Vesuvius plc Prospectus

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