Interim Results

Spirax-Sarco Engineering PLC
11 September 2003


                          Thursday 11th September 2003

                              2003 Interim Results


                                                                Six months to 30th June

                                                                       2003              2002      Change


Turnover                                                            £154.0m           £144.9m        +6%

Operating profit                                                     £20.3m            £20.0m        +1%

Operating profit margin                                               13.2%             13.8%

Profit before taxation                                               £19.6m            £18.9m        +4%

Earnings per share                                                    17.2p             16.7p        +3%

Dividend per share                                                     6.0p              5.8p        +3%

Operating cash inflow                                                £20.6m            £24.6m



•      Sales up 6%

•      Sales growth in all regions

•      Operating profit up 1% after charging production transfer
       costs of £11/2m

•      Underlying operating profit margin up to 14.1%

•      EPS and dividend up 3%



Commenting on the results, the Chairman, Tim Fortune, said:



'The Group has achieved a satisfactory performance in the first half of the
year.  Our diverse customer base, wide product range, geographical spread and
dedicated people remain the fundamental strengths which underpin our world
leading businesses.  Assuming that there is no deterioration in world trading
conditions, we expect to make further progress this year.'



Enquiries:



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:



'I am pleased to report satisfactory progress in the first half of 2003.  Our
business is built on providing a full value-added package of knowledge, service
and products to our customers across many industrial sectors and all regions of
the world who use steam or peristaltic pumping in their processes.  These
attributes allowed the firm start to the year to be continued through the first
half.



Group sales of £154 million increased by 6% with organic growth in all regions.
Exchange rate movements have had a small net negative effect on sales of around
1%, with the weakness of the American and Asian currencies mitigated by the
stronger euro.



The operating profit of £20.3 million increased by 1% as against the first half
of 2002, including an adverse exchange effect.  As explained in March, we have
transferred the production out of our small Spanish factory as part of our
efficiency improvements; the one-off cost of £11/2 million has been included in
operating profit in the first half of 2003.   Excluding this cost, the operating
profit margin showed a further improvement from 13.8% to 14.1%.



The net interest charge was down nearly 40% to £0.7 million (2002:  £1.1
million) mainly due to the lower level of net debt versus the first half of
2002.  Profit before tax was £19.6 million, an increase of 4% compared with
£18.9 million last year.



The tax charge was 33% (2002:  33%) and the attributable profit increased by 3%
to £12.8 million.  Earnings per share improved  by 3% to 17.2p (2002:  16.7p).



TRADING



Our industrial steam system and specialist peristaltic pumping businesses serve
global markets across most industrial sectors and our business is therefore
geographically well spread with over 85% of our sales being outside the UK.  The
sales growth has come from a combination of increased sales coverage,
implementation of sales developments, contributions from new products and
building on the strength of our customer relationships.  Our 900 sales and
service engineers worldwide provide knowledge and support in the application of
our products in order to improve the efficiency of our customers' plant, to save
cost or improve quality.   The technical expertise in our salesforce is central
to the service we provide for our customers, and we are the world leaders in our
focused markets.



The trading environment in the UK remained difficult with industrial production
and investment depressed.  Nevertheless, our sales organisations performed well
and increased sales.  The UK factories continued to be busy and, overall, UK
profits grew modestly as compared with the first half of 2002.



In Continental Europe, the economic conditions were mixed and generally weak.
However, the performance of our French company improved markedly following the
reorganisation at the end of 2002 and good progress was also made in Spain,
Italy, Czech Republic, Norway, Poland, Portugal, Sweden and generally in the
Watson-Marlow Bredel companies.  Business in Germany was tough, and our
underlying results were flat.  Overall in Continental Europe, sales increased in
the first half of the year.  Operating profits increased as a result of the
higher sales and the stronger euro, partly offset by the Spanish factory closure
cost of £11/2 million.  Ampe, the small Italian plant which we acquired at the
end of 2002 for £1.4 million, made a good contribution performing in line with
expectations.



The performance in the Americas was resilient given the lack-lustre economic
conditions.  The US economy remained weak, with some investment decisions being
delayed.  However, both our Spirax Sarco and Watson-Marlow Bredel operations
grew sales marginally in local currency but profits and margins were down due to
higher pension costs and the weakness of the US dollar.  Although recent signals
relating to economic activity in the USA appear encouraging, there is little
sign of increased industrial activity in our markets.  Good progress was made in
Argentina and Brazil but our Canadian and Mexican companies faced more
challenging trading conditions and Mexico, in particular, saw further declines.
Overall in the Americas, underlying progress with sales and profits was impacted
by unfavourable currency movements and results were lower in sterling.



Sales improved in Asia, Australasia and Africa.  The effect on our business of
SARS was limited and the after-effects seem to be minimal.  We achieved good
sales growth in China, India, Japan and Korea but in Australia, Malaysia, Taiwan
and Thailand business was slower.  Operating profits in the region were only
slightly ahead as weaker Asian currencies reduced margins.  The acquisition of
the Watson-Marlow Bredel distribution business in South Africa was completed in
April and the business has performed as expected and made a small contribution
to the improved results in the region.



BALANCE SHEET AND CASH FLOW



Working capital increased in the first half of 2003, reflecting the increase in
business levels.  Capital expenditure at £6.6 million (2002:  £5.3 million) was
in line with depreciation.  There was a cash outflow of £1.2 million for the
acquisition in South Africa.  Tax payments were higher at £9.0 million
reflecting the higher tax charge in 2002 and the timing of tax payments.



The cash flow followed the usual profile with higher outgoings in the first
half, notably the final dividend payment.  The higher working capital, increased
taxation payments and the acquisition resulted in an overall cash outflow of
£6.7 million.  In addition, the exchange movements in the half year increased
net debt on translation by a further £1.0 million.  Net debt at 30th June 2003
was therefore £30.4 million compared with £22.7 million at the end of 2002 and
£40.8 million at 30th June 2002.  Net gearing was 19% at the end of the period
but is expected to be lower by the year end.



DIVIDEND



The directors have declared an interim dividend for 2003 of 6.0p (2002:  5.8p)
per ordinary share, an increase of 3% which will be paid on 14th November 2003
to shareholders on the register at the close of business on 17th October 2003.
No scrip alternative to the cash dividend is being offered in respect of the
2003 interim dividend.







BOARD CHANGES



P. Michael Smith retired from the Board with effect from 31st May 2003.  Michael
has many years of experience in the manufacturing industry and brought an
incisiveness and clarity of purpose to the Group which was greatly appreciated.
The Board wishes to put on record its thanks for Michael's contributions to the
Group's performance over the last 17 years.



The Board is delighted to welcome Neil Daws as Director-Supply.  He started with
Spirax Sarco as an apprentice and has gained experience in all aspects of
product design and development, as well as production and customer service.  His
appointment was effective from 1st June 2003.



PROSPECTS



The Group has achieved a satisfactory performance in the first half of the year.
Our diverse customer base, wide product range, geographical spread and
dedicated people remain the fundamental strengths which underpin our world
leading businesses.  Assuming that there is no deterioration in world trading
conditions, we expect to make further progress this year.'









Spirax-Sarco Engineering plc



GROUP PROFIT AND LOSS ACCOUNT




                                          Six months           Six months           Year ended
                                          to 30th June         to 30th June         31st December
                                          2003                 2002                 2002
                                          £'000                £'000                £'000


Turnover                                  154,026              144,879              296,363

Operating profit                          20,257               19,993               42,674
Net interest payable                      (688)                (1,088)              (1,981)

Profit before taxation                    19,569               18,905               40,693
Taxation (note 3)                         (6,420)              (6,254)              (13,887)

Profit after taxation                     13,149               12,651               26,806
Minority interests - equity               (399)                (286)                (681)

Attributable profit                       12,750               12,365               26,125
Dividends                                 (4,463)              (4,304)              (14,350)

Retained profit                           8,287                8,061                11,775

Earnings per share (note 4)               17.2p                16.7p                35.3p

Dividends per share                       6.0p                 5.8p                 19.3p








Spirax-Sarco Engineering plc



GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES




                                            Six months           Six months           Year ended
                                            to 30th June         to 30th June         31st December
                                            2003                 2002                 2002
                                            £'000                £'000                £'000


Profit for the period                       12,750               12,365               26,125

Currency translation difference on foreign
currency net investments                    2,514                (4,893)              (8,475)

Total recognised gains and losses relating
to the period                               15,264               7,472                17,650

Prior year adjustment in respect of the
adoption of FRS19                                                (959)                (959)


Total recognised gains and losses                                6,513                16,691





Spirax-Sarco Engineering plc



GROUP BALANCE SHEET




                                                        30th June       30th June        31st December
                                                        2003            2002             2002
                                                        £'000           £'000            £'000


Fixed assets
Intangible assets                                       11,305          9,919            10,384
Tangible assets                                         90,600          89,542           88,593
                                                        101,905         99,461           98,977

Current assets
Stocks                                                  62,305          60,478           57,588
Debtors                                                 91,390          91,098           87,130
Cash deposits and short term investments                26,265          17,611           31,796
Cash at bank and in hand                                3,772           4,909            4,882
                                                        183,732         174,096          181,396

Creditors
Amounts falling due within one year                     (67,991)        (68,386)         (73,859)

Net current assets                                      115,741         105,710          107,537

Total assets less current liabilities                   217,646         205,171          206,514

Creditors
Amounts falling due after more than one year            (39,996)        (40,792)         (41,035)

Provisions for liabilities and charges                  (17,089)        (16,075)         (16,186)

Net assets                                              160,561         148,304          149,293

Capital and reserves
Called up share capital                                 18,589          18,507           18,575
Share premium account                                   34,584          33,578           34,380
Revaluation reserve                                     4,391           4,399            4,216
Capital redemption reserve                              1,832           1,832            1,832
Profit and loss account                                 97,953          87,014           87,328

Shareholders' funds - equity                            157,349         145,330          146,331
Minority interests - equity                             3,212           2,974            2,962

                                                        160,561         148,304          149,293








Spirax-Sarco Engineering plc



GROUP CASH FLOW STATEMENT


                                                      Six months          Six months       Year ended
                                                      to 30th June        to 30th June     31st December
                                                      2003                2002             2002
                                                      £'000               £'000            £'000


RECONCILIATION OF OPERATING PROFIT

TO OPERATING CASH FLOW
Operating profit                                      20,257              19,993           42,674
Depreciation & amortisation charges                   6,842               6,271            12,492
Increase in stocks                                    (2,696)             1,701            3,858
Increase in debtors                                   (2,210)             (2,720)          (2,241)
Decrease in creditors and provisions                  (1,587)             (628)            1,779
Cash inflow from operating activities                 20,606              24,617           58,562


GROUP CASH FLOW STATEMENT

Cash inflow from operating activities                 20,606              24,617           58,562
Net interest paid                                     (615)               (1,129)          (1,914)
Dividends paid by subsidiary undertakings

to minority interests                                 (182)               (255)            (527)
Taxation                                              (9,014)             (5,784)          (11,605)
Purchase of tangible fixed assets                     (6,602)             (5,317)          (11,684)
Sales of tangible fixed assets                        170                 153              345
Acquisitions (net of disposals)                       (1,245)             (1,213)          (1,386)
Equity dividends paid                                 (10,033)            (9,622)          (13,930)

Cash outflow before use of liquid resources

and financing                                         (6,915)             1,450            17,861
Management of liquid resources                        6,162               (1,737)          (15,918)
                                                      (753)               (287)            1,943

Financing
            -  Issue of ordinary share capital        218                 275              1,144
            -  Increase in debt                       647                 863              (4,492)
                                                      865                 1,138            (3,348)

Increase in cash in the period                        112                 851              (1,405)

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT (Note 5)
Increase in cash in the period                        112                 851              (1,405)
Cash inflow from increase in debt                     (647)               (863)            4,492
Cash inflow from decrease in liquid
resources                                             (6,162)             1,737            15,918

Change in net debt resulting from cash flows          (6,697)             1,725            19,005
Amortisation of loan expenses                         -                   (11)             (21)
Translation difference                                (1,014)             (2,045)          (1,177)
Movement in net debt in the period                    (7,711)             (331)            17,807
Opening net debt                                      (22,666)            (40,473)         (40,473)

Closing net debt                                      (30,377)            (40,804)         (22,666)




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
1999 has been capitalised and is being amortised over 20 years.  The charge for
amortisation in the six months to 30th June 2003 was £319,000 (2002:  £266,000).



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


                                         Six months        Six months         Year ended
                                         to 30th June      to 30th June       31st December
                                         2003              2002               2002
                                         £'000             £'000              £'000


United Kingdom corporation tax           1,514             852                2,815
Overseas taxation                        5,206             5,313              11,357
Deferred taxation                        (103)             104                (102)
Adjustment in respect of previous years  (197)             (15)               (183)
                                         6,420             6,254              13,887



4.         The calculation of earnings per share before the non-operating item
is based on earnings of £12,750,000 (2002:  £12,365,000) together with the
weighted average number of shares in issue during the half year of 74,316,289
(2002:  73,979,877).  For the full year 2002 the calculation is based on
earnings of £26,125,000 together with the weighted average number of shares in
issue during the full year of 74,072,923.



5.         Analysis of changes in net debt:


                                At                  Cash flow        Exchange         At
                                1st Jan 2003                         movement         30 th June 2003
                                £'000               £'000            £'000            £'000


Cash in hand and at bank        4,882               (1,337)          227              3,772
Overdrafts                      (6,794)             1,449            (356)            (5,701)
                                                    112
Debt due within a year          (12,542)            (2,420)          (365)            (15,327)
Debt due beyond a year          (38,491)            1,593            (1,051)          (37,949)
Finance leases                  (1,517)             180              (100)            (1,437)
                                                    (647)
Current asset investments       31,796              (6,162)          631              26,265
                                (22,666)            (6,697)          (1,014)          (30,377)





6.         Capital employed is represented by net assets excluding goodwill and
net debt.





7.         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 year accounts for 2002 with an unqualified audit report have
been filed with the Registrar of Companies.



8.         Copies of the Interim Report will be sent on 12th September 2003 to
members and can be obtained from our registered office at Charlton House,
Cirencester Road, Cheltenham, Gloucestershire GL53 8ER.  From 11th September
2003 the Interim Report will be available on our website at
www.SpiraxSarcoEngineering.com.




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