Final Results

Spirax-Sarco Engineering PLC
12 March 2001


Monday 12th March 2001

                         2000 PRELIMINARY ANNOUNCEMENT

                                  HIGHLIGHTS


                                              Year to 31st December
                                              2000         1999         Change
Turnover                                      £278.1m      £258.9m      +7%
Operating profit*                             £43.4m       £42.7m       +2%
Operating profit margin                       15.6%        16.5%
Profit before taxation                        £41.2m       £41.8m       -1%
     (before non-operating item)
Earnings per share                            37.4p        36.1p        +4%
     (before non-operating item)
Dividends per share                           18.0p        17.3p        +4%
Net gearing                                   33.8%        27.7%

* After charging goodwill amortisation of £0.4m (1999: £0.2m)

  - Good organic sales growth of 6%

  - Strong performance in Asia

  - UK and Latin America weak

  - Good underlying progress in Continental Europe and North America

  - Margin in Continental Europe impacted by exchange rates

  - Adjusted EPS up 4%


Tim Fortune, Chairman, commenting on prospects said:-

'Given stable world economic conditions, we expect a good performance in 2001'.

Enquiries:

Tim Fortune     -     Chairman
Marcus Steel     -     Chief Executive
David Meredith     -     Director Finance
Tel: [phone] at Citigate Dewe Rogerson until 6.00 p.m.

                         SPIRAX-SARCO ENGINEERING plc
                              PRELIMINARY RESULTS

SUMMARY

The Chairman, Tim Fortune, says:

'I am pleased to report a solid set of results for the Group. The good growth
achieved in the first half continued through the second half of 2000. Turnover
for the year was £278 million, as against £259 million in 1999, an increase of
7% which included organic growth of 6%. The sales growth was relatively
widespread, and was particularly strong in Asia, although this was offset by
weakness in the UK and Latin America. Sales advances in Europe were negated by
adverse exchange rate movements, resulting in little change in sterling terms.
With our concentration on the niche markets in which we operate and our high
level of sales support and customer service, we have clear plans for continued
growth through new products and improved market developments which we are
currently implementing.

The Group's operating profit for the year was up 2% from £42.7 million in 1999
to £43.4 million despite an adverse exchange rate effect of £11/2 million. The
good underlying results, particularly in Asia, and the improvement, in line
with expectations, in Spirax Sarco Inc. were offset by lower profits in the
weak UK and Latin American markets together with the exchange rate impact in
Europe. During the year we increased our investments in sales, IT and product
development to realise the future growth of which we are confident. The
operating profit margin was slightly lower but remained strong at 15.6%, and
the return on capital employed remained high, at 26%.'

The Chief Executive, Marcus Steel, reports:-

TRADING

The generally stable macro-economic environment in the first half year was
sustained through the second half, with the recovery in Asia, which started in
1999, continuing strongly through 2000. In the USA, the markets in which we
operate remained steady as the industrial sector of the economy has been
relatively quiet, and in Latin America the depressed conditions persisted
through the year. The economies in Continental Europe were mixed, but overall
grew steadily following the rather disappointing conditions in 1999; no doubt
the improvement in 2000 was partly due to the weak euro giving some support to
export industries. Against this, the UK industrial market was under siege, with
the strength of sterling undermining exports, which was accompanied by customer
plant closures in some of our markets.

The good growth in sales in the first half year continued in the second half,
giving sales for the full year of £278 million, 7% above 1999. The net effect
of exchange rates on the sterling value of sales was negligible, but this
included significant mix variations, with a negative impact on European sales
of around £6.6 million due to the weak euro offset by a similar positive impact
on American and Asian sales due to the stronger dollar. Excluding acquisitions,
and at constant exchange rates, organic sales increased by 6% over 1999. The
average number of employees in the Group increased by 3% in 2000, giving an
increase in sales per employee of 4%.

Operating profits rose from £42.7 million in 1999 to £43.4 million in 2000, an
increase of 2%. Exchange rate movements had an adverse effect on the operating
profit of £11/2 million, mainly due to the exchange transaction impact in
Europe of the weak euro. At constant exchange rates, operating profits were 5%
up on 1999. The operating profit margin was 15.6%, down from 16.5% in 1999.
This was due both to the exchange transaction effect and to the weak business
levels in the UK and Latin America, partially offset by improved operating
profit margins in Asia and North America.

We stepped up our investment in 2000 in IT systems to facilitate better
communication and sharing of information across the Group, and also in
centrally co-ordinated marketing actions to focus and improve sales
performance.

United Kingdom

UK domestic sales were down 2%, with both Spirax Sarco and Watson-Marlow Bredel
sales being disappointing. The underlying market conditions were weak and
business confidence was low which, together with a continuing closure of
customer plants, led to reduced turnover and lower operating profits. Our sales
teams are refocusing the sales effort on the identified opportunities for
growth. Our UK factories benefited from good demand, particularly from Asia,
and they improved productivity and operating profits. During the year a number
of new products were released which have been well received in our markets.
Manufacturing is well spread across a number of countries and the UK factories
supply about a third of the products that are sold worldwide. The strength of
sterling reinforces our drive to reduce production costs and we continue to
switch the sourcing of raw materials to outside Europe. The overall UK
operating profit of £11.9 million was 5% below the 1999 figure.

Continental Europe

The sterling value of sales in Continental Europe was virtually unchanged.
Within this, a sales increase of 8% in local currencies was masked by the
impact of the weaker euro on translation as against 1999. Excluding
acquisitions and at constant exchange rates, organic sales growth was 6%. This
sales increase in Continental Europe was broadly based, with good progress in
Germany, France, Spain, Norway, Portugal, Italy and Switzerland. Trading
conditions were difficult in Czech, Denmark, Poland and Sweden. The French
factory had a successful year with a good increase in demand from Group
companies in Europe and around the world, particularly Asia. In addition, it
benefited from the transfer of some production from Italy and the USA which
boosted through-put and operational efficiencies.

On 10th January 2000, Watson-Marlow Bredel acquired Alitea, a small Swedish
manufacturer of high precision peristaltic pumps, for £1.9 million and the
business has performed strongly in its first year as part of the Group. On 31st
October 2000, the Spirax Sarco business acquired M&M International, an Italian
based manufacturer of solenoid valves and piston actuated valves, for £6.9
million. This purchase brings a new range of products to the Group which will
be sold worldwide.

The substantial adverse movement in exchange rates against sterling in Europe
more than accounts for the 10% reduction in operating profit from £15.0 million
in 1999 to £13.5 million in 2000. The exchange impact on the Continental
European operating profits was £21/4 million, of which £11/4 million was a
transaction effect, which largely accounts for the reduced operating profit
margin.

International (markets outside Europe and the Americas)

The strong recovery in the Asian economies and in the sales by our
International companies, which started in 1999, continued through 2000
resulting in the excellent 18% sales increase. The underlying growth in sales
was a strong 14%, which additionally benefited from the strengthening of the
Asian currencies (many of which tend to shadow the US dollar). Our selling
company in Korea performed particularly strongly, helped by an increase in
project work, and good progress was made in China, Malaysia and Thailand. We
also made good progress in Japan in spite of the flat economy, as a result of
years of sales development work by our local team and the provision of new
products specifically designed for the market. The Indian, South African and
Taiwanese markets were somewhat slow and our performance declined in these
territories. Operating profits in International increased by 24% from £7.9
million to £9.9 million due largely to the growth in sales, but also due to £
0.4 million of exchange gains on translation. Watson-Marlow Bredel sales in the
International region grew strongly and contributed to the good results of the
Watson-Marlow Bredel business.

Americas

We made good progress with both sales and profits in the Americas, although the
results are somewhat mixed with advances in North America being partially
offset by disappointing results in the difficult economies in Latin America.
Sales advanced 14%, roughly half of which was due to exchange movements.
Although the US economy grew strongly during 2000, the industrial market in
which we operate was flat. Nevertheless, Spirax Sarco Inc. continued, as
anticipated in the interim report, to improve its performance in terms of
production rates, sales and operating profits, producing better results as the
year progressed and we expect to see continued improvement through 2001. The
Watson-Marlow Bredel sales company produced an excellent result as we further
developed the peristaltic pumping market and increased our market share.

The sales levels in Latin America were disappointing. The economies were
somewhat depressed, particularly in Argentina, and there was a slow-down in the
Mexican economy later in the year. As a result, our operating profits in the
region were lower.

Overall, the operating profits in the Americas improved by 11% from £7.3
million in 1999 to £8.1 million in 2000, arising mainly from the increased
sales together with a small exchange rate benefit.

INTEREST, TAX, EPS & DIVIDENDS

The net interest charge rose from £1.0 million in 1999 to £2.2 million in 2000
due to the extra debt arising from the acquisitions and the cost of buying back
a further 1.7 million shares, the overall net benefit of which is reflected in
earnings per share. During the year there was a non-operating item which was a
loss on disposal of property in the USA of £1.0 million. Profit before tax for
the year was £40.2 million and excluding the non-operating item was £41.2
million, compared with £41.8 million in 1999. Amortisation of goodwill was £0.4
million (1999: £0.2 million).

The tax charge, excluding the non-operating item, was 30.1% compared with 30.4%
in 1999 and minority interests were marginally lower at £0.9 million. Earnings
per share were 35.4p and, excluding the non-operating item, were 37.4p compared
with 36.1p in 1999, an increase of 4%. The Board is recommending a final
dividend of 12.6p which, with the 5.4p interim dividend, makes a total for the
year of 18.0p compared with 17.3p in 1999, an increase of 4%. The combined cost
of the interim and final dividends is £13.3 million which is covered 2.1 times
by adjusted earnings. No scrip dividend alternative will be offered.

CAPITAL EMPLOYED AND CASH FLOW

Capital employed (net assets plus net debt) increased to £183.9 million at 31st
December 2000 from £163.5 million a year earlier. Excluding exchange rate
effects and acquisitions, underlying capital employed rose by 5%. Fixed asset
additions of £17.4 million (1999: £15.7 million) included continuing investment
in the latest CNC equipment aimed at reducing manufacturing costs and
increasing flexibility. New offices, warehouse and training facilities were
constructed in Japan, providing an ideal base for our continued development in
this important market. Our Italian operations in Milan were also consolidated
onto one extended and improved site. Working capital, comprising stock plus
debtors less creditors, increased by an underlying £11.2 million reflecting the
increase in business levels. This included a small underlying improvement in
the utilisation of stocks expressed in weeks of inventory usage in stock.

The cash flow from operating activities was again strong at £43.4 million
(1999: £42.1 million). The acquisition of Alitea in January and M&M in October
cost £8.0 million and there was a further outflow of £5.9 million for 1.7
million shares repurchased under the share buy-back programme at an average
price of 349.0p (excluding costs). The total number of shares repurchased since
the original approval in 1998 is 7.3 million shares for £34.6 million at an
average share price of 468.7p (excluding costs); this represents 9.1% of the
Group's share capital. Net debt increased by £10.8 million during the year due
to these two factors and due to an adverse exchange translation effect of £2.2
million. Net debt at 31st December 2000 was £45.6 million and net gearing was
34%.

THE FUTURE

The market which is served by the Spirax Sarco business is large and, although
we are the biggest single supplier to the steam market, we have a small overall
market share, particularly in those parts of the product range or sectors of
the market which we are now targeting, such as safety valves, controls valves
and actuators, boiler controls and level controls, and in the oil and
petrochemical and OEM markets. As far as Watson-Marlow Bredel is concerned, the
peristaltic pumping principle is still a relatively new method of pumping.
Improvement in materials technology is constantly widening the possible
applications for peristaltic pumps and improving the comparative total cost of
ownership as against other pumping methods. There is a large potential market
to be converted to peristaltic pumps from other types of pump. The Group's long
term sales development plans include the steady increase in our direct sales
coverage worldwide and expanding the product ranges, both by product
development and by acquisition, to ensure that we can properly address those
parts of the market and those applications which offer the best potential.

The market is, of course, always changing which brings both business threats
and opportunities. As already outlined, our method of approaching the market,
by using the skills of our highly trained sales engineers to advise customers
and solve their problems, is increasingly being demanded as a result of some
customers slimming down or outsourcing their technical departments and relying
on suppliers and consultants for advice and guidance. The growing requirements
for certification and compliance with health and safety, hygiene and
environment regulations also tend to favour those suppliers who supply more
than just a product. An example of the opportunities that these changes are now
opening up is the supply of fully assembled solutions, designed by Spirax with
assured performance and which are delivered complete, so that the customer or
contractor can simply connect up and operate the unit. This modular approach is
being well received worldwide and Spirax is happy to be associated in an
alliance with Alfa Laval for plate heat exchangers used on some of these
projects. We are also seeing a growing opportunity to provide plant audits and
surveys, and to offer maintenance services for some customers; here too, the
interest on the part of our customers is remarkably consistent worldwide. Such
a service can only be supplied by those companies that have a deep technical
knowledge of customers' applications. It therefore calls for those knowledge,
service and product attributes and for the global reach for which we are well
known.

We continue pro-actively to pursue acquisitions where this will accelerate
achievement of the strategic objectives of our core businesses. We will not
overpay and attractive businesses are not necessarily immediately available.

The electronic communications revolution is also opening up many opportunities,
both to allow direct contact and provision of information to customers and,
internally, to improve our own efficiencies and operating performance. We are
receiving a steadily increasing number of contacts and enquiries
electronically, and have recently upgraded our website and installed electronic
communications on a worldwide basis for the Group.

Both the Spirax Sarco business and Watson-Marlow Bredel are serving markets
which are fundamental to the world economy and which help to provide virtually
all the goods we see, touch or consume on a daily basis. We can capitalise on
these opportunities by deploying the high level of technical advice and support
to customers and these are the features of our business that also provide the
strong financial performance.

PROSPECTS

The Chairman comments as follows:-

'The industrial and commercial world continues to rely on the unique properties
of steam in heat using processes and space heating requirements, and an
increasing number of organisations are discovering the benefits that
peristaltic pumps offer over other pump principles. This, together with the
opportunities presented by technological advances, environmental and health &
safety requirements and the addition of new products to our ranges, means that
we have good potential for growth. Given stable world economic conditions, we
expect a good performance in 2001 as we use the fundamental strengths of our
technical selling and customer support structure to capitalise on our recent
investments in products and marketing capabilities.'



                         SPIRAX-SARCO ENGINEERING plc

The audited trading results for the Group for the year ended 31st December 2000
(together with the comparative figures for 1999) are set out below:-


                                                              2000         1999
                                                             £'000        £'000

Turnover                                                   278,148      258,942
Operating costs                                          (234,778)    (216,221)

Operating profit                                            43,370       42,721
Loss on disposal of fixed assets                             (990)            -

Profit before interest                                      42,380       42,721
Net interest payable                                       (2,213)        (970)

Profit on ordinary activities before taxation               40,167       41,751
Taxation on profit on ordinary activities                 (12,867)     (12,693)

Profit on ordinary activities after taxation                27,300       29,058
Minority interests - equity                                  (933)        (943)

Profit for the financial year                               26,367       28,115
Dividends                                                 (13,301)     (13,102)

Retained profit for the financial year                      13,066       15,013

Earnings per share before non-operating item                 37.4p        36.1p
Earnings per share after non-operating item                  35.4p        36.1p
Dividends per share                                          18.0p        17.3p



                         SPIRAX-SARCO ENGINEERING plc

                   Group Balance Sheet at 31st December 2000
                                                                 2000      1999
                                                                £'000     £'000
Fixed assets
Intangible assets                                               9,299     4,484
Tangible assets                                                89,114    84,668
                                                               98,413    89,152

Current assets
Stocks                                                         64,166    57,799
Debtors                                                        88,768    76,884
Cash deposits and short term investments                       18,111    22,863
Cash at bank and in hand                                        2,961     2,345
                                                              174,006   159,891

Creditors
Amounts falling due within one year                           (81,204)  (70,128)

Net current assets                                             92,802    89,763

Total assets less current liabilities                         191,215   178,915

Creditors
Amounts falling due after more than one year                  (42,060)  (39,960)

Provisions for liabilities and charges                        (10,891)  (10,218)

Net assets                                                    138,264   128,737

Capital and reserves
Called up share capital                                        18,398    18,751
Share premium account                                          32,097    31,263
Revaluation reserve                                             4,653     4,558
Capital redemption reserve                                      1,832     1,416
Profit and loss account                                        77,944    69,775

Shareholders' funds - equity                                  134,924   125,763
Minority interests - equity                                     3,340     2,974
                                                              138,264   128,737

                         SPIRAX-SARCO ENGINEERING plc
        Group Cash Flow Statement for the year ended 31st December 2000

                                                                   2000   1999*
                                                                  £'000   £'000
RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOW
Operating profit                                                 43,370  42,721
Depreciation and amortisation charges                            11,216  10,812
Increase in stocks                                               (4,220) (4,718)
Increase in debtors                                             (10,046)( 6,790)
Increase in creditors and provisions                              3,073      84
Cash flow from operating activities                              43,393  42,109

GROUP CASH FLOW STATEMENT
Cash flow from operating activities                              43,393  42,109
Returns on investments and servicing of finance                  (2,878) (1,375)
Taxation                                                        (11,993)(10,583)
Capital expenditure                                             (10,248)(14,382)
Acquisitions                                                     (7,408) (1,519)
Equity dividends paid                                           (13,104)(13,523)

Cash (outflow)/inflow before use of liquid resources &           (2,238)    727
financing
Management of liquid resources                                    4,877  12,772
                                                                  2,639  13,499

Financing     - Issue of ordinary share capital                     897   1,367
          - Share buy-back                                       (5,851)(22,604)
          - Increase in debt                                      1,840   3,254
                                                                 (3,114)(17,983)
Decrease in cash and cash equivalents in the period                (475) (4,484)

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Decrease in cash and cash equivalents in the period                (475) (4,484)
Cash inflow from increase in debt                                (1,840) (3,254)
Cash inflow from decrease in liquid resources                    (4,877)(12,772)

Change in net debt resulting from cash flows                     (7,192)(20,510)
Amortisation of loan expenses                                       (25)    (23)
Finance leases                                                     (732)      -
Finance leases acquired with subsidiary                            (619)      -
Translation difference                                           (2,237)  1,828

Movement in net debt in the period                              (10,805) 18,705)
Net debt at 1st January 2000                                    (34,803)(16,098)

Net debt at 31st December 2000                                  (45,608)(34,803)

*     The cash flow statement for 1999 has been restated for cash and
      overdrafts.
Net debt is unchanged.

                         SPIRAX-SARCO ENGINEERING plc
             Group Statement of Total Recognised Gains and Losses
                     for the year ended 31st December 2000

                                                                  2000     1999

                                                                 £'000    £'000
Profit for the financial year                                   26,367   28,115

Currency translation differences on foreign                      1,049  (1,857)
currency net investments

Total recognised gains and losses relating                      27,416   26,258
to the year






                         SPIRAX-SARCO ENGINEERING plc
              Group Movement in Shareholders' Funds for the year
                           ended 31st December 2000


                                                             2000          1999

                                                            £'000         £'000
Shareholders' funds at 1st January                        125,763       133,844
Profit for the financial year                              26,367        28,115
Dividends                                                (13,301)      (13,102)
Share buy-back                                            (5,851)      (22,604)
Net proceeds of issue of shares                               897         1,367
Currency translation differences                            1,049       (1,857)

Shareholders' funds at 31st December                      134,924       125,763




Notes:

1.     Foreign currency assets and liabilities are translated into sterling at
rates of exchange ruling at 31st December. Trading results of overseas
subsidiary undertakings have been translated into sterling at average rates of
exchange ruling during the year.

2.     The analysis of turnover by reference to the geographical location of
customers is as follows:-

                                                            2000           1999

                                                           £'000          £'000
United Kingdom                                            37,507         38,242
Continental Europe                                        94,190         94,332
The Americas                                              83,079         72,755
Asia, Australasia and Africa                              63,372         53,613
                                                         278,148        258,942
and by reference to the geographical location of the Group's operations is as
follows:-

                                                                 2000      1999

                                                                £'000     £'000
United Kingdom                                                 86,802    81,540
Continental Europe                                            114,091   110,162
The Americas                                                   88,050    77,721
Asia, Australasia and Africa                                   57,255    47,605
                                                              346,198   317,028

Intra-group sales                                            (68,050)  (58,086)

Sales to third parties                                        278,148   258,942



3.     Operating profit, analysed by reference to the geographical location of
the Group's operations, is as follows:-
                                                                2000       1999

                                                               £'000      £'000
United Kingdom                                                11,878     12,464
Continental Europe                                            13,468     14,986
The Americas                                                   8,139      7,326
Asia, Australasia and Africa                                   9,885      7,945
                                                              43,370     42,721


 4.     Net interest payable:-
                                                             2000          1999

                                                            £'000         £'000
Interest payable:
     Bank loans and overdrafts                              2,483         2,159
     Other loans                                              930           916
                                                            3,413         3,075
Interest receivable                                       (1,200)       (2,105)
                                                            2,213           970



5.     Taxation:-
                                                                   2000    1999

                                                                  £'000   £'000
United Kingdom corporation tax                                    9,024   7,162
Deduct double taxation relief                                   (5,766) (4,020)
                                                                  3,258   3,142
Overseas taxation                                                 8,734   9,126
Deferred taxation                                                 1,108     445
                                                                 13,100  12,713
Adjustment in respect of previous years                           (233)    (20)
                                                                 12,867  12,693

     Taxation includes a charge of £488,000 relating to the non-operating item.

6.     The calculation of earnings per share before the non-operating item is
based on earnings of £27,845,000 (1999: £28,115,000) and the calculation of
earnings per share after the non-operating item is based on earnings of £
26,367,000 (1999: £28,115,000), as shown in the Group profit and loss account,
divided by the weighted average number of shares in issue during the year of
74,531,906 (1999: 77,934,804).

7.     If approved at the annual general meeting on 25th April 2001, the final
dividend will be paid on 15th May 2001 to shareholders on the register at 17th
April 2001.

8.     The analysis of net assets by reference to the geographical location of
the Group's operations is as follows:-
                                                                 2000      1999

                                                                £'000     £'000
United Kingdom                                                 43,847    45,182
Continental Europe                                             53,974    39,956
The Americas                                                   52,322    48,555
Asia, Australasia and Africa                                   36,690    32,192
                                                              186,833   165,885
Cash at bank and in hand                                      (2,961)   (2,345)
Capital employed                                              183,872   163,540
Net debt                                                     (45,608)  (34,803)
Net assets                                                    138,264   128,737



Return on capital employed is based on operating profit of £43,370,000 (1999: £
42,721,000) before deducting goodwill amortisation of £363,000 (1999: £
241,000), and average net assets as shown above excluding net goodwill of £
9,299,000 (1999: £4,484,000) and net debt as shown above.

9.     Analysis of changes in net debt.

                           1st Jan    Cash     Other     Exchange     31st Dec
                              2000    Flow  non-cash     movement         2000
                             £'000   £'000   changes        £'000        £'000
                                               £'000
Cash in hand and at bank     2,345     565         -           51        2,961
Overdrafts                 (2,877) (1,040)         -         (73)      (3,990)
                                     (475)

Debt due within a year    (17,240) (3,177)         -      (1,274)     (21,691)
Debt due beyond a year    (39,835)   1,310      (25)      (1,020)     (39,570)
Finance leases                (59)      27   (1,351)         (46)      (1,429)
                                   (1,840)

Current asset investments   22,863 (4,877)         -          125       18,111
Total                     (34,803) (7,192)   (1,376)      (2,237)     (45,608)

10.     The financial information set out above does not constitute the
company's statutory accounts for the years ended 31st December 2000 or 1999
but is derived from those accounts. Statutory accounts for 1999 have been
delivered to the registrar of companies, and those for 2000 will be delivered
following the company's annual general meeting. The auditors have reported on
those accounts, their reports were unqualified and did not contain statements
under section 237 (2) or (3) of the Companies Act 1985


        .