Preliminary Results 2010

RNS Number : 0358C

Cookson Group PLC

01 March 2011

1 March 2011

COOKSON GROUP PLC

ANNOUNCEMENT OF 2010 FULL YEAR RESULTS

HIGHLIGHTS

· Significant performance improvement in 2010:

Revenue of £2,546m, up 30%; 23% on an underlying basis¹ (2009: £1,961m)

Trading profit¹ of £252.1m, up 126% (2009: £111.7m)

Return on sales¹ of 9.9% (2009: 5.7%) - Ceramics 11.9%; Electronics 9.8%

Headline profit before tax¹ of £222.1m, up 193% (2009: £75.7m)

· End-markets have recovered strongly but generally remain below pre-crisis levels, leaving considerable potential for further improvement

· Effective tax rate² of 21.1% (2009: 35.2%) reflects a more normal geographic distribution of profitability, and certain non-recurring credits (underlying rate: 24%)

· Headline earnings per share¹ of 61.5p, up 242% (2009: 18.0p)

· Net debt reduced by £41m to £330m. Net debt to EBITDA ratio of 1.1 times

· Recommended final dividend of 11.5p per share (last dividend payment declared in August 2008)

· New three year performance targets announced in January 2011 set out the ambition and strategy for further strong progress through to end 2013

· Healthy growth rates anticipated for 2011 in key end-markets of steel, foundry and electronics - Group performance expected to be well ahead of 2010

1 Refer to Note 1 of the attached financial statements for definitions

2 Tax rate on headline profit before tax (before share of post-tax profit of joint ventures)

				Year-on-year change
		2010	2009	Reported rates	Constant rates

Revenue		£2,546m	£1,961m	30%	26%
Trading profit¹		£252.1m	£111.7m	126%	112%
Return on sales¹		9.9%	5.7%	4.2pts	4.0pts

Profit/(loss) before tax	- headline¹	£222.1m	£75.7m	£146.4m
	- basic	£189.4m	£(20.9)m	£210.3m
Tax rate - headline²		21.1%	35.2%	14.1pts
Profit/(loss) after tax	- headline¹	£175.4m	£49.4m	£126.0m
	- basic	£152.1m	£(41.3)m	£193.4m
Earnings per share³	- headline¹	61.5p	18.0p	43.5p
	- basic	53.0p	(17.8)p	70.8p
Dividend per share⁴		11.5p	-	11.5p

Free cash flow¹		£63.7m	£157.3m	down £93.6m
Net debt¹		£329.7m	£371.4m	down £41.7m

^¹Refer to Note 1 of the attached financial statements for definitions

^²Tax rate on headline profit before tax (before share of post-tax profit of joint ventures)

³Continuing operations only

⁴Dividends are presented on an "as recommended" basis

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

"These results show that we have emerged very strongly from the economic crisis.

"With the continuing market penetration of our new higher margin products, our strong presence in high-growth emerging markets, and the further recovery potential in mature markets where our cost base has been significantly reduced, we are well positioned for further strong earnings growth, as demonstrated by our recently announced three year targets and strategy.

"Recent encouraging newsflow from our key end-markets of steel, electronics and foundry reinforces our confidence that Cookson's performance in 2011 will be well ahead of 2010."

COOKSON GROUP PLC

ANNOUNCEMENT OF 2010 FULL YEAR RESULTS

OVERVIEW

The Group's performance improved very significantly in 2010. This is the result of the actions taken to radically restructure in late 2008 and the first half of 2009, coupled with the continued market penetration of newly-developed products and the further expansion of our presence in emerging markets, which positioned our businesses favourably to benefit from the continued recovery in our end-markets. We see considerable potential for further improvement and in January 2011 we announced new three year performance targets, setting out our ambitions and strategy for further strong progress.

SUMMARY OF GROUP PERFORMANCE

Trading performance

Group revenue of £2,546m was 30% higher than 2009 as reported, and 23% higher on an underlying basis, that is to say at constant currency and eliminating the impact of passing through significantly higher commodity metals prices (tin, silver and gold). Trading profit of £252.1m was £140.4m (126%) higher than that reported for 2009 and the return on sales margin improved strongly to 9.9% (2009: 5.7%). The Group's end-markets have continued to recover from the impact of the global economic crisis but generally remain below the levels experienced in the first half of 2008 prior to the crisis.

The Ceramics division's revenue of £1,495m was 32% higher than that reported in 2009 and up 27% on an underlying basis. The global steel production end-market accounts for almost 60% of the division's revenue. According to the World Steel Association, global steel production in 2010 was 15% higher than in 2009 and, excluding China, the rest of the world showed an increase of 20%. The division's steel-related businesses, Steel Flow Control and Linings, reported revenue for the year of, respectively, £494m and £486m, underlying increases of 32% and 19% on the prior year and approaching 2008 levels, indicating continued market share gains. The recovery in the division's other main end-market, foundry castings, gained momentum through the year. Accordingly, the Foundry product line's revenue of £440m was up 33% on 2009 but was still some 17% below 2008 on an underlying basis. Lastly, the Fused Silica product line's revenue of £75m was up an underlying 29% on the prior year, reflecting the strong recovery in the photovoltaic wafer production end-market. In total, the division's trading profit of £177.4m was £106.5m (150%) higher than the prior year and the return on sales margin was 11.9% (2009: 6.3%).

The Electronics division's revenue of £721m was 36% higher than 2009, as reported. In part, this increase was due to the pass through of higher tin and silver commodity prices in our solder product sales and higher gold prices in our plating chemicals sales, which had the effect of increasing revenue by about £84m compared with the prior year when commodity prices were considerably lower. On an underlying basis, revenue increased by 18%, reflecting the continued strong recovery in electronics end-markets, particularly in the high-end consumer segment, and continuing market penetration of new, higher margin, products. The division's trading profit of £71.0m was £31.8m (81%) higher than the prior year and the return on sales margin was 9.8% (2009: 7.4%). The effect on revenue of passing through higher commodity metals prices than those prevailing in 2009 reduced the reported margin by about 1.3 percentage points.

The Precious Metals division's net sales value (being revenue excluding the precious metals content) of £134m was broadly unchanged from the prior year. Weak retail markets continued to be offset by strong levels of reclaim business in Europe and gold and silver coin blank sales to the US Mint. Trading profit of £12.7m was £3.8m (43%) higher than the prior year, reflecting the full year benefits of the restructuring completed in the first half of 2009 and improved sales mix with higher levels of reclaim and coins.

Exceptional items

A net charge, pre-tax, of £32.7m was incurred, principally due to restructuring charges (£17.3m) and amortisation of intangible assets (£17.7m), partially offset by a gain relating to the closure of the UK defined benefit pension plan to future benefit accrual (£4.7m). The equivalent charge in 2009 was £96.6m, reflecting the major cost reduction/restructuring programme implemented in the face of the economic crisis.

Taxation

The headline effective tax rate for 2010 was 21.1%, a significant improvement on the 2009 rate of 35.2%. This improvement reflects both the return to a more normal geographic distribution of profitability, combined with the benefit of a number of non-recurring credits recognised in the year. These credits related to the recognition of some previously unrecorded tax losses combined with a number of adjustments arising from the finalisation of prior year tax liabilities. The underlying tax rate for 2010, excluding the benefit of these non-recurring credits, was around 24%. A headline tax rate of between 23% and 24% is anticipated for 2011 and 2012.

Attributable profits and earnings

Headline attributable profit was £169.8m (2009: £45.6m) and headline earnings per share was 61.5p (2009: 18.0p).

After taking into account all exceptional items, the Group recorded a profit for the year of £145.3m compared with a loss of £48.5m for 2009.

Dividend and dividend policy

No interim dividend was paid during the year and the last dividend paid was an interim dividend of 8.8p in October 2008. As a consequence of the Group's improved financial position and prospects, the Board is now recommending to shareholders a final dividend payment in respect of 2010 of 11.5p per ordinary share.

As part of its three year Group performance targets, the Board is targeting growing dividends from this base at least in line with the growth in earnings, with the next payment expected to be an interim dividend in October 2011.

Financial position

Net debt at 31 December 2010 was £330m, £41m lower than a year earlier. The Group has very substantial liquidity headroom within its committed debt facilities which total £855m. In December 2010, we successfully completed the issue of US$250m of US Private Placement loan notes with an average fixed interest rate of 4.6% and average duration of just under 9 years. The principal maturities under the existing bank facility are in late 2012 and our intention is to refinance this facility by the end of 2011.

At 31 December 2010, the ratio of net debt to EBITDA was 1.1 times, very comfortably within the debt covenant level of 3.0 times, and the interest cover ratio was 13.8 times.

DIRECTORATE

Having served nine years as a non-executive Director, Barry Perry will retire, as planned, from the Board at the close of the Annual General Meeting on 12 May 2011.

TARGETS AND STRATEGY

On 26 January 2011, we gave an extensive Capital Markets presentation setting out our targets for performance improvement over the coming three years and our strategy for achieving those targets. The full presentation is available on our web site. The targets are:

· average annual revenue growth to exceed 1.5 times global GDP growth;

· return on sales margin of 12% by year 2013;

· double digit average annual headline earnings growth;

· dividend growth at least in line with earnings growth;

· return on investment increasingly ahead of the Group's weighted average cost of capital; and

· maintaining a strong financial position with a leverage ratio (year-end net debt to EBIDA ratio) of not more than 1.5 times.

In setting these targets we are not assuming any significant acquisitions, but some bolt-on acquisitions are possible. Also no major disposals are anticipated but any opportunities to create value will be considered objectively.

We see the achievement of these targets being underpinned by:

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

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

· significant emerging market exposure (c.50% of revenue; >60% of trading profit);

· considerable further recovery potential in mature markets where cost base significantly reduced; and

· opportunities to leverage further organic growth through bolt-on acquisitions.

OUTLOOK FOR 2011

For 2011, based on a number of third party forecasts, we are expecting global steel production growth to be at mid-single digit levels, slightly higher growth in electronic equipment production, and double digit growth rates in our foundry castings and fused silica end-markets. The significant cost reduction measures implemented in the first half of 2009, the continuing market penetration of new, higher margin products, and the production capacity expansion projects completed in 2010 and currently underway, mean that the Group is well positioned to benefit from these positive end-market growth trends.

Accordingly, we continue to expect that the Group's performance in 2011 will be well ahead of 2010.

REVIEW OF OPERATIONS

Note: the data provided in the tables below are at reported exchange rates.

Group

	Revenue (£m)		Trading Profit (£m)		Return on Sales (%)
	2010	2009	2010	2009	2010	2009

First half	1,233	929	120.3	16.5	9.8	1.8
Second half	1,313	1,032	131.8	95.2	10.0	9.2

Year	2,546	1,961	252.1	111.7	9.9	5.7

2010 was marked by continuing strong recovery in the performance of the Group's businesses, which started towards the end of the first half of 2009, although trading is generally still not back to the levels experienced prior to the onset of the global economic crisis.

Group revenue in 2010 of £2,546m was 26% higher than 2009 at constant currency and 30% higher at reported exchange rates. Underlying revenue (being revenue at constant currency; adjusted for the impact of differences in commodity metal prices; and eliminating back-to-back customer equipment sales) was 23% higher than 2009. 2010 saw a gradual improvement in a number of the Group's key end-markets as the year progressed, notably for foundry castings and electronics, and underlying revenue in the second half of 2010 was 6% higher than the first half. 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.

Following the extensive cost reduction measures implemented since the fourth quarter of 2008, the majority of which were completed by mid-2009, profit 'drop-through' from the increased revenue in 2010 has been strong. As a result, trading profit in 2010 more than doubled to £252.1m (2009: £111.7m), with significant improvements in all three divisions. Trading profit in the second half of 2010 was also 10% higher than the first half (at both constant currency and reported exchange rates).

The return on sales margin in 2010 was 9.9%, significantly higher than the 5.7% reported in 2009. The impact of higher metal prices, which increased reported revenue in the Electronics and Precious Metals divisions without any impact on profitability, reduced the return on sales in 2010 by around 0.5 percentage points.

Headline profit attributable to owners of the parent of £169.8m was over three and a half times higher than the £45.6m reported in 2009, reflecting the higher trading profit, lower finance charges and a significantly lower effective tax rate. Headline earnings per share more than trebled to 61.5p, notwithstanding a 9% increase in the weighted average number of shares as a result of the full year effect of the March 2009 rights issue.

Exceptional charges (net of tax), excluded from headline results, totalled £23.3m, significantly lower than the £90.7m incurred in 2009 which included £75.6m of restructuring charges.

Net debt as at 31 December 2010 was £330m (31 December 2009: £371m) resulting in a net debt to EBITDA ratio at year end of 1.1 times.

Ceramics division

Trading under the Vesuvius and Foseco brand names, the Ceramics division is the world leader in the supply of advanced consumable products and systems to the global steel and foundry industries and a leading supplier of speciality products to the glass and solar industries.

	Revenue (£m)		Trading Profit (£m)		Return on Sales (%)
	2010	2009	2010	2009	2010	2009

First half	734	543	86.8	11.4	11.8	2.1
Second half	761	588	90.6	59.5	11.9	10.1

Year	1,495	1,131	177.4	70.9	11.9	6.3

In 2010, the Ceramics division experienced a continuation of the improvement in the majority of its end-markets which had started towards the end of the first half of 2009. Revenue of £1,495m was 27% higher than 2009 at constant currency (32% at reported exchange rates). Revenue in the second half of 2010 was 5% higher than the first half (at constant currency).

As a result of the higher revenue, trading profit in 2010 rose significantly to £177.4m (2009: £70.9m), being £99.9m higher at constant currency and £106.5m at reported exchange rates. Trading profit was 5% higher in the second half of 2010 compared to the first half (at constant currency). The return on sales margin in 2010 was 11.9%, significantly higher than the 6.3% reported in 2009.

Steel end-market: global steel production is the division's main end-market corresponding to a little over half of its total revenue. According to the World Steel Association ("WSA"), global steel production was 1,414m tonnes in 2010, a 15% increase compared to 2009 and a record level of global steel production. Global steel production was marginally lower (by 3%) in the second half compared to the first half.

Within these totals, steel production in China (which now accounts for 44% of global steel production) grew 9% in 2010 compared to 2009. Chinese steel production grew strongly in the first half but then fell by 6% in the second half compared to the first half as a result of short-term government measures to restrict energy usage. However, market trends outside of China are more significant for the Ceramics division in the short-term as China currently accounts for less than 10% of the division's steel-related revenue. A large part of steel production in China is not yet based on the enclosed continuous casting technology which uses Vesuvius's Steel Flow Control products. The use of enclosed continuous casting is expected to increase over time as the Chinese steel industry continues to modernise and demand for higher grade 'flat' steel product increases. In the Linings product line, there is only modest revenue arising in China as yet as this market has only recently been addressed.

Excluding China, global steel production in 2010 was 20% higher than 2009. Following the unprecedented collapse in steel production in the fourth quarter of 2008, production levels started to recover from May 2009 onward with the recovery continuing throughout the first half of 2010. Steel production fell marginally in the third quarter, reflecting the normal seasonal slowdown in production, notably in Europe, but then recovered in the fourth quarter. As a result, steel production was unchanged between the first and second halves. Whilst the overall improvement in steel production is encouraging, production levels in most regions are still materially below the levels seen prior to the economic downturn. Global production (excluding China) in the fourth quarter of 2010 represented only 90% of the production levels seen in the second quarter of 2008.

Foundry castings end-market: this market, which represents around one-third of the division's revenue, 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 14% 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. The foundry castings market deteriorated significantly towards the end of 2008 with the unprecedented reduction in automotive and heavy truck production (particularly in the US and Europe) and the widespread cut in production of other engineering products.

Automotive production improved in the second half of 2009, stimulated by government sponsored vehicle replacement schemes, whilst global truck production remained at very low levels throughout the year. 2010 has seen further growth in automotive production according to JD Power, with 38% growth in North America, 13% growth in Europe and 23% growth in the Rest of the World (excluding China). Truck production has similarly grown very strongly in 2010, albeit from low levels, with growth of 23% in North America, 57% in Europe and 60% in the Rest of the World (excluding China). The other end-markets mentioned above typically exhibit more "late-cycle" characteristics. Given the extended period of de-stocking through the supply chain, other than for some specific regional markets, it was only towards the end of the first half of 2010 that the Foundry product line started to experience a more generally positive impact on its revenue with this improvement continuing as the year progressed.

Solar and glass end-markets: the principal products in Vesuvius' Fused Silica product line are Solar Crucibles™, which are used in the production of photovoltaic ("solar") panels, and tempering rollers used mainly in the production of glass for construction and automotive applications. Both products experienced very weak trading conditions in 2009 with weak end-markets exacerbated by a sharp de-stocking of solar panels, particularly in China. However, the significant improvement in demand for Solar Crucibles™, which started in the fourth quarter of 2009 as the de-stocking phase ended, continued throughout 2010. Demand for tempering rollers started to recover mid-way through 2010.

In the product line analysis below for the Ceramics division, all of the financial information is presented at constant currency. References to profitability of individual product lines (i.e. 'profit contribution' or 'contribution margin') refers to the relative contribution they make to divisional trading profit before centralised divisional costs.

Steel Flow Control

The Steel Flow Control product line provides a full range of products and 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. Revenue of £494m was 32% higher compared to 2009. This growth rate was ahead of the increase in steel production in the key markets in which Vesuvius operates, reflecting favourable product mix, including increased market penetration of the new, higher value-added, tundish tube changer and ladle shroud products, and some limited inventory restocking of Vesuvius' products by customers in the first half of the year. Revenue was broadly consistent between the first and second halves of 2010, reflecting the trends in steel production. Revenue in the second half of 2010 represented 95% of the revenue achieved in the first half of 2008, the last half year period prior to the impact of the global economic downturn.

Profit contribution nearly doubled compared to 2009 with a strong profit contribution drop-through of around one-third on the additional revenue.

During 2010, capacity was increased in the Chinese and Indian facilities in order to meet the continuing growth in demand in these countries. In China, during the first half of the year capacity was expanded at the main facility in Suzhou, whilst production re-started at the Tianjin facility. The Tianjin facility had previously been decommissioned following its acquisition with Foseco in April 2008. The expansion of the Wuhan facility, part of the joint venture with Wuhan Iron & Steel Corporation (China's third largest steel producer), and the project to double capacity at the Indian facility in Kolkata have now also been completed.

Linings

Linings includes products and services that enable customers' plants to withstand the effects of extreme temperatures or erosive chemical attack. 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 Linings 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 £486m represented an increase of 19% compared to 2009. The growth reflected increased levels of maintenance as steel producers restarted or increased production, and was broadly in line with the level of steel production growth in our key markets. The level of activity in non-steel markets remained subdued throughout 2010.

Underlying profit contribution increased by one-half compared to 2009. The contribution margin in 2010 was just over two percentage points lower than for the first half of 2008, as a consequence of revenue in the second half of 2010 still being only 94% of that achieved in the first half of 2008.

A project to increase production capacity by around one-half at the Chinese brick-lining business, BRC, was completed at the end of 2010. The Linings facility in Sao Paulo is being relocated to a larger site to serve better the growing demands of the Brazilian steel market. The relocation is expected to be completed by the end of the first half of 2011.

Foundry

The Foundry business is a leading supplier of products, services and solutions 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.

Revenue of £440m represented an increase of 33% compared to 2009. The end-markets for the Foundry product line have more 'late-cycle' characteristics and this, combined with significant de-stocking in the supply chain, resulted in only modest recovery in revenue during 2009. However, the beginning of 2010 saw strong and progressive revenue growth in certain regional markets, including Japan, China and Brazil, driven by recovery in their automotive and truck sectors. Revenue growth also started to be evident towards the middle of 2010 in Europe and North America, which constitute around two-thirds of the Foundry product line's global market. As a result, revenue for the Foundry product line in the second half was 10% higher than for the first half. Whilst these trends are encouraging, revenue in the second half was still only 83% of the revenue achieved in the first half of 2008 (pro-forma for Foseco).

Profit contribution increased by just under four times compared to 2009, reflecting very strong profit drop-through of just over 40% on the additional revenue. The contribution margin in 2010 reached low-teens, but was still three percentage points lower than for the first half of 2008.

The closure of the Foundry product line's manufacturing facility in Chambery, France has been announced and is expected to be completed by mid-2011, with production transferring to existing facilities in Poland and India.

The Chinese foundry castings end-market is expected to grow strongly over the next few years. In anticipation of this growth, a project has been initiated to construct a new production facility near Shanghai, planned for completion by the end of 2012. Building work should start in the first half of 2011, on completion of site acquisition and environmental permitting.

Fused Silica

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

Revenue of £75m represented a 29% increase compared to 2009, principally driven by a strong recovery in the photovoltaic end-market.

Solar Crucible™ revenue, which represents around 60% of total Fused Silica revenue, increased by 39% compared to 2009, reflecting the end of the severe de-stocking of solar panels, particularly in China, during the first three quarters of 2009. For tempering rollers and other speciality products used in the manufacture of glass, revenue increased by 15% compared to 2009 as the construction sector started to recover in the second half of the year.

Profit contribution more than doubled compared to 2009, reflecting the very strong profit drop-through on the additional Solar Crucible™ revenue. The contribution margin in 2010 was only just below that achieved in the first half of 2008.

In late 2008, a new Solar Crucible™ production facility in China was completed but, as demand was then falling rapidly, the plant was immediately mothballed. Following the strong pick-up in demand, this facility was commissioned during 2010, with commercial production starting in the first quarter of 2011. Construction of an additional Solar Crucible™ production facility in Moravia, Czech Republic has also been recently initiated with completion expected in 2012. In the second half of 2010, a new line at Skawina, Poland was completed for the production of 'ready to use' ('RTU') Solar Crucibles™. RTU Solar Crucibles™ are crucibles pre-coated with a patented solution which increases customers' manufacturing productivity. As a result of very strong demand for this product, a project has been initiated to double capacity of RTU Solar Crucibles™ from this facility for completion by mid 2011.

Electronics division

The Electronics division is a world leading supplier of electronic assembly materials and advanced surface treatment and plating chemicals, and comprises two product lines; the Assembly Materials product line is a supplier of solder and related products and the Chemistry product line is a supplier of electro-plating chemicals.

	Revenue (£m)		Trading Profit (£m)		Return on Sales (%)
	2010	2009	2010	2009	2010	2009

First half	344	240	31.3	6.3	9.1	2.6
Second half	377	290	39.7	32.9	10.5	11.3

Year	721	530	71.0	39.2	9.8	7.4

Revenue of £721m was 33% higher than 2009 at constant exchange rates (36% higher at reported exchange rates). The higher revenue partially reflects the 'pass through' to customers of higher tin and silver prices, the Assembly Materials product line's major raw materials. In 2010, the average prices of tin and silver were, respectively, 53% and 36% higher than 2009, such that approximately £65m of the division's revenue increase was as a result of these higher metal prices. Excluding both the impact of higher metal prices in Assembly Materials and precious metal sales and back-to-back electro-plating equipment sales in Chemistry, underlying revenue was 18% higher than 2009. Electronics end-markets (which make up three-quarters of the division's revenue) progressively improved during the year with particularly strong growth in demand for personal computers ('PCs'), mobile phones and automotive electronics. According to estimates from Henderson Ventures, global production of electronic equipment (measured in US dollars at constant currency) grew in 2010 by 17%, following the 11% decrease in 2009. Global PC unit shipments (both traditional and tablet PCs) were estimated to be 21% higher, whilst global unit shipments of mobile phones increased 29%. Other strong areas of growth within consumer electronics included flat screen TVs, games consoles and e-readers. Automotive markets have similarly shown good improvement, although industrial end-markets have generally remained subdued.

Underlying revenue was 23% higher in the first half of 2010 compared with the first half of 2009 but then increased 5% in the second half compared to the first half of 2010, reflecting both the improvement in trading conditions and also the normal seasonality of the business.

Trading profit for 2010 rose significantly to £71.0m (2009: £39.2m), being £30.7m higher at constant currency and £31.8m higher at reported exchange rates. The trading profit in the second half of 2010 of £39.7m was £8.4m higher than the £31.3m achieved in the first half of 2010, principally reflecting the normal seasonality of the business and the improved end-market conditions. The return on sales margin in 2010 was 9.8%, well ahead of the 7.4% achieved in 2009. This 2.4 percentage point increase in margin was achieved notwithstanding higher commodity metal prices and precious metal sales in 2010 which significantly increased revenue but had relatively little impact on trading profit. On an underlying basis, the margin increase was even stronger at 3.7 percentage points.

Asia-Pacific, the division's largest region, accounted for 45% of revenue in 2010 (by location of customer), two percentage points ahead of 2009.

References to profitability of product lines below (i.e. 'profit contribution' or 'contribution margin') refer to the relative contribution they make to divisional trading profit before centralised divisional costs.

Assembly Materials

Assembly Materials 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 plumbing, automotive and water treatment. Its products include solder (in bar, wire, paste, powder and sphere form) and fluxes, adhesives, cleaning chemicals and stencils.

Revenue for the year at £447m was 40% higher than 2009 at constant exchange rates (45% higher at reported exchange rates). Excluding the impact of passing through higher tin and silver prices, underlying revenue was 17% higher than last year (at constant exchange rates) reflecting both the strong growth in the global production of electronic equipment, combined with the continuation of the strategy to focus on higher margin, enhanced technology products. For solder products, which account for three-quarters of Assembly Materials' revenue, sales of higher margin, more value-added products such as solder paste (for which volumes were up 30%) have been stronger than the more commoditised products such as bar solder (up 10%), partially reflecting the continuing shift from wave soldering to surface mount technology for the production of PCBs.

Underlying revenue was 21% higher in the first half of 2010 compared with the first half of 2009 and increased by 5% in the second half compared to the first half of 2010, reflecting both the continued improvement in trading conditions and also the normal seasonality of the business. Trading profit for 2010 was just over 70% higher than for 2009 (at constant exchange rates).

Chemistry

The Chemistry product line manufactures 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 for the year at £274m was 22% higher than 2009 at constant exchange rates (23% higher at reported exchange rates). Excluding precious metal sales and back-to-back electro-plating equipment sales, underlying revenue was 21% higher than in 2009 (at constant exchange rates). Sales of plating-on-plastics and corrosion and wear-resistant products for automotive and industrial applications were up 18% compared to 2009, whilst sales of surface coating products serving the PCB fabrication market were up 15%. Copper damascene sales into the semi-conductor market were up by one-third compared to 2009.

Underlying revenue was 26% higher in the first half of 2010 compared with the first half of 2009 but increased by 5% in the second half compared to the first half of 2010 reflecting both the improvement in electronic materials end-markets and also normal seasonality. Trading profit for 2010 was 86% higher than for 2009 (at constant exchange rates).

With the continued growth of China's electronic materials, automotive and industrial end-markets, the construction of the new £14m Chemistry facility in Shanghai was started in the first quarter of 2010. Expected completion is in late 2011. Currently the China market is served from Cookson facilities in Shenzen, Tianjin and Singapore.

Precious Metals

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

	Revenue (£m)		Net Sales Value (£m)		Trading Profit (£m)		Return on Net Sales Value (%)
	2010	2009	2010	2009	2010	2009	2010	2009

First half	155	147	68	63	6.6	2.3	9.7	3.7
Second half	175	153	66	70	6.1	6.6	9.2	9.4

Year	330	300	134	133	12.7	8.9	9.5	6.7

The Precious Metals division operates in two distinct geographic regions: the US, which constitutes 43% of the total net sales value (being revenue excluding the precious metals content) for the division, and Europe (focused on the UK, France and Spain). Average precious metal prices in 2010 have been significantly higher than 2009, being approximately 25% higher for gold, 36% for silver and 35% for platinum.

Net sales value of £134m in 2010 was 2% higher at constant exchange rates (1% higher at reported exchange rates) compared to 2009. This reflected continuing weak retail jewellery markets, particularly in the US, being more than offset by strong sales to the US Mint of gold and silver coin blanks and higher levels of precious metal reclaim in Europe, stimulated by the high price of gold.

Trading profit in 2010 at £12.7m was £4.1m above 2009 at constant currency (£3.8m higher at reported exchange rates) principally due to improved profits in Europe reflecting the high level of reclaim business, particularly in Spain. Given the continued weak retail jewellery market in the US, further restructuring was initiated in November 2010 to reduce permanent headcount in the US by around 10%. The return on net sales value for the division was 9.5%, well ahead of the 6.7% achieved in 2009.

Group corporate

The Group's corporate costs, being the costs directly related to managing the Group holding company were £9.0m, £1.7m higher than for 2009.

FINANCIAL REVIEW

Group results highlights

				Change
	2010	2009		vs 2009
Profit/(loss) before tax (£m)
- headline	222.1	75.7		146.4
- basic	189.4	(20.9)		210.3

Earnings/(loss) per share (pence)¹
- headline	61.5	18.0		43.5
- basic	53.0	(17.8)		70.8

Dividends per share (pence)²
- interim	-	-		-
- final	11.5	-		11.5
Free cash flow (£m)	63.7	157.3	down 93.6
Net debt (£m)	329.7	371.4	down 41.7

¹Continuing operations only

² Dividends are presented on an "as recommended" basis

As described in detail in the Operating Review, most of the Group's businesses experienced significantly improved end-market conditions during 2010 and, as a result, the trading profit in 2010 of £252.1m was more than double that achieved in 2009.

After net finance costs (pre exceptional items) of £30.4m, headline profit before tax was £222.1m. The Group's effective tax rate decreased significantly in 2010 to 21.1% (2009: 35.2%) reflecting the return to a more normal geographic distribution of profitability combined with the benefit of a number of non-recurring credits recognised in the year. These credits related to the recognition of some previously unrecorded tax losses combined with a number of adjustments arising from the finalisation of prior year tax liabilities. The underlying tax rate for 2010, excluding the benefit of these non-recurring credits, was around 24%. A tax rate of between 23% and 24% is anticipated for 2011 and 2012.

The increase in the Group's trading profit combined with the lower finance costs and lower effective tax rate, resulted in headline profit after tax of £175.4m, over three and a half times that for 2009. Similarly, headline earnings per share of 61.5p was just under three and a half times the 18.0p in 2009, reflecting the higher headline profit after tax, partly offset by a 9% increase in the weighted average number of shares arising from the full year effect of the March 2009 rights issue.

During 2010 the Group experienced a significant improvement in its key end-markets and trading performance. This, together with the Board's current expectations of the likely trading environment in 2011, has resulted in the Board recommending to shareholders a final dividend for 2010 of 11.5p per share.

Net debt as at 31 December 2010 was £329.7m, a £41.7m reduction from 31 December 2009, resulting in a leverage ratio (net debt to EBITDA) of 1.1 times.

Group Income Statement

Headline profit before tax

Headline profit before tax was £222.1m for 2010, which was £146.4m higher than for 2009. The increase in headline profit before tax arose as follows:

	2010	2009	Change
	£m	£m	£m	%

Trading profit:

- at 2010 exchange rates	252.1	119.1	133.0	+112%

- currency exchange rate impact	-	(7.4)	7.4

Trading profit - as reported	252.1	111.7	140.4	+126%

Net finance costs - ordinary activities	(30.4)	(37.0)	6.6	+18%

Post-tax profit from joint ventures	0.4	1.0	(0.6)	-60%

Headline profit before tax	222.1	75.7	146.4	193%

The £6.6m lower charge for net finance costs (interest) principally comprised £6.0m of lower interest on borrowings, due mainly to a decrease in the average level of borrowings throughout the year, and £1.2m lower pension interest cost. The lower average level of borrowings reflects the positive operating cash flow in the year and the full year benefit of the proceeds (net of expenses) of £241m from the rights issue in March 2009.

Items excluded from headline profit before tax

A net charge of £32.7m was incurred in 2010 (2009: £96.6m) for the following items excluded from headline profit before tax:

Amortisation of intangible assets: costs of £17.7m (2009: £17.6m) were incurred in 2010 relating to customer relationships, intellectual property rights and the Foseco trade name, arising on the acquisition of Foseco in April 2008. These intangible assets are being amortised over lives varying between 10 and 20 years.

Restructuring and integration charges: of the total charge of £17.3m (2009: £75.6m), £16.4m related principally to redundancies where there will be a short-term cash cost and £0.9m to non-cash asset write-offs. The principal items included in the charge for 2010 were as follows:

· £9.6m arose in the Ceramics division, of which the principal element was £4.6m related to the closure of the Foundry product line's manufacturing facility in Chambery, France. This closure is expected to be completed by mid-2011; and

· £5.5m in the Electronics division, of which the principal element was £3.2m for restructuring and redundancy costs in the Chemistry product line in Europe.

Restructuring charges of between £5m and £10m are expected to be incurred in 2011.

Profit/(loss) relating to non-current assets: the net profit of £0.6m (2009: loss of £2.8m) arose mainly on the disposal of surplus property and investments.

Gains relating to employee benefits plans: of the total non-cash credit of £5.3m (2009: £9.7m), £4.7m related to the closure of the UK defined benefit plan to future benefit accrual. A new Group Personal Pension Plan has been established in place of both that plan and the current UK defined contribution plan to provide defined contribution benefits for all eligible UK employees.

Finance costs - exceptional items: costs of £3.0m (2009: £14.0m) were incurred in 2010 principally relating to the close-out of interest rate swaps. In December 2010, following receipt of the proceeds from the issuance of US$250m of US Private Placement loan notes, the Group was required to prepay certain of its borrowings under its existing syndicated bank facilities. Following these transactions, the Group closed out a number of interest rate swaps that had originally been taken out to hedge the interest payments relating to these borrowings.

Net (loss)/profit on disposal of continuing operations: a net loss of £0.6m (2009: profit of £3.7m) was incurred in 2010 relating to the disposal of the Electronics division's semi-conductor packaging operations, a small non-core business based in Singapore manufacturing epoxy mould compounds for encapsulating semi-conductors, and trailing costs related to prior years' disposals.

Group profit before tax and after the items noted above was £189.4m for 2010 compared to a loss before tax of £20.9m in 2009.

Taxation

The tax charge on ordinary activities was £46.7m on headline profit before tax of £222.1m, an effective tax rate (before share of post-tax profit from joint ventures) of 21.1% (2009: 35.2%). For the full year 2009, the effective tax rate was negatively impacted by the Group's low level of profit before tax which meant that the Group reported profit before tax in a number of tax-paying jurisdictions (such as China and India), whilst incurring losses before tax in jurisdictions (notably the US) where it was not appropriate to record a tax credit. The significantly higher level of profit before tax in 2010 has meant that this situation has not repeated. In addition, the Group has benefited in 2010 from non-recurring credits arising both from the recognition of tax losses in a number of countries where a deferred tax asset for those items had not previously been recorded, and from a number of adjustments arising from the finalisation of prior year tax liabilities. The underlying tax rate for 2010, excluding the benefit of these non-recurring credits, was around 24%. 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 2011 and 2012 will be between 23% and 24%.

A tax credit of £9.4m (2009: £5.9m) arose in relation to all the items excluded from headline profit before tax noted above.

Discontinued operations

A charge of £1.2m (2009: £3.4m) was incurred in 2010 in respect of additional costs for operations discontinued in prior years.

Profit/(loss) attributable to owners of the parent

Headline profit/(loss) attributable to owners of the parent for 2010 was £169.8m (2009: £45.6m), with the £124.2m increase over 2009 principally arising from the significant increase in headline profit before tax and the lower effective tax rate. Profit attributable to non-controlling interests of £5.6m was £1.8m higher than for 2009.

After taking account of all items excluded from headline profit before tax noted above (net of the related tax impact) and the charge relating to discontinued operations, the Group recorded a profit of £150.9m for 2010, £195.6m higher than the £44.7m loss recorded in 2009.

Return on investment (ROI)

The Group's post-tax ROI in 2010 was 9.6%, well ahead of the 3.4% reported in 2009, reflecting the significant improvement in trading performance during the year.

Earnings per share (EPS)

Headline earnings per share, based on the headline profit attributable to owners of the parent divided by the average number of shares in issue, amounted to 61.5p per share in 2010, compared to headline earnings per share of 18.0p per share in 2009. The Board believes this basis of calculating EPS is an important measure of the underlying earnings per share of the Group. Basic EPS, based on the net profit from continuing operations attributable to owners of the parent, was 53.0p (2009: loss per share of 17.8p).

The average number of shares in issue during 2010 was 276.2m, 23.4m higher than for 2009, principally reflecting the full year effect of the issue of 255.1m new shares as a result of the rights issue in March 2009. In accordance with IAS 33, the average number of shares in issue used in the calculation of EPS for all periods prior to the rights issue has been multiplied by an adjustment factor to reflect the bonus element in the new shares issued. The adjustment factor used was 6.6391. The average number of shares also reflects the share consolidation in May 2009, whereby shareholders exchanged 10 existing shares for 1 new share.

Dividend

Dividends have been suspended since the end of 2008 as a result of the economic downturn. However, end-market conditions and the Group's trading performance have shown a significant improvement in 2010 compared to 2009. This, together with the Board's current expectations of the likely trading environment in 2011, has resulted in the Board recommending a final dividend for 2010 of 11.5p per share which, if approved, is to be paid on 6 June 2011 to shareholders on the register on 20 May 2011.

Group cash flow

Net cash inflow from operating activities

In 2010, the Group generated £109.6m of net cash inflow from operating activities, £74.1m lower than in 2009.

	2010	2009	Change
	£m	£m	£m

EBITDA	306.3	165.3	141.0

Working capital	(92.4)	152.5	(244.9)

Assets held for sale	(1.6)	(0.8)	(0.8)

Restructuring and integration charges paid	(23.8)	(49.3)	25.5

Additional pension contributions	(11.6)	(8.3)	(3.3)

Net interest paid	(19.1)	(35.2)	16.1

Taxation paid	(48.2)	(40.5)	(7.7)


Net operating cash inflow	109.6	183.7	(74.1)

The cash outflow of £92.4m from trade and other working capital reflects the strong increase in underlying revenue in 2010. Whilst the absolute level of trade working capital rose during 2010, the ratio of average trade working capital to sales in 2010 of 21.1%, improved 0.3 percentage points from that achieved in 2009.

Cash outflow for restructuring and integration was £23.8m, of which the majority related to trailing costs from the cost-saving initiatives in the Ceramics and Electronics divisions initiated in the fourth quarter of 2008 and the first half of 2009. A cash outflow for restructuring and integration of around £15m is expected in 2011.

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

US defined benefit pension plan: an amount of £8.7m was paid in March 2010 to ensure continued compliance with the minimum funding levels required under the US Pension Protection Act. With effect from the beginning of 2011, additional top-up payments of approximately £6m per annum are expected to be made into the US pension plan.

UK defined benefit pension plan: payments totalling £2.9m were made into the UK pension plan in 2010. 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.

Net cash flows from investing activities

Capital expenditure: payments to acquire property, plant and equipment in 2010 were £57.2m, £22.2m higher than 2009 and representing 106% of depreciation (2009: 65%). A cash outflow for capital expenditure of around £90m is expected in 2011, principally reflecting the expansion of production capacity in the emerging markets of China, India and Brazil and customer installations in the Ceramics and Electronics divisions.

Proceeds from the sale of investments: net cash inflow from the sale of surplus trade investments was £4.6m (2009: £0.1m).

Acquisition of subsidiaries and joint ventures: net cash outflow in 2010 was £3.9m (2009: £5.9m), principally relating to the Ceramics division's investment in the Linings joint venture in China with Angang Steel, one of China's largest steel producers.

Disposal of subsidiaries and joint ventures: net cash inflow in 2010 was £6.2m (2009: £6.2m), principally relating to the disposal by the Electronics division of its epoxy mould compound business, based in Singapore.

Settlement of closed-out interest rate swaps: net cash outflow in 2010 was £6.5m (2009: £4.0m) and related to interest rate swaps that had been closed-out in 2009.

Free cash flow

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

Free cash inflow for 2010 was £63.7m, £93.6m lower than 2009, due to the £74.1m decrease in net cash flow from operating activities for the reasons described above, combined with the £22.2m increase in purchases of property, plant and equipment.

The Group traditionally experiences weaker free cash inflows in the first half of the year compared with the second half, due to the seasonality of trade working capital cash flows. In 2009, the marked reduction in revenue coupled with continued management focus on cash generation resulted in strong free cash flow in both the first and second halves of 2009. In 2010, a more normal trade working capital seasonality was experienced, resulting in much stronger free cash flow in the second half of the year compared to the first half (first half 2010: outflow of £14.9m; second half 2010: inflow of £78.6m). This normal trade working capital seasonality is expected to continue in 2011.

Net cash flow before financing

Net cash inflow before financing for 2010 was £51.8m, £90.7m lower than 2009 due principally to the decrease in cash flow from operating activities described above.

Cash flow from financing activities

Net cash outflow from financing activities (before movement in borrowings) was £6.9m (2009: inflow of £198.3m), principally comprising a cash outflow of £3.3m relating to the settlement during the year of forward foreign exchange contracts, in particular those relating to the Chinese renminbi. These forward foreign exchange contracts had been taken out to align broadly the currency profile of the Group's borrowings with the net assets of the Group and formed part of the hedge on investments of the Group's foreign operations. The cash inflow in 2009 arose principally from the proceeds (net of expenses) of £240.7m from the rights issue in March 2009.

Net cash inflow and movement in net debt

Net cash inflow for 2010 (before movement in borrowings) was £44.9m, £295.9m lower than 2009.

With a £1.5m negative foreign exchange adjustment and £1.7m in other non-cash movements, this resulted in a decrease in net debt from £371.4m at 31 December 2009 to £329.7m at 31 December 2010.

Net debt

The net debt of £329.7m as at 31 December 2010 was primarily drawn on available committed facilities of £855m. The Group's net debt comprised the following:

	31 December	31 December
	2010	2009
	£m	£m
US Private Placement loan notes (US$440m)	282.2	201.3
Committed bank facility	223.2	324.9
Lease financing	3.8	3.6
Other	7.2	1.8
Gross borrowings	516.4	531.6
Cash and short-term deposits	(186.7)	(160.2)
Net debt	329.7	371.4

On 16 December 2010, the Group issued US$250m of new US Private Placement loan notes. The notes were issued in two series: US$110m at a fixed interest rate of 4.16% maturing in December 2017, and US$140m at a fixed interest rate of 4.87% maturing in December 2020. The average weighted interest rate on the new notes is 4.57% and the average weighted duration from issuance is 8.7 years. The remaining US$190m of US Private Placement loan notes are repayable in May 2012.

In October 2007, the Group entered into a multi-currency, committed bank facility which now totals £573m. This facility is repayable in three tranches; £62m in April 2011, £38m and €19m in October 2011 and £425m and €38m in October 2012.

As at December 2010, the Group's ratio of EBITDA to interest on borrowings was 13.8 times (as compared with not less than 4.0 times for covenant purposes) and the ratio of net debt to EBITDA was 1.1 times (as compared with not more than 3.0 times for covenant purposes). Based on these covenant ratios, the Group will pay a margin of 65bps over LIBOR on its borrowings under the committed bank facility.

As at 31 December 2010, the Group had undrawn committed debt facilities totalling around £350m.

In January 2010, the Group entered into a number of interest rate swaps which, together with the impact of the US Private Placement loan notes issued in December 2010, results in around three quarters of the Group's current gross borrowings now being at fixed interest rates for an average period of just under four and a half years from December 2010.

Currency

During 2010, sterling weakened against the majority of currencies (by 3% against the US dollar and 7% against the Chinese renminbi). The principal exception was the euro, against which sterling strengthened by 4%. Overall, the relative weakness of sterling during the year meant that the average exchange rates used to translate the Group's overseas results into sterling for 2010 and 2009 had a minor positive impact on the Group's reported results. Between these years, the average exchange rates for sterling weakened against the US dollar by 1% and the Chinese renminbi by 2%, but strengthened against the euro by 4%.

In 2010, the net translation impact of currency changes compared to 2009 was to increase 2009 revenue by £54m and 2009 trading profit by £7m.

During the course of the second half of 2008, the majority of the currency-denominated borrowings under both the US Private Placement loan notes and the syndicated bank facility were switched into sterling such that changes in exchange rates would not have a material impact on the level of gross borrowings. Following the significant improvement in the Group's financial position since the beginning of 2010, there has been a progressive return to the previous policy of broadly matching the currency of borrowings to the currency of operating activities. Currently, around 75% of the Group's gross borrowings are non-sterling denominated, principally in US dollars, euros and Chinese renminbi.

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. In addition, the Group has various other post-retirement defined benefit ("PRB") arrangements, being principally healthcare arrangements in the US. The Group's two principal defined benefit pension plans in the US are closed to new members and to further accruals for existing members. Following the closure of the Group's UK defined benefit pension plan ("the UK Plan") and the UK defined contribution plan to future benefit accrual with effect from 31 July 2010, a new Group Personal Pension Plan has been established in their place to provide defined contribution benefits for all eligible UK employees.

The total charge to the income statement in 2010 for all pension plans (including defined contribution plans) was £20.5m, an increase of £5.7m over 2009. Of this charge, £22.2m (2009: £18.9m) has been deducted in arriving at trading profit and £3.6m (2009: £4.8m) has been included within net finance charges. In addition, an exceptional credit of £5.3m was reported (2009: £9.7m) relating mainly to the termination of future benefit accrual in the UK Plan. Total pension cash contributions amounted to £40.5m in 2010 (2009: £36.2m), which included additional cash funding contributions into the UK Plan of £2.9m and a funding contribution into the US plan of £8.7m.

As at 31 December 2010, a net deficit of £113.8m was recognised in respect of employee benefits. The reduction of £23.9m from the net deficit as at 31 December 2009 of £137.7m primarily arose due to a £25.8m improvement in respect of the UK arrangements. This improvement principally arose from actuarial gains on the UK Plan assets of £29.7m and a curtailment gain of £4.7m in connection with the UK Plan closure. The deficit in the Group's US pension arrangements increased by £3.8m to £57.9m, despite additional contributions into the plans of £8.7m. The main contributing factor was increased liabilities (£14.0m) resulting primarily from a reduction in the applicable discount rate. The net deficit in the plans in the remainder of the Group were marginally (£1.9m) lower than at the end of 2009.

The total Group net deficit comprises a surplus of £4.3m relating to the UK Plan and deficits of £57.9m relating to the Group's defined benefit pension plans in the US, £35.0m to plans in Germany, £15.5m to pension arrangements in other countries, and £9.7m to unfunded post-retirement defined benefit arrangements, being mainly healthcare benefit arrangements in the US.

During 2009 it was agreed, in consultation with the Trustee of the UK Plan, to reduce the level of 'top-up' payments (made in addition to normal cash contributions) from £14.0m per annum such that, with effect from 1 February 2009, no further additional payments would be made until August 2010. A new triennial funding valuation for the UK Plan as at the end of 2009 was completed in July 2010, based upon which the Company and Trustee agreed a new schedule of contributions to commence in August 2010 whereby, whilst the Company will make no further normal cash contributions, it will make 'top-up' payments of £7.0m per annum until February 2016, targeted at eliminating the deficit in the UK Plan by that date. 'Top-up' payments of £2.9m were made in 2010 (2009: £1.2m). 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.

The UK Plan has, since 2006, operated a hedging strategy to mitigate the impact of interest rate and inflation rate movements on the value of its projected liabilities for meeting future pension payments (the UK Plan's "economic liabilities"), the value of which is related more to interest rate and inflation rate swap yields than to corporate bond yields, upon which the discount rate used for IAS 19 valuation purposes is based. When the relationship between the relevant swap yields and corporate bond yields is stable, the UK Plan's hedging strategy should deliver a broadly stable 'funding ratio' (the ratio of plan assets to plan liabilities) not just in relation to the UK Plan's economic liabilities, but also under an IAS 19 basis of valuation. As at 31 December 2010, the estimated funding position (incorporating the UK Plan's economic liabilities) showed a funding ratio of 92%, with the IAS 19 valuation reflecting a funding ratio of 101%. This represents a valuation difference of around £41m. The Group continues to fund the UK Plan with reference to its economic funding position.

In July 2010, the UK government announced changes to the inflation index used for statutory pension increases (both for pensions in payment and pensions in deferment) to apply to private sector pension schemes. The Company and the UK Plan Trustee and their respective legal advisors are currently working to clarify how this impacts the UK Plan and will communicate with any affected members in 2011, at which time any resulting liability reduction will be reflected in the Group accounts.

In March 2010, the Group made a top-up payment of £8.7m into the US defined benefit pension plan to ensure continued compliance with the minimum funding levels required under the US Pension Protection Act. With effect from the beginning of 2011, additional top-up payments of approximately £6m per annum are expected to be made into the US pension plan.

For further information please contact:

Shareholder/analyst enquiries:
Nick Salmon, Chief Executive	Cookson Group plc
Mike Butterworth, Group Finance Director	Tel: + 44 (0)20 7822 0000

Media enquiries:
John Olsen	MHP Communications
Anthony Arthur	Tel: +44 (0)20 3128 8100

Copies of Cookson's 2010 Annual Report are due to be posted to shareholders of the Company who have elected to receive a hard copy on 6 April 2011 and are also expected to be available on the Company's website and at the Registered Office of the Company from this date.

Cookson management will make a presentation to analysts on 1 March 2011 at 10.00am (UK time). This will be broadcast live on Cookson's website, www.cooksongroup.co.uk and an archive version of the presentation will be available on the website later that day.

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

Group Income Statement

For the year ended 31 December 2010

		2010	2009
	Notes	£m	£m

Revenue	2	2,545.5	1,960.6
Manufacturing costs - raw materials		(1,263.7)	(972.7)
- other		(570.6)	(470.1)
Administration, selling and distribution costs		(459.1)	(406.1)
Trading profit	1.5, 2	252.1	111.7
Amortisation of intangible assets	12	(17.7)	(17.6)
Restructuring and integration charges	3	(17.3)	(75.6)
Profit/(loss) relating to non-current assets	4	0.6	(2.8)
Gains relating to employee benefits plans	5	5.3	9.7
Profit from operations	2	223.0	25.4
Finance costs - ordinary activities	6	(67.7)	(75.6)
- exceptional items	6	(3.0)	(14.0)
Finance income	6	37.3	38.6
Share of post-tax profit of joint ventures		0.4	1.0
Net (loss)/profit on disposal of continuing operations	7	(0.6)	3.7
Profit/(loss) before tax		189.4	(20.9)
Income tax costs - ordinary activities	8	(46.7)	(26.3)
- exceptional items	8	9.4	5.9
Discontinued operations	9	(1.2)	(3.4)
Profit/(loss) for the year		150.9	(44.7)

Profit/(loss) for the year attributable to:
Owners of the parent		145.3	(48.5)
Non-controlling interests		5.6	3.8
Profit/(loss) for the year		150.9	(44.7)


Headline earnings
Trading profit		252.1	111.7
Net finance costs - ordinary activities		(30.4)	(37.0)
Share of post-tax profit of joint ventures		0.4	1.0
Headline profit before tax	1.5	222.1	75.7
Income tax costs - ordinary activities		(46.7)	(26.3)
Profit attributable to non-controlling interests		(5.6)	(3.8)
Headline profit attributable to owners of the parent		169.8	45.6


Earnings/(loss) per share from continuing operations	10
Basic earnings/(loss) per share (pence)		53.0	(17.8)
Diluted earnings/(loss) per share (pence)		52.2	(17.8)
Headline basic earnings per share (pence)	1.5	61.5	18.0
Headline diluted earnings per share (pence)		60.4	18.0

Group Statement of Comprehensive Income

For the year ended 31 December 2010

		2010	2009
	Notes	£m	£m

Profit/(loss) for the year		150.9	(44.7)
Other comprehensive income/(loss) for the year
Exchange differences on translation of the net assets of foreign operations		84.5	(94.5)
Exchange translation differences arising on net investment hedges		(26.1)	16.8
Change in fair value of cash flow hedges		(4.2)	(1.0)
Change in fair value of cash flow hedges transferred to profit for the year		2.4	12.8
Actuarial gains on employee benefits plans		34.9	24.4
Actuarial losses on employee benefits plans		(32.4)	(101.7)
Change in fair value of available-for-sale investments		(1.4)	0.5
Change in fair value of available-for-sale investments transferred to profit for the year		(1.3)	-
Income tax relating to components of other comprehensive income	8	(0.7)	21.8
Other comprehensive income/(loss) for the year, net of income tax		55.7	(120.9)

Total comprehensive income/(loss) for the year		206.6	(165.6)

Total comprehensive income/(loss) for the year attributable to:
Owners of the parent		198.5	(168.2)
Non-controlling interests		8.1	2.6
Total comprehensive income/(loss) for the year		206.6	(165.6)

Group Statement of Cash Flows

For the year ended 31 December 2010

		2010	2009
	Notes	£m	£m
Cash flows from operating activities
Profit from operations		223.0	25.4
Amortisation of intangible assets		17.7	17.6
Restructuring and integration charges		17.3	75.6
(Profit)/loss relating to non-current assets		(0.6)	2.8
Gains relating to employee benefits plans		(5.3)	(9.7)
Depreciation		54.2	53.6
EBITDA	1.5	306.3	165.3
Net (increase)/decrease in trade and other working capital		(92.4)	152.5
Net operating outflow related to assets and liabilities classified as held for sale		(1.6)	(0.8)
Outflow related to restructuring and integration charges	3	(23.8)	(49.3)
Additional funding contributions into Group pension plans		(11.6)	(8.3)
Cash generated from operations		176.9	259.4
Interest paid		(27.9)	(43.8)
Interest received		8.8	8.6
Income taxes paid		(48.2)	(40.5)
Net cash inflow from operating activities		109.6	183.7

Cash flows from investing activities
Purchase of property, plant and equipment		(57.2)	(35.0)
Proceeds from the sale of property, plant and equipment		1.6	1.2
Proceeds from the sale of investments		4.6	0.1
Acquisition of subsidiaries and joint ventures, net of cash acquired		(3.9)	(5.9)
Disposal of subsidiaries and joint ventures, net of cash disposed of		6.2	6.2
Settlement of closed-out interest rate swaps		(6.5)	(4.0)
Dividends received from joint ventures		0.9	1.1
Other investing outflows		(3.5)	(4.9)
Net cash outflow from investing activities		(57.8)	(41.2)
Net cash inflow before financing activities		51.8	142.5

Cash flows from financing activities
Repayment of borrowings		(189.3)	(284.1)
Increase in borrowings		160.6	-
Settlement of forward foreign exchange contracts		(3.3)	(38.0)
Proceeds from the issue of share capital		0.1	240.7
Borrowing facility arrangement costs		(0.9)	(2.4)
Dividends paid to non-controlling shareholders		(2.8)	(2.0)
Net cash outflow from financing activities		(35.6)	(85.8)
Net increase in cash and cash equivalents	14	16.2	56.7
Cash and cash equivalents at 1 January		157.7	105.6
Effect of exchange rate fluctuations on cash and cash equivalents		7.5	(4.6)
Cash and cash equivalents at 31 December		181.4	157.7

FREE CASH FLOW	1.5
Net cash inflow from operating activities		109.6	183.7
Additional funding contributions into Group pension plans		11.6	8.3
Purchase of property, plant and equipment		(57.2)	(35.0)
Proceeds from the sale of property, plant and equipment		1.6	1.2
Dividends received from joint ventures		0.9	1.1
Dividends paid to non-controlling shareholders		(2.8)	(2.0)
Free cash flow		63.7	157.3

Group Balance Sheet

As at 31 December 2010

		2010	2009
	Notes	£m	£m
Assets
Property, plant and equipment		411.3	391.9
Intangible assets	12	1,137.1	1,115.6
Employee benefits - net surpluses	15	4.3	-
Interests in joint ventures		28.9	23.5
Investments		5.7	9.8
Deferred tax assets		19.9	12.0
Other receivables		12.4	11.0
Total non-current assets		1,619.6	1,563.8

Cash and short-term deposits		186.7	160.2
Inventories		287.5	222.0
Trade and other receivables		522.9	405.1
Income tax recoverable		4.6	5.5
Derivative financial instruments		2.4	0.2
Assets classified as held for sale		-	3.2
Total current assets		1,004.1	796.2

Total assets		2,623.7	2,360.0

Equity
Issued share capital		276.4	276.4
Share premium account		0.1	-
Other reserves		179.3	127.9
Retained earnings		797.8	643.9
Equity attributable to the owners of the parent		1,253.6	1,048.2
Non-controlling interests		23.5	18.2
Total equity		1,277.1	1,066.4

Liabilities
Interest-bearing loans and borrowings		390.4	441.6
Employee benefits - net liabilities	15	118.1	137.7
Other payables		23.1	27.2
Provisions		53.2	56.6
Derivative financial instruments		14.1	7.7
Deferred tax liabilities		95.7	99.3
Total non-current liabilities		694.6	770.1

Interest-bearing loans and borrowings		126.0	90.0
Trade and other payables		425.7	337.5
Income tax payable		48.4	45.8
Provisions		32.6	36.9
Derivative financial instruments		19.3	11.9
Liabilities directly associated with assets classified as held for sale		-	1.4
Total current liabilities		652.0	523.5

Total liabilities		1,346.6	1,293.6

Total equity and liabilities		2,623.7	2,360.0

NET DEBT	1.5
Interest-bearing loans and borrowings - non-current		390.4	441.6
- current		126.0	90.0
Cash and short-term deposits		(186.7)	(160.2)
Net debt	14	329.7	371.4

Group Statement of Changes in Equity

For the year ended 31 December 2010

			Exchange
			trans-		Available-
	Issued	Share	lation	Cash	for-sale		Owners	Non-
	share	premium	differ-	flow	invest-	Retained	of the	controlling	Total
	capital	account	ences	hedges	ments	earnings	parent	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m

As at 1 January 2009	21.3	8.1	202.1	(12.0)	2.0	753.1	974.6	17.6	992.2
(Loss)/profit for the year	-	-	-	-	-	(48.5)	(48.5)	3.8	(44.7)
Exchange differences on translation of the net assets of foreign operations	-	-	(93.3)	-	-	-	(93.3)	(1.2)	(94.5)
Exchange translation differences arising on net investment hedges	-	-	16.8	-	-	-	16.8	-	16.8
Change in fair value of cash flow hedges	-	-	-	(1.0)	-	-	(1.0)	-	(1.0)
Change in fair value of cash flow hedges transferred to profit for the year	-	-	-	12.8	-	-	12.8	-	12.8
Actuarial gains on employee benefits plans	-	-	-	-	-	24.4	24.4	-	24.4
Actuarial losses on employee benefits plans	-	-	-	-	-	(101.7)	(101.7)	-	(101.7)
Change in fair value of available-for-sale investments	-	-	-	-	0.5	-	0.5	-	0.5
Income tax relating to components of other comprehensive income (note 8)	-	-	-	-	-	21.8	21.8	-	21.8
Other comprehensive (loss)/income	-	-	(76.5)	11.8	0.5	(55.5)	(119.7)	(1.2)	(120.9)
Total comprehensive (loss)/income	-	-	(76.5)	11.8	0.5	(104.0)	(168.2)	2.6	(165.6)
Shares issued in the year	255.1	(8.1)	-	-	-	(6.3)	240.7	-	240.7
Recognition of share-based payments	-	-	-	-	-	1.1	1.1	-	1.1
Dividends paid	-	-	-	-	-	-	-	(2.0)	(2.0)
Total transactions with owners	255.1	(8.1)	-	-	-	(5.2)	241.8	(2.0)	239.8
As at 1 January 2010	276.4	-	125.6	(0.2)	2.5	643.9	1,048.2	18.2	1,066.4
Profit for the year	-	-	-	-	-	145.3	145.3	5.6	150.9
Exchange differences on translation of the net assets of foreign operations	-	-	82.0	-	-	-	82.0	2.5	84.5
Exchange translation differences arising on net investment hedges	-	-	(26.1)	-	-	-	(26.1)	-	(26.1)
Change in fair value of cash flow hedges	-	-	-	(4.2)	-	-	(4.2)	-	(4.2)
Change in fair value of cash flow hedges transferred to profit for the year	-	-	-	2.4	-	-	2.4	-	2.4
Actuarial gains on employee benefits plans	-	-	-	-	-	34.9	34.9	-	34.9
Actuarial losses on employee benefits plans	-	-	-	-	-	(32.4)	(32.4)	-	(32.4)
Change in fair value of available-for-sale investments	-	-	-	-	(1.4)	-	(1.4)	-	(1.4)
Change in fair value of available-for-sale investments transferred to profit	-	-	-	-	(1.3)	-	(1.3)	-	(1.3)
Income tax relating to components of other comprehensive income (note 8)	-	-	-	-	-	(0.7)	(0.7)	-	(0.7)
Other comprehensive income/(loss)	-	-	55.9	(1.8)	(2.7)	1.8	53.2	2.5	55.7
Total comprehensive income/(loss)	-	-	55.9	(1.8)	(2.7)	147.1	198.5	8.1	206.6
Shares issued in the year	-	0.1	-	-	-	-	0.1	-	0.1
Recognition of share-based payments	-	-	-	-	-	6.8	6.8	-	6.8
Dividends paid	-	-	-	-	-	-	-	(2.8)	(2.8)
Total transactions with owners	-	0.1	-	-	-	6.8	6.9	(2.8)	4.1
As at 31 December 2010	276.4	0.1	181.5	(2.0)	(0.2)	797.8	1,253.6	23.5	1,277.1

Notes to the financial statements

1. BASIS OF PREPARATION

1.1 GENERAL INFORMATION

The audited consolidated financial statements of Cookson Group plc (the "Company") in respect of the year ended 31 December 2010 have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") and were approved by the Board of Directors on 1 March 2011. The financial information set out in this annual results announcement does not constitute the Company's statutory accounts for the year ended 31 December 2010, but is derived from those accounts. An unqualified audit report was issued on the statutory accounts for 2010, which will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

The comparative figures for the financial year ended 31 December 2009 are not the Company's statutory accounts for that financial year. Those accounts, which were prepared under IFRS, have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was unqualified 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 these records and whether the auditor has obtained all the information and explanations necessary for the purposes of its audit.

1.2 CHANGES IN ACCOUNTING POLICY

The following revised and amended standards and interpretations, which have all been endorsed by the EU, have been adopted by the Group in its 2010 Annual Report. With the possible exception of the IFRS 3 (Revised) requirement to expense acquisition costs, none of these revised and amended standards and interpretations is expected to have a material impact on the Group's net cash flows, financial position, total comprehensive income or earnings per share.

IFRS 1 (Revised), First-time Adoption of International Financial Reporting Standards, which is effective for accounting periods beginning on or
after 1 July 2009, simplifies the structure of IFRS 1 without making any technical changes.

Amendments to IFRS 1, First-time Adoption of International Financial Reporting Standards, which is effective for accounting periods beginning

on or after 1 January 2010, introduces two additional exemptions for first-time adopters in relation to oil and gas assets.

Amendments to IFRS 2, Group Cash-Settled Share-based Payments Transactions, which is effective for accounting periods beginning on or

after 1 January 2010, provides a clear basis to determine the classification of share-based payment awards in both consolidated and separate

financial statements.

IFRS 3 (Revised), Business Combinations, which is effective for accounting periods beginning on or after 1 July 2009, harmonises business

combination accounting with US GAAP. The standard continues to apply the acquisition method to business combinations, but with some

significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with some

contingent payments subsequently re-measured at fair value through profit or loss; goodwill and non-controlling interests may be calculated on a

gross or net basis; and all transaction costs, which under previous practice were treated as part of the cost of a business combination, are to

be expensed.

IAS 27, Consolidated and Separate Financial Statements, which is effective for accounting periods beginning on or after 1 July 2009, requires

the effects of all transactions with non-controlling interests where there is no change in control to be recorded in equity. Such transactions will

no longer result in goodwill or gains or losses in the income statement.

Amendments to IAS 39, Financial Instruments: Recognition and Measurement, for Eligible Hedged Items, which is effective for accounting

periods beginning on or after 1 July 2009, clarifies how to apply the principles that determine whether a hedged risk or portion of cash flow is

eligible for designation.

IFRIC 12, Service Concession Arrangements, which is effective for accounting periods beginning on or after 29 March 2009, clarifies existing

requirements in relation to accounting for government sponsored infrastructure projects.

IFRIC 15, Agreements for the Construction of Real Estate, which is effective for accounting periods beginning on or after 1 January 2010,

standardises accounting practice for the recognition of revenue by real estate developers for sales before construction is complete.

IFRIC 16, Hedges of a Net Investment in a Foreign Operation, which is effective for accounting periods beginning on or after 1 July 2009,

clarifies which currency exposures qualify for hedge accounting; which entity within a group can hold the hedging instrument; and how to

determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item when an investment in

a foreign operation is disposed of.

IFRIC 17, Distributions of Non-cash Assets to Owners, which is effective for accounting periods beginning on or after 1 January 2010, clarifies

how an entity should measure distributions of assets, other than cash, when it pays dividends to its owners.

IFRIC 18, Transfers of Assets from Customers, which is effective for accounting periods beginning on or after 1 November 2009, clarifies the

accounting for arrangements where an item of property, plant and equipment provided by the customer, is used to provide an ongoing service.

1.3 BASIS FOR PREPARATION OF FINANCIAL STATEMENTS ON A GOING CONCERN BASIS

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements of the Group.

1.4 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 (Revised), the Company has adopted a policy of disclosing separately on the face of its 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 and integration 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 of operations either due to their size or nature.

1.5 USE OF 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. Because IFRS measures reflect all items which affect reported performance, the Directors believe that certain non-GAAP measures, which reflect what they view as the underlying performance of the Group, are important and should be considered alongside the IFRS measures. The following non-GAAP measures are used by the Company.

(a) Net sales value

Net sales value is calculated as the total of revenue less the amount included therein related to any precious metalcomponent. The Directors believe that net sales value provides an important measure of the underlying sales performance of the Group's Precious Metals division.

(b) 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. The Directors believe that return on sales provides an important measure of the underlying trading performance of the Group and the Group's Ceramics and Electronics divisions and that return on net sales value provides an important measure of the underlying trading performance of the Group's Precious Metals division.

Underlying revenue growth measures the organic growth in revenue from one year to the next after eliminating the effects of changes in exchange rates and commodity metals prices and the effects of business acquisitions, disposals and closures. The Directors believe that underlying revenue growth gives an important measure of the organic revenue generation capacity of the Group.

(d) Trading profit

Trading profit is defined as profit from operations before exceptional items. The Directors believe that trading profit is an important measure of the underlying trading performance of the Group.

(e) Headline profit before tax

Headline profit before tax is calculated as the net total of trading profit, plus the Group's share of post-tax profit of joint ventures and total net finance costs associated with ordinary activities. The Directors believe that headline profit before tax provides an important measure of the underlying financial performance of the Group.

(f) Headline earnings per share

Headline earnings per share is calculated as headline profit before tax 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 year. The Directors believe that headline earnings per share provides an important measure of the underlying earnings capacity of the Group.

(g) 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, is disclosed on the face of the Group statement of cash flows. The Directors believe that free cash flow gives an important measure of the underlying cash generation capacity of the Group.

(h) 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 year. 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.

(i) EBITDA

EBITDA is calculated as the total of trading profit before depreciation charges. The Directors believe that EBITDA provides an important measure of the underlying financial performance of the Group.

(j) 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.

(k) Interest cover

Interest cover is the ratio of EBITDA to net interest. The Directors believe that interest cover provides an important measure of the underlying financial position of the Group.

(l) Net debt

Net debt comprises the net total of current and non-current interest-bearing loans and borrowings and cash and short-term deposits. The Directors believe that net debt is an important measure as it shows the Group's aggregate net indebtedness to banks and other external financial institutions.

(m) Net debt to EBITDA

Net debt to EBITDA is the ratio of net debt at the year-end to EBITDA for that year. The Directors believe that net debt to EBITDA provides an important measure of the underlying financial position of the Group.

(n) Return on net assets

Return on net assets ("RONA") is calculated as trading profit plus share of post-tax profit 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). The Directors believe that RONA provides an important measure of the underlying financial performance of the Group's divisions.

(o) Return on investment

Return on investment ("ROI") is calculated as trading profit after tax plus share of post-tax profit of joint-ventures, divided by invested capital (being shareholders' funds plus net debt, employee benefits net surpluses and net liabilities and goodwill previously written-off to, or amortised against, reserves). The Directors believe that ROI provides an important measure of the underlying financial performance of the Group.

2. SEGMENT INFORMATION

2.1 BUSINESS SEGMENTS

For reporting purposes, the Group is organised into three main business segments: Ceramics, Electronics and Precious Metals. The Chief Executive of each of these business segments reports to the Chief Executive of the Group and 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, Ceramics, Electronics and Precious Metals. 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.

Segment revenue represents revenue from external customers (inter-segment revenue is not material) and segment result is equivalent to trading profit prior to corporate costs directly related to managing the parent company, which are reported separately in the table below. Segment net operating assets exclude goodwill and other intangible assets, net debt, net employee benefits liabilities, net income tax liabilities and other net non-operating liabilities. Segment result and segment net operating assets include items directly attributable to a segment as well as those items that can be allocated on a reasonable basis.

2.2 INCOME STATEMENT

			Precious		2010
	Ceramics	Electronics	Metals	Unallocated	Group
	£m	£m	£m	£m	£m

Segment revenue	1,494.9	720.9	329.7	-	2,545.5

Segment EBITDA	219.2	79.7	16.3	-	315.2
Segment depreciation	(41.8)	(8.7)	(3.6)	-	(54.1)
Segment result	177.4	71.0	12.7	-	261.1
Corporate costs	-	-	-	(9.0)	(9.0)
Trading profit	177.4	71.0	12.7	(9.0)	252.1
Amortisation of intangible assets	(17.7)	-	-	-	(17.7)
Restructuring and integration charges	(9.6)	(5.5)	(2.2)	-	(17.3)
(Loss)/profit relating to non-current assets	(0.2)	0.8	-	-	0.6
Gains relating to employee benefits plans	-	-	-	5.3	5.3
Profit from operations	149.9	66.3	10.5	(3.7)	223.0
Finance costs - ordinary activities					(67.7)
- exceptional items					(3.0)
Finance income					37.3
Share of post-tax profit of joint ventures					0.4
Net loss on disposal of continuing operations					(0.6)
Profit before tax					189.4

			Precious		2009
	Ceramics	Electronics	Metals	Unallocated	Group
	£m	£m	£m	£m	£m

Segment revenue	1,130.8	529.9	299.9	-	1,960.6

Segment EBITDA	111.6	48.5	12.5	-	172.6
Segment depreciation	(40.7)	(9.3)	(3.6)	-	(53.6)
Segment result	70.9	39.2	8.9	-	119.0
Corporate costs	-	-	-	(7.3)	(7.3)
Trading profit	70.9	39.2	8.9	(7.3)	111.7
Amortisation of intangible assets	(17.6)	-	-	-	(17.6)
Restructuring and integration charges	(44.3)	(27.8)	(2.4)	(1.1)	(75.6)
Loss relating to non-current assets	(0.1)	(2.6)	(0.1)	-	(2.8)
Gains relating to employee benefits plans	-	-	-	9.7	9.7
Profit from operations	8.9	8.8	6.4	1.3	25.4
Finance costs - ordinary activities					(75.6)
- exceptional items					(14.0)
Finance income					38.6
Share of post-tax profit of joint ventures					1.0
Net profit on disposal of continuing operations					3.7
Loss before tax					(20.9)

2.3 BALANCE SHEET

				Unallocated
				and dis-
			Precious	continued	2010
	Ceramics	Electronics	Metals	operations	Group
	£m	£m	£m	£m	£m

Property, plant and equipment	315.2	69.7	25.9	0.5	411.3
Trade working capital	344.6	115.9	44.3	(1.3)	503.5
Other net operating liabilities	(68.7)	(42.3)	(23.4)	(8.8)	(143.2)
Net operating assets/(liabilities)	591.1	143.3	46.8	(9.6)	771.6
Goodwill	607.9	301.0	-	-	908.9
Other intangible assets	228.2	-	-	-	228.2
Net debt	-	-	-	(329.7)	(329.7)
Net employee benefits liabilities	-	-	-	(113.8)	(113.8)
Net tax liabilities	-	-	-	(119.6)	(119.6)
Other net non-operating liabilities	-	-	-	(68.5)	(68.5)
Total net assets	1,427.2	444.3	46.8	(641.2)	1,277.1

Average net operating assets for RONA calculation [a]	577.6	150.4	65.9	(12.3)	781.6

				Unallocated
				and dis-
			Precious	continued	2009
	Ceramics	Electronics	Metals	operations	Group
	£m	£m	£m	£m	£m

Property, plant and equipment	299.1	65.4	26.8	0.6	391.9
Trade working capital	254.1	77.0	51.5	(2.1)	380.5
Other net operating liabilities	(61.3)	(31.0)	(18.8)	(9.6)	(120.7)
Net operating assets/(liabilities)	491.9	111.4	59.5	(11.1)	651.7
Goodwill	585.5	288.5	-	-	874.0
Other intangible assets	241.6	-	-	-	241.6
Net debt	-	-	-	(371.4)	(371.4)
Net employee benefits liabilities	-	-	-	(137.7)	(137.7)
Net tax liabilities	-	-	-	(127.6)	(127.6)
Other net non-operating liabilities	-	-	-	(64.2)	(64.2)
Total net assets	1,319.0	399.9	59.5	(712.0)	1,066.4

Average net operating assets for RONA calculation [b]	545.8	151.0	87.0	(15.8)	768.4

2.4 PERFORMANCE MEASURES

				Unallocated
				and dis-
			Precious	continued	2010
	Ceramics	Electronics	Metals	operations	Group
	£m	£m	£m	£m	£m

Trading profit	177.4	71.0	12.7	(9.0)	252.1
Share of post-tax (loss)/profit of joint ventures	(0.9)	1.3	-	-	0.4
Profit for RONA calculation [c]	176.5	72.3	12.7	(9.0)	252.5

RONA % [c] / [a]	30.6	48.1	19.3	-	-
Return on sales margin %	11.9	9.8	-	-	9.9
Return on net sales value %	-	-	9.5	-	-
Property, plant and equipment additions (£m)	50.1	11.0	2.2	-	63.3
Research and development (£m)	21.6	16.5	-	-	38.1
Research and development as % of sales	1.4	2.3	-	-	1.5
Number of employees - year-end	11,624	2,571	1,528	43	15,766
- average	11,124	2,699	1,582	43	15,448

				Unallocated
				and dis-
			Precious	continued	2009
	Ceramics	Electronics	Metals	operations	Group
	£m	£m	£m	£m	£m

Trading profit	70.9	39.2	8.9	(7.3)	111.7
Share of post-tax profit of joint ventures	0.3	0.7	-	-	1.0
Profit for RONA calculation [d]	71.2	39.9	8.9	(7.3)	112.7

RONA % [d] / [b]	13.0	26.4	10.2	-	-
Return on sales margin %	6.3	7.4	-	-	5.7
Return on net sales value %	-	-	6.7	-	-
Property, plant and equipment additions (£m)	28.7	4.8	1.5	-	35.0
Research and development (£m)	20.7	16.3	-	-	37.0
Research and development as % of sales	1.8	3.1	-	-	1.9
Number of employees - year-end	10,519	2,711	1,588	42	14,860
- average	10,555	2,280	1,565	45	14,985

3. RESTRUCTURING AND INTEGRATION CHARGES

The restructuring and integration charge for the year was £17.3m (2009: £75.6m). In 2010, the charge comprised wholly (2009: £48.7m) the cost of a number of initiatives throughout the Group aimed at reducing the Group's cost base and realigning certain of its manufacturing capacity and sales and marketing organisation with its customers' markets. These latter initiatives included redundancy programmes, the downsizing or closure of facilities, the streamlining of manufacturing processes and the rationalisation of product lines. In 2009, total restructuring and integration charges also comprised £4.9m of costs associated with the integration of Foseco plc into the Group's Ceramics division and £22.0m in respect of onerous lease costs. Of the total charge in the year, £0.9m (2009: £nil) related to asset write-downs.

Cash costs of £23.8m (2009: £49.3m) were incurred in the year in respect of the restructuring and integration initiatives commenced both in 2010 and in prior years, leaving provisions made but unspent of £38.4m as at 31 December 2010 (2009: £44.5m), of which £25.1m relate to future lease costs in respect of leases expiring between 3 and 18 years.

The net tax credit attributable to these restructuring and integration charges was £3.6m (2009: £3.7m).

4. PROFIT/(LOSS) RELATING TO NON-CURRENT ASSETS

The net profit of £0.6m in 2010 (2009: loss of £2.8m) comprised net profits of £2.0m (2009: £nil) arising on the sale of investments and surplus property, and asset write downs of £1.4m, principally relating to surplus plant and machinery (2009: £2.8m, principally relating to surplus freehold property). The net taxation charge attributable to the sale of non-current assets was £0.2m (2009: £1.3m credit).

5. GAINS RELATING TO EMPLOYEE BENEFITS PLANS

With effect from 31 July 2010, the main UK defined benefit pension plan was closed to future benefit accrual. This closure, together with the closure of one of the remaining defined benefit plans in the US, resulted in the recognition of curtailment gains of £5.3m in the year. The net gain relating to employee benefits plans of £9.7m in 2009 principally arose in relation to the reduction in the costs of providing benefits under the Group's US post-retirement medical arrangements. The tax associated with these gains was £nil (2009: £nil).

6. FINANCE COSTS AND FINANCE INCOME

Included within finance costs from ordinary activities of £67.7m (2009: £75.6m) is the interest cost associated with the liabilities of the Group's defined benefit pension and other post-retirement benefit plans of £36.3m (2009: £34.2m) and included within finance income of £37.3m (2009: £38.6m) is the expected return on the assets of the Group's defined benefit pension plans of £32.7m (2009: £29.4m).

As a consequence of the issuance of $250m of US Private Placement loan notes in December 2010, the Group was required to repay certain of its borrowings under its committed bank facilities. The exceptional finance costs of £3.0m reported in 2010 arose in relation to this early repayment: £2.4m of these costs related to the close-out of interest rate swaps that had been used to hedge the interest payable in relation to the borrowings; and £0.6m related to the write-off of costs that had been capitalised in relation to the borrowings.

The exceptional finance costs of £14.0m reported in 2009 arose in relation to the early repayment of certain of the Group's borrowings and the conversion into sterling of the remainder of the Group's foreign currency denominated borrowings: £12.8m of these costs related to the close-out of interest rate swaps that had been used to hedge the interest payable in relation to the borrowings; £0.5m related to the write-off of costs that had been capitalised in relation to the borrowings; and £0.7m related to early repayment costs.

The tax associated with these exceptional finance costs was £nil (2009: £nil).

7. NET (LOSS)/PROFIT ON DISPOSAL OF CONTINUING OPERATIONS

The net loss on disposal of continuing operations of £0.6m (2009: £3.7m profit) related to a number of small disposals from the Group's Ceramics and Electronics divisions, which generated £6.2m (2009: £6.2m) of net proceeds.

The tax charge associated with these disposals was £nil (2009: £0.9m).

8. INCOME TAX COSTS

The Group's effective tax rate, based on the tax charge on ordinary activities of £46.7m, decreased significantly in 2010 to 21.1% (2009: 35.2%), reflecting the return to a more normal geographic distribution of profitability combined with the benefit of a number of non-recurring credits recognised in the year. These credits related to the utilisation of some previously unrecognised tax losses combined with a number of adjustments related to the finalisation of prior year tax computations. The underlying tax rate for 2010, excluding the benefit of these non-recurring credits, was around 24%. Reported as a separate item on the face of the income statement is a credit of £9.4m (2009: £5.9m) relating to exceptional items comprising a credit of £3.6m (2009: £3.7m) in relation to restructuring and integration charges, a credit of £6.4m (2009: £5.1m) relating to the amortisation and impairment of intangible assets, a charge of £0.4m (2009: £3.3m) relating to deferred tax on goodwill, a charge of £0.2m (2009: credit of £1.3m) relating to non-current assets and a charge of £nil (2009: £0.9m) relating to the net (loss)/profit on disposal of continuing operations.

Tax charged in the Group statement of comprehensive income in the year amounted to £0.7m (2009: £21.8m credit), all of which related to net actuarial gains and losses on employee benefits plans.

9. DISCONTINUED OPERATIONS

The net post-tax loss attributable to discontinued operations of £1.2m (2009: £3.4m) related to additional costs in respect of prior years' disposals. The tax charge associated with discontinued operations was £nil (2009: £nil).

10. EARNINGS PER SHARE ("EPS")

10.1 PER SHARE AMOUNTS

	Continuing	Discontinued	Total	Continuing	Discontinued	Total
	operations	operations	2010	operations	operations	2009
	pence	pence	pence	pence	pence	pence

Earnings/(loss) per share - basic	53.0	(0.4)	52.6	(17.8)	(1.4)	(19.2)
- diluted	52.2	(0.5)	51.7	(17.8)	(1.4)	(19.2)
- headline	61.5	-	61.5	18.0	-	18.0
- diluted headline	60.4	-	60.4	18.0	-	18.0

10.2 EARNINGS FOR EPS

Basic and diluted EPS are based upon profit/(loss) attributable to owners of the parent, as reported in the Group income statement. Headline and diluted headline EPS are based upon headline profit attributable to owners of the parent. The table below reconciles the profit/(loss) attributable to owners of the parent as reported in the Group income statement to headline profit attributable to owners of the parent.

		Continuing		Discontinued		Total		Continuing		Discontinued	Total
		operations		operations		2010		operations		operations	2009
	£m		£m		£m		£m		£m		£m

Profit/(loss) attributable to owners of the parent	146.5		(1.2)		145.3		(45.1)		(3.4)		(48.5)
Adjustments for exceptional items:
Amortisation of intangible assets	17.7		-		17.7		17.6		-		17.6
Restructuring and integration charges	17.3		-		17.3		75.6		-		75.6
(Profit)/loss relating to non-current assets	(0.6)		-		(0.6)		2.8		-		2.8
Gains relating to employee benefits plans	(5.3)		-		(5.3)		(9.7)		-		(9.7)
Exceptional finance costs	3.0		-		3.0		14.0		-		14.0
Net loss/(profit) on disposal of continuing operations	0.6		-		0.6		(3.7)		-		(3.7)
Discontinued operations	-		1.2		1.2		-		3.4		3.4
Tax relating to exceptional items	(9.4)		-		(9.4)		(5.9)		-		(5.9)
Headline profit attributable to owners of the parent	169.8		-		169.8		45.6		-		45.6

10.3 WEIGHTED AVERAGE NUMBER OF SHARES

	2010	2009
	m	m

Weighted average number of ordinary shares:
For calculating basic and headline EPS	276.2	252.8
Adjustment for dilutive potential ordinary shares	4.7	-
For calculating diluted and diluted headline EPS	280.9	252.8

For the purposes of calculating diluted 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.

In addition to the shares shown as being dilutive in the table above, the Company had 0.5m (2009: 0.8m) of outstanding options and share awards in relation to its share-based payment plans that could dilute EPS in the future, but which are not included in the calculation of diluted EPS above because they were antidilutive in the years presented.

11. DIVIDENDS

No final dividend was paid in respect of 2008 or 2009, nor was an interim dividend paid in respect of 2009 and 2010. A proposed final dividend for 2010 of 11.5p per ordinary share (2009: nil) per ordinary share is subject to approval by shareholders at the Company's Annual General Meeting and has not been included as a liability in these financial statements. If approved by shareholders, the dividend will be paid on 6 June 2011 to ordinary shareholders on the register at 20 May 2011.

12. INTANGIBLE ASSETS

Intangible assets comprise goodwill and other intangible assets that have been acquired through business combinations. Goodwill is initially recognised as an asset at cost and subsequently measured at cost less any accumulated impairment losses, with impairment testing carried out annually, or more frequently when there is an indication that the cash-generating unit to which the goodwill has been allocated may be impaired. Other intangible assets are initially measured at cost, which is equal to the acquisition date fair value, and subsequently measured at cost less accumulated amortisation charges and any accumulated impairment losses. Other intangible assets are subject to impairment testing when there is an indication that an impairment loss may have been incurred.

12.1 MOVEMENT IN NET BOOK VALUE

		Other			Other
		intangible	Total		intangible	Total
	Goodwill	assets	2010	Goodwill	assets	2009
	£m	£m	£m	£m	£m	£m
Cost
As at 1 January	909.3	272.5	1,181.8	962.8	278.0	1,240.8
Exchange adjustments	37.1	4.9	42.0	(54.3)	(5.5)	(59.8)
Business acquisitions	-	-	-	3.0	-	3.0
Business disposals	(1.3)	-	(1.3)	(2.2)	-	(2.2)
As at 31 December	945.1	277.4	1,222.5	909.3	272.5	1,181.8

Amortisation and impairment
As at 1 January	35.3	30.9	66.2	39.6	13.6	53.2
Exchange adjustments	0.9	0.6	1.5	(3.6)	(0.3)	(3.9)
Amortisation charge for the year	-	17.7	17.7	-	17.6	17.6
Business disposals	-	-	-	(0.7)	-	(0.7)
As at 31 December	36.2	49.2	85.4	35.3	30.9	66.2

Net book value
As at 31 December	908.9	228.2	1,137.1	874.0	241.6	1,115.6

12.2 ANALYSIS OF GOODWILL BY CASH-GENERATING UNIT ("CGU")

Goodwill acquired in a business combination is allocated to each of the Group's CGUs expected to benefit from the synergies of the combination. For the purposes of impairment testing, the Directors consider that the Group has four CGUs: the Ceramics division, the Chemistry and Assembly Materials product lines of the Electronics division and the Precious Metals division. These CGUs represent the lowest level within the Group at which goodwill is monitored. For the Group's Precious Metals division CGU, goodwill recognised in the balance sheet is £nil (2009: £nil).

	2010	2009
	£m	£m

Ceramics	607.9	585.5
Chemistry	233.3	227.3
Assembly Materials	67.7	61.2
Total goodwill	908.9	874.0

12.3 AMORTISATION OF OTHER INTANGIBLE ASSETS

Other intangible assets are amortised over their useful lives as summarised below.

	Fair value on	Remaining	Charged in
	acquisition	useful life	2010
	£m	years	£m

Foseco - customer relationships	103.7	17.3	6.1
- trade name	72.4	17.3	3.6
- intellectual property rights	80.3	7.3	8.0
	256.4		17.7

13. IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

13.1 IMPAIRMENT POLICY

At each balance sheet date, the Group reviews the carrying value of its tangible and other intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs.

The Group also carries out annual impairment testing of the carrying value of its CGUs, to assess the need for any impairment of the carrying value of goodwill, and other intangible and tangible assets associated with these CGUs.

For the purpose of impairment testing, the recoverable amount of an asset or CGU is the higher of (i) its fair value less costs to sell and (ii) its value in use. If the recoverable amount of a CGU is less than the carrying amount of that unit, the resulting impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

The value in use calculations of the Group's CGUs are based on detailed business plans covering a three year period from the balance sheet date, higher level assumptions covering a further two year period and perpetuity calculations beyond this five year projection period. The cash flows in the calculations are discounted to their current value using pre-tax discount rates.

13.2 KEY ASSUMPTIONS

The key assumptions used in determining value in use are returns on sales, growth rates and discount rates.

Returns on sales assumptions are based on historic financial information, adjusted to factor in the anticipated impact of restructuring and rationalisation plans already announced at the balance sheet date.

Growth rates are determined with reference to: current market conditions; external forecasts and historical trends for the Group's key end-markets of steel, foundry castings, automotive and electronics; and expected growth in output within the industries in which each major Group business unit operates. A perpetuity growth rate of 3% (2009: 3%) has been applied based on the long-term growth rates experienced in the Group's end-markets. The Group's projections are based on historical trends and external forecasts.

Discount rates are calculated for each CGU, reflecting market assessments of the time value of money and the risks specific to each CGU. The pre-tax discount rate used for the Ceramics CGU was 14.5% (2009: 12.9%), for the Chemistry CGU 14.1% (2009: 13.0%) and for the Assembly Materials CGU 12.5% (2009: 11.4%).

13.3 GOODWILL IMPAIRMENT

In assessing goodwill for potential impairment as at 31 December 2010, the Directors made use of detailed calculations of the recoverable amount of the Group's CGUs as at 31 December 2010. Those calculations resulted in recoverable amounts significantly higher than the carrying values of each of the Group's CGUs.

14. RECONCILIATION OF MOVEMENT IN NET DEBT

	Balance as at	Foreign			Balance as at
	1 January	exchange	Non-cash		31 December
	2010	adjustments	movements	Cash flow	2010
	£m	£m	£m	£m	£m
Cash and cash equivalents
Short-term deposits	44.8	0.2	-	(5.4)	39.6
Cash at bank and in hand	115.4	7.2	-	24.5	147.1
Bank overdrafts	(2.5)	0.1	-	(2.9)	(5.3)
				16.2
Borrowings, excluding bank overdrafts
Current	(89.5)	(6.6)	(115.6)	89.6	(122.1)
Non-current	(444.3)	(2.5)	115.6	(60.9)	(392.1)
Capitalised borrowing costs	4.7	-	(1.6)	-	3.1
				28.7

Net debt	(371.4)	(1.6)	(1.6)	44.9	(329.7)

15. EMPLOYEE BENEFITS

The net employee benefits balance as at 31 December 2010 of £113.8m (2009: £137.7m) in respect of the Group's defined benefit pension and other post-retirement benefit obligations, results from an interim actuarial valuation of the Group's defined benefit pension and other post-retirement obligations as at that date. As analysed in the following table, the net employee benefits balance comprised net surpluses (assets) of £4.3m (2009: £nil), relating entirely to the Group's main pension plan in the UK, together with net liabilities (deficits) of £118.1m (2009: £137.7m).

	2010	2009
	£m	£m

Employee benefits - net surpluses
UK defined benefit pension plans	4.3	-

Employee benefits - net liabilities
UK defined benefit pension plans	0.8	22.3
US defined benefit pension plans	57.9	54.1
ROW defined benefit pension plans	49.7	46.0
Other post-retirement benefit obligations, mainly US healthcare arrangements	9.7	15.3
	118.1	137.7

The total net charge in respect of the Group's defined benefit pension and other post-retirement benefit obligations was £4.8m (2009: £2.1m), as shown in the table below.

	2010	2009
	£m	£m

Charged in arriving at trading profit:
- within other manufacturing costs	2.5	2.3
- within administration, selling and distribution costs	4.0	3.9
Charged/(credited) in arriving at profit from operations:
- within restructuring and integration charges	-	0.8
- gains relating to employee benefits plans	(5.3)	(9.7)
Charged/(credited) in arriving at profit before tax:
- within ordinary finance costs	36.3	34.2
- within finance income	(32.7)	(29.4)
Total net charge	4.8	2.1

16. RELATED PARTIES

All transactions with related parties are conducted on an arm's length basis and in accordance with normal business terms. Transactions between related parties that are Group subsidiaries are eliminated on consolidation and are not disclosed in this note.

During the year, Group subsidiaries made sales of products and services to Group joint venture companies of £1.7m (2009: £1.1m) and made purchases of goods and services from Group joint venture companies of £13.5m (2009: £12.3m). As at 31 December 2010, amounts owed by the Group's joint ventures to Group subsidiaries was £nil (2009: £nil) and amounts owed to Group joint ventures by Group subsidiaries was £nil (2009: £nil).

17. CONTINGENT LIABILITIES

Guarantees given by the Group under property leases of discontinued operations amounted to £4.1m (2009: £3.9m).

Cookson has extensive international operations and is subject to various legal and regulatory regimes, including those covering taxation and environmental matters. Several of the Group's subsidiaries are parties to legal proceedings, certain of which are insured claims arising in the ordinary course of the operations of the company involved, and are aware of a number of issues which are, or may be, the subject of dispute with tax authorities. While the outcome of litigation can never be predicted with certainty, having regard to legal advice received and the Group's insurance arrangements, the Directors believe that none of these matters will, either individually or in the aggregate, have a materially adverse effect on the Group's financial position or results of operations.

Legal claims have been brought against Group companies by third parties alleging that persons have been harmed by exposure to hazardous materials. Two of the Group's subsidiaries are subject to lawsuits in the US relating to a small number of products containing asbestos manufactured prior to the acquisition of those subsidiaries by the Group. To date, there have been no liability verdicts against either 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 materially adverse effect on the Group's financial position or results of operations.

18. 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 year 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 year-end rates. The principal exchange rates used were as follows:

	Year-end rates of exchange		Average rates of exchange
	2010	2009	2010	2009
US dollar	1.56	1.61	1.55	1.57
Euro	1.17	1.13	1.17	1.12
Czech Republic koruna	29.21	29.69	29.48	29.70
Polish zloty	4.61	4.63	4.66	4.86
Chinese renminbi	10.27	11.03	10.47	10.70

This information is provided by RNS

The company news service from the London Stock Exchange

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