Vesuvius plc Prospectus

(c) Net investment hedges
Net investment hedges in the table above comprise forward foreign exchange contracts used
to provide a hedge against the foreign exchange risk associated with Vesuvius’ investments
in its foreign operations. Of the change in the fair value of these contracts during 2011,
£10.7 million (which was associated with the change in spot prices) was determined to be
an effective hedge and was recognised in other comprehensive income and presented within
changes in invested capital and £4.0 million (which was associated with the change in
forward prices) was credited to the income statement within finance income.
(d) Derivatives not designated for hedge accounting purposes
Other derivatives in the table above that are not designated for hedge accounting purposes
comprise forward foreign exchange contracts used to hedge the change in fair value of
Vesuvius’ US Private Placement loan notes arising from fluctuation in exchange rates and
forward purchase contracts used to hedge against the cash flow risk relating to future
commodity metals purchases.
22 Assets and liabilities held for sale
FY 2009 FY 2010
(£m)
FY 2011
Property, plant and equipment ...................................... — — 3.7
Intangible assets ................................................. — — 1.4
Inventories ..................................................... — — 8.8
Trade and other receivables ........................................ — — 14.9
Total assets held for sale .......................................... — — 28.8
Trade and other payables .......................................... — — (4.6)
Provisions ...................................................... — — (3.1)
Net assets held for sale ........................................... — — 21.1
As at 31 December 2011, the US operations of Vesuvius’ Precious Metals Processing business and a
non-core business of Vesuvius’ Steel business were both in the process of being disposed of and were
classified as held for sale.
23 Capital management
The capital of Vesuvius is equal to the cumulative investment in Vesuvius companies.
As stated in the Basis of Preparation note 2.2, for the purposes of this historical financial information,
substantially all of the borrowings of Cookson have been reported in the historical financial information
for Vesuvius. Vesuvius has established policies for managing the financial risks to which its activities are
exposed, including the market risk resulting from fluctuations in exchange rates and interest rates; and
liquidity risk, being the risk that Vesuvius has insufficient debt facilities to finance its operational cash
flow requirements and any maturing financial liabilities. In managing these risks, Vesuvius uses derivative
financial instruments, including forward foreign exchange contracts and interest rate swaps. The majority
of the derivative activity entered into by Cookson related to the Cookson net debt and therefore, as noted
above, because the Cookson borrowings have been reported in this historical financial information for
Vesuvius, so the majority of the derivative activity in the Reporting Period is similarly reported within the
historical financial information of Vesuvius. Only where there are derivatives entered into by national
Alent entities will that derivative activity be reported in the Alent plc historical financial information.
Vesuvius monitors its capital using a number of key performance indicators, including free cash flow,
average working capital to sales ratios, net debt to EBITDA ratios, RONA and ROI (note 4). Vesuvius’
objectives when managing its capital are:
• to ensure that Vesuvius and all of its businesses are able to operate as going concerns and ensure that
Vesuvius operates within the financial covenants contained within its debt facilities;
• to maximise shareholder value through maintaining an appropriate balance between Vesuvius’ equity
and net debt;
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