Final Results

Diagonal PLC 22 February 2001 22 FEBRUARY 2001 DIAGONAL PLC PRELIMINARY RESULTS ANNOUNCEMENT FOR THE 53 WEEKS ENDED 1 DECEMBER 2000 Key highlights include: £82.7 million +14.3% * Turnover £7.5 million -11.0% * Profit before Tax* 6.44p -17.6% * Adjusted Diluted Earnings per share* 1.00 p * Final Dividend per share * All figures are before amortisation of goodwill arising from acquisitions * Record second half results in the Group's history following disappointing first six months * Benefits of management strategy from shift to higher margin consultancy led businesses coming through - Group gross profit margins increased to 28% * Benefits of restructured Consultancy Division recorded in second half * Performance of the new acquisitions, Eurostar, CenturyCom and Interop, has exceeded expectations. They now form the Secure Networks Division and produced turnover of £20.3 million at an operating margin, before amortisation of goodwill, of 14.4% * New management team and strategy in place * Group well positioned for the future. Enquiries: Graham Creswick, Chief Executive Tel: +44 (0) 1252 733 711 Alan Hunter, Finance Director Ian Seaton, Citigate Dewe Rogerson Tel: +44 (0) 207 638 9571 Georgina Peiser Notes to Editors Diagonal PLC provides a broad range of IT consulting services. The Consultancy Division is one of the UK's leading implementers of SAP systems and is the holder of the SAP Partner of Excellence Award. It also specialises in Enterprise Application Integration and e-commerce skills. The Secure Networks Division, formed last year with the amalgamation of three recent acquisitions, provides network and remote access security. Finally, the Resourcing Division specialises in the placement of IT personnel. CHAIRMAN'S STATEMENT I am very pleased to report considerable progress over the period taken as a whole. Turnover increased by 14% to £82.7 million. However profits, before tax and amortisation of goodwill, fell by 11% to £7.5 million. These results mask both the impact of an industry slowdown in the first half and the successful additions to our product mix and services in the second. Indeed, the results for the second half are a record for any six month period in the Group's history. The second half, which produced profits, before tax and goodwill amortisation, of £5.2 million (up 30% on 1999 profits of £4.0 million), clearly demonstrates the combined results of our strategic management review, acquisition strategy and restructuring of our businesses, allied to improved market conditions. A final dividend of 1.0p per share is recommended by the Directors, making a total for the year of 1.5p per share, the same level as 1999. The final dividend will be paid on 27 April 2001 to those shareholders on the register on 9 March 2001. There have been a number of Board changes during the year to reflect our new organisational structure. Founder Directors, Bryan Churcher and Colin Burnside, resigned in December 1999 and April 2000 respectively. In April Graham Creswick was promoted from Finance Director to Chief Executive Officer when I reduced my role to Chairman. Alan Hunter was recruited in June to fill the vacant role of Finance Director. David Beresford resigned from the Group in August. In December 2000 I became Non-executive Chairman. Dave Thompson, Managing Director of the Secure Networks Division, was promoted to the Board in January 2001. The Group has introduced an executive share option scheme during the year with the objective of aligning executive director and shareholder interests and has extended the scheme to senior management within the organisation. I should like to thank all my colleagues for their invaluable support and their unstinting efforts during the past difficult year. I have passed the executive reins to Graham Creswick with every confidence that he and his team possess the skills and attributes necessary to build upon the success they have achieved in the second half of 2000 and take the Group forward to the next stage in its development. Mark Samuels Non-executive Chairman CHIEF EXECUTIVE'S REVIEW My period as Chief Executive has been most challenging. The first half of the year was overshadowed by the downturn in IT spending following Y2K and major corporations reassessing their IT technology budgets. Our consultancy businesses, particularly SAP, were most affected during this period. However, revenues in the second half have risen significantly. The performance of the new acquisitions, namely Eurostar, CenturyCom and Interop, which trade in the Network Security arena, an area of high demand, has exceeded our expectations and they continue to perform well. Financial Results Profit and Loss Account The performance of the consultancy business in the second half of the year was greatly improved over the first half and allowed much of the lost ground to be recovered. The second half also saw a full contribution from the Secure Networks Division. An overall increase in Group annual turnover of 14.3% to £ 82.7 million was achieved. However, the legacy of a disappointing first half adversely affected profit, before tax and amortisation of goodwill, which fell by 11% to £7.5 million. The Group's stated aim, reaffirmed by our mid-year strategic review, is to continue the shift towards higher margin consultancy based businesses. This has resulted in a growing gross margin which has increased by one percentage point to 28% and has been assisted by the strong margins of our Secure Networks Division. The results of the second half of the year were at a record level for any equivalent period in the Group's history. During the second six months turnover increased by 3028% above the corresponding period in 1999 to £45.2 million. Profit, before tax and amortisation of goodwill, of £5.2 million also increased by 2830% over the equivalent period in 1999 and 123% above the first half of 2000. Cash Flow Cash generation increased in the second half of the year. At the year-end, there was a closing net cash balance of £6.1 million (1999 - £4.8 million) which continues to increase as the benefits of the Secure Networks Division are realised. Net interest income has improved to £242,000 (1999 - £177,000). The Group's effective tax rate, based on profits before tax and amortisation of goodwill, was 27.4%. Restructuring of Operations Following my appointment as Chief Executive we conducted a strategic review of our businesses. We determined that the operation of the Group as a collection of independently managed and incentivised units was inappropriate to the changing Group business model and client expectations. We decided that a more integrated management structure and approach was appropriate with principal divisions organised under an Operating Board chaired by myself and thereby promoting synergies of support and cross-selling of skills. We concluded that the Group should be rationalised into three operational divisions, Consultancy, Secure Networks and Resourcing. Consultancy Our strategic review identified the need to extend our skills offering and to build upon SAP achievements into complementary consultancy markets. We have integrated the businesses of MFT, Projects and Diagonal Consulting under Diagonal Solutions with the clear objective of offering Enterprise Application Integration (EAI) and e-commerce skills with a highly specialised professional team. Chris Chittock's role as Managing Director of the SAP practice has been enlarged to become Managing Director of our combined Consultancy Division with the objective of drawing together our professional skill-sets into a cohesive and client facing unit. Whilst the first half performance was disappointing, the benefits of this restructuring are beginning to be seen in the results of the second half. Annual turnover from the consolidated Consultancy business fell by 6.9% to £ 37.4m (1999 - £40.2 million) after a first half which was 13.2% below the equivalent period of the previous year. The second half has seen a substantial recovery and the forward order book is strong. The impact of the post Y2K slowdown caused gross margins for the year to fall by 3.3 percentage points to 30.5%. Similarly operating profit margins, before tax and amortisation of goodwill, fell by 6.5 percentage points to 9.7%. mySAP.com is being well received and we believe that our restructured Consultancy Division is appropriately skilled to offer a competitive advantage to our clients. In addition, our experience to date leads us to believe that Diagonal Solutions will build a significant client base specialising in both EAI and e-commerce consultancy. Secure Networks The Secure Networks Division, which was formed last year by amalgamating the new acquisitions of Eurostar, CenturyCom and Interop, has now been reorganised as a product led consultancy specialising in network security and remote access security, thereby fully complementing the product offering of our Consultancy Division. CenturyCom and Interop emerged from their earn-out periods in late November 2000 and we are now encouraging the management teams under the direction of Dave Thompson as Managing Director, to expand their activities in this specialist market segment. Turnover from the Division was £20.3 million with an operating margin, before tax and amortisation of goodwill, of 14.4%. We believe that the market for IT security services will continue to be both strong and sustained and that we can achieve a significant market share of this expanding sector. Resourcing The slow down in our agency businesses, as noted in the second half of 1999, continued through 2000 as the market appeared reluctant to drive through new implementations supported by contract personnel. Our strategic review of these businesses concluded that we must contain overhead cost and integrate databases to facilitate better identification and management of professional resources. The administration and support functions of the businesses of Marshall-Wilkins, Sequelogic, Strand and Conos have now been merged but they continue to trade under their recognised brand names. MAPP based in Aylesbury continues to operate independently. Consolidated annual turnover of the Division has fallen by 22% to £25.0 million (1999 - £32.1 million). However, by adopting strict margin disciplines and giving greater focus to permanent placements, the gross margin percentage has increased in absolute terms from 18.6% to 19.4%. We believe we have taken the necessary steps to position this business to benefit quickly from any upturn in the IT contracting market. Outlook 2000 has been a remarkable year for the IT industry when both profitability and external valuations have been highly volatile. Against this backdrop Diagonal has redefined its business strategy and extended its product and consultancy offerings to meet the increasing needs of its growing client base. We have seen a strong recovery in demand for SAP Consulting and, with the benefits from the Secure Networks Division, record profits have been realised in the second half of the year. By adopting the strategy of offering professional services of the highest standard in each of our selected high growth markets, we believe that Diagonal can achieve its ambitions to be the provider of choice and can deliver superior levels of performance. With strengthening markets and by offering products and services for which there is high demand management remains confident that the outlook for Diagonal is very positive. Graham Creswick Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT 53 weeks ended 1 December 2000 Note 53 weeks 52 weeks ended ended 1 28 December November 2000 1999 Continuing Operations Acquisitions Total £'000s £'000s £'000s £'000s TURNOVER 1 61,888 20,847 82,735 72,376 COST OF SALES (45,838) (13,803) (59,641) (52,792) GROSS PROFIT 16,050 7,044 23,094 19,584 ADMINISTRATIVE EXPENSES Amounts written off goodwill (343) (2,318) (2,661) (241) Other administrative expenses (11,870) (3,965) (15,835) (11,336) Total administrative expenses (12,213) (6,283) (18,496) (11,577) OPERATING PROFIT 1,2 3,837 761 4,598 8,007 Interest receivable 265 251 Interest payable and similar (23) (74) charges PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 4,840 8,184 TAX ON PROFIT ON ORDINARY ACTIVITIES (2,054) (2,056) PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 2,786 6,128 EQUITY DIVIDENDS (1,305) (1,226) RETAINED PROFIT FOR THE FINANCIAL PERIOD 11 1,481 4,902 Earnings per Ordinary share 4 3.32p 7.60p Adjusted earnings per Ordinary 4 6.48p 7.90p share Diluted earnings per Ordinary 4 3.30p 7.52p share Adjusted diluted earnings per Ordinary share 4 6.44p 7.82p Equity dividends per Ordinary 1.50p 1.50p share CONSOLIDATED BALANCE SHEET 1 December 2000 Note 1 28 December November 2000 1999 £'000s £'000s FIXED ASSETS Intangible assets 5 28,783 5,642 Tangible assets 6 2,772 4,109 Investments - own shares 10(1) 293 - 31,848 9,751 CURRENT ASSETS Stock 333 - Debtors 7 23,315 19,220 Cash at bank and in hand 6,145 4,792 29,793 24,012 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR 8 (16,949) (13,215) NET CURRENT ASSETS 12,844 10,797 TOTAL ASSETS LESS CURRENT LIABILITIES 44,692 20,548 CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 9 (21) (708) PROVISIONS FOR LIABILITIES AND CHARGES (58) (140) NET ASSETS 1 44,613 19,700 CAPITAL AND RESERVES Called up share capital 10 8,475 8,137 Share premium account 11 21,782 4,279 Shares to be issued 13 5,591 - Other reserves 11 600 600 Profit and loss account 11 8,165 6,684 EQUITY SHAREHOLDERS' FUNDS 44,613 19,700 CONSOLIDATED CASH FLOW STATEMENT Note 53 weeks 52 weeks ended ended 1 28 December November 2000 1999 £'000s £'000s Net cash inflow from operating activities a 7,039 8,674 Returns on investments and servicing of finance b 242 178 Taxation paid (2,002) (3,397) Capital expenditure and financial investment c 1,365 (685) Acquisitions d (12,168) (2,977) Equity dividends paid (1,254) (1,088) Cash (outflow)/inflow before financing (6,778) 705 Financing Issues of Ordinary share capital 10,500 10 Expenses of issues (166) (70) Net repayment of borrowings e (2,169) (984) 8,165 (1,044) Increase/(decrease) in net cash in the period f 1,387 (339) NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT 53 weeks 52 weeks ended ended 1 28 December November 2000 1999 £'000s £'000s a. Reconciliation of operating profit to net cash flow from operating activities Operating profit 4,598 8,007 Amortisation of goodwill 2,661 241 Depreciation 1,247 1,410 Loss on sale of tangible assets 79 22 Increase in stock (275) - (Increase)/decrease in debtors (1,081) 281 Decrease in creditors (108) (1,205) Decrease in provisions (82) (82) Net cash inflow from operating activities 7,039 8,674 b. Returns on investments and servicing of finance Interest received 206 253 Interest paid (23) (1) Interest element of finance lease payments 59 (74) Net cash inflow from returns on investments and servicing of finance 242 178 c. Capital expenditure and financial investment 53 weeks 52 weeks ended ended 1 28 December November 2000 1999 £'000s £'000s Purchases of tangible fixed assets (1,203) (1,004) Proceeds of disposals of fixed assets 2,568 319 Net cash inflow/(outflow) from capital 1,365 (685) expenditure and financial investment d. Acquisitions Cash cost of acquisitions (note 12) (13,744) (4,087) Less: Net cash acquired 1,576 1,110 Net cash outflow from acquisitions (12,168) (2,977) e. Reconciliation of net cash flow to movement in 53 weeks net funds ended 1 December 2000 £'000s Increase in cash in the period 1,387 Cash outflow from lease financing 2,169 Changes in net funds resulting from cash flows 3,556 New finance leases (618) Leases acquired (83) Movement in net funds 2,855 Net funds at 28 November 1999 3,150 Net funds at 1 December 2000 6,005 f. Movement in period Acquisi- At 28 tions Non- At 1 November Cash excluding cash December 1999 flows net cash changes 2000 £ £ £ £ £ '000s '000s '000s '000s '000s Cash 4,792 1,353 - - 6,145 Overdrafts (58) 34 - - (24) Increase in net cash - 1,387 - - - Finance leases (1,584) 2,169 (83) (618) (116) 3,150 3,556 (83) (618) 6,005 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 53 weeks 52 weeks ended ended 1 December 28 November 2000 1999 £'000s £'000s Profit for the financial period 2,786 6,128 Equity Dividends (1,305) (1,226) 1,481 4,902 Issues of shares 18,007 2,673 Expenses of share issues (166) (70) Shares to be issued 5,591 - Funding of qualifying employee shareholding trust - (1,683) Net additions to shareholders' funds 24,913 5,822 Opening shareholders' funds 19,700 13,878 Closing shareholders' funds 44,613 19,700 NOTES TO THE ACCOUNTS 1. ANALYSIS OF TURNOVER, OPERATING PROFIT AND NET ASSETS Analysis by class of business of turnover, operating profit and net assets are stated below. Turnover Operating profit* 53 weeks 52 weeks 53 weeks 52 weeks ended ended ended ended Net assets 1 28 1 28 1 28 December November December November December November 2000 1999 2000 1999 2000 1999 £'000s £'000s £'000s £'000s £'000s £'000s Class of business Continuing operations Consultancy 36,893 40,202 3,230 6,384 14,898 15,627 Resourcing 24,995 32,174 607 1,623 3,553 4,073 61,888 72,376 3,837 8,007 18,451 19,700 Acquired operations Secure Networks 20,327 - 817 - 26,518 - Consultancy 520 - (56) - (356) - 82,735 72,376 4,598 8,007 44,613 19,700 * Operating profit is stated after charging amortisation of goodwill An analysis of the Group's turnover by geographical market by destination is set out below. 53 weeks ended 52 weeks ended 1 December 28 November 2000 1999 £'000s £'000s UK 75,747 62,324 Other European countries 6,428 9,628 Rest of the world 560 424 82,735 72,376 2. OPERATING PROFIT 53 weeks ended 52 weeks ended 1 December 28 November 2000 1999 £'000s £'000s The operating profit is stated after charging Depreciation - owned assets 780 622 - leased assets 467 788 Loss on sale of fixed assets 79 22 Auditors' remuneration - audit fees 123 84 - other services 56 39 Operating lease charges - other 1,085 512 Losses on foreign exchange 4 - £118,000 (1999 - £25,000) in respect of fees paid to the auditors have been capitalised as part of the cost of acquisitions. 3. EMPLOYEES 53 weeks ended 52 weeks ended 1 December 28 November 2000 1999 The average number of employees, including Directors, employed by the Group during the period, was as follows Number Number Operating 311 254 Sales and administration 151 128 462 382 The costs incurred in respect of these employees £'000s £'000s were as follows Salaries and bonuses 24,154 21,283 Social security costs 2,889 2,536 Other pension costs 286 114 27,329 23,933 4. EARNINGS PER SHARE Earnings per share have been computed in accordance with Financial Reporting Standard 14 'Earnings per Share'. A reconciliation of the earnings and weighted average number of shares used in the calculation is set out below. 53 weeks 52 weeks ended ended 1 December 28 November 2000 1999 £'000s £'000s Profit on ordinary activities after tax 2,786 6,128 Amount written off goodwill 2,661 241 Adjusted profits 5,447 6,369 Number Number Weighted averaged number of shares in issue 83,998,301 80,651,523 Effect of options 542,232 799,862 Total shares 84,540,533 81,451,385 Pence Pence Basic EPS Unadjusted 3.32 7.60 Goodwill 3.16 0.30 Adjusted 6.48 7.90 Diluted EPS Unadjusted 3.30 7.52 Goodwill 3.14 0.30 Adjusted 6.44 7.82 5. INTANGIBLE FIXED ASSETS Group £'000s £'000s Goodwill arising on consolidation Cost at 29 November 1999 6,858 Goodwill arising on acquisitions (see note 12) 25,802 Cost at 1 December 2000 32,660 Amortisation at 29 November 1999 (1,216) Amortisation provided in the period (2,661) Amortisation at 1 December 2000 (3,877) Net book value at 1 December 2000 28,783 Net book value at 28 November 1999 5,642 6. TANGIBLE FIXED ASSETS Land Furniture and Motor fixtures Office Computer and buildings vehicles fittings equipment equipment Total £'000s £'000s £'000s £'000s £'000s £ '000s Cost At 29 November 1999 33 3,636 1,286 351 2,011 7,317 Acquisitions 239 454 34 172 49 948 Additions - 828 141 138 714 1,821 Disposals - (4,457) (14) (15) (164)(4,650) At 1 December 2000 272 461 1,447 646 2,610 5,436 Depreciation At 29 November 1999 15 1,410 509 207 1,067 3,208 Acquisitions 4 126 13 57 12 212 Charge for the 12 467 198 98 472 1,247 period Disposals - (1,819) (12) (11) (161)(2,003) At 1 December 2000 31 184 708 351 1,390 2,664 Net book value At 1 December 2000 241 277 739 295 1,220 2,772 At 28 November 1999 18 2,226 777 144 944 4,109 7. DEBTORS 1 28 December November 2000 1999 £''000s £'000s Trade debtors 21,845 18,219 Corporation tax - 355 Other debtors 201 445 Prepayments and accrued income 1,269 201 23,315 19,220 8. CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR 1 28 December November 2000 1999 £'000s £'000s Bank overdraft 24 58 Obligations under finance leases 95 876 Trade creditors 5,686 3,017 Corporation tax 1,909 1,728 Other taxation and social security 3,244 4,302 Other creditors 331 215 Accruals and deferred income 4,787 2,197 Dividends payable 873 822 16,949 13,215 The bank overdraft is secured by a fixed and floating charge over the assets of the Group. 9. CREDITORS - AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 1 28 December November 2000 1999 £'000s £'000s Obligations under finance leases 21 708 Analysis of repayments Between one and two years 21 526 Between two and five years - 182 21 708 10. CALLED UP SHARE CAPITAL 1 28 December November 2000 1999 £'000s £'000s Authorised Equity 120,000,000 (1999 - 120,000,000) Ordinary shares of 10p 12,000 12,000 each Called up, allotted and fully paid Equity 84,745,936 (1999 - 81,374,188) Ordinary shares of 10p 8,475 8,137 each Nominal Value Consideration Date Number £ £ Shares issued in the period were Acquisition of Eurostar 07.01.00 1,103,448 110,345 3,200,000* Acquisition of CenturyCom 12.01.00 321,660 32,166 1,180,000* Placing 02.03.00 1,179,775 117,978 10,500,000 Acquisition of Interop 16.06.00 188,764 18,876 1,010,000* Acquisition of Eurostar - additional consideration 31.07.00 427,784 42,778 1,570,000* Acquisition of Interop - additional consideration 06.09.00 47,508 4,751 254,000* 10.(1)Shares issued to Executive 17.10.00 95,789 9,579 273,000 Share Option Trust 10.(1)Shares issued to Executive 06.11.00 7,020 702 20,000 Share Option Trust 3,371,748 337,175 18,007,000 * deemed proceeds The qualifying employee shareholding trust has waived the right to dividends on its holding of 159,390 Ordinary 10p shares. The Executive Share Option Trust has waived the right to dividends on its holding of 102,809 Ordinary 10p shares. 10.(1) Investments - own shares The shares issued to the Executive Share Option Trust ('the Trust') were funded by a loan to the Trust from the Company. The shares are held by the Trust, for the benefit of the Company, to settle any future national insurance liability arising on the exercise of share options issued to employees. 11. STATEMENT OF MOVEMENTS ON RESERVES Share Capital Profit premium Merger redemption and loss account reserve reserve account £'000s £'000s £'000s £'000s Balances at 29 November 1999 4,279 22 578 6,684 Premium on issue of shares 17,669 - - - Expenses of issue (166) - - - Retained profit for the financial - - - 1,481 period Balances at 1 December 2000 21,782 22 578 8,165 12. ACQUISITIONS AND GOODWILL The following acquisitions have been accounted for using the acquisition method of accounting Total Eurostar CenturyCom Interop Datel 2000 £'000s £'000s £'000s £'000s £ '000s Tangible fixed assets 479 152 105 - 736 Debtors 1,232 1,008 1,690 3,930 Stock 27 4 27 - 58 Net cash 152 658 766 - 1,576 Creditors (amounts falling due within one year) (1,361) (1,794) (2,097) (300) (5,552) Book and fair value 529 28 491 (300) 748 Goodwill 8,087 8,240 8,877 598 25,802 8,616 8,268 9,368 298 26,550 Satisfied by Shares including premium 4,770 1,180 1,264 - 7,214 Cash paid 3,846 3,600 6,001 298 13,745 Shares to be issued - 3,488 2,103 - 5,591 8,616 8,268 9,368 298 26,550 Date of acquisition 03.12.99 06.01.00 12.04.00 01.06.00 Period of goodwill amortisation 10 years 10 years 10 years 18 months 13. SHARES TO BE ISSUED On 9 January 2001 1,885,720 Diagonal PLC Ordinary 10p shares were issued to satisfy the contingent consideration in connection with the acquisition of CenturyCom Limited. On 13 February 2001 996,956 Diagonal PLC Ordinary 10p shares were issued to satisfy the contingent consideration in connection with the acquisition of Interop Technologies Limited. 14. FINANCIAL INFORMATION The financial information set out in the announcement does not constitute the Group's statutory accounts for the 53 weeks ended 1 December 2000 or the 52 weeks ended 28 November 1999. The financial information for the period ended 28 November 1999 is derived from the statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under S237(2) or (3) Companies Act 1985. The statutory accounts for the 53 weeks ended 1 December will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following their publication.

Companies

Dialight (DIA)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today