Interim Results

Diagonal PLC 12 July 2000 DIAGONAL - INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 28 MAY 2000 EARLY RECOVERY IN SALES Diagonal PLC, the IT Services Group announces a strong recovery in second quarter revenue. FIRST HALF PERFORMANCE SUMMARY Turnover up by £0.4 million to £37.6 million Profit before tax down 47 per cent to £2.3 million Adjusted EPS down 46 per cent to 2.03p Interim dividend maintained at 0.5p. Commenting on the results, MARK SAMUELS, Chairman said: 'Despite a poor first quarter, which included December and January, the second quarter has picked up very quickly producing almost all of the profit recorded in the first half-year. We are particularly pleased with the performance of our new Solutions Group which produced revenue in excess of £10 million in the first half.' Mark Samuels Chairman FOR FURTHER INFORMATION MARK SAMUELS CHAIRMAN 01252 733711 GRAHAM CRESWICK CHIEF EXECUTIVE 01252 733711 RICHARD POLLEN POLLEN ASSOCIATES 01428 608860 CHAIRMAN'S STATEMENT I have pleasure in reporting our results for the six month period ended 28 May 2000. Group turnover increased by £0.4 million to £37.6 million compared to the equivalent period of the prior year. Profit before taxation (excluding the effects of goodwill amortisation) fell by 47 per cent to £2.3 million. Almost all of the shortfall occurred during the first quarter which included both December and January, a period of exaggerated inactivity. Nearly 90 per cent of the first half profit was made in the second quarter following a rapid increase in sales activity. Although adjusted earnings per share fell by 46 per cent to 2.03p, the interim dividend will be maintained at 0.5p and will be paid on 2 October 2000 to shareholders on the register as at 11 August 2000. The SAP marketplace clearly paused for breath following several years of intense activity preceding the millennium. We are now seeing firm evidence of the market improving and we will ensure that Diagonal remains at the forefront of our chosen specialisation. Our latest new revenue stream, Diagonal Solutions has exceeded expectations. Following the acquisition of MFT Computer Systems in 1999, a further three businesses have been acquired in the current financial year. Eurostar Network Systems, a highly respected product-led networking consultancy was acquired in December; CenturyCom, a young but fast growing internet security company was acquired in January and Interop, a remote access security business, was acquired in April. These combined businesses produced revenue in the half-year of £10.4 million at a net profit margin of nearly 14 per cent. Current indications are that they will achieve very strong results in the second half. Mark Samuels Chairman 11 July 2000 CONSOLIDATED PROFIT AND LOSS ACCOUNT Half- Half- year year Year Continuing Ended Ended ended Acquisitions 28 May 30 May 28 Nov Note Operations 2000 1999 1999 £000s (Unaudited) (Unaudited) (Audited) £000s £000s £000s £000s TURNOVER 29,169 8,386 37,555 37,141 72,376 COST OF SALES (22,067) (6,040) (28,107) (27,340) (52,792) -------- --------- -------- -------- -------- GROSS PROFIT 7,102 2,346 9,448 9,801 19,584 ADMINISTRATIVE EXPENSES Amounts (171) (408) (579) (69) (241) written off goodwill Administrative (5,924) (1,218) (7,142) (5,470) (11,336) expenses -------- --------- -------- -------- -------- Total (6,095) (1,626) (7,721) (5,539) (11,577) administrative expenses -------- --------- -------- -------- -------- OPERATING 1,007 720 1,727 4,262 8,007 PROFIT Net interest 18 96 177 -------- -------- -------- PROFIT ON 1,745 4,358 8,184 ORDINARY ACTIVITIES BEFORE TAXATION TAX ON PROFIT (633) (1,388) (2,056) ON ORDINARY ACTIVITIES -------- -------- -------- PROFIT ON 1,112 2,970 6,128 ORDINARY ACTIVITIES AFTER TAXATION DIVIDENDS (429) (404) (1,226) -------- -------- -------- RETAINED 683 2,566 4,902 PROFIT FOR THE PERIOD ====== ======= ======= Earnings per 2 1.33p 3.69p 7.60p Ordinary share Adjusted 2 2.03p 3.78p 7.90p earnings per Ordinary share Diluted 2 1.32p 3.66p 7.52p earnings per Ordinary share Adjusted 2 2.00p 3.74p 7.82p diluted earnings per Ordinary share ====== ======= ======= Dividends per 3 0.5p 0.5p 1.5p Ordinary share ====== ======= ======= 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 As at As at As at 28 May 30 May 28 Nov 1999 2000 1999 (Audited) (Unaudited) (Unaudited) £000s £000s £000s FIXED ASSETS Intangible assets 30,801 5,817 5,642 Tangible assets 4,753 4,206 4,109 ------ ------ ------ 35,554 10,023 9,751 CURRENT ASSETS Debtors 23,650 19,888 19,220 Cash at bank and in hand 4,744 3,476 4,792 ------ ------ ------ 28,394 23,364 24,012 CREDITORS - AMOUNTS FALLING DUE (26,028) (15,105) (13,215) WITHIN ONE YEAR ------ ------ ------ NET CURRENT ASSETS 2,366 8,259 10,797 ------ ------ ------ TOTAL ASSETS LESS CURRENT 37,920 18,282 20,548 LIABILITIES CREDITORS - AMOUNTS FALLING DUE (773) (776) (708) AFTER ONE YEAR PROVISIONS FOR LIABILITIES AND - (130) (140) CHARGES ------ ------ ------ 37,147 17,376 19,700 ====== ====== ====== CAPITAL AND RESERVES Called up share capital 8,459 8,079 8,137 Share premium 20,721 2,666 4,279 Other reserves 600 600 600 Profit and loss account 7,367 6,031 6,684 ------ ------ ------ EQUITY SHAREHOLDERS FUNDS 37,147 17,376 19,700 ====== ====== ====== RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS Profit after taxation 1,112 2,970 6,128 Dividends (429) (404) (1,226) ------ ------ ------ 683 2,566 4,902 Issue of shares 16,930 979 2,673 Expenses of issues (166) (47) (70) Funding of qualifying employee - - (1,683) shareholding trust ------ ------ ------ Net additions to shareholders funds 17,447 3,498 5,822 Opening shareholders funds 19,700 13,878 13,878 ------ ------ ------ Closing shareholders funds 37,147 17,376 19,700 ====== ====== ====== CONSOLIDATED CASH FLOW STATEMENT Half-year Half-year Year ended ended ended 28 May 30 May 1999 28 Nov 2000 (Unaudited) 1999 (Unaudited) £000s (Audited) £000s £000s NET CASH INFLOW FROM OPERATING 2,507 3,224 8,674 ACTIVITIES RETURNS ON INVESTMENTS AND 20 95 178 SERVICING OF FINANCE TAXATION PAID (497) (283) (3,397) CAPITAL EXPENDITURE AND FINANCIAL (172) (418) (685) INVESTMENT ACQUISITIONS AND DISPOSALS (11,390) (3,001) (2,977) EQUITY DIVIDENDS PAID (834) (684) (1,088) -------- ------ ------ CASH (OUTFLOW)/INFLOW BEFORE (10,366) (1,067) 705 FINANCING -------- ------ ------ FINANCING Issues of Ordinary share capital 10,760 - 10 Expenses of issues (166) (47) (70) Net repayment of borrowings (560) (483) (984) ------ ------ ------ 10,034 (530) (1,044) ------ ------ ------ DECREASE IN CASH IN THE PERIOD (332) (1,597) (339) ====== ====== ====== RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOW Operating profit 1,727 4,262 8,007 Amortisation of goodwill 579 69 241 Depreciation 784 660 1,410 (Profit)/loss on sales of tangible 6 (7) 22 assets (Increase)/decrease in debtors (1,059) (739) 281 Increase/(decrease) in creditors 579 (967) (1,205) Decrease in provisions (109) (54) (82) ------ ------ ------ NET CASH INFLOW FROM OPERATING 2,507 3,224 8,674 ACTIVITIES ====== ====== ====== MOVEMENT IN NET FUNDS/(DEBT) Opening balances Cash 4,792 5,467 5,467 Overdraft (58) (394) (394) Finance leases (1,584) (1,667) (1,667) ------ ------ ------ 3,150 3,406 3,406 ------ ------ ------ Movement in period Cash (48) (1,991) (675) Overdraft (285) 394 336 Finance lease repayments 560 483 984 Leases acquired (non- cash) (82) - - New finance leases (non-cash) (526) (466) (901) ------ ------ ------ (381) (1,580) (256) ------ ------ ------ Closing balances Cash 4,744 3,476 4,792 Overdraft (343) - (58) Finance leases (1,632) (1,650) (1,584) ------ ------ ------ 2,769 1,826 3,150 ------ ------ ------ NOTES 1. The interim results, approved by the Board of Directors on 11 July 2000, have been prepared in accordance with applicable United Kingdom Accounting Standards, using the historical cost convention. The financial information for the six month periods ended 28 May 2000 and 30 May 1999 has been neither audited nor reviewed and does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The results for the year to 28 November 1999 have been extracted from the Annual Report and Accounts which received an unqualified auditors' report and have been delivered to the Registrar of Companies. 2. 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 take account of the dilutive potential Ordinary Shares, which arise under the employees' Save-As-You-Earn Share Option Scheme, where the exercise price is less than the average market price of the Company's Ordinary Shares during the relevant period. It also takes account of the dilutive effect of deferred consideration shares, based on closing market price at the end of the period, where the criteria for the deferred consideration have been met. A reconciliation of the earnings and weighted average number of shares used in the calculation is set out below. Half-year Half-year Year ended ended ended 28 Nov 28 May 2000 30 May 1999 1999 (Unaudited) (Unaudited) (Audited) £'000s £'000s £'000s Profit on ordinary activities 1,112 2,970 6,128 after tax 579 69 241 Amounts written off goodwill ------ ------ ------ Adjusted profits 1,691 3,039 6,369 ====== ====== ====== Number Number Number Weighted average number of shares 83,416,869 80,486,434 80,651,523 in issue 1,108,398 768,742 799,862 Effect of options ---------- ---------- ---------- Total shares 84,525,267 81,255,176 81,451,385 ========== ========== ========== Pence Pence Pence Basic EPS Unadjusted 1.33 3.69 7.60 Goodwill 0.70 0.09 0.30 ------ ------ ------ Adjusted 2.03 3.78 7.90 ====== ====== ====== Diluted EPS Unadjusted 1.32 3.66 7.52 Goodwill 0.68 0.08 0.30 ------ ------ ------ Adjusted 2.00 3.74 7.82 ====== ====== ====== 3. The interim dividend will be paid on 2 October 2000 to shareholders on the register at the close of business on 11 August 2000. The cost of the dividend payable to Ordinary Shareholders is £417,000 (30 May 1999: £404,000; 28 November 1999: £822,000). In addition there is a charge of £12,000 in respect of an under provision for the 1999 final dividend. 4. 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.

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