Interim Results

FAIREY GROUP PLC
13 September 1999

Contact: John Poulter, Chief           Tel: [phone] (am)
         Executive
         Fairey Group                  Tel: [phone]
                                       
         Charles Watson                
         Financial Dynamics            Tel: [phone] (am)
 
                                      
                              FAIREY GROUP plc
                                      
                              INTERIM RESULTS
 
Fairey Group plc, the international process technology group, announces
results for the six months ended 3 July 1999. Key features of the
announcement include:
 
- Sales down to £129m (1998: £135m) and pre-tax profits £13m (1998: £16.5m)
due primarily to the impact of the Asian crisis and the cyclical downturn in
the semi-conductor industry
 
- Upturn in trading apparent in second quarter, which appears sustainable
into the second half of the year
 
- Product gross margins have been maintained
 
- Development of the group continued with the acquisition of Servomex plc, a
manufacturer of high specification gas analysis instrumentation.
 
- Dividend increased by 5% to 3.35p (1998: 3.20p), reflecting the Board's
confidence in the outlook for the group
 
 
Commenting on the results, Chief Executive John Poulter said:
 
'The results for the first half were adversely impacted by some of the most
difficult trading conditions witnessed by Fairey in its 12 year history. I
am however pleased  to report signs of an upturn in trading and this
positive trend has continued into the third quarter'.
 
'Despite the challenges faced by the group, we have husbanded our resources
carefully and have not been deflected from continuing investment in Fairey's
long term development including the acquisition of Servomex.'
 
 
Chairman's Statement
 
Overview
 
The first half year trading result reflected the very difficult climate
which the Group has experienced over the past 18 months after the Asian
crisis manifested itself in the exaggerated cyclical swing in the
semiconductor industry and reduced confidence in other manufacturing
markets.
 
 
Results
Compared with the equivalent period in 1998, continuing sales were down 3%
(£3.8m) and operating profit was down 13%  (£2.3m).  Our experience across
the first half year was of a particularly weak first quarter followed by
some improvement in the Spring.  In achieving this result, on what for
Fairey were unusually low volumes, benefits have come from cost restraints
and a 14% headcount reduction since the beginning of 1998, although product
development investment has been maintained throughout.    The trading result
masks considerable progress in upgrading product portfolios, market
presence, manufacturing efficiency and systems in our businesses.   In
addition to volume pressures, there has been some selective price weakness,
especially in Europe, and inflationary pressures associated with key
technical skills which are in short supply, particularly in the United
States.  Management actions have, however, maintained product gross margins.
 
 
Operating review
 
All three of our business sectors showed some erosion in the sales line and
this resulted in reduced operating profit.  In Process Instrumentation and
Filtration, these reductions were broadly consistent with the lower sales
volumes.   In Electronic Controls, the disproportionate fall in profit
reflected substantial revenue investments made at Arcom.   The company,
which produces embedded communications and control devices for telecom-
related collection of operational data, has invested heavily in new product
offerings for the oil and gas, communication and transportation markets.
This attenuated profitability in the first half but the positive effects are
now being seen in accelerating order intake on projects which will lead to
strong growth in the second half and subsequently.
 
 
Outlook
 
Turning to the second half generally, our order intake curves have shown
improvement during the latter part of the first half year and this has
continued through July and August.   The semiconductor equipment industry is
recovering and orders have picked up steadily, although it will be some time
before the levels of activity reach those seen in the mid-90's.   The
recovery beginning to be apparent in Asia is benefiting our businesses, as
is the improvement in U.S. manufacturing confidence.   However, our
companies exposed to more traditional industries, continue to experience
depressed demand.
 
Overall, the upturn in the second quarter appears to be sustainable and we
look forward to an improving trend in the second half year.
 
The Group continues to have an excellent rate of conversion of profits into
cash and used this to good advantage in the acquisition of Servomex plc
immediately before the end of the half year.   Servomex is an international
group designing, manufacturing and selling high specification gas analysis
instrumentation into a diversity of markets.    Since acquisition, a new
Managing Director has been appointed and a complex organisational structure
rationalised.  Peripheral operations are close to disposal and it is
intended to increase investment in the core business. This acquisition is
expected to enhance earnings per share in the current year before goodwill
amortisation.
 
Keith Mackrell has retired, having completed six years service as a director
of the group.  I wish to record our thanks to him and to wish him good
health and happiness in the future.
 
I am pleased to announce that we have appointed Mr. Martin Lamb to the Board
as a non-executive director.  Mr. Lamb is a director of IMI plc with
responsibility for the global drinks dispense business.   His wide business
and technical experience, both here and in North America, will be of
considerable value and we welcome him to the Board.
 
The Boards intends to pay an interim dividend of 3.35p, a 5% increase on
that paid in the previous year, reflecting continuing confidence in the
outlook for the Group.  It will be paid on 12th November, 1999 to
shareholders on the register at 15th October, 1999.
 
Sir Robin Biggam, Chairman 
 
 
A table of results is attached.
 
Copies  of this announcement are available to the public from the registered
office:
 
Fairey Group plc, Station Road, Egham, Surrey TW20 9NP
Group Results for the half year to 3 July 1999

                                    1999      1998     1998
                                    Half      Half     Full
                                    year      year     year
                                    £'000     £'000    £'000
                                                       
Sales turnover                                         
Continuing operations               129,368   133,129  261,557
Discontinued operations                 -       2,150    2,150
                                                       
                                                       
                                    129,368   135,279  263,707
                                                       
                                                       
Operating profit                                       
Continuing operations                15,512    17,770   34,208
Discontinued operations                 -         487      487
                                                       
                                                       
                                     15,512    18,257   34,695
Profit on sale of discontinued          -      34,698   36,688
operations
                                                       
                                                       
                                     15,512    52,955   71,383
                                                       
Net interest payable                  2,482     1,778    4,211
                                                       
                                                       
Profit before taxation               13,030    51,177   67,172
                                                       
Taxation  - UK                        1,879    17,467   18,857
          - Overseas                  2,030     2,461    5,323
                                                       
                                                       
Profit after taxation                 9,121    31,249   42,992
                                                       
Dividends                             3,160     3,040    9,850
                                                       
Retained profit                       5,961    28,209   33,142
                                                       
                                                       
 
Average number of shares in issue      93.8      99.1     96.9
(millions)
                                                       
Earnings per ordinary share             9.7p     31.5p    44.4p
Fully diluted earnings per share        9.6p     31.0p    43.6p
Normalised earnings per ordinary        9.7p     11.3p    21.7p
share
                                                       
Dividends per ordinary share           3.35p      3.20p   10.5p
 
The  financial information above does not constitute statutory accounts  for
the  company.  The results for 1998 are not the company's statutory accounts
but  an  abridged  version  of  the full accounts  which  have  received  an
unqualified report by the auditors and have been filed with the Registrar of
Companies.  The half year figures are unaudited.  Copies of this report have
been  sent  to shareholders and are available to the public at the company's
office.
 
Profit  on sale of discontinued operations comprises the profit on  sale  of
the aerospace and defence business.
 
Normalised  earnings  per share excludes the after tax  profit  on  sale  of
discontinued operations.
 
 
Business Sector Analysis
 
                                    1999      1998     1998
                                    Half      Half     Full
                                    year      year     year
                                    £'000     £'000    £'000
                                                       
Sales turnover
                                                       
Electronic Controls                 27,209    28,500    54,658
                                                       
Process Instrumentation             83,651    85,647   170,318
                                                       
Filtration Systems                  18,508    18,982    36,581
                                                       
                                                       
                                    129,368   133,129  261,557
                                                       
Discontinued operations                 -       2,150    2,150
                                                       
                                                       
                                    129,368   135,279  263,707
                                                       
                                                       
Operating profit
                                                       
Electronic Controls                   3,464     4,684    8,296
                                                       
Process Instrumentation               8,512     9,284   18,741
                                                       
Filtration Systems                    3,536     3,802    7,171
                                                       
                                                       
                                     15,512    17,770   34,208
                                                       
Discontinued operations                 -         487      487
                                                       
                                                       
                                     15,512    18,257   34,695
                                                       
Profit on sale of discontinued          -      34,698   36,688
operations
                                                       
                                                       
                                     15,512    52,955   71,383
                                                       
                                                       
Year 2000 Statement
 
Management is aware of the possible disruption to business caused by
millennium date change system failures and has addressed the related
challenge of ensuring, to the extent possible, the ongoing functionality of
products, business systems and processes.  Contingency plans are in place or
are being finalised where appropriate.
 
Other than residual capital expenditure on business system upgrades, revenue
costs are not expected to be material in the current year.
 
While the objective of the actions taken is to minimise any potential
disruption arising from the date change, there can be no absolute assurance
that the Group will not be adversely affected.
 
 
Balance Sheet Summary
                                        1999      1998      1998
                                      3 July        31    4 July
                                       £'000  December     £'000
                                                 £'000
                                                        
Intangible assets                     19,400       -         239
Fixed assets                          37,524    35,260    35,309
Investments                            4,815     4,815     3,298
Investments - held for disposal        4,000       -         -
Working capital                       52,799    48,396    48,121
Tax payable                          (20,807)  (16,930)  (16,932)
Dividends payable                     (3,164)   (6,833)   (3,039)
Provisions                            (1,724)   (1,698)   (4,606)
                                                        
                                                        
                                      92,843    63,010    62,390
Net borrowing                        (82,978)  (61,722)  (62,619)
                                                        
                                                        
Net assets                             9,865     1,288      (229)
                                                        
                                                        
Share capital                          4,778     4,738     4,775
Reserves                               5,087    (3,450)   (5,004)
                                                        
                                                        
Equity shareholders' funds             9,865     1,288      (229)
                                                        
Reconciliation of movements in shareholders'            
funds
                                                        
Retained profit                        5,961    33,142    28,209
Foreign exchange adjustments            (682)      134       921
New share capital subscribed           3,298     1,073     1,256
Share buy back                           -     (19,414)  (16,968)
Goodwill written back on disposal        -         845       845
                                                        
                                                        
Net increase/(decrease)                8,577    15,780    14,263
Opening shareholders' funds            1,288   (14,492)  (14,492)
                                                        
                                                        
Closing shareholders' funds            9,865     1,288      (229)
                                                        
In  accordance with FRS 10 goodwill on acquisitions from 1 January 1998  has
been capitalised and is being amortised over its useful economic life.
 
Cash Flow Summary
 
 
                                    1999      1998     1998
                                    Half      Half     Full
                                    year      year     year
                                    £'000     £'000    £'000
                                                       
Operating activities                16,775    14,668   40,622
                                                       
Capital expenditure                 (2,666)   (5,402)  (8,443)
                                                       
Fixed asset disposals                  157       742      294
                                                       
Net interest paid                   (2,482)   (1,778)  (4,291)
                                                       
Tax paid                            (1,285)   (3,959)  (14,882)
                                                       
                                                       
Free cash flow                      10,499     4,271    13,300
Dividends paid                      (6,828)   (6,939)   (9,955)
Share issues from options              224     1,256     1,073
Buy back of shares                     -     (16,968)  (19,414)
Purchase     of    fixed     asset     -        (676)   (2,193)
investments
Purchase of subsidiaries/business  (22,263)     (242)     (909)
Sale of subsidiaries                   -      50,350    50,591
Exchange adjustment                 (2,888)      357      (187)
                                                       
                                                       
Net cash movement                  (21,256)   31,409    32,306
                                                       
                                                       
Operating activities
     Operating profit               15,512    18,257    34,695
     Depreciation                    3,266     3,090     6,169
     Increase in working capital    (2,003)   (6,679)     (242)
                                                       
                                                       
                                    16,775    14,668    40,622