Interim Results - Replacement
Diagonal PLC
24 July 2003
DIAGONAL PLC
INTERIM RESULTS
FOR THE SIX MONTH PERIOD ENDED 30 MAY 2003
24 July 2003
In the announcement of the interim results released today under RNS number
8898N, the summary profit before tax and adjusted earnings per share figures
were stated as being after goodwill amortisation. The summary is to be amended
to read before goodwill amortisation. The remainder of the statement remains
unchanged and is reproduced below:
• Turnover £30.6m
• Profit before tax* £1.9m
• Adjusted earnings per share* 1.44p
• Dividend 0.7p
* before goodwill amortisation.
Key highlights include:
• Cash maintained at £14.4m after cash cost of acquisitions
• Dividend increased by 16.7%
• Robust performance from core Consultancy operations
• North America performing well
• Return to core focus of SAP/Consultancy
• Management changes
• Consequential reduction in overheads
Mark Samuels, Chairman, commented:
'I am pleased that we are on track for the first half, despite continuing
difficult market conditions. I believe there will be major benefits in
concentrating on our core competencies.'
Enquiries:
Colin Burnside, CEO Tel: +44 (0) 1252 733 711
Ian Seaton, Bankside Consultants Limited Tel: +44 (0) 20 7444 4157
Notes to Editors
Diagonal PLC provides a broad range of IT consulting services. The Consulting
Division is one of the UK's leading implementers of SAP systems and has been
awarded SAP Partner of Excellence on each occasion it has been presented. It
also specialises in Enterprise Application Integration and e-commerce skills.
The Secure Networks Division provides network and remote access security and
consultancy.
INTERIM COMMENTARY
Having spent four years on secondment to SAP(UK) in a senior management role, I
am confident that SAP will continue to strengthen its position as the world's
leading business software vendor. Diagonal, as SAP Partner of Excellence since
1995, is well placed to benefit from SAP's continued success. Against this
background I am excited by the opportunity to become Chief Executive of
Diagonal.
The SAP Consulting Division has performed well in the first half against
difficult market conditions. The Division has won the SAP Partner of Excellence
Award for an unprecedented seventh occasion. Whilst the market continues to be
slow, the Division has maintained profitability and market position by effective
management of resource. The acquisition of Partners for Change has led to
business wins and an increased ability of Diagonal to deliver business benefit
to clients. I am particularly pleased with the performance of the US office,
with profitability being ahead of plan.
The Enterprise Application Integration (EAI) business has performed well with
profit and revenue ahead of target for the period.
The Diagonal Secure Networks Division has faced a difficult six months, a
contributing factor being senior management distractions in pursuing the
proposed MBO. The Division has now concluded a series of restructuring plans,
new management is in place and a review of the Division's operations is
underway.
The Group continues to generate cash and has balances of over £14 million at the
period end, after cash cost of acquisitions.
I am confident that the sharper focus of the Diagonal Group through its
specialist consulting services will provide considerable opportunities for
growth to the long term benefit of both our clients and our shareholders.
Colin Burnside
Chief Executive Officer
24 July 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Note Half-year Half-year 52 weeks
ended ended ended
Continuing 30 May 2003 31 May 2002 29 Nov 2002
Operations Acquisition (Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s £'000s £'000s
TURNOVER 2 26,190 4,421 30,611 33,902 63,618
COST OF SALES (17,135) (3,914) (21,049) (23,634) (43,594)
GROSS PROFIT 9,055 507 9,562 10,268 20,024
ADMINISTRATIVE EXPENSES
Amounts written off goodwill (1,456) (79) (1,535) (1,446) (8,027)
Other administrative expenses (7,523) (378) (7,901) (7,346) (14,572)
Total administrative expenses (8,979) (457) (9,436) (8,792) (22,599)
OPERATING PROFIT/(LOSS) 2 76 50 126 1,476 (2,575)
Net interest receivable 198 131 321
PROFIT/(LOSS) ON ORDINARY
ACTIVITIES BEFORE TAXATION 324 1,607 (2,254)
TAX ON PROFIT/(LOSS) ON ORDINARY
ACTIVITIES (569) (920) (1,807)
(LOSS)/PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION (245) 687 (4,061)
EQUITY DIVIDENDS 4 (618) (531) (1,591)
RETAINED (LOSS)/PROFIT FOR THE
FINANCIAL PERIOD (863) 156 (5,652)
(Loss)/earnings per Ordinary Share 3 (0.27p) 0.78p (4.56p)
Adjusted earnings per Ordinary 3 1.44p 2.41p 4.45p
Share
Diluted (loss)/earnings per 3 (0.27p) 0.77p (4.56p)
Ordinary Share
Adjusted diluted earnings per
Ordinary Share 3 1.44p 2.40p 4.45p
Equity dividends per Ordinary Share 4 0.70p 0.60p 1.80p
There are no recognised gains or losses other than the profit for the current
and preceding financial periods. Accordingly, no statement of total recognised
gains and losses is given.
CONSOLIDATED BALANCE SHEET
Half-year Half-year 52 weeks
ended ended ended
30 May 2003 31 May 2002 29 Nov 2002
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
FIXED ASSETS
Intangible assets 19,632 24,616 18,264
Tangible assets 2,283 2,221 2,485
Investments - own shares 1,404 1,404 1,404
23,319 28,241 22,153
CURRENT ASSETS
Debtors 15,887 21,521 17,762
Cash at bank and in hand 14,440 12,248 14,417
30,327 33,769 32,179
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR (12,557) (14,149) (12,291)
NET CURRENT ASSETS 17,770 19,620 19,888
TOTAL ASSETS LESS CURRENT LIABILITIES 41,089 47,861 42,041
CREDITORS - AMOUNTS FALLING
DUE AFTER MORE THAN ONE YEAR (9) (110) (98)
NET ASSETS 41,080 47,751 41,943
CAPITAL AND RESERVES
Called up share capital 8,940 8,940 8,940
Share premium account 29,496 29,496 29,496
Other reserves 600 600 600
Profit and loss account 2,044 8,715 2,907
EQUITY SHAREHOLDERS' FUNDS 41,080 47,751 41,943
RECONCILIATION OF MOVEMENTS
IN EQUITY SHAREHOLDERS' FUNDS
(Loss)/profit for the financial period (245) 687 (4,061)
Equity dividends (618) (531) (1,591)
(863) 156 (5,652)
Issues of shares - 963 963
Net (reduction in)/addition to shareholders' funds (863) 1,119 (4,689)
Opening shareholders' funds 41,943 46,632 46,632
Closing shareholders' funds 41,080 47,751 41,943
CONSOLIDATED CASH FLOW STATEMENT
Half-year Half-year 52 weeks
ended ended ended
30 May 2003 31 May 2002 29 Nov 2002
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
NET CASH INFLOW FROM
OPERATING ACTIVITIES 3,793 3,406 8,234
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE 198 132 321
TAXATION PAID (834) (628) (1,877)
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (342) (155) (948)
ACQUISITIONS (1,694) - (229)
EQUITY DIVIDENDS PAID (1,060) (1,057) (1,587)
CASH INFLOW BEFORE FINANCING 61 1,698 3,914
FINANCING
Issues of Ordinary share capital - 436 436
Net repayment of borrowings (38) (41) (88)
(38) 395 348
INCREASE IN CASH IN THE PERIOD 23 2,093 4,262
RECONCILIATION OF OPERATING PROFIT
TO NET CASH FLOW FROM OPERATING ACTIVITIES
Operating profit 126 1,476 (2,575)
Amortisation of goodwill 1,535 1,446 8,027
Depreciation 510 497 1,010
Loss/(profit) on sales of tangible fixed assets 4 (56) 9
Decrease in debtors 4,780 822 4,568
Decrease in creditors (3,162) (779) (2,805)
NET CASH INFLOW FROM
OPERATING ACTIVITIES 3,793 3,406 8,234
MOVEMENT IN NET FUNDS/(DEBT)
Opening balances
Cash 14,417 10,155 10,155
Finance leases (174) (214) (214)
14,243 9,941 9,941
Movement in period
Cash (777) 2,093 4,262
Net cash acquired with subsidiary 800 - -
Finance lease repayments 38 41 88
Leases acquired (non-cash) - - (48)
61 2,134 4,302
Closing balances
Cash 14,440 12,248 14,417
Finance leases (136) (173) (174)
14,304 12,075 14,243
ACQUISITIONS
Purchase of subsidiary undertaking (2,494) - (229)
Less: net cash acquired with subsidiary 800 - -
Net cash outflow from acquisitions (1,694) - (229)
NOTES
1. The interim results, approved by the Board of Directors on 24 July 2003, have been prepared in accordance with
applicable United Kingdom Accounting Standards, using the historical cost convention. The interim results have
been prepared on the basis of accounting policies consistent with those applied in the 2002 Annual Report and
Accounts. This has had no effect on reported profits and has not given rise to any restatement of figures
reported for the prior period. The financial information for the six month periods ended 30 May 2003 and 31 May
2002 have not been audited and do not constitute statutory accounts as defined in Section 240 of the Companies
Act 1985. The results for the 52 weeks to 29 November 2002 have been extracted from the Annual Report and
Accounts which received an unqualified auditors' report, did not contain a statement under Section 237 (2) or
Section 237 (3) of the Companies Act 1985 and have been delivered to the Registrar of Companies.
2. Analysis of turnover and operating profit/(loss) by class of business:
Turnover Operating profit/(loss) (1)
Half-year Half-year 52 weeks Half-year Half-year 52 weeks
ended ended ended ended ended ended
30 May 2003 31 May 2002 29 Nov 2002 30 May 2003 31 May 2002 29 Nov 2002
(Unaudited) (Unaudited) (Audited) (Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s £'000s £'000s £'000s
Class of business
Continuing
operations
Consulting 19,867 25,527 48,201 1,469 1,903 3,846
Secure Networks 6,323 8,375 15,417 (1,393) (427) (6,421)
26,190 33,902 63,618 76 1,476 (2,575)
Acquired
operations
Consulting 4,421 - - 50 - -
30,611 33,902 63,618 126 1,476 (2,575)
(1) Operating profit/(loss) is stated after charging amortisation of goodwill.
3. Earnings per share have been computed in accordance with Financial Reporting Standard 14 'Earnings per
Share'.
Basic earnings per share are calculated by dividing the Profit on Ordinary Activities after Tax by the
weighted number of Ordinary Shares in issue during the period. Diluted earnings per share are calculated to
take account of the potential issue of further Ordinary Shares. These arise under the employees'
Save-As-You-Earn Share Option Scheme, the Executive Share Option Plan and the Long Term Incentive Plan,
where the exercise price is less than the average market price of the Company's Ordinary shares during the
relevant period.
FRS 14 requires presentation of diluted EPS when a company could be called upon to issue shares that would
decrease net profit or increase net loss per share. For a loss making company with outstanding share
options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it
seems inappropriate to assume that option holders would exercise options in this situation, no adjustment
has been made to diluted EPS for out-of-the-money share options.
A reconciliation of the earnings and weighted average number of shares used in the calculation is set out
below:
Half-year Half-year 52 weeks
ended ended ended
30 May 2003 31 May 2002 29 Nov 2002
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
(Loss)/profit on ordinary activities after taxation (245) 687 (4,061)
Amounts written off goodwill 1,535 1,446 8,027
Adjusted profits 1,290 2,133 3,966
Number Number Number
Weighted average number of shares in issue 89,401,341 88,499,269 89,049,702
Effect of options - 235,218 -
Total Shares 89,401,341 88,734,487 89,049,702
Pence Pence Pence
Basic EPS
Unadjusted (0.27) 0.78 (4.56)
Goodwill 1.71 1.63 9.01
Adjusted 1.44 2.41 4.45
Diluted EPS
Unadjusted (0.27) 0.77 (4.56)
Goodwill 1.71 1.63 9.01
Adjusted 1.44 2.40 4.45
4. The interim dividend will be paid on 3 October 2003 to shareholders on the register at the close of business of
15 August 2003. The cost of the dividend payable to Ordinary Shareholders is £618,000 (31 May 2002: £531,000;
29 November 2002: £1,060,000).
5. The interim report will be mailed to shareholders and copies will be available at the Company's registered
office: Diagonal PLC, Wey Court, Farnham, Surrey GU9 7PT.
INDEPENDENT REVIEW REPORT TO DIAGONAL PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 May 2003 which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 5. We have
read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purposes. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 May 2003.
Deloitte & Touche
London
23 July 2003
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