Preliminary Results

Cookson Group PLC
11 March 2008



11 March 2008



ANNOUNCEMENT OF 2007 PRELIMINARY RESULTS



HIGHLIGHTS

  • Strong improvement in continuing operations:

       -   Revenue of £1,620 million, up 6%*

       -   Trading profit of £170 million, up 17%*

       -   Return on sales up one percentage point to 10.5%*

  • Very strong performance in Ceramics:

       -   Underlying revenue growth of 11%

       -   Trading profit of £109 million, up 25%*

       -   Return on sales up two percentage points to 14.0%*

       -   Continued investment in capacity in high-growth markets

  • Ongoing restructuring and efficiency programmes in Electronics and
    Precious Metals benefiting results

  •  Headline PBT and EPS up 14% and 17% respectively

  •  Strong profit growth in low tax rate jurisdictions reduces the Group's
     effective tax rate by 4.4 percentage points

  • Final dividend of 8.75 pence per share, total dividends up 30%

  • Anti-trust clearances received for Foseco acquisition - completion
    expected 4 April

* at constant currency
                                                                                Reported          Constant
                                              2007          2006                   rates             rates

Continuing Operations1

Revenue                                    £1,620m       £1,590m                     +2%               +6%
Trading profit2                            £169.6m       £150.3m                    +13%              +17%
Return on sales2                             10.5%          9.5%                +1.0 pts          +1.0 pts
Tax rate - headline(3)                       26.9%         31.3%                -4.4 pts

Total Operations

Revenue                                    £1,621m       £1,661m                     -2%               +2%
Trading profit2                            £169.4m       £158.2m                     +7%              +11%
Return on sales2                             10.5%          9.5%                +1.0 pts          +0.9 pts
Profit before tax     - headline2          £149.6m       £131.2m                    +14%
                      - basic              £151.4m       £113.5m                    +33%
Earnings per share    - headline2            54.3p         46.6p                    +17%
                      - basic                53.4p         32.8p                    +63%
Dividends per share                          13.0p         10.0p                    +30%

Free cash flow2                             £47.6m        £64.5m             down £16.9m
Net debt2                                   £50.6m       £180.5m            down £129.9m

1  Continuing operations exclude the results of the former Monofrax and
   Laminates businesses

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

3   Tax rate on headline profit before tax from continuing operations (before
    share of post-tax profit of JVs)


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

'2007 was another year of good progress for the Group.  This was driven by a
continued strong improvement in the Ceramics division, which produced almost
two-thirds of the Group's trading profit for the year.  Ceramics will be further
enhanced by the acquisition of Foseco, which we expect to complete next month.

'The positive end-market trends experienced by Ceramics over the second half of
last year have continued and we are increasing production capacities in the
higher-growth products and regions.  In Electronics, we expect some slowing of
growth rates for consumer electronics, but have been implementing efficiency
improvements to offset this.  Precious Metals faces a weak retail environment,
but its performance should be helped by recent and ongoing significant cost base
reductions.

'We therefore anticipate a continuing strong performance in 2008.'


OVERVIEW


Summary of Group results

2007 was another year of good progress for the Group, driven by a continued
strong improvement in the Ceramics division's performance. Group revenue from
continuing operations increased by 6% and trading profit grew 17% at constant
exchange rates.  Headline profit before tax increased by 14% and strong profit
growth in lower tax jurisdictions resulted in a lower tax charge.  As a result,
headline earnings per share were up 17% to 54.3 pence.

Net debt at 31 December 2007 was £51 million (2006: £181 million), having raised
£151 million from the share placing in October.  The worldwide pension deficit
reduced from £155 million to £96 million, reflecting cash contributions of £45
million and favourable discount rate movements.


Ceramics division

The division's underlying revenue increased by 11% to £781 million.  Trading
profit increased 25% to £109.4 million and the return on sales margin for the
second half of 2007 reached 14.4%, consistent with the new margin target range
of 14% to 16% announced last August.

Global steel production, our main end-market, grew 8% in 2007 and our underlying
revenue growth exceeded steel production growth in all regions.

Sales of our market-leading steel flow control products, used in the enclosed
continuous casting process, grew 9% to £372 million.  Linings activity worldwide
grew 11% to £310 million, with particularly strong growth in NAFTA.  Worldwide,
the linings margin reached 7.7% (pre divisional and central cost allocations),
up from 5.8% in 2006.  Fused silica revenue grew 23% to £52 million driven by a
50% rise in sales of Solar CruciblesTM, reflecting the continuing strong growth
rates in the worldwide production of photovoltaic (or solar) cells.

Production capacities are being expanded in the higher-growth products and
regions.  In 2007, two new Solar CrucibleTM plants were completed, one in Poland
and one in China and work has started on building three more (one in the Czech
Republic and two more in China).  Also in 2007, new slide-gate (steel flow
control) facilities in Mexico and Poland were completed, linings production in
India and Mexico was expanded, and a local supplier of linings products in China
was acquired which gives us a base from which to expand linings operations in
Asia.  Several further expansion projects were announced for completion in 2008,
including foundry crucible facilities in China and Mexico and VISOTM (steel flow
control) facilities in China and Europe.


Electronics division

The division's trading profit was up 3% to £58.0 million on underlying revenue
2% lower at £558 million, reflecting mix changes in product sales, as detailed
below.  The return on sales margin of 10.4% was slightly down on 2006 due to the
'pass through' of higher metals prices to customers impacting revenue but not
profit.  If metals prices had remained at 2006 levels, the 2007 pro-forma return
on sales margin would have been 11.5%.

The Assembly Materials sector continued to benefit from growing demand for
higher-margin products, particularly SACXTM (the low silver content lead-free
solder) and solder pastes (both lead-free and lead-based) due to the continuing
shift from wave soldering to surface mount technologies.  Conversely demand for
electronic solder bar and wire, particularly traditional lead-based, is
declining.  As a consequence of this change in the mix of activities, trading
profit increased 10% on underlying revenue 6% lower than 2006.  The
Semi-conductor Packaging Materials business, which represents 5% of Assembly
Materials sector revenue, experienced difficult market conditions and
consequently made a loss of almost £1 million compared with a profit of £2
million in 2006, on revenue down 14% for the year.  Progress is being made in
the turnaround of this business.

The Chemistry sector saw a continuation of the first half revenue trends with
good growth in plating-on-plastics and corrosion and wear-resistant coating
products for the industrial and automotive markets, but weaker growth in surface
finish products for the electronic printed circuit board market.  Underlying
revenue grew 3%, but trading profit was 3% lower, reflecting this change in mix
of product sales.

In September 2007, a new Assembly Materials factory in Mexico was opened and two
factories in the US were closed.  A solder reclaim operation in the US was
started where our customers' waste products and scraps are recycled and, based
on the success of this initiative, planning approvals are being sought to set up
an equivalent operation in China in 2008.  In Europe, the intention to relocate
solder paste production from the UK to Hungary by the end of 2008 has been
announced, to reflect the migration of our customer base in Europe to the East.
Construction of the new Chemistry plant in China has been delayed by over one
year due to more complex permitting requirements than originally foreseen, but
these issues are now close to being resolved.


Precious Metals division

For the full year, net sales value was 1% lower than 2006 and trading profit was
down 2% (both at constant currency), which represented a reasonably encouraging
second half performance after the weak first half results and the continuing
weak retail environment in both North America and Europe.

Results from the European operations benefitted from the restructuring
undertaken in the UK in the first half of the year and the move of some
production to a new, low labour cost facility in Thailand which started up in
August.  A similar move is being made in the US operations through the creation
of a low labour cost facility in the Dominican Republic, where we will transfer
the equivalent of 200 jobs from our Attleboro (Massachusetts) facility during
2008.


In September 2007, the assets, designs and customer lists of a local competitor
in the US, Leach & Garner, were acquired for US$7 million.  Over the first half
of 2008, production of the acquired product ranges will be transferred into our
Attleboro and Dominican Republic facilities.  This should increase our net sales
value in the US and help offset the decline in the US market.  Notwithstanding
this, in response to the current weak retail environment in the US, we
implemented 60 redundancies at Attleboro in February 2008.



Foseco acquisition

Following the recent anti-trust clearances by the EU and US competition
authorities and the approval of the transaction by Foseco's shareholders, the
approval by Cookson's shareholders at today's EGM and court approval of the
scheme of arrangement is now awaited.  This should lead to the transaction being
completed on 4 April 2008.  The synergy expectations from combining Foseco with
our Ceramics operations, which were announced last October, are reconfirmed.
The Board remains convinced of the clear strategic rationale for this
acquisition and that it will deliver attractive financial returns.


OUTLOOK

The positive end-market trends experienced by Ceramics over the second half of
last year have continued and we are increasing production capacities in the
higher-growth products and regions.  The Ceramics division will be further
enhanced by the acquisition of Foseco which is expected to complete next month.
In Electronics, some slowing of growth rates is expected for consumer
electronics, but we have been implementing efficiency improvements to offset
this.  Precious Metals faces a weak retail environment, but its performance
should be helped by recent and ongoing significant cost base reductions.


A continuing strong performance is therefore anticipated in 2008.


REVIEW OF OPERATIONS


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


Group - Continuing operations


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

                                     2007        2006           2007          2006           2007          2006

             First half               785         803           78.4          69.7           10.0           8.7
             Second half              835         787           91.2          80.6           10.9          10.3

             Year                   1,620       1,590          169.6         150.3           10.5           9.5



Revenue from continuing operations, which exclude the results of the Monofrax
business in 2007 and 2006 and the Laminates business in 2006, was 6% higher at
constant exchange rates and 2% higher at reported exchange rates.  The increase
in revenue from continuing operations principally reflected strong underlying
growth in the Ceramics division and the impact of higher metal prices being '
passed through' to customers in the Precious Metals and Electronics divisions.
This revenue growth was partially offset by the loss of approximately £37
million of revenue relating to businesses which have been sold or closed in the
last two years but which do not qualify to be treated as discontinued operations
for financial reporting purposes.  Revenue growth from continuing operations at
constant exchange rates was stronger in the second half of the year compared to
the first half (8% and 4% respectively) reflecting the impact of higher metal
prices in the second half of the year and the normal seasonality of the Precious
Metals division.

Trading profit from continuing operations was 17% higher at constant exchange
rates and 13% higher at reported exchange rates.  Trading profit at constant
exchange rates increased by 25% to £109.4 million in the Ceramics division; by
3% to £58.0 million in the Electronics division; and decreased slightly by 2% to
£9.9 million in the Precious Metals division.

The strong growth in trading profit resulted in a significant increase in the
Group's return on sales from continuing operations (at constant exchange rates)
to 10.5% from 9.5%.  But for the impact of higher metal prices increasing
reported revenue without any impact on profitability, this increase would have
been around 0.4 percentage points higher.


The fastest growing and most profitable region for the Group continued to be
Asia-Pacific, where revenue from continuing operations (by location of customer
and at constant currency) increased by 9% compared with 2006.  Europe and NAFTA
(which comprises the US, Canada and Mexico) contributed 34% and 31% respectively
of Group revenue; however, despite revenue growth in both these regions, higher
levels of growth in Asia-Pacific in particular has seen their combined share of
Group revenue fall marginally from 66% in 2006 to 65% in 2007 with Asia-Pacific
and Rest of the World representing 35% of Group revenue in 2007.



Ceramics division

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

                               2007        2006           2007          2006          2007          2006

           First half             386          383          52.6          42.6          13.6          11.1
           Second half            395          374          56.8          46.9          14.4          12.6

           Year                   781          757         109.4          89.5          14.0          11.8


Good market conditions, combined with the beneficial impact of the investment
and restructuring initiatives implemented in the last two years resulted in a
further strong improvement in performance.  Revenue on continuing operations for
the year at £781 million was 7% higher than 2006 at constant exchange rates and
3% higher at reported exchange rates.  These results exclude the results of
Monofrax, the US based fused cast refractory business, which was sold in
February 2007 and the results of which are included in discontinued operations.
The division's results do, however, include the results of a number of smaller
businesses which were either sold or closed during the last two years but which
did not qualify to be treated as discontinued operations for financial reporting
purposes.  These include the principally US based Ceramics Fibres business (sold
March 2006), the UK based Carbon Blocks business (sold June 2006), the UK based
Magnesia-carbon Bricks business (closed December 2006) and the US based Alumina
Bricks business (sold February 2007).  Excluding the revenue from these
businesses, underlying revenue for the division was up 11% at constant exchange
rates, well ahead of the growth in world steel production which grew 7.5%.  This
outperformance reflects some market share gains, together with the progressive
increase in the division's addressable market, as the steel industry in
countries such as China, Russia and Ukraine increasingly converts to enclosed
continuous casting technology which requires the division's steel flow control
products.

Trading profit from continuing operations grew strongly by 25% at constant
exchange rates (22% higher at reported exchange rates) to £109.4 million.  All
regions and product lines showed good trading profit growth compared to 2006
with a particularly strong performance for linings, which improved its return on
sales (pre divisional and central cost allocations) from 5.8% in 2006 to 7.7%.
Return on sales for the division from continuing operations was 14.0%, up two
percentage points from the 12.0% reported in 2006.  Return on net assets (being
trading profit divided by the total of average property, plant and equipment,
investments, trade working capital and other operating receivables and payables)
increased strongly from 35.0% in 2006 to 39.6% in 2007.

The division's key end-market is global steel production, which accounts for
around 70% of the division's revenue.  In 2007, global steel production rose by
7.5% to over 1.3 billion tonnes.  Following the 9% growth in 2006, the rate of
growth in 2007 has remained strong, being 10% in the first half and 6% in the
second half of the year.  China reinforced its position as the world's leading
steel producer with year-on-year growth of 16% and accounted for 36% of the
world's total production in 2007.  Notwithstanding the strong growth from this
region, global production outside of China still showed growth of 3%, with
marginally lower production in the US (down 1%) being more than offset by strong
growth in the major regions of India (up 7%), the CIS (up 3%) and the enlarged
European Union (up 2%).

Europe and NAFTA are the division's two largest regions by location of customer,
each making up 32% of total divisional revenue from continuing operations.
However, the two fastest growing regions are Asia-Pacific and Rest of the World,
which include the fast-developing markets of China, India and Brazil, together
comprising 36% of total divisional revenue.

Note: in the regional analysis below for the Ceramics division, all of the
financial information is presented on an underlying basis in that it is from
continuing operations, at constant exchange rates and adjusted for the disposals
and closures noted above.  The fused silica product line is managed on a global
rather than regional basis so its operations are discussed separately from the
three regional summaries below.


NAFTA (comprising the US, Canada and Mexico)

Underlying revenue in NAFTA grew by 7% to £242 million with 16% growth in
linings (which constitutes just over half of the region's revenue) more than
offsetting a small decline in steel flow control.  Revenue in foundry was in
line with 2006.  Steel production in NAFTA was unchanged in 2007 reflecting a 1%
reduction in the US being offset by growth in Mexico and Canada.  In the first
half of 2007, US steel production was down 4% reflecting some temporary
production cut-backs initiated in late 2006/early 2007.  These cut-backs were
reversed in the second quarter of 2007 such that production in the second half
of the year was 2% ahead of the corresponding period in 2006.

Underlying trading profit increased by nearly one-quarter compared to 2006
reflecting improved profitability in linings, achieved through increased
management focus combined with rigorous cost control.

During 2007, the division continued its restructuring programme with the closure
of the Crown Point (Illinois) facility in June and the announcement in August of
the closure of the Buffalo (New York) facility by the end of 2008.  Production
of taphole clay, a product used in the operation of blast furnaces, has been
transferred from Crown Point to an existing facility at Chicago Heights
(Illinois) where a new production line using updated technology has been
constructed.  There is to be a phased run-down of the Buffalo facility during
2008 with final closure by year-end.  This facility, which manufactures
isostatically-pressed foundry crucibles, has relatively high labour costs and
production is to be relocated to the division's existing facility in Monterrey,
Mexico which will become a fully integrated facility producing foundry crucibles
using two technologies - isostatic pressing and traditional spinning - to serve
the NAFTA market.  The closure is expected to generate cost savings of
approximately £1 million per annum from the beginning of 2009.


Europe (including CIS)

Good market conditions resulted in underlying revenue in Europe growing by 10%
to £305 million.  Steel flow control, which constitutes nearly 60% of Europe's
revenue, grew by 12%, well ahead of the 3% growth in steel production in the
region.  This resulted from market share gains and an increase in the
addressable market as the Russian and Ukrainian steel industry increasingly
converts to enclosed continuous casting technology which requires the division's
steel flow control products.  Steel production growth was particularly strong in
Germany, Spain, Turkey, the UK, Russia and Ukraine, with more modest growth in
Italy and decreases in France and Belgium.  Following steel production growth of
5% in the first half of 2007 there was some slowing of growth rates, although
production still grew by 1% in the second half.  Linings, which constitute
one-third of Europe's revenue, also grew well with 5% growth in underlying
revenue.  Revenue in foundry was marginally lower.

Underlying trading profit grew significantly by 29% compared to 2006 as a result
of strong volume growth in steel flow control and linings combined with cost
reductions in linings.

The expansion of slide-gate capacity at the facility in Skawina, Poland based on
new slide-gate plate technology was completed on schedule in July, with
production of slide-gates in Goole, UK ceasing in the third quarter.  With the
region's flow control operations currently operating at, or near to, full
capacity, it has been decided to invest £8 million in a new steel flow control
facility in Ostend, Belgium.  This new facility, which should be operational in
the fourth quarter of 2008, will deliver productivity improvements as well as
increasing flow control capacity.  The expected future growth in Russian and
Ukrainian steel production and the modernisation of their steel industries,
represents a significant opportunity for the division.  These markets are
currently served by products manufactured outside of these two countries and the
possibility of establishing a local manufacturing presence is currently being
evaluated.


Asia-Pacific and Rest of World

Underlying revenue in these regions grew in total by 13% to £182 million
reflecting both strong steel production growth in the three key markets of China
(up 16%), India (up 7%) and Brazil (up 9%) which underpinned strong growth in
steel flow control (up 14%), plus strong revenue growth in linings, which
primarily operates in Australia (up 11%).  The Chinese government continues to
encourage the steel industry to shift to more modern, energy efficient and lower
pollution methods of steel production which should expand the market for the
Ceramics division's steel flow control products.  In May 2007, the government's
intention to close 682 old facilities (totalling 42 million metric tons of steel
production) by 2010 was announced, with these facilities to be replaced by
modern enclosed continuous casting plants.  Implementation of this policy has
been successful and, by the end of 2007, 150 facilities had been closed
totalling 20 million metric tons of steel production.  This trend should enable
the division to continue its strong progress in China.

The strong revenue growth has resulted in trading profit increasing strongly by
18% with improved profitability from both the steel flow control and the linings
product lines.

The division is already very well positioned in these fast-growing and
profitable markets.  With further strong growth anticipated as these countries
continue to industrialise, production capacity is being increased in a number of
areas which should help drive increased performance from this region over the
next few years.

The construction of a new £5 million foundry crucibles facility in Suzhou,
Jiangsu Province, near two of the division's existing Chinese facilities, is now
nearing completion and the facility is expected to be operational in the second
quarter of 2008.  This facility will produce long-life, high-performance alumina
graphite crucibles for the fast growing non-ferrous foundry market.  The Chinese
foundry industry is the largest in the world and has experienced growth of
around 10% per annum over the last few years.

For linings, the division is expanding its capabilities in these emerging
markets and leveraging its expertise gained from its strong presence in the more
established markets in order to capture the expected strong demand for these
products.  During the year, the construction of a new £1 million linings
facility in India was completed.  This facility, which produces monolithics,
pre-cast linings and taphole clay for this fast-growing market, became
operational in the fourth quarter of 2007.

In April 2007, the acquisition of Bayuquan Refractories Co. Limited ('BRC') was
completed for a cash consideration of US$9 million (£4 million).  BRC, which
manufactures brick-lining products in China, was previously a supplier to the
division.  This acquisition gives certainty of supply of these products and also
provides the division with more freedom to conduct and grow its linings business
in Asia-Pacific.  This facility is currently operating at full capacity and a £1
million expansion project has been approved for completion in the second quarter
of 2008.

Given the expected strong growth in steel production, plans to expand further
steel flow control production capacity in China and India are currently under
evaluation.

The division's main steel flow control production facilities in China are
located in Suzhou and are 100% owned.  To support these, in October 2007, two
new joint venture agreements were announced with two of China's largest steel
producers, Wuhan Iron & Steel Corporation ('WISCO') and Anshan Iron and Steel
Corporation Group ('Angang').  Since 2003, the division has operated a 50/50
Joint Venture with WISCO, China's fifth largest steel producer, producing
slide-gate refractories.  This operation had revenue of £6 million in 2007.
Based on this success, a further 50/50 joint venture between the parties has
been formed, for the production of VISOTM, the division's range of
isostatically-pressed alumina-carbon products used to control and protect the
flow of molten metal in the enclosed continuous casting steel-making process.
The new joint venture, to be managed by Cookson, will involve the construction
of a new facility in Wuhan, Hubei Province.  Around half of the production will
be dedicated to supplying VISOTM products to satisfy the anticipated expansion
of WISCO's own steel-making capacity, with the remainder available to the
Ceramics division to sell to other Chinese steel producers.  The investment in
the new facility will be £4 million, of which the division's share is £2
million, with the facility expected to be completed by the second quarter of
2008.

A letter of intent has also been signed with Angang for the formation of a 50/50
joint venture to supply various refractory products to Angang.  Following the
completion of the proposed merger with Benxi Iron & Steel, Angang will be
China's largest steel producer and has plans to increase significantly its steel
production over the next five years from the current level of 15 million tons
per annum to between 40 and 50 million tons.  The joint venture, to be managed
by Cookson, will supply Angang with a significant proportion of its total
requirements for magnesia-carbon bricks, magnesia-based monolithics and VISOTM
products from three new facilities.  Initial investment plans are in the process
of being finalised.


Fused Silica

The fused silica product line is managed on a global rather than regional basis.
The principal products in the global fused silica product line are tempering
rollers used in the glass industry and Solar CruciblesTM used in the manufacture
of photovoltaic ('solar') cells.  Underlying revenue has grown by 23% to £52
million compared to 2006 with good market conditions in both principal
end-markets.

Revenue growth of 6% in tempering rollers and other speciality products reflects
good growth in the glass industry, driven by strong demand from the construction
industry in China and the Middle East and increased sales of flat screen
television panels.  To meet the increased demand, in the first quarter of 2007,
a £2 million investment in Kua Tang, the site of the division's existing glass
roller business in China was completed, which significantly expanded capacity
for producing the rollers used in the glass industry and transformed this
facility into the Ceramics division's leading centre for glass roller production
worldwide.  This facility is currently running at close to full capacity and an
additional £1 million investment has been agreed further to increase capacity
which should be completed by the second quarter of 2008.

Solar CrucibleTM revenue has grown very strongly by 50% reflecting an
acceleration in the solar energy industry as supply shortages of the
polycrystalline silicon material used in the majority of solar panels have eased
as a result of additional capacity now coming on stream.  Worldwide sales of
solar cells in 2007 grew by over 40% compared to 2006 and commentators are
forecasting growth to continue at this level over the next few years.

Trading profit was only marginally ahead of 2006 reflecting the impact of the
strong volume growth being partially offset by 'one off' production start-up
costs arising in the new Solar CrucibleTM facilities in China and Poland.

Two new Solar CrucibleTM facilities were completed in 2007 for a total
investment of £10 million, in China (Wei Ting, Jiangsu Province) and Poland
(Skawina), to supply customers in Asia-Pacific and Europe respectively.  Both of
these facilities are expected to be at full capacity in the first quarter of
2008.  In August 2007, it was announced that a further new facility would be
built in Moravia, Czech Republic for an investment of £6 million and this
facility was completed in March 2008.  In addition, in October 2007 a further £2
million investment at the Wei Ting, China facility was approved which will
double its capacity for completion by the third quarter of 2008.

In response to continued strong growth in the solar energy industry, an
additional facility ('Sunrise') is to be constructed in Jiangsu Province, close
to the division's existing Solar CrucibleTM facility in Wei Ting.  The total
investment in the new facility will be just over £11 million and it is expected
to be completed by the end of 2008.  The main part of the production from this
facility will be supplied, under a five year agreement, to a new £245 million
solar cell factory being constructed in Jiangsu Province by Glory Silicon Energy
('GSE').  GSE's factory will represent one of the largest facilities of its type
in the world, capable of producing solar cells generating 1,500 megawatts of
electricity per annum.


These new investments will enable the division to continue to benefit from the
strong growth in the solar energy market and maintain its leading market
position as a key supplier to this industry.


Electronics division

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

                                  2007        2006          2007           2006          2007          2006

           First half              269         281          26.8           27.1           9.9           9.6
           Second half             289         274          31.2           31.4          10.8          11.5

           Year                    558         555          58.0           58.5          10.4          10.5




The Electronics division comprises two sectors, Assembly Materials and
Chemistry, the results of which are reviewed below.  Return on net assets for
the division reduced marginally from 43.0% in 2006 to 40.0% in 2007, reflecting
higher levels of trade working capital arising from higher metal prices.



Assembly Materials

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

                                2007        2006          2007           2006          2007          2006

           First half              154         162          12.9           12.7           8.4           7.8
           Second half             172         157          16.9           15.5           9.8           9.8

           Year                    326         319          29.8           28.2           9.1           8.8



Revenue for the year at £326 million was 7% higher than the prior year at
constant exchange rates (2% higher at reported exchange rates).  The higher
revenue reflected the 'pass through' to customers of higher metal prices, in
particular for tin and silver.  In 2007, the average price of tin and silver -
the sector's major raw materials - were respectively 68% and 15% higher than in
2006, such that revenue increased by approximately £52 million as a result of
these higher metal prices.  Excluding the impact of higher metal prices and
disposals and closures, underlying revenue was 6% lower than last year (at
constant exchange rates) reflecting changes in the mix of products sold.

The lower underlying revenue reflects flat volumes of lead-free solder with
lower cost SACXTM (0.3% silver) making strong gains (constituting 31% of
lead-free sales (by weight) in 2007 compared with 24% in the prior year) and
substituting higher cost 3% silver solder.  Volumes of traditional unleaded
solder have been significantly lower (by 20%), reflecting a strategy of focusing
resources on higher margin, more value-added products and exiting more
commoditised markets.

The market penetration of lead-free solder, driven by EU legislation which
became effective in July 2006, has remained broadly constant compared to the end
of 2006, against an expectation of a continuing (albeit slowing) increase in
penetration levels.  The significant increase in the price of tin and silver in
2007 has resulted in lead-free solder being much more expensive than
traditional, leaded solder.  For 2007, 53% of solder revenue came from lead-free
sales (2006: 47%), only marginally ahead of the 51% achieved in the fourth
quarter of 2006.  However, higher metal prices have boosted demand for our less
expensive SACXTM products and they made up 21% of total lead-free solder revenue
in 2007 (2006: 15%).

Solder is sold in three principal forms: bar, wire and paste.  Sales of
higher-margin solder paste have benefited from the continuing shift from wave
soldering to surface mount technology and have increased by 17% (by weight) in
2007 compared to the prior year.  A number of new solder pastes have recently
been launched targeting specific product applications (such as mobile phones),
including SACXTM in paste form and a new low-silver lead-free paste product with
a 1% silver content.  2007 has also benefitted from strong growth in the reclaim
business in the US, in which scrap solder generated by our customers' production
processes is reclaimed for processing back into solder alloys for sale to third
parties or for reuse within the Assembly Material business.

The Semi-conductor Packaging Materials business, which provides epoxy mould
compounds, underfills and solder spheres to the semi-conductor supply industry
and constitutes approximately 5% of the sector's revenue, faced continuing
difficult market conditions in 2007 and revenue was down 14% on last year.  The
business successfully launched a number of new products in 2007 which have
recently been approved by customers and an improved performance is expected in
2008.

Trading profit for the sector of £29.8 million was 10% higher than last year at
constant exchange rates (6% higher at reported exchange rates), reflecting good
growth in profitability in the Alpha Fry solder business resulting from the
transition to higher-margin products such as solder paste and SACXTM and growth
of the reclaim business in the US.  However, the Semi-conductor Packaging
Materials business reported a loss for the year of just under £1 million
compared to a £2 million trading profit in 2006.  Excluding the Semi-conductor
Packaging Materials business, trading profit in 2007 increased 19% on the prior
year (at constant exchange rates).  Return on sales for the sector increased
marginally from 8.8% to 9.1%, notwithstanding the underperformance of the
Semi-conductor Packaging Materials business and the impact of higher metal
prices.  If metals prices in 2007 had remained at similar levels to those in
2006, the return on sales in 2007 would have been around two percentage points
higher at 10.9%.

Asia-Pacific, the sector's largest region by location of customer accounted for
57% of revenue, an increase of 4 percentage points over 2006, which reflects the
continuing migration of consumer electronics production to this region.  Europe
accounted for 21% of revenue, NAFTA 17%, and the Rest of the World 5%.

During 2007, the sector's manufacturing operations in NAFTA were significantly
restructured.  This initiative, which was completed at the end of the third
quarter, should generate annualised savings of £2 million.  Production of high
labour-intensive solder wire has been moved from the Altoona (Pennsylvania)
facility to a new site in Monterrey, Mexico.  The Jersey City (New Jersey)
facility has been closed with production moving to Monterrey, Mexico and to
Altoona.  The wave solder flux manufacturing facility in Alpharetta (Georgia)
has been closed with production moving to an existing Chemistry sector facility
in Mexico City, Mexico.  In total, headcount in the US has been reduced by 120,
with a corresponding increase in Mexico.

New product development remains a key focus, reflected by a further expansion of
R&D capabilities in Bangalore, India.  This facility, which now employs around
50 personnel, relocated during 2007 to new, larger premises.


Chemistry

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

 
                                  2007        2006          2007           2006          2007          2006

           First half              115         119          13.9           14.4          12.0          12.1
           Second half             117         117          14.3           15.9          12.3          13.7

           Year                    232         236          28.2           30.3          12.2          12.9



Revenue for the year at £232 million was 2% higher than 2006 at constant
exchange rates (1% lower at reported exchange rates).  Excluding the impact of
precious metal sales, underlying revenue growth was 3% (on a constant currency
basis), reflecting good growth in plating-on-plastics and corrosion and
wear-resistant coating products for industrial and automotive markets and
marginally lower revenue for surface coating products serving the printed
circuit board fabrication market within electronics.  Copper damascene sales to
the semi-conductor market were well ahead of 2006.

Trading profit for 2007 at £28.2 million was 3% lower than 2006 at constant
exchange rates (7% lower at reported exchange rates), reflecting a mix change
away from higher-margin products serving electronics markets.  Return on sales
in 2007 decreased from 12.9% to 12.2%.

Europe and NAFTA remain the sector's largest regions by customer location with
42% and 30% of total sector revenue.  Asia-Pacific represents 25% of total
sector revenue.

The rationalisation of the sector's European sales, manufacturing and
distribution network, which was initiated in 2005, was largely completed in
2007.  Production capacity has been expanded at existing facilities in Germany
and the Netherlands, with these two locations now supplying all of the sector's
European customers.  Facilities in Italy and Spain have been downsized and
relocated.  These initiatives will result in annualised savings of £2 million,
most of which were captured in 2007.

In order to serve customers better in the fast-growing markets of Eastern
Europe, new operations have recently been established in each of Slovakia and
Romania.

Following the buy-out of the 49% minority interest in the Chinese operations in
October 2006, the construction of a new £8-9 million facility was announced to
accelerate the growth of the sector's operations in China.  Delays have been
experienced in finding an appropriate location for the new facility due to a
new, and more stringent, permitting regime.  Following an extensive review, a
site has now been identified near Shanghai which is in the process of being
acquired, with construction expected to commence in mid 2008 for completion in
mid 2009.


Precious Metals division

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

                         2007      2006       2007       2006        2007      2006       2007       2006

First half                129       139          49         57        3.1       4.3        6.3         7.5
Second half               151       139          56         54        6.8       6.7       12.2        12.5

Year                      280       278         105        111        9.9      11.0        9.4         9.9




The Precious Metals division operates in two distinct geographic regions: the
US, which constitutes 55% of the total net sales value for the division; and
Europe (which includes the UK, France and Spain).  Return on net assets was
broadly unchanged on last year at 13.9% (2006: 14.3%).



Precious Metals - US

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

                          2007      2006       2007       2006        2007      2006       2007       2006

First half                 64        77          26         33        2.3       4.0        8.9        11.9
Second half                84        78          32         31        5.0       5.0       15.7        16.2

Year                      148       155          58         64        7.3       9.0       12.6        14.0



Net sales value of £58 million was broadly unchanged compared to last year,
being 2% lower at constant exchange rates (10% lower at reported exchange
rates).  This reflected weaker retail demand for jewellery throughout the year
being offset by an additional £3 million of net sales value from the Leach &
Garner jewellery business, which was acquired in September 2007.

Trading profit for 2007 at £7.3 million was 11% lower than last year at constant
exchange rates (19% lower at reported exchange rates) reflecting the weaker
underlying volumes.  Return on net sales value was 12.6% (2006: 14.0%).

The initiative to consolidate all of the US manufacturing operations into the
principal facility in Attleboro (Massachusetts) has continued with the
relocation to Attleboro of Inverness (the ear-stud business previously located
in New Jersey) in the third quarter of 2007.  This relocation resulted in a net
headcount reduction of 30 and generates annual cost savings of over £1 million.

In September 2007, the business and manufacturing equipment of Leach & Garner, a
jewellery business also based in North Attleboro (Massachusetts), was acquired
for a cash consideration of US$7 million (£3 million).  During 2008, Leach &
Garner's facility will be closed with all production moving on a phased basis to
the division's existing facility in Attleboro.

A new manufacturing facility is currently being built in the Dominican Republic
for a capital investment of £0.7 million.  The facility will be completed in the
first quarter of 2008 and the manufacture of a number of product lines will be
transferred from Attleboro to the new facility on a phased basis during 2008.
This will result in a headcount reduction of approximately 200 in the US.  This
restructuring should generate annual cost savings of approximately £2 million
from the beginning of 2009.



Precious Metals - Europe


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

                        2007      2006       2007       2006        2007      2006       2007       2006

    First half           65        62         23         24         0.8       0.3        3.4        1.3
   Second half           67        61         24         23         1.8       1.7        7.5        7.5

       Year             132       123         47         47         2.6       2.0        5.5        4.3



Net sales value of £47 million was unchanged compared to 2006 both at reported
and constant exchange rates, with each of the UK, France and Spain trading in
line with last year.  The UK business, which generates nearly half of Europe's
net sales value, outperformed the overall jewellery market with hallmark
statistics for 2007 from the Assay Office showing a 5% decline from 2006 in the
number of gold jewellery items requiring a hallmark.

Trading profit for 2007 was £2.6 million, 37% (£0.7 million) ahead of 2006 at
constant exchange rates (30% higher at reported exchange rates).  All three
countries were profitable.  Trading profit in 2007 was in line with last year
for France and Spain but was doubled in the UK as the benefits of the recent
restructuring programme started to be realised.  Return on net sales value was
5.5% (2006: 4.3%).

In January 2007, a fundamental restructuring of the UK's manufacturing
operations was announced for implementation on a phased basis during 2007.
Manufacturing activity at the main manufacturing facility in Birmingham was
halved in the second quarter and a facility in Wrexham closed at the end of
August.  A new facility in Thailand became operational in July 2007.  These
initiatives resulted in a headcount reduction of approximately 70 in the UK and
will generate an annualised profit improvement of approximately £2 million.


Group corporate

The Group's corporate costs, being the costs directly related to managing the
Group holding company, were £7.7 million, £1.0 million lower than in the
previous year.  The costs in 2006 reflected a number of non-recurring charges,
in particular costs relating to the successful SEC deregistration.



Group - Discontinued operations (Laminates and Monofrax)


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

                                  2007        2006           2007          2006          2007          2006

           First half                 2          62         (0.1)           6.3         (6.7)          10.1
           Second half                -          10         (0.1)           1.6             -          16.7

           Year                       2          72         (0.2)           7.9        (13.3)          11.0



Discontinued operations in 2007 include the results of Monofrax prior to its
disposal in February 2007.  For 2006, discontinued operations comprise Monofrax
for the full year and also include the results of the Laminates business prior
to its disposal in April 2006.



GROUP FINANCIAL REVIEW



Group results highlights
                                                                                  Improvement
                                                      2007             2006         vs 2006
Profit before tax (£m)
- headline                                           149.6            131.2                 +14%
- basic                                              151.4            113.5                 +33%

Earnings per share (pence)
- headline                                            54.3             46.6                 +17%
- basic                                               53.4             32.8                 +63%

Dividends per share (pence)                           13.0             10.0                 +30%

Free cash flow (£m)                                   47.6             64.5          down £16.9m
Net debt (£m)                                         50.6            180.5         down £129.9m



As described in detail in the Review of Operations, the positive end-market
growth experienced in the majority of our businesses during 2007, together with
the benefit of the investment and restructuring initiatives implemented over the
last few years, drove an improvement in operating margins from our continuing
businesses by one percentage point to 10.5%; delivering trading profit of £169.6
million - an increase of 17% on that reported for 2006 (at constant exchange
rates).

After net finance costs of £21.5 million, reduced from last year as a result of
lower average borrowings and lower pension interest, headline profit before tax
was up 14% over last year to £149.6 million.  The Group's effective tax rate on
continuing operations reduced significantly by 4.4 percentage points to 26.9% as
more of the Group's taxable profits were earned in lower tax rate jurisdictions.

The continued improvement in the Group's trading performance, coupled with the
lower interest charge and lower effective tax rate, resulted in a 17% increase
in headline earnings per share over 2006.  This strong performance contributed
to the Board's decision to recommend to shareholders a final dividend of 8.75
pence for 2007.  This final dividend, together with the interim dividend paid in
October 2007, makes a total of 13.00 pence per ordinary share for the year (up
30% over 2006).

Finally, the successful share placing in October in connection with the proposed
acquisition of Foseco, which raised net proceeds of £151 million, meant that net
debt at the year-end was £51 million, a reduction of £130 million from last
year.



Group Income Statement


Headline profit before tax


Headline profit before tax for total operations was £149.6 million for 2007,
which was £18.4 million higher than for 2006.  The increase in headline profit
before tax arose as follows:

                                                           2007           2006             Change
                                                             £m             £m         £m          %

Trading profit:

Continuing operations
 - at 2007 exchange rates                                 169.6          145.2            24.4    +17%

Currency impact                                               -            5.1           (5.1)

Discontinued operations
  (Laminates and Monofrax)                                (0.2)            7.9           (8.1)

Trading profit - at reported exchange rates               169.4          158.2            11.2    +7%

Net finance charges (interest)                           (21.5)         (28.4)             6.9    -24%

Post-tax income from joint ventures                         1.7            1.4             0.3

Headline profit before tax                                149.6          131.2            18.4    +14%



The £6.9 million lower charge for net finance costs (interest) principally
comprised £3.5 million due to lower pension interest as a result of the lower
employee benefits deficit and £3.0 million due to a decrease in the average
level of borrowings of £70 million throughout the year.

The £8.1 million decrease in trading profit from discontinued operations
primarily related to the disposal of the Laminates business in April 2006.


Items excluded from headline profit before tax

A net credit of £1.8 million was incurred in 2007 (2006: charge of £17.7
million) for the following items excluded from headline profit before tax:

Rationalisation costs: rationalisation costs of £5.8 million (2006: £34.7
million) were incurred in 2007, all relating to continuing operations.  Of the
total charge, £1.6 million related to the non-cash write-down of assets and £4.2
million to cash-related costs.  The principal items included in the charge for
2007 were as follows:



  • £2.1 million in the Ceramics division, principally relating to the
    rationalisation of facilities in the US;
  • £2.8 million in the Precious Metal division, both for the rationalisation
    of the UK manufacturing operations and also the relocation of Inverness, the
    ear-stud business, to Attleboro, US; and
  • £0.8 million in the Chemistry sector for the rationalisation of its sales,
    manufacturing and distribution network in Europe.


Profit relating to non-current assets: a profit of £7.0 million (2006: £13.1
million) was realised in 2007, principally relating to the disposal of surplus
properties in Hong Kong, the UK and Australia.

Employee benefits curtailment gains: a credit of £1.0 million (2006: £8.6
million) was realised in the year relating to amendments to the defined benefit
post-retirement healthcare plan in the UK.

Loss on disposal of continuing operations: a net loss of £0.4 million (2006:
loss of £4.7 million) comprised a small profit arising on the disposal of a US
Alumina Bricks business in February 2007, net of trailing costs incurred in
respect of prior years' disposals.  The US Alumina Bricks business, which did
not qualify to be treated as a discontinued operation for financial reporting
purposes, was formerly part of the Ceramics division.  The net charge included a
write-off of goodwill of £0.5 million.

The loss on disposal of continuing operations in 2006 related principally to the
disposal of the Ceramic Fibres and the UK Carbon Blocks businesses, both
formerly part of the Ceramics division, and the PVC Cements business, formerly
part of the Assembly Materials sector.

Group profit before tax and after the items noted above was £151.4 million for
2007 compared to £113.5 million in 2006, up 33%.


Taxation

The tax charge on ordinary activities was £39.9 million.  The effective tax rate
on headline profit before tax from continuing operations (before share of
post-tax profit of joint ventures) was 26.9% (2006: 31.3%).  The decrease in the
effective tax rate in 2007 compared to 2006 arises both from a higher proportion
of the Group's taxable profits being earned in relatively low-tax rate countries
(notably China and the Czech Republic) and from improved profitability in
previously loss-making countries (notably the UK and the US).  This effective
tax rate is expected to reduce further for 2008, before the impact of Foseco, by
about a percentage point to around 26.0%, absent any significant changes in the
future geographic split of the Group's taxable profits and any material changes,
beyond those already announced, in the statutory tax rates in those countries
where the Group has significant taxable profits.  The cash outflow in respect of
tax in 2007 was £26.7 million (2006: £27.5 million).

A tax charge of £3.5 million (2006: £5.3 million) arose in relation to all the
items excluded from headline profit before tax noted above.

Net post-tax loss on disposal of discontinued operations

A net post-tax loss of £0.1 million (2006: loss of £3.3 million) was reported
for 2007, comprising a profit before goodwill write-off arising on the disposal
of Monofrax (formerly part of the Ceramics division) of £8.2 million, a
write-off of goodwill of £4.3 million, a profit of £1.2 million in respect of
additional proceeds received in respect of the disposal in 2003 of the Group's
former Speedline business, and additional trailing costs related to prior years'
disposals of £5.2 million.

The net post-tax loss on disposal of operations of £3.3 million in 2006
principally related to the disposal of the Group's Laminates business, formerly
part of the Electronics division.


Profit attributable to equity holders

Headline profit attributable to equity holders for 2007 was £106.8 million
(2006: £89.2 million), with the £17.6 million increase over 2006 arising from
the significant increase in headline profit before tax, the decrease in the
effective tax rate and a decrease of £0.6 million in profit attributable to
minority interests following the buy-out in October 2006 of the 49% minority
interest in the Chemistry sector's Chinese operations.

After taking account of all items excluded from headline profit before tax noted
above (net of the related tax impact) and the net post-tax loss on disposal of
operations, the Group recorded a profit of £107.9 million for 2007, £41.5
million higher than the £66.4 million profit recorded in 2006.


Return on investment (ROI)

The Group's post-tax ROI in 2007 was 9.8%, ahead of the 8.4% reported in 2006
and reflecting the growth in the Group's profitability.   The ROI now exceeds
the Group's post-tax cost of capital ('WACC') of 8.5%.


Earnings per share (EPS)

The weighted average number of shares in issue during 2007 was 196.7 million,
5.2 million higher than for 2006 principally reflecting the placing of 18.6
million new shares on 11 October 2007.

Headline EPS, based on the headline profit attributable to equity holders
divided by the average number of shares in issue, amounted to 54.3 pence per
share in 2007, an increase of 17% on the 46.6 pence recorded in 2006.  Based on
the results of continuing operations only, headline EPS was 54.4 pence, an
increase over 2006 of 28%.  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 attributable to parent company equity holders, was
53.4 pence (2006: 32.8 pence).



Dividends

For 2006, the Company paid a total dividend of 10.0 pence per share; an interim
dividend of 3.00 pence per share paid in October 2006 and a final dividend of
7.00 pence per share paid in June 2007.  The Board's confidence in the future
prospects for the Group, supported by the strong improvement in profitability in
2007, has resulted in the Board recommending a final dividend of 8.75 pence per
share for 2007, a 25% increase on the 2006 final dividend.  This final dividend,
together with the interim dividend of 4.25 pence per share paid in October 2007,
would give a total dividend for 2007 of 13.00 pence per share, an increase of
30% on 2006.

If approved, the final dividend will be paid on 9 June 2008 to shareholders on
the register at the close of business on 23 May 2008.  Shareholders may choose
to use the Dividend Reinvestment Plan ('DRIP') to reinvest the final dividend.
The closing date for the receipt of new DRIP mandates is 23 May 2008.



Group cash flow


Net cash inflow from operating activities


In 2007, the Group generated £69.4 million of net cash inflow from operating
activities, £1.7 million higher than in 2006.  This net increase principally
arose from:


                                                          2007          2006         Change
                                                            £m            £m             £m

EBITDA                                                   204.3         195.2             9.1

Trade and other working capital                         (44.8)        (29.2)          (15.6)

Cash outflow related to assets and liabilities held      (1.5)         (7.2)             5.7
for sale

Rationalisation costs paid                              (14.7)        (16.1)             1.4

Additional UK pension contributions                     (28.1)        (25.5)           (2.6)

Net interest paid                                       (19.1)        (22.0)             2.9

Taxation paid                                           (26.7)        (27.5)             0.8


Net cash inflow from operating activities                 69.4          67.7             1.7



Of the £44.8 million cash outflow in respect of trade and other working capital,
£31.3 million relates to the increased level of inventory and trade receivables
resulting from the 11% underlying revenue growth in the Ceramics division in
2007.  Also contributing to the outflow was a negative impact of £12.7 million
on the value of inventories and trade receivables at 31 December 2007 of higher
metal prices (notably for gold, silver and tin) in the Precious Metals and
Electronics divisions.  The higher levels of working capital resulted in a ratio
of average trade working capital to sales from continuing operations for 2007 of
23.0%, 1.2 percentage points higher than for 2006.

The £5.7 million reduction in outflows related to assets and liabilities held
for sale related principally to Laminates which was disposed of in April 2006.

Cash outflow for rationalisation was £14.7 million related to programmes in
respect of continuing businesses that were initiated either in 2007 or prior
years.  Of the total cash outflow for rationalisation, £8.1 million related to
the Ceramics division.  A cash outflow for rationalisation of around £5 million
is expected in 2008.



Net cash flow from investing activities


Capital expenditure: payments to acquire property, plant and equipment in 2007
were £59.9 million, 39% higher than 2006 and representing 172% of depreciation
(2006: 117%).  Of the total payments, £43.8 million arose in the Ceramics
division in respect of a number of projects in China, India, Poland, the Czech
Republic and Mexico which, once completed, will increase production capacity and
enhance underlying revenue growth going forward.  A cash outflow for capital
expenditure of between £60 million to £65 million is expected in 2008 (excluding
the impact of the proposed Foseco acquisition).  This reflects both the delay,
from 2007 to 2008, of the construction of the new £8 million Chinese facility in
the Chemistry sector and the identification of a number of additional expansion
projects in the Ceramics division, including some £15 million in respect of the
expansion of Solar CrucibleTM capacity.

Proceeds from the sale of surplus properties: net proceeds, principally arising
in Hong Kong, the UK and Australia, were £10.5 million (2006: £16.6 million).

Dividends from joint ventures: dividends of £1.3 million were received in 2007
(2006: £0.9 million) from the Chemistry sector's Japanese joint venture.

Disposals and acquisitions: net cash inflow from disposals and acquisitions in
2007 was £10.8 million which comprised the following:


•        proceeds from the disposal of businesses, net of disposal costs, of
£24.8 million, principally comprising £18.2 million for the disposal in February
2007 of Monofrax, £1.7 million for the disposal in February 2007 of a US Alumina
Bricks business, £1.2 million of deferred consideration relating to the disposal
in June 2006 of the Carbon Bricks operation in Bawtry, UK and £3.7 million of
additional proceeds relating to the disposal in 2003 of the Speedline business;
and


•        acquisition of subsidiaries and joint ventures for £14.0 million,
comprising £10.6 million in respect of the Precious Metal division's acquisition
of the Leach & Garner jewellery business (being cash consideration of £3.1
million for certain assets of the Leach & Garner business and £7.5 million for
the working capital impact of the acquisition), £1.8 million in respect of the
Ceramics division's investment in the Chinese joint venture with WISCO, and £1.5
million in respect of deferred consideration for prior years' acquisitions.


Proceeds from the disposal of businesses, net of disposal costs, in 2006 were
£59.4 million, principally comprising £11.1 million for the disposal in March
2006 of the Ceramic Fibres business, £42.2 million for the disposal in April
2006 of the Laminates business, £1.4 million for the disposal in June 2006 of
the UK Carbon Blocks business, £1.7 million for the disposal in December 2006 of
the PVC Cements business and £3.8 million of additional proceeds in respect of
the disposal in 2003 of the Speedline business.

Outflow relating to property held for sale: in January 2007, the Group acquired
for £9.0 million the freehold interest in the site of its former Magnesia-carbon
Bricks business located in Worksop (UK), a business which had been closed in
December 2006.  In December 2007, this site was sold for a net cash
consideration of £12.7 million, resulting in a net cash inflow in 2007 of £3.7
million.

Other investing outflows: net cash outflow from other investing activity in 2007
was £11.6 million which principally included the following:


•        repayment of £5.3 million of monies owing to the Walloon regional
government in Belgium in respect of the Ceramics division's operations in this
region;


•        trailing costs of £4.9 million in respect of prior years' disposals;
and


•        cash payments of £1.7 million in respect of professional fees relating
to the proposed acquisition of Foseco.



Free cash flow

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

Free cash outflow for 2007 was £47.6 million, £16.9 million lower than 2006, due
both to the £15.6 million increase in cash outflows relating to trade and other
working capital for the reasons described above and the £16.7 million increase
in the payments to acquire property, plant and equipment.

As in prior years, free cash flow in the second half of the year increased
strongly compared with the first half due to higher profitability and
significantly higher cash inflows from trade working capital.


Net cash flow before financing

Net cash inflow before financing for 2007 was £24.2 million, £70.0 million lower
than 2006.  This arose due both to the reduction in free cash flow for the
reasons noted above and a £34.6 million reduction in proceeds from the disposal
of businesses.


Cash flows from financing activities

Net cash inflow from financing activities (before repayment of borrowings) was
£104.2 million (2006: outflow of £14.9 million), principally comprising the
following:


•        proceeds (net of costs) of £150.6 million from the placing of 18.6
million new shares on 11 October 2007 in connection with the proposed
acquisition of Foseco.  The shares issued in the placing represented
approximately 9.6% of Cookson's issued ordinary share capital prior to the
placing and were issued at a price of 825 pence per share;


•        cash outflow of £20.0 million relating to the settlement during the
year of forward foreign exchange contracts.  These had been taken out to broadly
align 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.  This cash outflow was therefore largely offset by an increase in
the net assets of those operations.  The cash outflow arose principally as a
result of the strengthening against sterling during the year of the European
currencies (notably the euro, Polish zloty and the Czech Republic koruna) and
the Chinese renminbi, which more than offset a marginal weakening of the US
dollar during the year;


•        payments of £4.8 million in respect of the new £950 million committed
bank facility; and


•        dividend payments to equity shareholders of £21.7 million, comprising a
£13.5 million payment of the 2006 final dividend of 7.00 pence per share in June
2007 and a £8.2 million payment of the 2007 interim dividend of 4.25 pence per
share in October 2007.



Net cash inflow and movement in net debt


Net cash inflow for 2007 (before repayment of borrowings) was £128.4 million,
£49.1 million higher than 2006.  With a £4.3 million positive foreign exchange
adjustment, £2.4 million of debt arising on the Ceramics division's acquisition
in April 2007 of BRC (a manufacturer of brick-lining products in China), and
£0.4 million of other non-cash movements, this resulted in a reduction in net
debt of £129.9 million to £50.6 million.



Group borrowings



The net debt of £50.6 million as at 31 December 2007 was primarily drawn on
available medium to long-term committed facilities of around £383 million.  The
Group's net debt comprised the following:


                                                                         31 December         31 December
                                                                                2007                2006
                                                                                  £m                  £m
US Private Placement loan notes                                                183.0               278.5
Committed bank facility                                                         13.0                   -
Lease financing                                                                  1.5                 1.9
Other loans, overdrafts, other                                                  20.5                12.0
Gross borrowings                                                               218.0               292.4
Cash and short-term deposits                                                 (167.4)             (111.9)
Net debt                                                                        50.6               180.5



The US Private Placement loan notes, currently US$365 million following the
repayment of US$50 million in May 2007 and US$130 million in November 2007, are
repayable at various dates between 2009 and 2012.



The current committed bank facility is for £200 million and has a current
maturity date of March 2010.



On 10 October 2007, the Group entered into a new multi-currency, committed bank
facility for approximately £950 million, raised for the purpose of the proposed
acquisition of Foseco.  On completion of this acquisition, the facility will be
used, in combination with the net proceeds of £151 million from the share
placing on 11 October 2007, to finance the acquisition of Foseco.  This will
include the refinancing of the existing committed bank facilities of Cookson and
Foseco.  Cookson's US Private Placement loan notes will not be refinanced on
completion of the acquisition.



Currency


The US dollar weakened marginally against sterling during the course of the year
such that the exchange rate at 31 December 2007 was some 2% higher than at 1
January 2007.  However, the European currencies, particularly the euro, the
Polish zloty and the Czech Republic koruna, strengthened significantly against
sterling by 8%, 13% and 11% respectively.  The Chinese renminbi also
strengthened 5% against sterling during the year.


The average US dollar exchange rate for 2007 was 9% higher than the average
exchange rate for 2006.  The Chinese renminbi also weakened 4% against sterling.
The average values of the European currencies in 2007 were relatively stable
against sterling compared to the prior year, with the euro unchanged, the Polish
zloty 3% stronger and the Czech Republic koruna 2% stronger.


In 2007, the net translation impact of currency changes compared to last year
was to reduce revenue from continuing operations by around £60 million and
reduce trading profit from continuing operations by around £5 million.



Pension fund and other post-retirement obligations


The Group operates defined contribution and defined benefit pension plans,
principally in the UK and US.  In addition, the Group has various other defined
benefit post-retirement arrangements, being principally healthcare plans in the
US.  The Group's UK defined benefit pension plan is closed to new members and
its two principal defined benefit pension plans in the US are closed to new
members and to further benefit accrual for existing members.



As at 31 December 2007, a liability of £96.1 million was recognised in respect
of employee benefits, a decrease of £59.0 million over the £155.1 million as at
31 December 2006.  This decrease results primarily from an increase in the
prescribed discount rates used to calculate the present value of future
liabilities and, in respect of the UK plan, the additional 'top-up' payments
made in 2007 in accordance with an agreement reached with the Trustee in 2006.
These factors have more than offset the assumption of increased life expectancy
of retirees.  Of the total liability, £26.0 million relates to the deficit on
the Group's defined benefit pension plan in the UK, £34.6 million to the Group's
defined benefit pension plans in the US, £14.0 million to pension arrangements
in the Rest of the World, and £21.5 million to unfunded post-retirement defined
benefit arrangements, being mainly healthcare benefit arrangements in the US.


In order to significantly reduce the future underlying volatility of the Group's
UK plan, in November 2006 the plan Trustee implemented risk mitigation elements
within its investment strategy by which it entered into a portfolio of inflation
and interest rate swaps, executed an equity hedge and increased its asset
diversification.  The effect of these arrangements has been to significantly
narrow the range of likely outcomes for the underlying economic value of the UK
employee benefit deficit, whether arising from variability in the investment
performance of the plan's assets due to the impact of future changes in economic
circumstances, or from other aspects of financial market pricing which are
largely outside of the Group's control.  These risk mitigation enhancements have
not impacted on the expected return assumptions in the Group's financial
reporting under the relevant accounting standard.


The schedule of funding contributions agreed with the Trustee of the Group's UK
plan in 2006 was reconfirmed in March 2008 and requires 'top-up' payments (in
addition to the normal cash contributions) of £26.5 million in 2008.  The level
of the scheduled additional 'top-up' payments is expected to be reviewed in
consultation with the Trustee in the second half of 2008, after the proposed
acquisition of Foseco is completed.


The total charge to the income statement in 2007 for all pension plans
(including defined contribution plans) and other post-retirement benefits was
£16.4 million, a reduction of £5.9 million over 2006.  Of this charge, £13.4
million (2006: £15.8 million) has been deducted in arriving at trading profit
and £3.0 million (2006: £6.5 million) has been included within net finance
costs.  Total pension cash contributions amounted to £42.8 million in 2007
(2006: £42.2 million).



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
Anna Hartropp, Investor Relations Manager

Media enquiries:
John Olsen                                               Hogarth Partnership
                                                         Tel: [phone]

                                                         + 44 (0)7770 272082



Copies of Cookson's 2007 Annual Report are due to be posted to the shareholders
of the Company on 11 April 2008 and will be available on the Company's website
and at the Registered Office of the Company after that date.


Cookson management will make a presentation to analysts on 11 March 2008 at 11:
15am (UK time).  This will be broadcast live on Cookson's website.  An archive
version of the presentation will be available on the website from mid-afternoon
on 11 March.

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 2007


                                              Continuing  Discontinued     2007    Continuing  Discontinued      2006
                                              operations    operations    Total    operations    operations     Total
                                        Notes         £m            £m       £m            £m            £m        £m
Revenue                                   2      1,619.5           1.5  1,621.0       1,589.6          71.8   1,661.4
Manufacturing costs   - raw materials            (797.4)         (0.2)  (797.6)       (766.6)        (30.8)   (797.4)
                               - other           (370.6)         (1.3)  (371.9)       (376.9)        (23.9)   (400.8)
Administration, selling and                      (281.9)         (0.2)  (282.1)       (295.8)         (9.2)   (305.0)
distribution costs
Trading profit                           1,2       169.6         (0.2)    169.4         150.3           7.9     158.2
Rationalisation of operating activities 1,2,3      (5.8)             -    (5.8)        (34.6)         (0.1)    (34.7)
Profit relating to non-current assets   1,2,4        7.0             -      7.0          13.1             -      13.1
Curtailment gains relating to employee  1,2,5        1.0             -      1.0           8.5           0.1       8.6
benefits
Profit from operations                    2        171.8         (0.2)    171.6         137.3           7.9     145.2
Finance costs                             6       (50.9)             -   (50.9)        (53.8)             -    (53.8)
Finance income                            6         29.4             -     29.4          25.4             -      25.4
Share of post-tax profit of joint                    1.7             -      1.7           1.4             -       1.4
ventures
Loss on disposal of continuing            7        (0.4)             -    (0.4)         (4.7)             -     (4.7)
operations
Profit before tax                                  151.6         (0.2)    151.4         105.6           7.9     113.5
Income tax costs     - ordinary           8       (39.9)             -   (39.9)        (38.2)         (0.3)    (38.5)
activities
                     - exceptional   
                       items            1,8       (3.5)             -    (3.5)         (5.3)             -     (5.3)
Net post-tax loss on disposal of          
discontinued operations                   9            -         (0.1)    (0.1)             -         (3.3)     (3.3)

Profit for the year                                108.2         (0.3)    107.9          62.1           4.3      66.4

Profit for the year attributable to:
Equity holders of the parent company               105.3         (0.3)    105.0          58.6           4.3      62.9
Minority interests                                   2.9             -      2.9           3.5             -       3.5
Profit for the year                                108.2         (0.3)    107.9          62.1           4.3      66.4


Headline profit before tax:               1
Trading profit                                     169.6         (0.2)    169.4         150.3           7.9     158.2
Net finance costs                                 (21.5)             -   (21.5)        (28.4)             -    (28.4)
Share of post-tax profit of joint          
ventures                                             1.7             -      1.7           1.4             -       1.4

Headline profit before tax                         149.8         (0.2)    149.6         123.3           7.9     131.2
Income tax costs on ordinary activities           (39.9)             -   (39.9)        (38.2)         (0.3)    (38.5)
Profit attributable to minority                  
interests                                          (2.9)             -    (2.9)         (3.5)             -     (3.5)

Headline profit attributable to parent          
company equity holders                             107.0         (0.2)    106.8          81.6           7.6      89.2


Earnings per share (pence):              10
Basic                                               53.5         (0.1)     53.4          30.6           2.2      32.8
Diluted                                             53.4         (0.2)     53.2          30.4           2.2      32.6

Headline earnings per share (pence):    1,10
Basic                                               54.4         (0.1)     54.3          42.6           4.0      46.6
Diluted                                             54.3         (0.1)     54.2          42.3           4.0      46.3


Weighted average number of ordinary  
shares (millions)                        10                               196.7                                 191.5





Group Statement of Cash Flows
For the year ended 31 December 2007

                                                                                               2007           2006
                                                                                  Notes          £m             £m
Cash flows from operating activities
Profit from operations                                                                        171.6          145.2
Adjustments for:
Rationalisation of operating activities                                                         5.8           34.7
Profit relating to non-current assets                                                         (7.0)         (13.1)
Curtailment gains relating to employee benefits                                               (1.0)          (8.6)
Depreciation                                                                                   34.9           37.0

EBITDA                                                                              1         204.3          195.2
Net increase in trade and other working capital                                              (44.8)         (29.2)
Net outflows related to assets and liabilities classified as held for sale                    (1.5)          (7.2)
Outflow related to rationalisation of operating activities                          3        (14.7)         (16.1)
Additional funding contributions into Group pension plans                           14       (28.1)         (25.5)

Cash generated from operations                                                                115.2          117.2
Interest paid                                                                                (24.9)         (28.3)
Interest received                                                                               5.8            6.3
Income taxes paid                                                                            (26.7)         (27.5)

Net cash inflow from operating activities                                                      69.4           67.7

Cash flows from investing activities
Purchase of property, plant and equipment                                                    (59.9)         (43.2)
Proceeds from the sale of property, plant and equipment                                        10.5           16.6
Purchase of property classified as held for sale                                              (9.0)              -
Proceeds from the sale of property classified as held for sale                                 12.7              -
Acquisition of subsidiaries and joint ventures, net of cash acquired                         (14.0)          (4.1)
Disposal of subsidiaries and joint ventures, net of cash disposed of                           24.8           59.4
Dividends received from joint ventures                                                          1.3            0.9
Other investing outflows, including additional costs for prior years' disposals              (11.6)          (3.1)

Net cash (outflow)/inflow from investing activities                                          (45.2)           26.5

Net cash inflow before financing activities                                                    24.2           94.2

Cash flows from financing activities
Repayment of borrowings                                                             13       (93.0)         (29.9)
Increase in borrowings                                                              13         14.2              -
Settlement of forward foreign exchange contracts                                             (20.0)          (5.4)
Proceeds from the issue of share capital                                                      152.5            8.0
Proceeds from the sale of treasury shares                                                         -            0.9
Payment of transaction costs                                                                  (4.8)              -
Dividends paid to equity shareholders                                               11       (21.7)         (15.4)
Dividends paid to minority shareholders                                                       (1.8)          (3.0)

Net cash inflow/(outflow) from financing activities                                            25.4         (44.8)

Net increase in cash and cash equivalents                                                      49.6           49.4

Cash and cash equivalents (including bank overdrafts)
Cash and cash equivalents at 1 January                                                        105.0           63.5
Effect of exchange rate fluctuations on cash and cash equivalents                             (1.4)          (7.9)
Net increase in cash and cash equivalents                                                      49.6           49.4

Cash and cash equivalents at 31 December                                                      153.2          105.0

Free cash flow
Net cash inflow from operating activities                                                      69.4           67.7
Additional funding contributions into Group pension plans                                      28.1           25.5
Purchase of property, plant and equipment                                                    (59.9)         (43.2)
Proceeds from the sale of property, plant and equipment                                        10.5           16.6
Dividends received from joint ventures                                                          1.3            0.9
Dividends paid to minority shareholders                                                       (1.8)          (3.0)

Free cash flow                                                                      1          47.6           64.5






Group Balance Sheet

As at 31 December 2007


                                                                                               2007           2006
                                                                                 Notes           £m             £m
Assets
Property, plant and equipment                                                                 254.7          222.4
Intangible assets                                                                             430.8          429.0
Interests in joint ventures                                                                    14.2           11.6
Investments                                                                                    16.3           15.8
Income tax recoverable                                                                          3.0            2.3
Deferred tax assets                                                                             8.9           11.3
Other receivables                                                                               7.6            9.8

Total non-current assets                                                                      735.5          702.2

Cash and short-term deposits                                                                  167.4          111.9
Inventories                                                                                   201.4          171.2
Trade and other receivables                                                                   355.9          303.0
Income tax recoverable                                                                          0.8            1.1
Derivative financial instruments                                                                0.3            1.7
Assets classified as held for sale                                                                -           18.6

Total current assets                                                                          725.8          607.5

Total assets                                                                                1,461.3        1,309.7

Equity
Issued share capital                                                                           21.3           19.3
Share premium account                                                                           8.0            6.3
Other reserves                                                                                (0.2)         (17.0)
Retained earnings                                                                  12         724.9          466.2
Total parent company shareholders' equity                                                     754.0          474.8
Minority interests                                                                             11.9            9.4

Total equity                                                                                  765.9          484.2

Liabilities
Interest-bearing loans and borrowings                                                         199.3          188.1
Employee benefits                                                                  14          96.1          155.1
Other payables                                                                                 13.0           19.5
Provisions                                                                                     24.5           22.5
Deferred tax liabilities                                                                       23.5           21.8

Total non-current liabilities                                                                 356.4          407.0

Interest-bearing loans and borrowings                                                          18.7          104.3
Trade and other payables                                                                      258.6          241.9
Income tax payable                                                                             41.5           27.7
Provisions                                                                                     17.9           32.7
Derivative financial instruments                                                                2.3            6.1
Liabilities directly associated with assets classified as held for sale                           -            5.8
Total current liabilities                                                                     339.0          418.5

Total liabilities                                                                             695.4          825.5

Total equity and liabilities                                                                1,461.3        1,309.7

Analysis of net debt:
Interest-bearing loans and borrowings      - non-current                                      199.3          188.1
                                           - current                                           18.7          104.3
Cash and short-term deposits                                                                (167.4)        (111.9)
Net debt                                                                          1,13         50.6          180.5





Group Statement of Recognised Income and Expense
For the year ended 31 December 2007


                                                                                               2007          2006
                                                                                                 £m            £m

Exchange differences on translation of the net assets of foreign operations                    27.3        (81.1)
Net investment hedges                                                                        (10.1)          25.3
Cash flow hedges                                                                              (0.3)             -
Actuarial gain on employee benefits plans                                                      23.5          21.8
Change in fair value of available-for-sale investments                                          1.0           0.2
Income tax on items recognised directly in equity                                             (0.3)             -
Net income/(expense) recognised directly in equity                                             41.1        (33.8)
Profit for the year                                                                           107.9          66.4
Total recognised income and expense for the year                                              149.0          32.6

Total recognised income and expense for the year attributable to:
Equity holders of the parent company                                                          145.0          29.9
Minority interests in  - profit for the year                                                    2.9           3.5
                          - exchange differences on translation of the net assets               1.1         (0.8)
of foreign operations
Total recognised income and expense for the year                                              149.0          32.6





Group Reconciliation of Movements in Equity
For the year ended 31 December 2007

                                                                         Total equity
                                                                         attributable
                                                                            to parent
                                                                              company       Minority          Total
                                                                       equity holders      interests         equity
                                                                                   £m             £m             £m

As at 1 January 2006                                                            449.0           12.7          461.7

Total recognised income and expense for the year                                 29.9            2.7           32.6
New share capital issued                                                          8.0              -            8.0
Disposal of treasury shares                                                       0.9              -            0.9
Recognition of share-based payments                                               2.4              -            2.4
Dividends paid                                                                 (15.4)          (3.1)         (18.5)
Acquisition of minority interest                                                    -          (2.9)          (2.9)
                                                                                 25.8          (3.3)           22.5

As at 31 December 2006                                                          474.8            9.4          484.2

Total recognised income and expense for the year                                145.0            4.0          149.0
New share capital issued                                                        152.5              -          152.5
Recognition of share-based payments                                               3.4              -            3.4
Dividends paid                                                                 (21.7)          (1.5)         (23.2)
                                                                                279.2            2.5          281.7

As at 31 December 2007                                                          754.0           11.9          765.9





Notes to the Accounts


1           BASIS OF PREPARATION

The audited consolidated financial statements of Cookson Group plc (the 'Company
') in respect of the year ended 31 December 2007 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 11 March 2008. The
financial information set out in this preliminary results announcement does not
constitute the Company's statutory accounts for the year ended 31 December 2007
but is derived from those accounts. An unqualified audit report was issued on
the statutory accounts for 2007, 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 2006 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 237(2) or (3) of the
Companies Act 1985. 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.


1.1      DISCLOSURE OF EXCEPTIONAL ITEMS

IAS 1 provides no definitive guidance as to the format of the income statement,
but states key lines which should be disclosed. It also encourages additional
line items and the re-ordering of items presented on the face of the income
statement when appropriate for a proper understanding of the entity's financial
performance. In keeping with the spirit of this aspect of IAS 1, 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, the financial effect of
any profits or losses arising on business disposals, major rationalisation or
restructuring activity, curtailment gains or losses relating to employee
benefits, profits or losses relating to non-current assets 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.


1.2      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 metal component. 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.


(c)         Underlying revenue growth

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
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, defined as profit from operations before the costs of
rationalisation of operations, profits or losses relating to non-current assets
and curtailment gains or losses relating to employee benefits, is separately
disclosed on the face of the Group income statement. 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 the net total of trading profit,
plus the Group's share of post-tax profit of joint ventures and total net
finance costs and income tax costs associated with ordinary activities, less
profit attributable to minority 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 acquisition and disposal of non-current assets, dividends from
joint ventures and dividends paid to minority 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 (being inventories, trade and other receivables
and trade and other payables) for a year to the reported revenue for that year.
The Directors believe that the average working capital to sales ratio provides
an important measure of the underlying effectiveness with which working capital
balances are managed throughout the Group.


(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 is calculated as trading profit, plus the Group's share of
post-tax profit of joint ventures divided by average operating net assets (being
property, plant and equipment, trade working capital and other operating
receivables and payables). The Directors believe that return on net assets
provides an important measure of the underlying financial performance of the
Group's divisions.


(o)         Return on investment

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


2           SEGMENT REPORTING

Segment revenue represents revenue to external customers and segment results
include items directly attributable to a segment as well as those items that can
be allocated on a reasonable basis. The contribution from acquisitions to
revenue and profit from operations in 2007 and 2006 was not material.


                                                                                    2007                      2006
                                                                             Profit from               Profit from
                                                                   Revenue    operations     Revenue    operations
By business segments                                                    £m            £m          £m            £m
Ceramics                                                             781.1         109.4       756.6          89.5
Electronics                                                          558.2          58.0       554.7          58.5
- Assembly Materials                                                 326.3          29.8       319.3          28.2
- Chemistry                                                          231.9          28.2       235.4          30.3
Precious Metals                                                      280.2           9.9       278.3          11.0
Group corporate costs                                                    -         (7.7)           -         (8.7)
Trading profit - continuing operations                             1,619.5         169.6     1,589.6         150.3
                      - discontinued operations                        1.5         (0.2)        71.8           7.9
Rationalisation of operating activities                                  -         (5.8)           -        (34.7)
Profit relating to non-current assets                                    -           7.0           -          13.1
Curtailment gains relating to employee benefits                          -           1.0           -           8.6
Total Group                                                        1,621.0         171.6     1,661.4         145.2



Of the total cost of rationalisation of operating activities of £5.8m (2006:
£34.7m), £2.1m related to Ceramics (2006: £22.9m); £0.1m to Assembly Materials
(2006: £7.0m); £0.8m to Chemistry (2006: £1.7m) and £2.8m to Precious Metals
(2006: £2.4m). Additionally in 2006, £0.6m related to Group corporate operations
and £0.1m to discontinued operations.

Of the total net profit relating to non-current assets of £7.0m (2006: £13.1m),
£5.8m related to Ceramics (2006: £0.1m loss); £1.1m to Assembly Materials (2006:
£1.5m) and £0.1m to Chemistry (2006: £12.8m). Additionally in 2006, £1.1m loss
related to Group corporate operations.


                                                                         2007                                2006
                                                                           By                                  By
                                                   By location of    customer          By location of    customer
                                                 Group operations    location        Group operations    location
                                                           Profit                              Profit
                                                             from                                from
                                             Revenue   operations     Revenue    Revenue   operations     Revenue
By geographical segments                          £m           £m          £m         £m           £m          £m
Europe                                         618.2         59.0       552.6      590.3         46.2       525.7
NAFTA                                          520.4         29.9       497.7      552.8         30.8       525.9
Asia-Pacific                                   389.8         68.5       441.3      359.7         63.7       420.9
Rest of the World                               91.1         12.2       127.9       86.8          9.6       117.1
Trading profit - continuing operations       1,619.5        169.6     1,619.5    1,589.6        150.3     1,589.6
                      - discontinued             1.5        (0.2)         1.5       71.8          7.9        71.8
operations
Rationalisation of operating activities            -        (5.8)           -          -       (34.7)           -
Profit relating to non-current assets              -          7.0           -          -         13.1           -
Curtailment gains relating to employee             -          1.0           -          -          8.6           -
benefits
Total Group                                  1,621.0        171.6     1,621.0    1,661.4        145.2     1,661.4



Of the total cost of rationalisation of operating activities of £5.8m (2006:
£34.7m), £1.8m related to Europe (2006: £24.2m); £3.4m to NAFTA (2006: £9.1m);
£0.4m to Asia-Pacific (2006: £1.2m) and £0.2m to the Rest of the World (2006:
£0.1m). Additionally in 2006, £0.1m related to discontinued operations.

Of the total net profit relating to non-current assets of £7.0m (2006: £13.1m),
£3.4m related to Europe (2006: £8.9m); £0.9m loss to NAFTA (2006: £3.1m); £4.5m
to Asia-Pacific (2006: £1.2m), with no profit or loss from the Rest of the World
(2006: £0.1m loss).



3           RATIONALISATION OF OPERATING ACTIVITIES

The charge for rationalisation of operating activities of £5.8m (2006: £34.7m)
was the result of the implementation of a number of initiatives aimed at
reducing the Group's cost base and realigning its manufacturing capacity with
its customer markets. The initiatives implemented included redundancy
programmes, the consolidation of facilities, plant closures, the streamlining of
manufacturing processes and the rationalisation of product lines. Of these
rationalisation charges, £1.6m (2006: £10.3m) was in respect of asset
write-downs. Total cash spend in respect of rationalisation initiatives was
£14.7m (2006: £16.1m), leaving provisions made but unspent of £5.8m as at 31
December 2007 (31 December 2006: £19.3m). The net taxation credit attributable
to these rationalisation costs was £0.5m (2006: £2.1m).



4           PROFIT RELATING TO NON-CURRENT ASSETS

The net profit relating to non-current assets of £7.0m (2006: £13.1m) mainly
comprised profits arising on the sale of surplus property. The net taxation
charge attributable to the sale of non-current assets was £1.2m (2006: £3.7m).



5           CURTAILMENT GAINS RELATING TO EMPLOYEE BENEFITS

Curtailment gains relating to employee benefits of £1.0m (2006: £8.6m) were
credited in arriving at profit from operations.

The curtailment gain of £1.0m in the year arose in relation to the UK
post-retirement plan, resulting from a reduction in the Group's cost of
providing benefits under the plan. Curtailment gains of £8.6m in 2006 resulted
from reductions in liabilities arising from the closure of the Group's two
largest US defined benefit pension plans to new members and the freezing of the
benefits of existing members therein, together with reductions in the level of
benefits provided through certain of the Group's US post-retirement healthcare
plans.



6           FINANCE COSTS AND FINANCE INCOME

Included within finance costs is the interest cost associated with the
liabilities of the Group's defined benefit pension and other post-retirement
benefit plans of £25.6m (2006: £26.1m) and included within finance income is the
expected return on the assets of the Group's defined benefit pension plans of
£22.6m (2006: £19.6m).



7           LOSS ON DISPOSAL OF CONTINUING OPERATIONS

During 2007 and 2006, the Group disposed of a number of businesses from its
Ceramics and Electronics divisions, none of which individually or in aggregate
represented a separate major line of business or geographical area of operation.
Accordingly, these disposals are presented within pre-tax results from
continuing operations in the Group's income statement. The aggregate proceeds,
net of selling costs, amounted to £1.5m (2006: £14.5m) and, together with
additional costs in relation to prior years' disposals, resulted in a net loss
before tax of £0.4m (2006: loss of £4.7m). The tax charge associated with these
disposals was £nil (2006: £0.6m).



8           INCOME TAX

The total charge for income tax of £43.4m for 2007 (2006: £43.8m) comprises a
tax charge on ordinary activities of £39.9m (2006: £38.5m), representing an
effective rate of 26.9% (2006: 31.3%) on headline profit before tax from
continuing operations before the Group's share of post-tax joint venture income,
together with a tax charge on exceptional items of £3.5m (2006: £5.3m). The tax
charge on exceptional items comprises a £0.5m credit (2006: £2.1m) in relation
to rationalisation costs, a charge of £1.2m (2006: £3.7m) in relation to
non-current assets and a charge of £2.8m (2006: £3.1m) in relation to the
different treatment of goodwill amortisation for tax and reporting purposes.
Additionally in 2006, there was a charge of £0.6m on the loss on disposal of
continuing operations.



9           NET POST-TAX LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS

The net post-tax loss of £0.1m on disposal of discontinued operations comprised
a profit of £3.9m on the sale of Monofrax Inc. ('Monofrax'), additional profit
of £1.2m in respect of the 2003 disposal of the Group's former Speedline
business, net of £5.2m of additional costs in respect of prior years' disposals.

On 1 February 2007, the Group sold its Monofrax business, a US-based
manufacturer of fused-cast refractory products, which previously formed part of
the Ceramics division, to RHI AG ('RHI') for US$45.0m (£22.9m). The purchase
price was satisfied by the assumption by RHI of pension, retirement and other
liabilities of US$5.6m (£2.9m) with the balance satisfied by cash of US$39.4m
(£20.0m). As at 31 December 2006, the assets and liabilities of the Monofrax
business were reclassified in the Group balance sheet to 'held for sale' and
measured at fair value less costs to sell, resulting in neither a profit nor a
loss in 2006. The disposal of Monofrax in 2007 resulted in a profit of £3.9m.

As part of the sale of the Group's former Speedline business in 2003 to KPS, an
equity fund, the sale agreement provided for the Group to receive further
consideration from KPS contingent upon Speedline being sold in the future for
more than a specified sum. In December 2006, Speedline was sold by KPS for an
amount in excess of the specified sum and accordingly a profit of £1.2m has been
recognised in 2007, in addition to the £2.7m reported in 2006.

In 2006, the £3.3m post-tax loss on disposal of discontinued operations
comprised a £5.8m loss resulting from the disposal of the Group's former
Laminates business, £0.2m of additional costs incurred in relation to the
disposal in 2005 of the Group's former Specialty Coatings Systems business and a
profit of £2.7m arising in relation to additional consideration receivable in
respect of the disposal of the Group's Speedline business in 2003.

There was no tax charge or credit associated with the net post-tax loss on
disposal of discontinued operations in 2007 (2006: £nil).



10       EARNINGS PER SHARE

Earnings per share are calculated using a weighted average number of ordinary
shares of 196.7m (2006: 191.5m). Diluted earnings per share are calculated
assuming conversion of all outstanding dilutive share options. Outstanding share
options are only treated as being dilutive when their conversion to ordinary
shares would decrease earnings per share, or increase loss per share, from
continuing operations. These adjustments give rise to an increase in the
weighted average number of ordinary shares of 0.5m (2006: 1.3m).



11       DIVIDENDS

During the year, the Company paid a final dividend of 7.00p per ordinary share
in respect of the year ended 31 December 2006 and an interim dividend of 4.25p
per ordinary share in respect of the year ended 31 December 2007. The total cost
of dividends paid in 2007 was £21.7m (2006: £15.4m).

The proposed final dividend in respect of the year ended 31 December 2007 of
8.75p per share (2006: 7.00p) 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 9 June 2008 to ordinary shareholders on the register at 23 May 2008 and,
based upon the number of ordinary shares in issue at 31 December 2007, will cost
£18.6m.



12       RETAINED EARNINGS

In October 2007, the Company issued 18,583,519 new 10p ordinary shares through a
share placing at a price of 825p per ordinary share, to part finance the
Company's proposed acquisition of Foseco plc. The issue raised £150.6m net of
issue costs. A cash box structure was utilised to effect the share placing, as a
result of which Section 131 of the Companies Act 1985 applied to the excess of
the net proceeds over the nominal value of the shares issued and consequently no
share premium was recognised. The excess net proceeds of £148.7m were recorded
as a merger reserve that was subsequently transferred to retained earnings and
which is available for distribution to shareholders.



13       RECONCILIATION OF MOVEMENT IN NET DEBT

                                           Balance       Foreign                                          Balance
                                                at                                                             at
                                         1 January      exchange    Acquired     Non-cash             31 December       
                                              2007    adjustment        debt    movements   Cash flow        2007
                                                £m            £m          £m           £m          £m          £m
Cash and cash equivalents:
Short-term deposits                           68.0           0.5           -            -        49.7       118.2
Cash at bank and in hand                      43.9         (1.8)           -            -         7.1        49.2
Bank overdrafts                              (6.9)         (0.1)           -            -       (7.2)      (14.2)
                                                                                                 49.6
Borrowings, excluding overdrafts:
Current                                     (97.4)           2.2       (2.4)            -        93.0       (4.6)
Non-current                                (188.8)           3.5           -            -      (14.2)     (199.5)
Capitalised borrowing costs                    0.7             -           -        (0.4)           -         0.3
                                                                                                 78.8

Net debt                                   (180.5)           4.3       (2.4)        (0.4)       128.4      (50.6)



14       EMPLOYEE BENEFITS

The balance as at 31 December 2007 of £96.1m (2006: £155.1m) in respect of the
Group's defined benefit pension and other post-retirement benefit obligations,
classified in the balance sheet as 'Employee benefits', results from an interim
actuarial valuation of the Group's defined benefit pension and other
post-retirement obligations as at that date. Of the total balance, £60.6m (2006:
£118.1m) relates to the combined deficits of the Group's principal defined
benefit pension schemes in the UK and the US. Of the remainder of the total,
£14.0m (2006: £13.6m) relates to defined benefit pension arrangements in the
Rest of the World and £21.5m (2006: £23.4m) relates to unfunded post-retirement
benefit arrangements, being mainly healthcare benefit arrangements in the US.

The total charge in the income statement for 2007 in respect of the Group's
defined benefit pension and other post-retirement benefit obligations, before
curtailment gains and disposals, was £10.3m (2006: £15.3m). Curtailment gains of
£1.0m (2006: £8.6m) were credited in arriving at profit from operations (note 5)
and £1.0m was credited (2006: £0.3m charged) in arriving at the net post-tax
loss on disposal of discontinued operations.

Cash contributions into the Group's defined benefit pension plans, including
additional funding contributions of £26.5m (2006: £25.5m) aimed at accelerating
the reduction in the UK plan deficit as agreed with the plan Trustee, amounted
to £42.8m (2006: £40.1m). Actuarial gains contributed £23.5m to the reduction in
the employee benefits balance in the year (2006: £21.8m).



15       EXCHANGE RATES

The Group reports its results in pounds sterling. A substantial portion of the
Group's revenue and profits are denominated in currencies other than pounds
sterling. It is the Group's policy to translate the income statements and cash
flow statements of its overseas operations into pounds sterling using average
exchange rates for the 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 rate                Average rate
                                                                   2007          2006          2007          2006
US dollar                                                          1.99          1.96          2.00          1.84
Euro                                                               1.36          1.48          1.46          1.47
Czech Republic koruna                                             36.26         40.84         40.60         41.57
Polish zloty                                                       4.93          5.69          5.53          5.71
Hong Kong dollar                                                  15.56         15.22         15.62         14.30
Chinese renminbi                                                  14.58         15.28         15.23         14.68





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