Interim Results

Diagonal PLC 17 July 2001 DIAGONAL - INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 1 JUNE 2001 17 July 2001 Turnover £45million +20% Profit before tax* £4.5million +94% Adjusted earnings per share* 3.53p +74% Dividend 0.6p +20% * All figures are before amortisation of goodwill arising from acquisitions Key highlights include: Success of strategic shift into quality higher margin business demonstrated Acquisition of Claritas announced today Strength of SAP product range confirmed Secure Networks businesses developing in line with expectations Enquiries: Graham Creswick, Chief Executive Alan Hunter, Finance Director Tel: +44 (0) 1252 733 711 Ian Seaton, Citigate Dewe Rogerson Georgina Peiser Tel: +44 (0) 207 638 9571 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 have pleasure in reporting our results for the six month period ended 1 June 2001. Turnover at £45 million has increased by 20% over the equivalent period of the prior year, while profit, before taxation and goodwill amortisation, has increased by 94% to £4.5million. Adjusted earnings per share have increased by 74% to 3.53p. In recognition of the improved performance of the Group the interim dividend has been increased by 20% to 0.6p. We have continued to implement the strategy adopted last year, of moving the Group towards quality higher margin businesses and are pleased to announce the acquisition of Claritas Information Security Limited, an IT consultancy specialising in information security consultancy services. In April the MAPP resourcing business was sold to the management team at book value. We note the general market sentiment towards the IT sector and while Diagonal would not be immune to a widespread slowdown in IT services spending, the second half has commenced satisfactorily. Staff utilisation in our Consultancy businesses has been high and our positive view for the remainder of the year is reinforced by a good order book and prospect list. The Secure Networks Division does not have a long term order book, as has been the case historically. However, sales for the month of June have been strong and we do not currently see signs of a downturn in activity. Based upon evidence to date we expect a satisfactory outcome for the full year. Mark Samuels Chairman 16 July 2001 CONSOLIDATED PROFIT AND LOSS ACCOUNT Note Half -year Half-year 53 Weeks Continuing Discontinued Ended Ended ended Operations Operations 1 June 28 May 1 Dec 2001 2000 2000 £'000s £'000s (Unaudited) (Unaudited)(Audited) £'000s £'000s £'000s TURNOVER 2 42,264 2,691 44,955 37,555 82,735 COST OF SALES (29,787) (2,239) (32,026) (28,107) (59,641) GROSS PROFIT 12,477 452 12,929 9,448 23,094 ADMINISTRATIVE EXPENSES Amounts written (1,584) - (1,584) (579) (2,661) off goodwill Other (8,149) (452) (8,601) (7,142) (15,835) administrative expenses (9,733) (452) (10,185) (7,721) (18,496) OPERATING PROFIT 2 2,744 - 2,744 1,727 4,598 Net Interest 176 18 242 PROFIT ON ORDINARY 2,920 1,745 4,840 ACTIVITES BEFORE TAXATION TAX ON PROFIT ON (1,413) (633) (2,054) ORDINARY ACTIVITIES PROFIT ON ORDINARY 1,507 1,112 2,786 ACTIVITIES AFTER TAXATION EQUITY DIVIDENDS 4 (528) (429) (1,305) RETAINED PROFIT 979 683 1,481 FOR THE FINANCIAL PERIOD Earnings per 3 1.72p 1.33p 3.32p Ordinary share Adjusted earnings 3 3.53p 2.03p 6.48p per Ordinary share Diluted earnings 3 1.71p 1.32p 3.30p per Ordinary share Adjusted diluted 3 3.51p 2.00p 6.44p earnings per Ordinary share Equity dividends 4 0.60p 0.50p 1.50p per 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 1 June 2001 28 May 2000 1 Dec 2000 (Unaudited) (Unaudited) (Audited) £'000s £'000s £'000s FIXED ASSETS Intangible assets 26,460 30,801 28,783 Tangible assets 2,731 4,753 2,772 Investments - own shares 877 - 293 30,068 35,554 31,848 CURRENT ASSETS Stock 211 - 333 Debtors 25,797 23,650 23,315 Cash at bank in hand 9,182 4,744 6,145 35,190 28,394 29,793 CREDITORS-AMOUNTS FALLING (18,830) (26,028) (16,949) DUE WITHIN ONE YEAR NET CURRENT ASSETS 16,360 2,366 12,844 TOTAL ASSETS LESS CURRENT LIABILITIES 46,428 37,920 44,692 CREDITORS-AMOUNTS FALLING (6) (773) (21) DUE AFTER MORE THAN ONE YEAR PROVISIONS FOR LIABILITES AND CAHRGES (58) - (58) NET ASSETS 46,374 37,147 44,613 CAPITAL AND RESERVES Called up share capital 8,789 8,459 8,475 Share Premium account 27,831 20,721 21,782 Shares to be issued - - 5,591 Other reserves 600 600 600 Profit and loss account 9,144 7,367 8,165 EQUITY SHAREHOLDERS' FUNDS 46,364 37,147 44,613 RECONCILATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Profit for the financial period 1,507 1,112 2,786 Equity dividends (528) (429) (1,305) 979 683 1,481 Issues of shares 772 16,930 18,007 Expenses of share issues - (166) (166) Shares to be issued - - 5,591 Net additions to shareholders' funds 1,751 17,447 24,913 Opening shareholders' funds 44,613 19,700 19,700 Closing shareholders' funds 46,364 37,147 44,613 CONSOLIDATION CASH FLOW STATEMENT Half-year Half-year 53 weeks ended ended ended 1 June 2001 28 May 2000 1 Dec 2000 (Unaudited) (Unaudited) (Audited) £'000s £'000s £'000s NET CASH FLOW FROM OPERATING ACTIVITIES 4,750 2,507 7,039 RETURNS ON INVESTMENTS AND SERVICING OF 175 20 242 FINANCE TAXATION PAID (1,327) (497) (2,002) CAPITAL EXPENDITURE AND FINANCIAL (520) (172) 1,365 INVESTMENT ACQUISITIONS AND DISPOSALS 767 (11,390) (12,168) EQUITY DIVIDENDS PAID (874) (834) (1,254) CASH INFLOW/(OUTFLOW) BEFORE FINANCING 2,971 (10,366) (6,778) FINANCING Issues of Ordinary share capital 146 10,760 10,500 Expenses of share issues - (166) (166) Net repayment of borrowings (56) (560) (2,169) 90 10,034 8,165 INCREASE/(DECREASE IN CASH IN THE 3,061 (332) 1,387 PERIOD RECONCILATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES Operating profit 2,744 1,727 4,598 Amortisation of goodwill 1,584 579 2,661 Depreciation 479 784 1,247 Loss on sales of tangible fixed assets 8 6 79 Loss on sale of investment 12 - - Decrease/(increase) in stock 122 - (275) Increase in debtors (3,036) (1,059) (1,081) Increase/(decrease) in creditors 2,837 579 (108) Decrease in provisions - (109) (82) NET CASH INFLOW FROM OPERATING 4,750 2,507 7,039 ACTIVITIES MOVEMENT IN NET FUNDS/(DEBT) Opening balances Cash 6,145 4,792 4792 Overdraft (24) (58) (58) Finance leases (116) (1,584) (1,584) 6,005 3,150 3,150 Movement in period Cash 3,037 (48) 1,353 Overdraft 24 (285) 34 Finance lease repayments 60 560 2,169 Leases acquired (non-cash) - (82) (83) New Finance leases (non-cash) - (526) (618) 3,121 (381) 2,855 Closing balances Cash 9,182 4,744 6,145 Overdraft - (343) (24) Finance leases (56) 1,632) (116) 9,126 2,769 6,005 NOTES 1. The interim results, approved by the Board of Directors on 16 July 2001, 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 1 June 2001 and 28 May 2000 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 53 weeks to 1 December 2000 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. Analysis of turnover and operating profit by class of business Turnover Opening Profit (1) Half-year Half-year 53 weeks Half-year Half-year 53 weeks Ended ended ended ended ended ended 1 June 28 May 1 Dec 1 June 28 May 2000 1 Dec 2001 2000 2000 2001 2000 (Unaudited)(Unaudited)(Audited)(Unaudited) (Unaudited)(Audited) £'000s £'000s £'000s £'000s £'000s £'000s Class of business Continuing operations Consultancy 22,671 17,045 37,413 2,352 564 3,174 Secure Networks 12,302 8,386 20,327 213 720 817 Resourcing 7,291 12,124 24,995 179 443 607 42,264 37,555 82,735 2,744 1,727 4,598 Discontinued 2,691 - - - - - operations Resourcing (1) Operating profit 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. A reconciliation of the earnings and weighted average number of shares used in the calculation is set out below. Half-year Half-year 53 weeks ended ended ended 1 June 2001 28 May 2000 1 Dec 2000 (Unaudited) (Unaudited) (Audited) £'000's £'000's £'000s Profit on ordinary activities after 1,507 1,112 2,786 taxation Amounts written off goodwill 1,584 579 2,661 Adjusted profits 3,091 1,691 5,447 Number Number Number Weighted average number of shares in 87,636,069 83,416,869 83,998,301 issure Effect of options 323,238 1,108,398 542,232 Total shares 87,959,307 84,525,267 84,540,533 Pence Pence Pence Basic EPS Unadjusted 1.72 1.33 3.32 Goodwill 1.81 0.70 3.16 Adjusted 3.53 2.03 6.48 Diluted EPS Unadjusted 1.71 1.32 3.30 Goodwill 1.80 0.68 3.14 Adjusted 3.51 2.00 6.44 - The interim dividend will be paid on 1 October 2001 to shareholders on the register at the close of business on 17 August 2001. The cost of the dividend payable to Ordinary Shareholders is £528,000 (28 May 2000: £417,000; 1 December 2000: £873,000). - 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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