Interim Results

SPIRAX-SARCO ENGINEERING PLC
9 September 1999


SPIRAX-SARCO ENGINEERING PLC
1999 Interim Results
                        
                                     1999      1998       Change
Turnover                          £126.5m    £122.8m         +3%
Operating profit                   £19.1m     £20.2m         -5%
Operating profit margin             15.1%      16.4% 
Profit before taxation             £18.6m     £20.1m         -7%
Earnings per share                  15.3p      16.2p         -6%
Dividend per share                   5.2p       5.0p         +4%

1998 comparatives are stated before an exceptional item

* Growth in underlying sales and profits
* Start of recovery in Asia but Europe slow in first half
* Operating profit down 5% due to the previously announced
  production delays in the USA
* Good progress made in restoring customer service in the USA
* Dividend up 4%

Commenting on prospects, the Chairman, Tim Fortune, said:
'We continue to work to restore customer
service levels in he USA by the end of the
year, and to develop sales growth in our
steam specialty and peristaltic pumping
businesses worldwide.  Bearing in mind the
fundamental strengths of our business, and
assuming that both the recovery in Asia and
returning confidence in Europe continue, we
expect to make progress in the full year.'


Enquiries:

Tim Fortune     -    Chairman
Marcus Steel    -    Chief Executive
David Meredith  -    Director-Finance

Tel: [phone] at Citigate Dewe Rogerson until 6.00 p.m.

The Chairman, Tim Fortune, comments as follows:

The results for the first half of 1999 represent
a sound performance by our worldwide businesses
generally.  We achieved growth in our underlying
sales and profits, which was offset by the
effects of delays in the build-up of
output from our new plant in the USA, as
indicated in my statement in March.  The long
term investment in our steam and peristaltic
pumping business, together with our fundamental
strengths, has allowed us to take advantage
of those markets where opportunities for growth
have arisen in a generally difficult world economy.

Turnover in the first half was £127 million
compared with £123 million in the first half of
1998, an increase of 3%. The net effect of
exchange rates on both turnover and profits as
compared with the first half of 1998 has been
negligible, although sterling remains
essentially strong. On a like-for-like basis,
excluding the effects of exchange rate movements 
and acquisitions, turnover was up 1%.
                       
Operating profit was £19.1 million in the first
half of 1999, as against operating profit
before exceptional items of £20.2 million in
1998, a reduction of 5%, and representing 
an operating profit margin of 15.1%.  If 
the effect of the reduced performance in the 
USA were excluded, the underlying operating 
profit increased by 2%, and the operating 
profit margin was broadly unchanged from 
the 16.4% pre-exceptional operating profit 
margin in the first half of 1998.

Net interest payable was £0.5 million, compared
with £0.1 million in the first half of 1998,
principally due to the increase in net debt arising 
from the share buyback, to which I refer later. The
charge in the first half of 1999 for amortisation 
of goodwill on acquisitions was £0.1 million.  
Profit before tax was £18.6 million, compared 
with profit before tax and exceptional items 
of £20.1 million in the first half of last year.  
The tax charge was 33.0% (1998 pre-exceptional: 33.6%).
Earnings per share were 15.3p (1998 pre-exceptional:
16.2p).

TRADING

Our niche businesses address their markets in
similar ways, by providing support and
expertise to end users directly, and through
distributors, OEMs and contractors. This is
achieved by offering levels of knowledge,
service and product which our product based
competitors cannot match.  The steam specialty
market, supplied by Spirax Sarco, and the
peristaltic pumping market supplied by Watson-
Marlow Bredel, are present worldwide in a
diverse range of industries and customers. 
We cover these markets by employing over 800
skilled sales engineers, who are able to
analyse customers' requirements and offer
complete solutions, which are aimed at helping
customers to improve the quality of their
product, to improve the consistency of their
processes, and to reduce costs, which often
take the form of energy savings with the attendant
environmental benefits.

Our sales operations in the UK have encountered
difficult market conditions, in which
industrial activity continues to be adversely
affected by the strength of sterling.
Sales and profits were flat.

In Continental Europe, our markets have been
slower overall than in 1998, although the
performances have been mixed. Our companies in
France, Belgium, Poland, Portugal and Sweden
pushed ahead well in sales and profits terms.
In April we acquired Byvap, a small French
steam trap manufacturer, for a total cost of
£1.1 million, and integration into our French
company is progressing well. In Germany, the 
market was particularly difficult, as it was 
in Italy and Denmark. Bredel performed strongly 
on the back of good demand. There are signs 
that confidence may be beginning to return in 
some of the Continental European economies.

In the USA, as we explained in March, it is
taking longer than we had anticipated to build 
up the rate of production in our new Spirax 
Sarco plant in South Carolina. We continue to 
invest in new technology and have seconded 
experienced management support from the UK to 
assist our US management team in the build-up 
of the new workforce and infrastructure. The 
production delays have affected product supply, 
and we have taken steps to mitigate the effect 
on the market. Good progress has been made, 
and customer service levels will be restored 
by the end of the year. The USA profits have, 
however, been much lower in the first six months 
of 1999 than in the same period in 1998. The 
underlying cost savings are, nevertheless, much 
in line with expectations, and benefits will be 
felt in 2000 following the restoration of 
manufacturing and sales volumes.

Our Watson-Marlow Bredel operation in North
America continues to expand its presence and its
sales, and has been picking up some good orders
for shipment in the second half. Our Brazilian
company performed well, increasing profits under
difficult circumstances; although depressed, the
economy has been surprisingly resilient following 
the devaluation of the Real. Our Canadian company 
also had a good half year. Our Argentinian and
Mexican companies have encountered tough trading
conditions, and the Argentinian domestic market
has been affected by the increased competitiveness 
of the Brazilian economy.

In our International markets (those outside
Europe and the Americas), there has been an
improved performance, with a recovery in sales
and profits as compared with the first half of
1998. There are signs of an up-turn in Asia
generally, although it is mixed and still
fragile. Our Korean company pushed ahead with
sales and profits, as did Taiwan. Our
developing Chinese operation continued its
profitable expansion. The Japanese, Malaysian
and South African economies remain weak, which
was reflected in the results of our local
companies. Nevertheless, there was good
progress overall in the region, and, unless
there is another shock to the system, the
gradual recovery seems likely to continue.

Our Supply organisations in the UK and France
performed well in the first half of 1999, and
demand is returning following the de-stocking
in 1998 by our Asian companies associated with
the Far Eastern crisis. We continue to develop
and release additions and modifications to our
product ranges. We have also made progress
with improving productivity and with reducing
material costs, either through re-design or
resourcing.


BALANCE SHEET AND CASH FLOW

Capital employed (net assets plus net debt)
increased during the period, reflecting the
growth in sales, acquisitions and a small rise
in stocks.  Capital expenditure was £5.7
million as against £8.3 million in the first 
half of last year. In line with FRS10, goodwill 
on acquisitions since 1st January 1998 is being 
amortised over twenty years, giving a non-cash 
charge of £0.1 million in the first half.  
There was an increase in net debt in the 
period of £10.1 million, which included 
£1.1 million in respect of the Byvap acquisition 
and £8.4 million in respect of a further 
1.6 million shares purchased and cancelled under
the share buy-back programme. Since announcing 
our intentions last October, we have bought back 
2.7 million shares for £14.4 million.  Net debt 
at 30th June was £26.2 million, which compares 
with £16.1 million at 31st December 1998.

MILLENNIUM COMPLIANCE

The task of ensuring millennium compliance of
all critical elements of Group systems is
nearing completion.  The Group has applied a
planned programme to cover material risks
in both IT systems and general business
operations.  The work includes minimisation of
risks of third party (mainly supplier) non-
compliance, and creation of contingency plans.

DIVIDEND
The Board has declared an interim dividend of
5.2p (1998:  5.0p) per ordinary share, an
increase of 4%, which will be paid on 12th
November 1999 to shareholders on the register 
at the close of business on 24th September 1999. 
No scrip alternative to the cash dividend is 
being offered in respect of the 1999 interim 
dividend.

PROSPECTS

We continue to work to restore customer
service levels in the USA by the end of 
the year, and to develop sales growth in 
our steam specialty and peristaltic pumping 
businesses worldwide.  Bearing in mind 
the fundamental strengths of our business, 
and assuming that both the recovery in Asia 
and returning confidence in Europe continue, we
expect to make progress in the full year.


GROUP PROFIT AND LOSS ACCOUNT

                Six months      Six months to June 1998      Year ended
              to 30th June             (Restated)              31st Dec
                      1999      Before     Except.   After         1998
                                except.      item   except.After except.
                                  item    (note 4)    item         item
                     £'000       £'000      £'000    £'000        £'000

Turnover           126,511     122,787         -    122,787     249,030
                    ------      ------     ------   -------    --------

Operating profit    19,083      20,189     (5,800)   14,389      32,283

Provision for
 loss on disposal
 of fixed assets         -          -      (1,600)   (1,600)     (1,479)
                    ------     ------     -------    ------      ------

Profit before
   interest         19,083      20,189     (7,400)   12,789      30,804
                        
Interest payable
   less receivable    (469)       (121)         -      (121)       (163)
                     ------      ------     ------    ------     ------
Profit before
   taxation         18,614       20,068    (7,400)   12,668      30,641
                        
Taxation
   (note 5)         (6,142)      (6,741)    1,900    (4,841)    (10,501)
                    ------       ------    ------    ------      ------

Profit after
   taxation         12,472       13,327    (5,500)    7,827      20,140
                        
Minority interests
   - equity          (439)         (411)        -      (411)       (917)
                    ------       ------     ------    ------      ------

Attributable
   profit           12,033       12,916    (5,500)    7,416      19,223
                        
Dividends           (4,031)      (4,011)        -    (4,011)    (13,116)
                    ------       ------    -------    ------      ------
Retained profit      8,002        8,905    (5,500)    3,405       6,107
                    ======       ======    ======     ======      ======

Earnings per
  share (note 6)
 before exceptional
  item                15.3p         16.2p       -         -        34.5p
 after exceptional 
  item                15.3p            -        -       9.3p       24.1p
                     ======        ======   ======    ======      ======

Dividends per share    5.2p          5.0p       -       5.0p       16.5p
                     ======        ======   ======    ======      ======



GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

                                         Six months
                         Six months    to 30th June        Year ended 
                       to 30th June       1998 31st          December
                               1999      (Restated)              1998
                              £'000          £'000              £'000


Profit for the period        12,033          7,416             19,223

Currency translation
 difference on
 foreign currency
  net investments              (400)          (648)             2,116
                              ------         ------            ------

Total recognised
 gains and losses
 relating to the
  period                     11,633          6,768             21,339
                             =======        ======             ======
GROUP BALANCE SHEET
                                         30th June
                          30th June           1998      31st December
                               1999     (Restated)               1998
                              £'000          £'000             £ '000

Fixed assets
Intangible assets             4,706          2,461              4,404
Tangible assets              81,613         75,669             81,067
                             ------         ------             ------
                             86,319         78,130             85,471

Current assets
Stocks                       56,048         55,708             53,561
Debtors                      80,209         70,612             76,186
Cash deposits and 
 short term investments      30,580         38,930             36,441
Cash at bank
 and in hand                  5,750          5,707              5,102
                            --------      ---------          --------
                            172,587        170,957            171,290
Creditors
Amounts falling due
  within one year            74,014         53,843             69,743
                            -------        -------            -------
Net current assets           98,573        117,114            101,547
                            -------        -------            -------
Total assets less
  current liabilities       184,892        195,244           187,018
                         
Creditors
Amounts falling due
 after more than
  one year                   37,713         43,009            40,995
                         
Provisions for
 liabilities and
  charges                    10,095         15,718             9,827
                            --------       --------          -------
Net assets                  137,084        136,517           136,196
                            ========================================

Capital and reserves
Called up share capital      19,480         20,058            19,791
Capital redemption
  reserve                       678             -                290
Share premium
 account                     31,156        29,746             29,982
Revaluation reserve           4,535         4,398              4,520
Profit and loss  
 account                     78,474        80,059             79,261
                            ---------     --------          --------
Shareholders'
  funds - equity            134,323       134,261            133,844
Minority
  interests - equity          2,761         2,256              2,352
                           --------      --------           --------
                            137,084       136,517            136,196
                           =========================================



GROUP CASH FLOW STATEMENT
                        Six months to  Six months to      Year ended 
                       30th June 1999 30th June 1998   31st December
                                          (Restated)            1998
                                £'000          £'000           £'000
Operating profit               19,083         14,389          32,283
Depreciation charges            5,435          5,374          10,498
Increase in stocks             (2,653)        (3,329)          1,020
Increase in debtors            (4,583)         1,904             580
Increase in creditors
  and provisions                1,327          (866)          (5,411)
                               --------   ---------         ---------
Cash flow from
  operating activities         18,609        17,472           38,970
                         
Net interest paid                (427)          (69)             (97)
Dividends paid by
 subsidiary undertakings
 to minority interests           (196)         (242)            (571)
Taxation                       (5,919)       (5,813)         (13,664)
Purchase of tangible
 fixed assets                  (5,708)       (8,307)         (17,296)
Sales of plant and machinery      185           345              904
Acquisitions                   (1,111)       (3,577)          (5,432)
Equity dividends paid          (9,083)       (4,784)          (8,797)
                               --------     --------         --------
Cash outflow before
 use of liquid resources
 and financing                 (3,650)       (4,975)          (5,983)
Management of liquid
 resources                      5,624        (2,816)             360
                             --------       --------         -------
  
                                1,974        (7,791)          (5,623)
                               -------     ---------        --------
Financing  -
     Issue of ordinary 
      share capital             1,251         1,063            1,322
     Share buy-back            (8,373)            -           (6,142)
     Decrease in debt          (2,442)        3,903            3,757
                               --------   ---------         ---------
                               (9,564)        4,966           (1,063)
                               --------   ---------         ---------
Decrease in cash in the period (7,590)       (2,825)          (6,686)
                               ======================================



RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

Decrease in cash in 
 the period                    (7,590)       (2,825)          (6,686)
Cash outflow from 
 decrease in debt and lease 
  financing                     2,442        (3,903)          (3,757)
Cash inflow from decrease 
 in liquid resources           (5,624)        2,816             (360)
                               --------   ----------        ---------
Change in net debt
 resulting from
 cash flows                   (10,772)      (3,912)          (10,803)
Realised gain on gilt               -           21                18
Amortisation of loan 
 expenses                         (12)           -               (23)
Translation difference            726          222            (1,652)
                               --------   ---------         ---------
Movement in net debt
 in the period                 (10,058)     (3,669)          (12,460)
Opening net debt               (16,098)     (3,638)           (3,638)
                               --------   ---------          --------
Closing net debt               (26,156)     (7,307)          (16,098)
                               ======================================

Notes

1. Overseas results and cash flows have been
translated into sterling at average rates of 
exchange for each period. Foreign currency 
assets and liabilities have been translated 
at period end rates.

2. In accordance with Financial Reporting
Standard 10, purchased goodwill arising on
consolidation in respect of acquisitions
since 1st January 1998 has been capitalised 
and is being amortised over 20 years.

3. Financial Reporting Standard 12
'Provisions, Contingent Liabilities and
Contingent Assets' has been adopted for the
interim statement. This has had no effect
on the results of the current period or the
1998 full year comparative period. However,
to comply with the new standard the 1998
first half comparative figures have
been restated to show exceptional costs
after tax of £5,500,000 (previously
£7,700,000).

4. The exceptional item charged in 1998 was
in respect of the closure of the Group's
facility in Pennsylvania, USA and the
relocation and start-up of a new facility
in South Carolina. The 1998 full year
comparative operating profit of £32,283,000
is stated after charging exceptional costs 
of £10,150,000. 

5. Taxation has been estimated at the rate
expected to be incurred in the full year.

                                         Six months
                           Six months  to 30th June       Year ended 
                         to 30th June          1998    31st December
                                 1999    (Restated)             1998
                                £'000         £'000            £'000

United Kingdom
 corporation tax                1,604         2,195            3,988
Overseas taxation               4,290         2,603            6,809
Deferred taxation                 290             6             (274)
Adjustment in respect
  of previous years               (42)           37              (22)
                                ------        ------           ------ 
                                6,142         4,841            10,501
                                ======        ======           ======


6. The calculation of earnings per share before
the exceptional item is based on earnings of
£12,033,000 (1998:  £12,916,000) and the 
calculation of earnings per share after the 
exceptional item is based on earnings of 
12,033,000 (1998: £7,416,000) together with 
the weighted average number of shares in 
issue during the half year of 78,687,786 
(1998:  79,615,874).

7. Capital employed is represented by net
assets excluding net debt.

8. Copies of the Interim Report will be sent
on 11th September 1999 to members and can be
obtained from our registered office at
Charlton House, Cirencester Road, Cheltenham,
Gloucestershire GL53 8ER.

9. This financial information, which is
unaudited, does not amount to full accounts
within the meaning of Section 240 of the 
Companies Act 1985 (as amended). Full accounts 
for 1998 with an unqualified audit report 
have been filed with the Registrar of Companies.