RNS Number:5591M
McLeod Russel Holdings PLC
20 June 2003



                           McLeod Russel Holdings PLC

             Interim Results for the six months ended 31 March 2003

McLeod Russel Holdings PLC, announced today its interim results for the six
months ended 31 March 2003.

Main points:

*         Group operating loss* of #0.9m (2002: profit* #1.5m) against
difficult trading conditions reflecting decline in UK and export markets and
major contract deferrals from German healthcare and Cudd Bentley customers

*         Implementation of an extensive cost reduction and rationalisation
programme at a cost of #2.5m this financial year

*         Sales levels from core clean air and liquid filtration operations
maintained at #33m with solid performances from Vokes, Sweden and Switzerland

*         A number of parties have expressed interest in principle in making
an offer for the Group and have been sent an Information Memoranda


*before goodwill amortisation and exceptional items



James Leek, Chairman, commented:

"This has been a very difficult period for McLeod Russel. Clearly the Group's
financial performance for the year will be poor, especially after taking into
account exceptional and restructuring costs. Traditionally our second half
trading is seasonally stronger and we should begin to see some initial benefit
from the cost reductions.  We are convinced that the resolute action we have
taken has positioned the Group to reflect current sales levels and to take
advantage of any upturn in the markets in which we operate"


                                     -ends-

Date:           20 June 2003



For further information contact:

McLeod Russel Holdings PLC                                Tel: 01235 536677
Ian Hazlehurst, Chief Executive
Richard Cotton, Finance Director



                               FINANCIAL SUMMARY


                                                                            6 months to        6 months to
                                                                               31 March           31 March
                                                                                    '03                '02
                                                                                   #000               #000

Turnover - continuing activities                                                 36,982             37,453

Operating profit/(loss) - before goodwill amortisation and
exceptional items
Clean air and liquid filtration                                                      12              1,540
Other ongoing activities                                                            250                530
Central costs                                                                   (1,165)              (659)
Discontinued activities                                                               -                101

Total activities                                                                  (903)              1,512

Basic earnings per share                                                       (11.27p)              1.04p
Adjusted earnings per share                                                     (3.82p)              1.08p
Interim dividend per share                                                            -              1.25p
Net asset value per share                                                         52.4p              60.5p


Interim Statement

Overview

In January 2003, we indicated that our business was facing increasingly
difficult and volatile markets and the rest of the first half of the year has
seen a continuation of this position.  In addition, we have also had to deal
with a number of important corporate events.  As a result, we are reporting an
operating loss (before goodwill, amortisation and exceptional costs) of #0.9m
for the six months to 31st March 2003 (2002: #1.5m profit).  The principal
trading and restructuring factors underlying this are detailed below.  In view
of this result, the Directors are not declaring an interim dividend.

Corporate Events

* On 1st February 2003, we welcomed Chris Brown to the Board as a
  non-executive Director.

* On 27th March 2003, we announced the receipt of an unsolicited approach with
  an indicative offer for the entire share capital of the Company.  We also
  informed shareholders of a requisition from shareholders owning 14 per cent of
  the Company to convene an Extraordinary General Meeting ("EGM") with proposals
  to replace four of our five Directors with their own nominees.

* On 11th April 2003, we announced the withdrawal of the shareholders'
  requisition for an EGM, the appointment of Mike Balfour as a non-executive
  Director, and gave a trading update.  We also stated that our two prime
  objectives for the remainder of this year were:

      *   to complete the restructuring of the Clean Air businesses in order
          to position the business more appropriately for the future; and

      *   to review whether shareholder value could be enhanced by seeking an
          offer for the Group.

* On 30th April 2003, the Board further updated its 11th April 2003
  trading statement indicating that the cost of organisational restructuring,
  further integration of operations and rationalisation costs associated with 
  the development of European product lines would be approximately #2.5m.  This 
  was expected to result in a loss before tax for the current financial year.  
  On 20th May 2003, we circulated the formal reports on this forecast from our 
  auditors and financial advisers as required by the City Code on Takeovers and 
  Mergers.

Trading Results

The company specific factors resulting in the first half operating loss (pre
goodwill, amortisation and exceptional items) of #0.9m, compared to #1.5m
operating profit in the comparable period last year were;

*         a reduction of more than #1.3m in the operating profit of our
          principal UK clean air business due to an unexpected decline in both 
          UK and export demand and, in particular, nuclear export contracts 
          which benefited last year;

*         a #0.4m profit reduction due to corporate changes in the UK retail
          sector which led to a severe cutback in the workload of our Cudd 
          Bentley engineering consultancy;

*         a payment of #0.3m within central costs as an extra contribution to
          reduce the pension deficit on the Wheway fund referred to in our last 
          annual report.

Overall, sales held up encouragingly, helped by a first time contribution from
McLeod Russel Denmark and there have been a number of successes elsewhere: our 
Vokes UK liquid filtration company continues to show impressive profits growth; 
the Swiss subsidiary is now trading profitably and McLeod Russel Sweden has 
maintained performance.  The clean air markets in continental Europe have, with 
the exception of France, performed better than in the UK.  Our German medical 
business, with its strong market share and good order book, is hampered by 
contract deferrals due to cash constraints in the German healthcare industry.  
Eurogard has continued to make progress strategically including securing a new 
long-term contract with its major customer.

Restructuring and Rationalisation

Faced with difficult market conditions and an uncertain outlook in Europe we
have been implementing an extensive programme of costs reduction and
rationalisation during the first half.  The major measures which impacted the
first half (as included in Note 4 - Exceptional Items) have been:

*         planned restructuring costs of #0.2m in France as we continue the
          rationalisation of the European product range;

*         a charge of #0.9m in respect of our UK activities.  This charge
          follows a review undertaken because of the fall off in business and 
          includes charges in respect of obsolete stocks and irrecoverable 
          debtors.

These two items plus other one-off operating charges in the first half total
#1.4m.  This amount combined with forecast second half restructuring costs of
approximately #1.1m constitute the #2.5m referred to in the Corporate Events
paragraph above and will be fully reflected in the year end results.  We expect
the benefits from these measures to come through during the latter part of the
second half and beyond.

In addition, the results for the half year show:

*         a one time charge of #2.4m reflecting the full net present value of
the deficit of assets against MFR liabilities for the Joseph Mason Pension
Scheme (necessitated under current accounting rules because the active
membership has reduced) following an actuarial review as at 17th June 2003.  The
contributions to correct this deficit will be made over a period of 10 years;

*         a credit within operating profit of #0.4m arising from the
successful renegotiation of contractual arrangements and a supply contract with
Zellweger Luwa.

Our announcement of 20th May 2003 referred to increased pension provisions and
also a review of the carrying value of goodwill.   This has now been completed
and no adjustment has been necessary.

Banking

In our announcement of 20th May 2003,  we explained that, as a result of the
performance of the Group, the Company is in breach of its trading based bank
covenants although not in default of any payment obligations.  Following
discussions with the Group's bankers an independent review of the Group has been
commissioned and is due to be completed during July 2003.  The directors expect
that the Group will agree revised bank facilities within which it will be able
to operate.  The banks are fully informed as to the position and are continuing
to extend banking facilities.

Update on potential offers

On 30th April 2003, the Board appointed new financial advisers to instigate a
process whereby potential offers for the Company could be evaluated and
explored.  Amethyst Corporate Finance has issued Information Memoranda to a
number of parties who have expressed an interest in principle in making an offer
for the Group.  Further announcements will be made when appropriate.

Outlook for the year

In light of the current market conditions, predicting the short-term trading
outlook is not easy.  Traditionally our second half trading is seasonally
stronger and we should begin to see some initial benefit from the cost
reductions.  We are convinced that the resolute action we have taken has
positioned the Group to reflect current sales levels and to take advantage of
any upturn in the markets in which we operate.  Clearly, and as already
indicated, the Group's financial performance for the year will be poor,
especially after taking into account the exceptional and restructuring costs
referred to above.  We recognise how painful this necessary process is both for
our shareholders and all who work within McLeod Russel.

We believe, however, that our underlying businesses have strong intrinsic value
and will ultimately be able to report financial results which justify the costly
actions which are having to be taken.



James Leek                  Ian Hazlehurst
Chairman                    Chief Executive

20 June 2003



                      CONSOLIDATED PROFIT AND LOSS ACCOUNT


                                                                      6 Months       6 Months     Year ended
                                                                   to 31 March    to 31 March        30 Sept
                                                                          2003           2002           2002

                                                                         Total          Total          Total

                                                                   (unaudited)    (unaudited)
                                    Notes                                 #000           #000           #000
Turnover
Continuing operations                                                   36,982         37,453         77,180
Discontinued operations                                                      -          2,801          2,801
Total turnover                                                          36,982         40,254         79,981

Operating (loss)/profit pre goodwill amortisation and operating
exceptional items
Continuing                                                               (903)          1,411          3,784
Discontinued                                                                 -            101            101
Total                                                                    (903)          1,512          3,885
Goodwill amortisation                                                    (443)          (427)          (871)
Operating exceptional items            4a                                (478)              -          (404)
Operating (loss)/profit
Continuing operations                                                  (1,824)            984          2,509
Discontinued operations                                                      -            101            101
Total operating (loss)/profit                                          (1,824)          1,085          2,610

Income from other fixed asset                                                -              5             48
investments
Exceptional items:
Restructuring costs                    4b                                (197)              -              -
(Loss)/profit on disposal of           4c
operations
                                                                       (2,373)            382            249
(Loss)/profit on disposal of fixed     4d
assets                                                                   (180)              -            463
                                                                         
(Loss)/profit on ordinary                                              (4,574)          1,472          3,370
activities before interest
Net interest payable                                                     (735)          (693)        (1,392)
Amounts written off investments
          - exceptional                                                      -              -          (661)
(Loss)/profit on ordinary                                              (5,309)            779          1,317
activities before taxation
Taxation on (loss)/profit on            2                                (532)          (245)          (822)
ordinary activities
(Loss)/profit for the period                                           (5,841)            534            495
Dividends                               5                                    -          (642)          (847)
Retained loss for the period                                           (5,841)          (108)          (352)
Earnings per share
- basic                                 3                             (11.27p)          1.04p          0.96p
- adjusted                              3                              (3.82p)          1.08p          3.30p
- diluted                               3                             (11.27p)          1.04p          0.96p
Interim dividend proposed               5                                    -          1.25p          1.25p
Final dividend paid                                                          -              -          3.25p






                           CONSOLIDATED BALANCE SHEET


                                                              31 March 2003      31 March 2002    30 Sept 2002
                                                                (unaudited)        (unaudited)
                                                  Notes                #000               #000            #000
Capital employed
Fixed assets
Intangible assets                                                    16,894             16,559          16,341
Tangible assets                                                      15,509             22,463          15,321
Investments                                                             427              1,299             639
                                                                     32,830             40,321          32,301
Current assets
Stocks                                                                9,168              9,894           9,502
Debtors                                                              21,297             22,133          21,316
Cash at bank and in hand                                              2,489              3,338           4,999
                                                                     32,954             35,365          35,817
Creditors: amounts falling due within one year                     (18,553)           (24,518)        (19,569)
Net current assets                                                   14,401             10,847          16,248
Total assets less current liabilities                                47,231             51,168          48,549
Creditors: amounts falling due after more than                     (15,116)           (17,748)        (15,144)
one year
Provisions for liabilities and charges                              (4,967)            (2,330)         (2,406)
                                                                     27,148             31,090          30,999
Financed by
Capital and reserves
Called up share capital                                               5,211              5,211           5,211
Share premium account                             6                   5,270              5,270           5,270
Other reserves                                    6                     943            (1,415)         (1,047)
Profit and loss account                           6                  15,724             22,024          21,565
Shareholders' funds                                                  27,148             31,090          30,999



                             CONSOLIDATED CASH FLOW


                                                                       6 months to   6 months to   Year ended

                                                                     31 March 2003 31 March 2002 30 Sept 2002
                                                             Notes     (unaudited)   (unaudited)
                                                                              #000          #000         #000

Net cash inflow from operating activities                          7           380         1,403        5,677

Returns on investments and servicing of finance                              (586)         (669)      (1,341)
Tax paid                                                                     (788)         (545)        (907)
Capital expenditure and financial investment                                 (425)         (475)        4,686
Acquisitions and disposals                                                   (506)           885          980
Equity dividends paid                                                        (642)             -      (1,669)
Cash inflow/(outflow) before use of liquid resources/financing             (2,567)           599        7,426
Management of liquid resources                                                  37           200          191
Financing                                                                    (638)       (2,305)      (8,669)
Decrease in cash                                                           (3,168)       (1,506)      (1,052)



                        RECONCILIATION OF NET CASH FLOW
                            TO MOVEMENT IN NET DEBT


                                                               6 months to        6 months to     Year ended
                                                             31 March 2003      31 March 2002   30 Sept 2002
                                                               (unaudited)        (unaudited)

                                                                      #000               #000           #000
Decrease in cash                                                   (3,168)            (1,506)        (1,052)
Cash inflow from decrease in liquid resources                         (37)              (200)          (191)
Cash outflow from decrease in debt                                     530              2,209          8,479
Cash outflow from lease financing                                      108                 96            190
Change in net debt resulting from cash flows                       (2,567)                599          7,426
Exchange movements                                                   (667)                219          (195)
Movement in net debt in the period                                 (3,234)                818          7,231
Net debt at the start of the period                               (12,961)           (20,192)       (20,192)
Net debt at the end of the period                                 (16,195)           (19,374)       (12,961)



                             ADDITIONAL INFORMATION


Statement of total recognised gains and losses                     6 months to      6 months to      Year ended
                                                                 31 March 2003    31 March 2002    30 Sept 2002
                                                                   (unaudited)      (unaudited)
                                                                          #000             #000            #000
(Loss)/profit for the period                                           (5,841)              534             495
Currency translation difference on foreign currency net
investment                                                               1,990              416             780
                                                                         
Taxation effect of currency translation difference on
foreign currency net investments                                             -               78              97
                                                                             
                                                                       (3,851)            1,028           1,372






Movements in shareholders' funds                                      6 months to   6 months to    Year ended
                                                                    31 March 2003 31 March 2002  30 Sept 2002
                                                                      (unaudited)   (unaudited)
                                                                             #000          #000          #000
(Loss)/profit for the period                                              (5,841)           534           495
Dividends                                                                       -         (642)         (847)
                                                                          (5,841)         (108)         (352)

Other recognised gains and losses relating to the period (net)              1,990           494           877
Net (reduction in)/addition to shareholders' funds                        (3,851)           386           525
Opening shareholders' funds                                                30,999        30,704        30,474
Closing shareholders' funds                                                27,148        31,090        30,999



                             ADDITIONAL INFORMATION


Segmental analysis                               Turnover                        Operating (loss)/ profit
                                    6 months to    6 months to  Year ended  6 months to  6 months to  Year ended
                                       31 March       31 March    30 Sept     31 March     31 March     30 Sept
                                           2003           2002        2002         2003         2002        2002
                                    (unaudited)    (unaudited)              (unaudited)  (unaudited)
                                           #000           #000        #000         #000         #000        #000
Class of business:
Clean air and liquid filtration          33,709         32,809      67,975           12        1,540       4,033
Other ongoing activities                  3,273          4,644       9,205          250          530       1,301
Ongoing activities before                36,982         37,453      77,180          262        2,070       5,334
central costs, goodwill
amortisation and exceptional
items
Central costs                                 -              -           -      (1,165)        (659)     (1,550)
Discontinued activities                       -          2,801       2,801            -          101         101

Total before goodwill                    36,982         40,254      79,981        (903)        1,512       3,885
amortisation and exceptional
items
Goodwill amortisation:
  - Clean air and liquid                      -              -           -        (443)        (427)       (871)
filtration
Exceptional items:
  - Clean air and liquid                      -              -           -        (478)            -       (353)
filtration
  - Central costs                             -              -           -            -            -        (51)

As reported                              36,982         40,254      79,981      (1,824)        1,085       2,610

Geographical analysis by
destination:
United Kingdom                           10,026         13,996      25,897
Rest of Europe                           24,827         24,228      49,637
Rest of World                             2,129          2,030       4,447
                                         36,982         40,254      79,981



As the Group's operations are now all located in Europe, which is considered to
be substantially one homogeneous market, a geographic segmental breakdown of
turnover and operating profit by origin is not provided.

Central costs reported above of #1,165,000 includes for the first time #316,000
of the ongoing additional contributions paid to reduce the pension deficit on
the Wheway pension fund.

NOTES

1          Basis of presentation

The interim financial statements have been prepared in accordance with the
accounting policies set out on pages 18 to 19 of the Group's statutory accounts
for the year ended 30 September 2002 to which no changes have been made.  The
results are presented as continuing activities and discontinued activities of
the Group in accordance with Financial Reporting Standard 3.

The Group meets its day to day working capital requirements through banking
facilities which expire in December 2005.  Under the facility agreement the
Group has to comply with certain stipulated financial covenants.  The facility
agreements stipulate covenant conditions up to September 2003 but not beyond.
It is anticipated that covenants beyond that date will be negotiated with the
bank.

As a result of the performance of the Group, the Group is in breach of its
trading based financial covenants and therefore the banking facilities are
currently repayable on demand.  Following discussions with the Group's bankers
an independent review of the Group has been commissioned and is due to be
completed during July 2003.  The Group is continuing its discussions with its
bankers who are fully informed of the position and are continuing to extend
banking facilities.

On the basis of cash flow forecasts which cover the period to September 2004,
their discussions to date with the Group's bankers and their expectations of the
outcome of the independent review the directors consider that the Group will
agree banking facilities within which it will be able to operate.

On this basis, the directors consider it appropriate to prepare the interim
statement on the going concern basis.

2          Taxation

The tax charge for the period is based on the estimated tax rate for the full
year, reflects the international mix of the Group's businesses and the inability
to relieve tax losses across international borders.

The tax charge includes a charge of #189,000 (March 2002: credit #23,000,
September 2002: credit #24,000) in respect of exceptional items.

3          Earnings per share

Basic earnings per share are calculated on earnings attributable to ordinary
shareholders of  loss #5,841,000 (2002 profit : #534,000) and on the weighted
average of 51,814,394 (2002 : 51,365,540) ordinary shares in issue during the
period, after excluding ordinary shares held by the McLeod Russel Employee
Benefit Trust.

The adjusted earnings per share figure is calculated on attributable earnings
before exceptional items and goodwill amortisation of a loss of #1,981,000 (2002
profit : #556,000).


                                     NOTES



4          Exceptional items

a) Operating exceptional items comprise:

Charges in respect of obsolete stocks and irrecoverable debtors of #925,000
following European product rationalisation and a significant reduction in the MR
UK business.  A one off gain has been generated of #447,000 following the
successful renegotiation of contractual arrangements and a supply contract with
Zellweger Luwa.  This results in a net total charge of #478,000.

FRS 3 exceptional items comprise:

b) Planned restructuring of the French operation following rationalisation of
the European product range of #197,000.

c) Provision for additional contributions required under the Mason Pension
Scheme rules following the updated MFR (Minimum Funding Requirement) valuation
of #2,373,000.  Following disposal of the Masons operations the Group retained
certain funding obligations to the Scheme in respect of former employees.

d) Residual assets at the Masons Derby site have been fully written off by
#180,000 following review of potential net realisations.

5          Dividends

The directors do not recommend the payment of an interim dividend (2002: 1.25p).

6          Reserves

                                                         Share       Capital
                                                       premium    redemption        Other    Profit and
                                                       account       reserve     reserves  loss account
                                                          #000          #000         #000          #000
At 30 September 2002                                     5,270         2,635      (3,682)        21,565
Exchange movements                                           -             -        1,990             -
Retained loss  for the period                                -             -            -       (5,841)
At 31 March 2003                                         5,270         2,635      (1,692)        15,724

7             Reconciliation of operating profit to net cash inflow from
operating activities

                                                          6 months to        6 months to        Year ended
                                                             31 March           31 March           30 Sept
                                                                 2003               2002              2002
                                                                 #000               #000              #000
Operating (loss)/profit                                       (1,824)              1,085             2,610
Depreciation and amortisation charges                           1,584              1,783             3,471
Exchange losses                                                    14                 62               151
(Profit)/loss on disposal of tangible fixed                       (5)                 12              (18)
assets
Decrease/(increase) in stocks                                     869               (32)               604
Decrease in debtors                                             1,261                285             3,356
Decrease in creditors                                         (1,502)            (1,570)           (4,039)
Decrease in provisions                                           (17)              (222)             (458)
Net cash inflow from operating activities                         380              1,403             5,677



                                     NOTES


8                The comparative figures for the financial year ended 30
September 2002 are not the company's statutory accounts for that financial year,
but an extract therefrom. Those accounts have been reported on by the company's
auditors and delivered to the Registrar of Companies. The report of the auditors
was unqualified and did not contain a statement under section 237 (2) or (3) of
the Companies Act 1985.





9          The Interim Report is being dispatched to shareholders before 30 June
2003 and copies will be available from the Group's registered office at 2
Hitching Court, Blacklands Way, Abingdon Business Park, Abingdon, Oxon, OX14
1RG.








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