also name many other product manufacturers. To date, the Group is not aware of there being any liability verdicts against any of these subsidiaries. A number of lawsuits have been withdrawn, dismissed or settled and the amount paid, including costs, in relation to this litigation has not had a material adverse effect on the Group's financial position or results of operations.

15. EXCHANGE RATES

The Group reports its results in pounds sterling. A substantial portion of the Group's revenue and profits are denominated in currencies other than pounds sterling. It is the Group's policy to translate the income statements and cash flow statements of its overseas operations into pounds sterling using average exchange rates for the period reported (except when the use of average rates does not approximate the exchange rate at the date of the transaction, in which case the transaction rate is used) and to translate balance sheets using period end rates. The principal exchange rates used were as follows:

	Period end rates of exchange			Average rates of exchange for the period
	30 June 2012	30 June 2011	31 Dec 2011	Half year 2012	Half year 2011	Full year 2011
US dollar	1.57	1.61	1.55	1.58	1.62	1.60
Euro	1.24	1.11	1.20	1.22	1.15	1.15
Czech Republic koruna	31.60	26.94	30.49	30.53	28.08	28.32
Polish zloty	5.25	4.41	5.34	5.15	4.56	4.74
Brazilian real	3.16	2.51	2.89	2.94	2.64	2.68
Chinese renminbi	9.98	10.38	9.78	9.97	10.58	10.37

16. NON-GAAP FINANCIAL MEASURES

The Company uses a number of non-Generally Accepted Accounting Practice ("non-GAAP") financial measures in addition to those reported in accordance with IFRS. The Directors believe that these non-GAAP measures, listed below, are important when assessing the underlying financial and operating performance of the Group and its divisions.

16.1 NET SALES VALUE

Net sales value is calculated as revenue, excluding the amount included therein related to commodity metals.

16.2 RETURN ON SALES AND RETURN ON NET SALES VALUE

Return on sales is calculated as trading profit divided by revenue. Return on net sales value is calculated as trading profit divided by net sales value.

16.3 UNDERLYING REVENUE

Underlying revenue is calculated as revenue, adjusted to exclude the effects of changes in metals prices and exchange rates, and business acquisitions, disposals and closures.

16.4 HEADLINE PROFIT BEFORE TAX

Headline profit before tax is calculated as the net total of trading profit, plus share of post-tax profit/(loss) of joint ventures and total net finance costs associated with ordinary activities.

16.5 HEADLINE EARNINGS PER SHARE

Headline earnings per share is calculated as headline profit before tax and after income tax costs associated with ordinary activities and profit attributable to non-controlling interests, divided by the weighted average number of ordinary shares in issue during the period.

16.6 FREE CASH FLOW

Free cash flow, defined as net cash flow from operating activities after net outlays for the purchase and sale of property, plant and equipment, dividends from joint ventures and dividends paid to non-controlling shareholders, but before additional funding contributions to Group pension plans.

16.7 AVERAGE WORKING CAPITAL TO SALES RATIO

The average working capital to sales ratio is calculated as the percentage of average working capital balances to the annualised revenue for the period. Average working capital (comprising inventories, trade and other receivables, and trade and other payables) is calculated as the average of the six previous month-end balances, and annualised revenue is derived from the revenue for the previous six months.

16.8 EBITDA

EBITDA is calculated as the total of trading profit before depreciation charges.

16.9 NET INTEREST

Net interest is calculated as interest payable on borrowings less interest receivable, excluding any item therein considered by the Directors to be exceptional.

16.10 INTEREST COVER

Interest cover is the ratio of EBITDA to net interest.

16.11 NET DEBT

Net debt comprises the net total of current and non-current interest-bearing borrowings and cash and short-term deposits.

16.12 NET DEBT TO EBITDA

Net debt to EBITDA is the ratio of net debt at the period-end to EBITDA for the preceding 12 month period.

16.13 RETURN ON NET ASSETS

Return on net assets ("RONA") is calculated as trading profit plus share of post-tax profit/(loss) of joint ventures, divided by average net operating assets (being the average over the previous 12 months of property, plant and equipment, trade working capital and other operating receivables and payables).

16.14 RETURN ON INVESTMENT

Return on investment ("ROI") is calculated as trading profit after tax plus share of post-tax profit/(loss) of joint ventures, divided by invested capital (being total equity plus net debt, net employee benefits liabilities and goodwill previously written off to, or amortised against, reserves).

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Vesuvius (VSVS)

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