Interim Results

Diagonal PLC
24 July 2003



                                  DIAGONAL PLC

                                 INTERIM RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 MAY 2003



24 July 2003


•        Turnover                                                       £30.6m

•        Profit before tax*                                              £1.9m

•        Adjusted earnings per share*                                    1.44p

•        Dividend                                                         0.7p


*    after 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:  [phone]

Ian Seaton, Bankside Consultants Limited              Tel:  [phone]



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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