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to defined benefit arrangements in other jurisdictions in which Cookson operates will be<br />
retained by the legal entity which currently acts as plan sponsor.<br />
Based on the above allocation of Cookson Group’s pension liabilities, of the total Cookson<br />
Group net employee benefits deficit of £81 million as at 30 June 2012, £55 million has been<br />
apportioned to <strong>Vesuvius</strong>, with the remaining £26 million being apportioned to Alent.<br />
However, it should be noted that the level of net employee benefits deficit for <strong>Vesuvius</strong> as<br />
at the date of the Demerger will reflect any changes in the level of the deficit or surplus of<br />
the various plans that occur between 1 July 2012 and the date of the Demerger. In<br />
particular, the portion of the mitigation payment noted above made just prior to Demerger in<br />
respect of the UK Plan should significantly improve the funding position of this plan as at<br />
the date of the Demerger.<br />
Throughout the Reporting Period, Cookson Group has incurred costs within its central<br />
headquarters in London. These costs have been deducted from the underlying trading results<br />
of Cookson’s three divisions – Engineered Ceramics, Performance Materials and Precious<br />
Metals Processing – in arriving at the results for the Cookson Group as a whole. These<br />
centrally incurred costs, and their treatment in the Cookson Group’s historical financial<br />
information, can be analysed as follows:<br />
• “Unallocated central costs”: headquarter costs (e.g. Cookson Board costs) relating to<br />
Cookson Group’s operations as a public company. These costs have historically not<br />
been allocated to Cookson’s three divisions as any allocation would have been arbitrary<br />
in nature.<br />
• “Allocated central costs”: headquarter costs (e.g. tax and treasury functions) which<br />
relate to the management and oversight of Cookson Group’s three divisions. These costs<br />
have historically been allocated to the three businesses in proportion to their revenue.<br />
In producing the historical published financial statements included in Part IX: “Historical<br />
Financial Information” of this document, all of the “unallocated central costs” relating to<br />
Cookson’s central headquarters have been included in the historical financial information<br />
for <strong>Vesuvius</strong>, with no allocation to Alent. This is because any allocation would be arbitrary<br />
in nature and may not reflect properly the headquarter costs as would have been incurred by<br />
<strong>Vesuvius</strong> had it been a standalone business throughout the Reporting Period. The historical<br />
financial information for <strong>Vesuvius</strong> also reflects the “allocated costs” relating to Cookson’s<br />
central headquarters as these costs have historically been allocated against the Engineered<br />
Ceramics and Precious Metals Processing divisions of the Cookson Group in its historical<br />
published financial statements. The following table shows the impact of these unallocated<br />
and allocated central headquarters costs on <strong>Vesuvius</strong>’ historical results:<br />
FY 2009 FY 2010 FY 2011<br />
HY 2011<br />
(unaudited)<br />
HY 2012<br />
(unaudited)<br />
(£m)<br />
Trading profit, as reported ............. 72.5 181.1 190.6 100.9 91.2<br />
Allocated central costs ................ 4.7 9.0 5.8 3.7 1.2<br />
Unallocated central costs .............. 7.3 9.0 8.8 4.3 5.0<br />
Trading profit before all central costs ..... 84.5 199.1 205.2 108.9 97.4<br />
EBITDA¹, as reported ................. 116.8 226.5 238.3 124.4 114.3<br />
Allocated central costs ................ 4.7 9.0 5.8 3.7 1.2<br />
Unallocated central costs .............. 7.3 9.0 8.8 4.3 5.0<br />
EBITDA before all central costs ......... 128.8 244.5 252.9 132.4 120.5<br />
Notes:<br />
(1) Refer to note 4 of the historical financial information for definitions.<br />
(2) In producing the trading profit or EBITDA for the three businesses of <strong>Vesuvius</strong> (Steel,<br />
Foundry and Precious Metals Processing), the allocated central costs noted above<br />
would normally be allocated between them based on their relative contribution to<br />
<strong>Vesuvius</strong>’ total revenue.<br />
(3) For comparison purposes with the above information, the trading profit before all<br />
central costs (both allocated and unallocated) of <strong>Vesuvius</strong> in FY 2008, assuming that<br />
Foseco <strong>plc</strong> had been acquired on 1 January 2008, rather than on 4 April 2008, was<br />
£196.4 million and EBITDA, on the same basis of calculation, was £236.7 million.<br />
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