DIPLOMA PLC 
ANNUAL REPORT AND ACCOUNTS 2003
DIPLOMA PLC ANNUAL REPORT AND ACCOUNTS 2003
DIPLOMA PLC
20 Bunhill Row
London
EC1Y 8UD
www.diplomaplc.com
Tel 020 7638 0934
Fax 020 7638 7651 COMPANY STATEMENT
CONTENTS
01 FINANCIAL HIGHLIGHTS
02 GROUP STRUCTURE 
03 CHAIRMAN’S STATEMENT
04 CHIEF EXECUTIVE OFFICER'S REVIEW 
06 REVIEW OF OPERATIONS
12 FINANCE DIRECTOR’S REVIEW 
14 BOARD OF DIRECTORS AND ADVISORS
15 DIRECTORS’ REPORT
17 CORPORATE GOVERNANCE
19 REMUNERATION REPORT
24 DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS
25 INDEPENDENT AUDITORS’ REPORT
26 GROUP PROFIT & LOSS ACCOUNT
27 BALANCE SHEETS
28 GROUP CASH FLOW STATEMENT
29 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
29 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
30 NOTES TO THE FINANCIAL STATEMENTS
44 GROUP ACCOUNTING POLICIES
46 PRINCIPAL SUBSIDIARIES
47 FINANCIAL CALENDAR AND SHAREHOLDER INFORMATION
48 FIVE YEAR RECORD
Diploma PLC is a group of specialised 
international distribution businesses 
serving industries with long term growth 
potential and with the opportunity for 
sustainable superior margins through 
the quality of customer service, depth of 
technical support and value adding activities.
Designed by Energy Design Studio Ltd. Produced by Imprima De Bussy Limited 020 7902 7200. FINANCIAL HIGHLIGHTS
1 DIPLOMA PLC Annual Report and Accounts 2003
2003 2002
Turnover from continuing businesses £77.1m £73.7m
Operating profit from continuing businesses, £9.7m £8.9m
before exceptional items and goodwill amortisation
Profit before tax, exceptional items and goodwill amortisation £10.6m £9.9m
Profit before tax £12.7m £10.1m
Basic earnings per share 42.8p 31.2p
Adjusted earnings per share 32.2p 29.4p
Dividends per share 15.0p 14.0p
n Profit before tax, exceptional items and goodwill amortisation up 7% to £10.6m
from £9.9m; operating margin of 12.6% (2002: 12.1%).
n Earnings per share, after adjusting for exceptional items and goodwill amortisation, 
up 10% at 32.2p; basic earnings per share 42.8p. Full year dividend up by 1.0p
to 15.0p, 2.1 times covered by adjusted earnings per share.
n Strong operating cash flow of £11.1m and proceeds of £4.2m from sale of land 
and properties. Net funds of £29.3m at the year end.
n Acquisition of Hawco business completed in July for a maximum net cash cost of £6.3m;
two month contribution to operating profits of £0.3m on sales of £3.6m.
n Implementation of major new IT system across North American operations 
of Seals & Components for capital cost of £0.9m.
n Disposal of first seven acres of Stamford land and of remaining surplus properties 
contributed to net exceptional profits of £2.4m. Preparation for sale of a further 
20 acres continues.
n Acquisition of Filcon for a maximum net cash cost of £4.1m, announced after 30 September
2003, expands the scope of our Controls & Interconnect business in Germany. Life Sciences
Seals & Components
Controls & Interconnect Total Sales 2003 £24.7m  
of Group turnover
32%
(2002: £18.6m)
Total Sales 2003 £27.4m  
of Group turnover
36%
(2002: £28.2m)
Total Sales 2003 £25.0m 
of Group turnover
32%
(2002: £26.9m)
Distributors of instrumentation,
consumables and related 
services to the Life Science
research laboratories of the major
pharmaceutical and biotechnology
companies, universities and
research institutions
BUSINESSES
Anachem
a1-envirotech
Life Sciences 
contributes
Catalogue based distributors of
hydraulic seal kits, cylinder
components and gaskets to repair
and maintenance operations
(RMOs) serving a broad range of
mobile machinery after-markets
BUSINESSES
Hercules Bulldog Sealing
Products
FPE
Seals & Components 
contributes
Distributors of specialised wiring,
connection and control devices
into a range of technically
demanding applications
BUSINESSES
IS Rayfast
IS Motorsport
Clarendon
Hawco
Sommer
Controls & Interconnect 
contributes
GROUP STRUCTURE
2 DIPLOMA PLC Annual Report and Accounts 2003 The Group has again demonstrated the resilience of its
operating businesses despite the difficult market and economic
conditions prevailing in most sectors and geographies in which
we operate. Against this background, the Group achieved a
commendable result. Solid progress was also achieved in
delivering the strategy of building more substantial, broader
based businesses through a combination of acquisitions and
investment in organic growth.
EARNINGS AND DIVIDENDS
Earnings per share, after excluding exceptional items and
goodwill amortisation, increased by 10% to 32.2 pence
compared with 29.4 pence last year. Basic earnings per 
share were 42.8 pence compared with 31.2 pence last year.
The Directors are recommending an increased final 
dividend of 10.0 pence per share (2002: 9.0 pence), which
raises the total dividend payment for the year to 15.0 pence
per share (2002: 14.0 pence), an increase of 7%.
PEOPLE
It was with great sadness that we learnt in April of the
sudden death of our colleague, Bill Reid. Bill had been a
Non-executive Director of the Company for nine years and
contributed significantly to the substantial restructuring of
the Group which has been achieved in recent years.
In July we welcomed John Matthews to the Board as a 
Non-executive Director. We look forward to the contribution
he will make to the future development of the Group, given
his many years of experience as a Director of a number of
public and private companies.
After over thirty years as Chairman and Chief Executive of 
the Company, and in recent years as Non-executive Chairman, 
I have decided to retire from the Board at the conclusion 
of the AGM on 7 January 2004. 
I have derived immense satisfaction from leading the
Company through its various phases of development and 
I am pleased to see it today in robust financial health 
and poised for its next period of growth. I am confident 
that the Group will continue to flourish under the new 
team guided by my successor, John Rennocks.
As I reflect, in 1969 the Company had both a net worth 
and market capitalisation of £370,000. Financed almost
exclusively from our own cash flow, we have grown net 
worth to ca. £60m (including £30m of cash) and market
capitalisation to ca. £100m. This has been achieved after
returning more than £70m to shareholders in recent years, 
in addition to our regular and growing dividends. Over the
years, our guiding objective has been to focus on positive
cashflow and this remains a fundamental principle for the
Board, as is demonstrated by the accounts.
Finally, I should also like to express my thanks to all my
colleagues, both past and present, who have made my time
with the Company so rewarding and also to our employees
who continue to make a vital contribution to the
development of the Group.
CURRENT TRADING
The current trading conditions remain difficult and signs 
of economic recovery in each of the sectors in which we
operate are patchy. However, the businesses have begun 
the new financial year trading in line with expectations 
and their inherent resilience to changing trading conditions,
together with the recent acquisitions, should allow the 
Group to make further progress in 2004.
Christopher Thomas
Chairman
17 November 2003
CHAIRMAN’S STATEMENT
3 DIPLOMA PLC Annual Report and Accounts 2003
Our guiding objective has been to focus 
on positive cash flow and this remains a 
fundamental principle We have made further progress towards 
our strategic objective of building more 
substantial, broader based businesses
in our chosen sectors.
The Group’s strategy is to invest in Specialised Distribution
businesses with long term growth potential in the UK,
Continental Europe and North America.
The businesses have a consistent record of sustaining
superior margins over the business cycle, under-pinned by
the quality of customer service, the depth of technical
support and value adding activities. It is these characteristics
that have enabled the operating businesses to demonstrate
such resilience in their performance in continuing difficult
market conditions. 
RESULTS
Sales from the continuing businesses increased by 5% to
£77.1m (2002: £73.7m) and operating profits, before
goodwill amortisation and exceptional items, increased by
9% to £9.7m (2002: £8.9m). 
Profit before tax increased by 26% to £12.7m from £10.1m,
benefiting from exceptional profits of £3.1m made on the
sale of land and properties. After excluding exceptional items
and goodwill amortisation, profits of the continuing
businesses increased by 7% to £10.6m compared with £9.9m
last year. 
The results benefited from the newly acquired Hawco
business which contributed sales and operating profits of
£3.6m and £0.3m respectively in the two months since
acquisition. Without this contribution, however, the
operating businesses still managed to maintain sales and
move operating profits, before exceptional items, forward 
by 5% – a creditable performance in testing times.
The Group again generated strong cash flow. Operating cash
flow of £11.1m was supplemented by cash proceeds of £4.2m
from the sale of surplus properties. After spending £6.1m on
acquisitions, the Group’s net cash funds increased by £2.4m
to £29.3m at the end of the year.
STRATEGIC DEVELOPMENTS
We have continued to make progress towards our strategic
objective of building more substantial, broader based
businesses in our chosen sectors.
In Life Sciences, the market for higher value Instrumentation
has continued to be weak with pharmaceutical and
biotechnology companies hesitant to commit resources. 
However, the Consumables business has given a solid core 
to the business and advances have been made in developing
further the Service and Environmental businesses. In terms
of Service, Anachem has marketed a number of new concepts,
such as LeaseSure and Premium Care Contracts and has
broadened the range of instruments serviced. The
Environmental business has now grown to 20% of sector
sales and has strong operations in both the UK and Germany.
While this year has very much been one of consolidation 
in Seals & Components, this sector perhaps best
demonstrates our growth model combining organic growth
and acquisitions. When Hercules was acquired in 1996, its
sales were ca. £10m and operating profit ca. £1m. The sales
of the Seals & Components sector are now approaching £30m
and profits have more than tripled. The sector has also
expanded in terms of geographic spread. While Hercules’
sales at the time of acquisition were predominately in the US,
35% of sector sales are now outside the US.
The acquisitions of FPE in 1999 and Pevco (Bulldog) in 2001
have accounted for about half of the sector growth, but the
balance has come from organic growth. Investment in
engineering development has increased the number of
product line items by 40,000 since 1996, increasing the total
under management to over 90,000. A new main warehouse
and office facility was built in March 1999 in Clearwater to
increase efficiency and responsiveness. We have also invested
this year in an advanced computer system which is
operational in all five of the North American locations. This
will give a firm foundation to expand the sector further in
terms of products, customer base and geography.
CHIEF EXECUTIVE OFFICER’S REVIEW
4 DIPLOMA PLC Annual Report and Accounts 2003 In Controls & Interconnect, we made further advances in 
our strategy of building a more substantial, broader based
business. Dowatronic, acquired in April 2002, has been
successfully integrated with Sommer in Germany and has
given a focus for growth in the Munich area and in the space
and defence sectors.
Our business in Germany has been further expanded by 
the acquisition, announced after the year end, of Filcon. 
This new acquisition, again based near Munich, is a supplier
of specialist connectors principally to the defence and
aerospace sectors in Germany.
Hawco was acquired in July 2003 for a maximum net cash
cost of £6.3m. Hawco is a distributor of instrumentation and
devices used in the measurement and control of temperature
and pressure. This acquisition has further extended our
sector coverage in terms of products supplied and customer
groups served. Hawco was a private, family owned company
with genuine reasons for sale. Under new leadership and with
our input of resources and experience, we believe that this
new addition can accelerate the profitable growth of the
sector.
MANAGEMENT AND INFRASTRUCTURE
The strategy for the Group is clear and consistent, but to
execute it successfully we must continuously develop the
human and physical resources.
The Group has always held to the belief of having a small
head office focused on strategy and financial control. This
function is carried out by a team of eight, including the three
Executive Directors – Iain Henderson, Nigel Lingwood and
myself. This can only work if there are strong, self standing
management teams in place in the operating businesses,
motivated and rewarded according to their success. 
The management teams now in place have been further
strengthened by the challenges of the year and show a 
good blend of youthful energy and ambition, but also of
experience. To demonstrate this, the Managing Directors of
the businesses have an average age of 43, have been in their
current positions for three years on average, and have an
average length of service within their companies of 14 years.
In terms of infrastructure, we have progressively invested in
the physical facilities and have sufficient capacity to support
substantial further growth. With the investment in the 
new computer system in Seals & Components we now have
common systems with strong capabilities in each of the three
sectors, giving a firm foundation on which to build more
substantial businesses.
ACQUISITIONS
Acquisitions remain an important element of our strategy
moving forward and it is an area where we have considerable
experience. Over the last 10 years, we have completed a 
total of 17 acquisitions and have generated a 20% pre-tax
return on the total investment in these acquisitions. 
In evaluating our performance against this measure we
include all investment including goodwill, investment post
acquisition and any net profits or losses if businesses are
subsequently divested.
In this last year we have completed the acquisition of 
Hawco and subsequent to the year end we announced the
acquisition of Filcon. We have also expended significant
resource on evaluating other acquisitions which ultimately
did not meet our demanding criteria. Though the merger
and acquisition market is again becoming competitive, 
we hope to be successful in completing further acquisitions
in the coming year.
Bruce Thompson
Chief Executive Officer
17 November 2003
5 DIPLOMA PLC Annual Report and Accounts 2003 REVIEW OF OPERATIONS
6 DIPLOMA PLC Annual Report and Accounts 2003
Life 
Sciences
Anachem continued to 
develop its innovative 
service partnership with
Pfizer at its facility in
Sandwich, Kent. 
This year saw the launch
of the new Ultra pipette,
an ergonomically
advanced pipette 
for users performing
repetitive pipetting 
tasks in the laboratory.
The Environmental business
grew sales by 20% and 
now has strong growing
operations in both the UK 
and Germany. REVIEW OF OPERATIONS LIFE SCIENCES
7 DIPLOMA PLC Annual Report and Accounts 2003
Sales in our Life Sciences businesses decreased by 7% to 
£25.0m following the rationalisation of our a1-biotech
business. However, the improved gross margins and reduced
overheads from this rationalisation led to a 7% increase in
operating profits.
CONSUMABLES & SERVICE
The Consumables and Service business continued to produce 
a steady performance, somewhat insulated from the reduced
capital budgets of our customers. Sales of pipettes and tips
were broadly flat year on year and pipette servicing matched
the record level of sales in 2002. In the second half of the
year, the Ultra pipette was launched and early sales have
been encouraging. The Ultra is an ergonomically advanced
pipette designed for users who are performing repetitive
pipetting tasks in the laboratory. 
Capital service revenues grew by 4% in the year as the range 
of products serviced was broadened. Anachem continued to
develop its innovative service partnership with Pfizer
whereby we manage the servicing of Pfizer’s research
instrumentation on the Sandwich site in Kent.
INSTRUMENTATION
Budget constraints on the purchase of higher value
instruments remain a key feature of the pharmaceutical and
biotechnology sectors. The severity of the downturn has
slowed, however, and Anachem limited its sales shortfall to
10% in traditional chromatography instruments.
In the second half of last year, the decision was taken to
rationalise the UK and German operations of a1-biotech back
into Anachem. This was in response to the dramatic decline
in investment in genomic instrumentation by biotechnology
companies. Total instrumentation sales in this financial year
have therefore reduced, but the margin lost has been more 
than offset by the benefit of reduced overheads.
The Reactarray portfolio of process optimisation products was
expanded by the launch of an advanced data management
tool, RDM. New application software was also introduced to
enable the product to be used on a wider range of analytical
equipment. Reactarray products were installed during the
year at Bayer, GlaxoSmithKline and Pfizer.
ENVIRONMENTAL
The growing Environmental business increased sales by 
ca. 20% year on year with particularly strong growth in
Continental Europe.
There were increased sales of organic carbon analysers and
the new range of potent powder enclosures made further
advances in the UK and Continental Europe. 
The a1-envirotech subsidiary in Germany made solid progress 
and delivered a positive operating performance in only its
second full year of operation.
The Anachem group of companies supply
Instrumentation, Consumables and Services to
the Life Sciences research laboratories of the
major pharmaceutical and biotechnology 
companies, universities and research institutions. REVIEW OF OPERATIONS
Seals & 
Components
During the year, our
engineering staff at Hercules
Bulldog have developed 
and introduced 2,600 new
product line items taking 
the total under management
to over 90,000.
Hercules Bulldog offers 
a next day delivery service
anywhere in the US. 
Fill rates, as measured 
by units shipped 
complete, average 95%.
FPE has added metal hard
parts to its product range.
These are used in the repair
of hydraulic equipment.
8 DIPLOMA PLC Annual Report and Accounts 2003 REVIEW OF OPERATIONS SEALS & COMPONENTS
9 DIPLOMA PLC Annual Report and Accounts 2003
Our Seals & Components businesses increased sales by 5% 
on a constant currency basis with a modest increase in
operating profits. Expressed in sterling terms, sales were 
3% lower than the prior year at £27.4m and operating profits
were also 3% lower. The year was dominated by the design 
and implementation of a new computer system which is 
now operational across all North American locations.
HERCULES BULLDOG SEALING PRODUCTS (HBSP)
The US domestic business was flat year on year reflecting
continuing pressures in the US economy, but HBSP maintained
its position by continuing to offer value-added services and 
by providing a time-critical delivery service to its demanding
hydraulic equipment repair customers. The operation in
Clearwater, Florida deals with up to 900 orders per day, 
75% of which are received in the critical period between 
4 pm and 7 pm. The orders are then processed, picked,
packaged and despatched to meet the 8 pm cut-off deadline 
of the airfreight couriers.
Outside the US, the Canadian operations showed solid 
growth, helped by access to Bulldog’s gasket product line.
International customers outside North America also benefited
from the combined Hercules and Bulldog product portfolios
and selective increases in supporting inventory.
Operationally this was a year of significant change and
investment for HBSP, with further progress in the merger of
the Hercules and Bulldog businesses. The US domestic sales
force now has full access to Bulldog’s range of gasket and seal
kits and to the tractor parts distribution sector. Equally the
Bulldog International sales team has been able to offer
Hercules’ extensive range of hydraulic seals, cylinder
components and ‘O’ rings to its distribution network in the rest
of the world.
The implementation of a new Enterprise Resource Planning
computer system took place in August 2003 after 12 months 
of careful design and planning. All of the North American
companies are now up and running on the new software and
hardware platforms. The new IT platform has the capacity to
handle significant growth in transactions and revenues, as well
as expansion in the Group’s product offering. It also has the
capability to support multi-site operations and to integrate
new business units. Additional benefits will be gained from
accelerated financial and operational reporting within a
unified IT structure. This investment will improve our ability to
integrate new businesses into the Group and will give a firm
and expandable infrastructure to support the next phase of
growth.
FLUID POWER EQUIPMENT (FPE)
FPE grew sales by over 10% and delivered excellent profit
growth. A strong performance in the core seal products was
enhanced by the introduction of a specialised range of metal
“hard parts” used  in the repair of hydraulic equipment and
sold to FPE’s existing customers.
Hercules Bulldog Sealing Products and FPE offer
a next day delivery service for hydraulic seal kits,
gaskets and cylinder components, supplied to
repair and maintenance operations (RMOs) serving
a broad range of mobile machinery after markets. REVIEW OF OPERATIONS
Controls &
Interconnect
Our Motorsport businesses
offer a kitting service
for small parts such as
fasteners and ‘O’ rings, 
to streamline customers’
assembly operations. 
Sommer supplies prototype
lengths from its purpose
built cabling machine.
Hawco supplies a broad 
range of instrumentation 
and devices used in the
measurement and control 
of temperature and pressure.
10 DIPLOMA PLC Annual Report and Accounts 2003 REVIEW OF OPERATIONS CONTROLS & INTERCONNECT
11 DIPLOMA PLC Annual Report and Accounts 2003
Our Controls & Interconnect companies increased overall
sales by 33% to £24.7m and increased operating profits 
by 20%.
The sector results benefited from an additional two months
of Clarendon, acquired in December 2001 and from two
months of the new acquisition, Hawco. However, the
remaining business still delivered organic growth of over 10%
in both sales and operating profits and this was achieved in
very demanding market conditions.
IS RAYFAST 
Despite the generally subdued UK manufacturing environment, 
IS Rayfast achieved a 5% growth in sales. Countering the
broader sector trends, the growth mainly came from the
aerospace sector with some increased sales to military
customers, but also to the civil aircraft repair and
refurbishment sector.
Gross margins came under pressure from the strengthening 
Euro, but action was taken in the second half to switch the
majority of purchases to sterling.
IS MOTORSPORT & CLARENDON
This was a challenging year for the upper tiers of Motorsport
with fewer teams competing and new rule changes introduced
in Formula 1 to help contain costs. Against this background, 
our Motorsport operations managed to record modest gains
in sales.
This was achieved by increasing sales to customers serving 
the North American Motorsport series, particularly IRL and
CART. We also offered added value services such as Kanban 
and the kitting of parts to help streamline customers’
assembly operations.
SOMMER
On a constant currency basis, Sommer grew sales by 15%.
Sommer benefited from a full year contribution from
Dowatronic, but half of the increased sales came from organic
growth in a severely depressed German market.
Sommer achieved its success through a focus on niche
markets such as high performance wire for specialist medical
equipment and connectors for the space and defence sectors.
Again, added value activities continued to play an important
role in securing longer term business, such as the
construction of low volume, prototype length cables using
Sommer’s purpose built cabling machine.
HAWCO
Hawco, acquired in July 2003, is a distributor of a broad
range of instrumentation and devices used in the
measurement and control of temperature and pressure.
Hawco supplies product to a wide range of applications from
chilled cabinets for supermarkets, bars and restaurants to
fire detection systems; from air conditioning and domestic
appliances to laboratory equipment.  
Hawco contributed two strong months to the Group’s results,
experiencing strong demand in the summer, particularly for
refrigeration and air conditioning applications.
The IS Group, Clarendon, Sommer and 
Hawco supply specialised wiring, connection
and control devices into a range of technically
demanding applications. FINANCE DIRECTOR’S REVIEW
12 DIPLOMA PLC Annual Report and Accounts 2003
RESULTS FOR THE YEAR
Profit before tax, goodwill amortisation and exceptional
items for the year ended 30 September 2003 was £10.6m
compared with £9.9m last year. The newly acquired Hawco
business contributed £0.3m on sales of £3.6m. Operating
margins improved by 0.5% to 12.6% reflecting the benefit
from cost reduction activity implemented in the second half
of last year. 
INTEREST INCOME
Interest income fell slightly by £0.1m to £0.9m from £1.0m 
last year. This reflected a combination of higher average net 
cash funds, but lower interest rates.
EXCEPTIONAL ITEMS
Exceptional items before tax contributed net profits of £2.4m
compared with net profits of £0.5m last year. 
Exceptional profits of £3.1m were earned on the disposal 
of seven acres of the Group’s property in Stamford and on
the disposal of the remaining two properties relating to
businesses divested in earlier years. Having completed the
sale of the first parcel of the Stamford land in November
2002 for £2.6m before expenses, the Group has been granted
planning permission for a further eight acre site and is
actively pursuing its sale. In addition, planning permission 
is being sought for the vacant twelve acre brickworks site
formerly occupied by Williamson Cliff. At 30 September 2003,
the market value of these two parcels of land in their present
condition is estimated to be not less than £5.0m before
expenses and taxation, compared with a net book value 
of £0.1m.
Exceptional items charged against operating profit were
£0.7m and comprised aborted acquisition costs of £0.4m 
and £0.3m for the implementation of new computer systems
in the North American Seals & Components businesses. 
TAXATION
The current year tax charge of £3.2m on profit before
goodwill amortisation and exceptional items represents an
effective tax rate of 30.2% which is consistent with last year.
No tax liability arose on the disposal of land and properties
in the year due to the availability of capital tax losses. These
losses have now been largely utilised.
EARNINGS AND DIVIDENDS
Earnings per share, adjusted for exceptional items and 
goodwill amortisation, increased by 9.5% to 32.2 pence
compared with 29.4 pence last year.
With a proposed final dividend of 10.0 pence, total dividends 
for the year are 15.0 pence, an increase of 7.1% on the prior
year. Dividend cover against earnings before exceptional
items and goodwill amortisation is 2.1 times.
ACQUISITIONS
On 29 July 2003 the Group acquired 95% of the issued shared
capital of HA Wainwright (Group) Limited (“Hawco”) for
£5.9m, which was net of cash acquired of £2.1m. Further
deferred consideration up to a maximum of £0.4m will be
payable depending on the operating profit of Hawco in the
year ending 31 December 2003. In addition, £0.2m was spent
on purchasing from a minority shareholder, 8% of the share
capital of FPE. The remaining minority shareholder now holds
12% of the share capital.
Net assets acquired with Hawco, after provisional fair value
adjustments, were £2.7m, excluding cash acquired of £2.1m.
Goodwill of £3.7m arising on the acquisition of both Hawco
and the FPE minority interest will be amortised over 20 years.
On 17 November 2003 the Group announced the acquisition
of Filcon, a specialist connector business based near Munich
in Germany, for a maximum net cash cost of £4.1m.
The businesses generated a strong operating
cash flow of £11.1m. Return on trading capital
employed improved to 21.6% CASH FLOW
The businesses generated a strong operating cash flow of
£11.1m compared with £9.9m last year, again benefiting from
reduced levels of working capital.
Additions to fixed assets were £1.1m and largely comprised 
the cost of completing the IT implementation in the Seals &
Components business. A total of £0.9m has been spent on 
this project of which £0.6m was spent this year. The proceeds
from the sale of surplus properties of £4.2m, together with 
the strong operating cash flow, helped offset the impact of
spending £6.1m on acquiring businesses during the year.
At 30 September 2003 the Group’s net cash funds had
increased by £2.4m to £29.3m from £26.9m last year.
FINANCIAL POSITION
Shareholders’ funds increased by £6.2m to £57.1m at 
30 September 2003.
Return on trading capital employed, after taking account of
goodwill, both capitalised and written off directly to
reserves, improved to 21.6% compared with 20.3% last year.
PENSIONS
The disclosures required by FRS17 on Retirement Benefits in
the third year of the transitional rules are set out in Note 26.
The limited recovery in equity markets more than offset the
impact of a lower bond yield applied in valuing the liabilities.
Accordingly the deficit in the Principal Schemes fell from
£5.0m to £4.6m at 30 September 2003. Had the Group opted
to account for pensions in accordance with FRS 17, the
charge to operating profit would have been £0.3m; however
£0.7m would have been credited in the Statement of Total
Recognised Gains and Losses, largely representing the
movement in the value of the Principal Schemes during 2003.
TREASURY RISK MANAGEMENT
The Group maintains a small treasury function which operates
under Board guidelines covering management of exchange
exposure and interest rate risk. 
At 30 September 2003 the Group’s non-sterling net assets of
overseas businesses were £15.9m (2002: £14.6m), principally
held in the United States. The impact on shareholders’ funds
from the depreciation of the US$ this year was largely offset
by the appreciation of the Euro.
The Group regularly reviews its foreign exchange exposure in
respect of net assets held in currencies other than sterling.
At the present time the Group has decided not to hedge its
exposure back into sterling.
Approximately 45% of the Group’s turnover and operating
profit relates to business operations in the United States and
Germany. The depreciation of the US dollar during the year,
partly offset by an appreciation in the euro, reduced the
sterling value of the Group’s turnover and operating profit
earned overseas by £1.5m and £0.1m respectively. 
In addition to the overseas businesses, the Group’s UK
businesses are also exposed to fluctuations in exchange rates 
as a large amount of their stock purchases are denominated
in foreign currencies. The Group manages its exposure to
these exchange rate fluctuations through the use of forward
foreign exchange contracts.
The Group continues to manage the net cash position in a
manner designed to maximise interest income, while at the
same time minimising any risk to these funds. Surplus cash
funds are therefore deposited with commercial banks for
periods of between one to six months. At 30 September
2003, the Group had net funds of £29.3m (2002: £26.9m) 
of which £28.7m (2002: £25.8m) were held on deposit.
13 DIPLOMA PLC Annual Report and Accounts 2003
52.8
58.4
66.3
73.7
9.7
7.8
8.8
8.0
8.9
Turnover (£m)
(continuing operations) 
Operating profit before 
goodwill and exceptional items  
(£m) (continuing operations) 
Return on trading capital  
employed (including goodwill) (%) 
2003
2002
2001
2000
1999 10.3
21.7
14.4
20.3
21.6 77.1 BOARD OF DIRECTORS AND ADVISORS
14 DIPLOMA PLC Annual Report and Accounts 2003
AJC Thomas (72)*†‡
Chairman
Joined the Board in 1969. Became
Non-executive on 5 June 2001, after
more than 30 years as Chairman and
Chief Executive of the Company.
BM Thompson (48)
Chief Executive Officer
Joined the Board in 1994 and
appointed Chief Executive Officer in
1996. He was previously Director of
Arthur D Little Inc’s Technology
Management Practice in the United
States.
NP Lingwood ACA (44)
Group Finance Director and
Company Secretary
Joined the Company in June 2001 and
appointed Group Finance Director on 
3 July 2001. He was previously Group
Financial Controller of Uniq plc.
I Henderson (47)
Executive
Joined the Board as a Director 
in 1998. He was previously a 
Director of Glenchewton plc and 
of ANC Holdings Limited.
JL Rennocks FCA (58)*†‡
Non-executive
Joined the Board in July 2002. He is a
Director of Xenova plc and a Director of
Foreign & Colonial Investment Trust
Plc. He has previously been Executive
Director – Finance at Corus Group Plc
and Finance Director of PowerGen Plc
and Smith & Nephew plc.
Lord Stewartby (68)*†‡
Non-executive
Joined the Board in 1990. He 
previously held a number of Ministerial
appointments in HM Government,
including Economic Secretary to HM
Treasury. He is Deputy Chairman of
Standard Chartered PLC and Chairman 
of The Throgmorton Trust plc.
JW Matthews FCA (59)*†‡
Non-executive
Joined the Board in 2003. He is 
Chairman of Crest Nicholson plc and
Regus plc. He has previously been a
Managing Director of County NatWest 
and Deputy Chairman/Deputy Chief
Executive of Beazer plc.
*Member of the Remuneration
Committee
†Member of the Audit Committee
‡Member of the Nomination Committee
Investment Bankers
Lazard
50 Stratton Street
London W1J 8LL
Corporate Stockbrokers
Evolution Beeson Gregory Limited
100 Wood Street
London EC2V 7AN
Solicitors
Ashurst Morris Crisp
Broadwalk House
5 Appold Street
London EC2A 2HA
Auditors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH The Directors present their report and the audited financial
statements for the year ended 30 September 2003.
PRINCIPAL ACTIVITIES
The principal activity of the Group is the distribution of
specialised products and services. A description of the
activities of each of the subsidiaries is presented on page 2.
A review of the activities of the Group during the financial
year and an analysis of turnover and profit are presented in
the Review of Operations and Finance Director’s Review on
pages 6 to 13. An indication of future developments is
contained in the Chairman’s Statement and Chief Executive
Officer’s Review on pages 3 to 5.
RESULTS AND DIVIDENDS
The profit for the financial year attributable to shareholders
was £9.7m (2002: £7.2m). The Directors recommend a final
dividend of 10.0p per share (2002: 9.0p), to be paid, if
approved, on 20 January 2004. This, together with the
interim dividend of 5.0p per share paid on 23 June 2003,
amounts to 15.0p for the year (2001: 14.0p). This leaves a
retained profit of £6.3m to be transferred to reserves.
ACQUISITIONS
Details of acquisitions completed during the year are set out
in Note 22 to the financial statements.
SUBSEQUENT EVENT
On 17 November 2003, the Group acquired Filcon Electronic
GmbH (“Filcon”) for a maximum consideration of £4.3m.
Filcon is a supplier of specialist connectors principally to the
defence and aerospace sectors in Germany. It is based near
Munich in Germany.
SUBSTANTIAL SHAREHOLDINGS
In addition to the Directors’ shareholdings set out on
page 24, at the date of this report the Company has been
notified by the following that they hold a disclosable
beneficial interest of 3% or more in the issued ordinary share
capital of the Company:
Percentage of
ordinary share
capital
UBS Global Asset Management (UK) Limited 6.04
Morley Fund Management Limited 5.98
Fidelity International Limited 5.94
M&G Investment Management Limited 5.42
Insight Investments Limited 4.90
Herald Investment Management Limited 3.97
Legal and General Investment Management Limited 3.27
Platinum Investment Trust Plc 3.16
As far as the Directors are aware there were no other
notifiable interests.
EMPLOYEES
The Group is committed to a policy of equal opportunities in
employment by which the Group has and continues to:
n select, recruit, develop and promote the very best people,
basing its judgement solely on suitability for the job;
n ensure that all applicants and employees receive fair and
equal treatment irrespective of sex, marital status,
nationality, colour, race, ethnicity, national origin or
disability;
n encourage diversity in its workforce reflecting, where
practical, the diversity of the working population;
n maintain a working environment free from sexual and racial
harassment or intimidation;
n ensure that all employment conditions and job
requirements reflect its commitment to equal opportunities.
Where people become disabled during the course of their
employment, every practical effort is made to retain their
services and to provide retraining if necessary. All employees
are eligible for appropriate training, career development and
promotion, and disabled people are not treated any
differently in this respect.
15 DIPLOMA PLC Annual Report and Accounts 2003
DIRECTORS’ REPORT DIRECTORS
The persons currently serving as Directors of the Company
are shown on page 14. On 2 April 2003 W Reid sadly died.
On 24 July 2003 JW Matthews was appointed as an
independent Non-executive Director of the Company and
having been appointed since the last Annual General Meeting
and being eligible, offers himself for re-election. Directors’
beneficial interests in the Company’s ordinary share capital
at 30 September 2003 are set out in the Remuneration
Report. 
CHARITABLE AND POLITICAL DONATIONS
The UK companies of the Group made donations for
charitable purposes during the year which amounted to
£3,350. No political donations were made.
PAYMENT POLICY
The Group does not have a formal code that it follows with
regard to payments to suppliers. Group companies agree
payment terms with their suppliers when they enter into
binding purchasing contracts for the supply of goods and
services. Suppliers are, in that way, made aware of these
terms. Group companies seek to abide by these payment
terms when they are satisfied that the supplier has provided
the goods or services in accordance with the agreed terms
and conditions. At 30 September 2003 the amount of trade
creditors shown in the Group balance sheet represents 45
days of average purchases.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 11.00 am on 
7 January 2004 in the Members’ Room, Chartered
Accountants’ Hall, Moorgate Place, London EC2P 2BJ. The
Notice of Meeting is set out in a separate document issued
to shareholders.
The Notice of Meeting includes an ordinary resolution to
approve the Remuneration Report for the year ended
30 September 2003, which is set out on pages 19 to 24. The
Special Business of the Meeting includes an ordinary
resolution to consider, and if appropriate, approve the
proposed new Long Term Incentive Plan for Executive
Directors which is summarised on page 19.
The Directors will be seeking approval to amend the Articles
of Association so that no person over the age of 70 may be
appointed as a Director of the Company without the approval
of the members of the Company and a Director will have to
vacate his office at the end of the proceeding Annual
General Meeting of the Company, after he attains the age of
70, unless that Director is re-appointed by the members.
The Directors will also be seeking renewal of the Directors’
existing authority to make market purchases of the Ordinary
shares of 5 pence in the capital of the Company, up to a
maximum of 10 per cent of the Company’s shares, in
accordance with Sec 166 of the Companies Act.
INDEPENDENT AUDITORS
Following the conversion of PricewaterhouseCoopers into a
limited liability partnership on 1 January 2003,
PricewaterhouseCoopers resigned as auditors of the Company
on 13 March 2003 and PricewaterhouseCoopers LLP was
appointed as auditor to fill the casual vacancy which arose.
A resolution to reappoint PricewaterhouseCoopers LLP as
auditors and to authorise the Directors to determine their
remuneration will be proposed at the forthcoming Annual
General Meeting of the Company.
By order of the Board
NP Lingwood
Company Secretary
17 November 2003
16 DIPLOMA PLC Annual Report and Accounts 2003
DIRECTORS’ REPORT CONTINUED COMPLIANCE STATEMENT
The Board recognises the importance of high standards of
corporate governance and supports the Principles of Good
Governance contained in the Combined Code published in
June 1998 (“the Code”) and appended to the Listing Rules of
the Financial Services Authority. The Board confirms that the
Company complies with the requirements of Section 1 of the
Code and has done so throughout the year.
In July 2003, the Financial Reporting Council issued a new
Combined Code on Corporate Governance. The new Combined
Code will apply for reporting years beginning on or after
1 November 2003. The Company has not reported under the
new Combined Code during the year ended 30 September
2003. It is the Board’s current intention that it will report
under the new Combined Code in next year’s Annual Report.
The manner in which the Group applies the principles of
good corporate governance, as defined by the existing Code,
is described below.
DIRECTORS
The Board comprises four Non-executive Directors, including
the Chairman, and three Executive Directors, providing a
wide range of skills and experience. The roles of the
Chairman, who is Non-executive, and the Chief Executive
Officer are separate and clearly defined, and the Board
considers the majority of its Non-executives to be
independent. The biographical details of the Board members
are set out on page 14. All Directors must stand for election
at the first Annual General Meeting after they are appointed.
The Articles provide that all Directors will stand for re-
election at least every three years. The senior independent
Non-executive Director is Lord Stewartby.
The Executive Directors have service contracts which are
subject to 12 months’ notice of termination by the Company
or the Executive Director.
The Board meets regularly to review financial performance
and strategy and has a formal schedule of matters
specifically reserved to it for decision. The main Board
papers comprising an agenda and formal Board reports,
together with briefing papers on specific matters, are sent to
the Directors in advance of each meeting. All members of the
Board have access to the advice and services of the Company
Secretary and may take independent professional advice as
required at the expense of the Company. There are a number
of Standing Committees of the Board to which various
matters are delegated. Membership of the Committees is set
out on page 14. The Committees all have terms of reference,
brief details of which are set out below.
Nomination Committee
The Board as a whole is responsible for the appointment of
its own members, and for nominating them for election by
shareholders on first appointment and thereafter for re-
election at three yearly intervals. A Nomination Committee
comprising the Non-executive Directors under the
chairmanship of AJC Thomas is responsible for recommending
new members to the Board for appointment.
Remuneration Committee
The Remuneration Report on pages 19 to 24 details the
constitution and role of the Remuneration Committee, and
how the principles of the Code relating to Directors’
remuneration have been applied. The Committee was chaired
by AJC Thomas during the year. 
Audit Committee
The Audit Committee has a formal written constitution and
comprises the four Non-executive Directors. It was chaired by
Lord Stewartby until 8 January 2003 when he retired as
Chairman. He was replaced as Chairman by JL Rennocks. The
Committee receives reports from management, and from the
external auditors on the external audit, on a regular basis
and reviews the financial controls of the Group and the scope
of, and matters arising out of, the audit. It considers
annually whether the Group should set up an internal audit
function. It also keeps under review the nature and extent of
non-audit services provided to the Group by the external
auditors.
DIRECTORS’ REMUNERATION
Details of Directors’ Remuneration are set out in the
Remuneration Report on pages 19 to 24. This Report sets out
compliance with the Code’s requirements with regard to
remuneration matters and complies with the Directors’
Remuneration Report Regulations 2002.
RELATIONS WITH SHAREHOLDERS
The Company maintains regular contact with major
shareholders to communicate clearly the Group’s objectives
and monitors movements in significant shareholdings. Notice
of the Annual General Meeting is sent to shareholders at
least twenty working days prior to the Meeting. In the
17 DIPLOMA PLC Annual Report and Accounts 2003
CORPORATE GOVERNANCE absence of a poll being called, proxy votes cast are declared
after each resolution has been dealt with on a show of
hands. The Chief Executive Officer and Company Secretary
generally deal with questions from individual shareholders.
All shareholders have the opportunity to put questions at the
Company’s Annual General Meeting when the Chairman and
Chief Executive Officer give a statement on the Company’s
performance during the year, together with a statement on
current trading conditions. The Chairman of the Board and of
the Remuneration and Audit Committees will normally be
available to answer questions at the meeting.
ACCOUNTING, INTERNAL CONTROL AND AUDIT
The respective responsibilities of the Directors and auditors
in connection with the financial statements are explained on
pages 24 and 25. The Directors’ statement on going concern
is set out below.
The Directors are responsible for the Group’s system of
internal control and for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities. The Code
refers to internal controls in the widest sense, including
operational and compliance controls and risk management as
well as internal financial controls.
During the year the Board has carried out a risk assessment
process on the key financial, operational and compliance
risks to identify, evaluate and manage significant risks to the
Group’s business. The assessments have been effected at
both Group and individual company level. They included
common definitions of risk and ensure, as far as practicable,
that the policies and procedures established by the Board are
appropriate to manage the perceived risks to the Group.
During the year, the risk assessment process revealed no
significant risks of which the Board was not previously
aware. Each operating unit is required to prepare an annual
self assessment report of internal control and these are
reviewed by the Board. 
The day to day running of the Group’s business is delegated
to the Executive Directors of the Company. The Executive
Directors visit each operating unit on a regular basis and
meet with both operational and finance management and
staff.
Key financial and operational measures are reported on a
weekly and/or monthly basis and are measured against both
budget and interim forecasts which have been approved and
reviewed by the Board. The Board has established a clear
organisational structure with defined authority levels.
The Board acknowledges that it is responsible for the Group’s
system of internal control and for reviewing its effectiveness.
As with all such systems, internal control is designed to
manage rather than eliminate the risk of failure to achieve
business objectives and can only provide reasonable and not
absolute assurance against material misstatement or loss.
Throughout the year, the Group has been in full compliance
with the Combined Code provisions on internal control.
The Board keeps under review the need for internal audit in
the Group. Given that the Group’s financial control resource
carries out those internal audit functions which are
considered appropriate for a group of the size and nature of
Diploma PLC, the Board’s current view is that a separate
internal audit function is not required.
GOING CONCERN
The Directors have reviewed the Group’s budget for 2003/04
and are satisfied that it is appropriate to prepare the
financial statements on the going concern basis.
18 DIPLOMA PLC Annual Report and Accounts 2003
CORPORATE GOVERNANCE CONTINUED This Report is presented to shareholders by the Board and
provides information on Directors’ remuneration. This Report
complies with the Directors’ Remuneration Report Regulations
2002 that apply to the Company for the first time this year. 
This Report also sets out how the principles of the Combined
Code relating to Directors’ remuneration are applied.
A resolution will be put to shareholders at the Annual General
Meeting on 7 January 2004 inviting them to consider and
approve this Report.
THE REMUNERATION COMMITTEE
The Remuneration Committee (“the Committee”) is governed
by formal terms of reference agreed by the Board and is
comprised of Non-executive Directors. The specific
remuneration packages, including contract periods of
Executive Directors, are determined by the Committee. The
Committee comprised AJC Thomas (Chairman), JW Matthews
(appointed 9 September 2003), JL Rennocks (appointed
9 September 2003) and Lord Stewartby. W Reid was a member
of the Committee until he died on 2 April 2003. 
The Chief Executive attends meetings at the invitation of the
Committee to provide guidance as appropriate on the impact
of remuneration policy and advice on the performance of
Executive Directors. The Chief Executive does not attend
meetings when his own position is discussed. Any matter
affecting the Chairman is discussed by the Committee without
the Chairman present.
The Committee met on three occasions during the year.
REMUNERATION POLICY
This report sets out the Company’s policy on Directors’
remuneration for 2003 and, so far as practicable, for subsequent
years. In framing this policy the Board has given full
consideration to the provisions of the Combined Code.
The Company’s policy for Executive Director remuneration is that
total remuneration (basic remuneration plus short term and long
term remuneration) should reward both short and long term
results, delivering competitive rewards for target performance.
The Company’s policy for basic Director remuneration is to pay
competitive market salaries and associated benefits, having
regard to the Directors’ experience, the size and complexity of
the job and any other relevant factors, such as business sector
expertise.
Share ownership is encouraged. Equity based reward
programmes align the interests of Executive Directors with
those of shareholders and the long term success of the Group.
The Committee considers that a successful remuneration policy
needs to be sufficiently flexible to take account of future
changes in the Company’s business environment and in
remuneration practice. Any changes in policy for years after
2003 will be described in future Remuneration Reports. All
statements in this Report in relation to remuneration policy
for years after 2003 should be considered in this context.
As part of the process of keeping the Group’s remuneration
policy under review a proposal will be put to the shareholders
at the Company’s Annual General Meeting on 7 January 2004,
for the adoption of a new Long Term Incentive Plan (“LTIP”)
for Executive Directors. The new LTIP, if approved, will replace
the existing Long Term Incentive Scheme (“LTIS”). In line
with current best practice, the proposed new LTIP provides for
annual grants to Executive Directors. 
Under the proposed new LTIP, Executive Directors will be
awarded rights to acquire ordinary shares. Each award made
under the LTIP is subject to performance conditions which will
determine how many, if any, of the shares under the award
the participant is entitled to receive after the three year
performance period. The value of awards which can be made
in any year to a participant will normally be equal to 100 per
cent of basic salary. This limit can be increased to a maximum
of 200 per cent in the case of a participant who within the
previous 12 months joined the Group or received a significant
promotion.
Two performance conditions will apply to the initial awards so
that the vesting of 50 per cent of the award will be linked to
earnings per share (“EPS”) growth and 50 per cent will be
linked to Total Shareholder Return (share price growth and
reinvested dividends) (“TSR”), measured by comparison with
the FTSE mid-250 Index (excluding investment trusts).
The first performance condition will be that the average
annual compound growth in the Company’s earnings per share
(“EPS”) over the three consecutive financial years, following
the year prior to the grant, must exceed the annual compound
growth rate in the UK Retail Price Index (RPI) plus 3 per cent,
over the same period. At this level of performance, 30 per
cent of the award relating to EPS performance would vest. Full
vesting of the award relating to EPS performance will require
that the Company’s average annual compound growth in EPS
exceeds the compound growth in RPI plus 5 per cent over the
period. Between these two points, an increasing proportion of
vesting occurs at RPI plus 3.5 per cent, RPI plus 4 per cent
and RPI plus 4.5 per cent. For the purposes of this condition,
EPS will be calculated as earnings per share before exceptional
items and goodwill amortisation.
19 DIPLOMA PLC Annual Report and Accounts 2003
REMUNERATION REPORT EPS was chosen as the appropriate measure of performance
as it provides an absolute benchmark of the Company’s
performance and is therefore a suitable balance with the
relative TSR performance measurement.
The second performance condition compares the growth of
the Company’s TSR over a three year period to that of the
companies in the FTSE mid-250 Index (excluding investment
trusts). The Company’s ranking amongst the comparator
companies determines the percentage of shares which will
vest to a participant. For the participant to receive the full
number of shares awarded, the Company must rank in the
top quartile of the comparator group. Where the Company’s
performance is at the median, 30 per cent of any award is
vested. Between these two points, vesting is on a straight-
line basis. Where performance over the three year period
does not reach the median ranking no shares are vested, the
relevant award lapses and there is no re-testing of
performance.
The TSR performance condition was chosen as the Committee
believes that TSR is an appropriate method of comparing the
performance of the Company to that of its peers. The FTSE
mid-250 index (excluding investment trusts) was chosen as
the comparator group as there are a limited number of
companies which are directly comparable to the Company
and the index was therefore felt to be a suitable yardstick of
relative performance.
Benefits under the LTIP are not pensionable.
COMPONENTS OF REMUNERATION
The current elements of remuneration for Executive Directors
are as follows:
Salary and Benefits
The Committee reviews salaries taking account of Group and
personal performance. Account is also taken of the levels of
pay awarded elsewhere in the sector and competitive market
practice.
The value of non-cash benefits for Executive Directors is
included in the table of remuneration on page 23 and
comprises life and health insurance and cash advances in
lieu of a car. The value of these benefits is not pensionable,
but is assessable to tax.
Short Term Incentives
The Company operates an annual performance related bonus
scheme for Executive Directors. Annual bonuses for Executive
Directors are determined by the achievement against
demanding individual, business and corporate objectives.
Long Term Incentive Scheme (“LTIS”)
For a number of years, the Company has operated a Long
Term Incentive Scheme (“LTIS”) for the benefit of Executive
Directors. The LTIS provides that an Executive Director will
receive a cash bonus based upon three performance
conditions, measured over a three year period.
The first condition is based upon the uplift in Earnings Per
Share, before goodwill amortisation and exceptional items
(“Adjusted EPS”), over the performance period. The current
awards are calculated on the basis of £5,000 per 1 pence of
uplift in Adjusted EPS, after adjusting for growth in the RPI
over the performance period. The basis of award for BM
Thompson is £12,500 per 1 pence of uplift.
The second condition is the increase in the share price of
the Company over the performance period. The share price at
the beginning and the end of the period is determined by
the average of the daily share price during the three months
prior to the measurement dates. The current awards are
calculated at £300 per 1 pence (BM Thompson: £600 per
1 pence) increase in the Company’s share price over the
performance period. The awards under this condition are
subject to an upper limit of £75,000 (BM Thompson:
£150,000).
The third and final condition relates to the Committee’s
assessment of personal performance during the performance
period, measured against certain expectations. The current
awards under this condition are subject to an upper limit of
£75,000 (BM Thompson: £150,000).
These three conditions were chosen as the appropriate
measures of performance as they provide an absolute
benchmark of the Company’s and the Executive’s performance
and they align the award to the benefits which accrue to
shareholders.
An overall limit to the aggregate of the current awards under
each of the three conditions is set at £250,000 
(BM Thompson: £500,000).
On crystallisation of awards, one-third of the aggregate
amount is paid out to the Directors immediately with the
balance being paid in two deferred payments.
The current awards under this LTIS crystallise in January
2004 for BM Thompson and I Henderson and in January 2005
for NP Lingwood. As explained above, the Company intends
to replace the existing LTIS with a new LTIP with effect from
1 October 2003. The proposals for this new LTIP will be
circulated to shareholders for review and, if appropriate,
approval at the forthcoming Annual General Meeting.
20 DIPLOMA PLC Annual Report and Accounts 2003
REMUNERATION REPORT CONTINUED Pension Arrangements
The Executive Directors receive pension contributions from
the Company which are paid into money-purchase schemes.
No Directors are members of the Group’s defined benefit
schemes. The pension contributions in 2002/03 were
equivalent to 12 per cent of the aggregate of base
remuneration and annual performance bonuses.
RELATIVE PERFORMANCE OF REMUNERATION ELEMENTS
The Committee’s view is that the performance related
elements of the remuneration package for Executive Directors
should be a significant element of the total. This serves to
align the interests of such Directors with shareholders.
Assuming full payment of all elements, more than half of the
total remuneration of each of the Executive Directors
(excluding pension contributions) would be performance
related.
SERVICE CONTRACTS - EXECUTIVE DIRECTORS
The service agreements of the Executive Directors include the
following terms:
Date of Contract Notice Period
BM Thompson 13 July 2000 12 months
I Henderson 1 August 2000 12 months
NP Lingwood 3 July 2001 12 months
The Executive Directors are subject to rolling contracts and
offer themselves for re-election as Directors at least every
three years in accordance with the Company’s Articles of
Association. Payments on termination for Executive Directors
are restricted to the value of salary and contractual benefits
for the notice period. There is no predetermined special
provision for Executive Directors with regard to
compensation in the event of loss of office. The
Remuneration Committee would consider the circumstances
of individual cases of early termination and determine
compensation payments accordingly.
NON-EXECUTIVE DIRECTORS
The fees for the Non-executive Directors are determined by
the Board as a whole, having regard to market practice.
Business expenses are also reimbursed.
The Non-executive Directors do not have contracts of service,
but are appointed pursuant to letters of appointment. Such
appointments are for a one year term and the Company’s
policy is for re-appointment to be on an annual basis. Non-
executive Directors are not eligible to participate in any
incentive plan or Company pension arrangement and are not
entitled to any payment in compensation for any early
termination of their appointment. They are due for re-
appointment to the Board on the following dates:
Date of Re-appointment Renewal
AJC Thomas 8 January 2004 Annual
J Matthews 24 July 2004 Annual
JL Rennocks 11 July 2004 Annual
Lord Stewartby 8 January 2004 Annual
All Directors’ appointments are subject to approval of the
shareholders in General Meeting sought on a three yearly
basis.
During the year ended 30 September 2003 the remuneration
consisted of a base fee of £23,000 per annum. Lord
Stewartby, as the senior Non-executive Director, receives a
supplement at an annual rate of £2,000 per annum. The
Chairman, who is a Non-executive Director, received a salary
and fees of £70,000 per annum for his services during the
year ended 30 September 2003.
21 DIPLOMA PLC Annual Report and Accounts 2003 PERFORMANCE
The graph below shows the total shareholder return for a holding of the Company’s ordinary shares for the five financial years
of the Company of which the year ended 30 September 2003 is the last.
This is compared to the total shareholder return for a hypothetical holding in the FTSE mid-250 index (excluding investment
trusts). This was chosen as the Committee believes it is the most appropriate index to which the Company’s performance can
be compared and it is the index which will be used for the purposes of the proposed new Long Term Incentive Plan. Total
shareholder return is the growth in value of a share plus the value of dividends re-invested in the Company’s shares on the day
on which they are paid.
TOTAL SHAREHOLDER RETURN (REBASED TO 100)
The five year total shareholder return figures for Diploma and the FTSE mid-250 index were as follows:
FTSE
Diploma mid-250
September 1998 100 100
September 2003 349 146
+249% +46%
22 DIPLOMA PLC Annual Report and Accounts 2003
REMUNERATION REPORT CONTINUED
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Oct 98 Apr 99 Oct 99 Apr 00 Oct 00 Apr 01 Oct 01 Apr 02 Oct 02 Apr 03 Oct 03
Diploma
FTSE Mid 250 excl. ITs
249%
46% 23 DIPLOMA PLC Annual Report and Accounts 2003
TOTAL REMUNERATION OF THE DIRECTORS
The total remuneration of the Directors for the year end 30 September is set out below.
Performance
Fixed emoluments based Prior
Salary Other emolument Year
& Fees Benefits Bonus Total Total
£000 £000 £000 £000 £000
I Henderson 145 11 25 181 166
NP Lingwood 150 13 25 188 173
JW Matthews 
(1)
5 - - 5 -
W Reid 
(2)
6 - - 6 23
JL Rennocks 23 - - 23 6
Lord Stewartby 
(3)
23 4 - 27 29
AJC Thomas 70 3 - 73 98
BM Thompson 245 15 65 325 297
667 46 115 828 792
Notes:
1 J Matthews was appointed on 10 July 2003
2 W Reid died on 2 April 2003
3 Until 1 April 2003, Lord Stewartby received a fully expensed company car.
The pension contributions paid into the schemes on behalf of the Directors are as follows:
2003 2002
£000 £000
BM Thompson 35 36
I Henderson 19 19
NP Lingwood 19 18
73 73
The awards outstanding under the Company’s Long Term Incentive Scheme are as follows:
Award Value at 30 Sept
Award Crystallisation 2003 2002
Date Date £ £
BM Thompson 24 January 2001 January 2004 354,600 253,000
I Henderson 26 February 2001 January 2004 168,300 118,000
NP Lingwood 28 January 2002 January 2005 85,340 37,000
Notes:
1 The rules of LTIS are summarised on page 20.
2 The performance period for each award is three years commencing on 1 October prior to the award date.
3 The value at 30 September 2003 and 2002 has been calculated based on the Company’s Adjusted EPS and average share price in the three months ended
30 September 2003 of 405p (2002: 327p). Awards reflecting the personal assessment condition will be decided at the crystallisation dates, but are
included at their full rate in the values above.
4 The base Adjusted EPS for BM Thompson and I Henderson was 23.4p (NP Lingwood 30.2p) and the base share price for BM Thompson and I Henderson
was 214.3p (NP Lingwood 287.3p). DIRECTORS’ SHAREHOLDINGS
Ordinary shares of 5p each
30 September 1 October
2003 2002
I Henderson 17,842 17,842
NP Lingwood 5,000 5,000
JW Matthews - -
JL Rennocks - -
Lord Stewartby 25,000 25,000
AJC Thomas 530,813 530,813
BM Thompson 100,000 100,000
None of the Directors hold any shares non-beneficially. There were no changes to the Directors’ shareholdings between 
30 September 2003 and 17 November 2003.
The information set out above under the headings Total Remuneration of the Directors and Directors’ Shareholdings is
auditable. All other information provided in the Remuneration Report is not subject to audit.
This report on remuneration has been approved by the Board and signed on its behalf by:
AJC Thomas
Chairman of the Remuneration Committee
17 November 2003
24 DIPLOMA PLC Annual Report and Accounts 2003
REMUNERATION REPORT CONTINUED
DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS
The Directors are required by the Companies Act 1985 to
prepare financial statements for each financial year which
give a true and fair view of the state of affairs of the
Company and the Group as at the end of the financial year
and of the profit or loss for the financial year.
The Directors consider that in preparing the financial
statements (on pages 26 to 46), the Company has used
appropriate accounting policies, consistently applied, and
supported by reasonable and prudent judgements and
estimates, and that all financial reporting standards which
they consider to be applicable have been followed.
The Directors have responsibility for ensuring that the
Company keeps accounting records which disclose with
reasonable accuracy the financial position of the Company
and which enable them to ensure that the financial
statements comply with the Companies Act 1985.
The Directors have general responsibility for taking such
steps as are reasonably open to them to safeguard the
assets of the Group and to prevent and detect fraud and
other irregularities. 25 DIPLOMA PLC Annual Report and Accounts 2003
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
DIPLOMA PLC
We have audited the financial statements which comprise the
group profit and loss account, the group and company
balance sheets, the group cash flow statement, the statement
of total recognised gains and losses, the reconciliation of
movements in shareholders’ funds and the related notes to
the financial statements. We have also audited the disclosures
required by Part 3 of Schedule 7A to the Companies Act 1985
contained in the directors’ remuneration report (“the
auditable part”).
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the annual report
and the financial statements in accordance with applicable
United Kingdom law and accounting standards are set out in
the statement of directors’ responsibilities. The directors are
also responsible for preparing the directors’ remuneration
report.
Our responsibility is to audit the financial statements and the
auditable part of the directors’ remuneration report in
accordance with relevant legal and regulatory requirements
and United Kingdom Auditing Standards issued by the
Auditing Practices Board. This report, including the opinion,
has been prepared for and only for the company’s members as
a body in accordance with Section 235 of the Companies Act
1985 and for no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown
or in to whose hands it may come save where expressly
agreed by our prior consent in writing.
We report to you our opinion as to whether the financial
statements give a true and fair view and whether the
financial statements and the auditable part of the directors’
remuneration report have been properly prepared in
accordance with the Companies Act 1985. We also report to
you if, in our opinion, the directors’ report is not consistent
with the financial statements, if the company has not kept
proper accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding directors’ remuneration
and transactions is not disclosed.
We read the other information contained in the annual report
and consider the implications for our report if we become
aware of any apparent misstatements or material
inconsistencies with the financial statements. The other
information comprises only the information provided on pages
1 to 24 and pages 47 and 48.
We review whether the corporate governance statement
reflects the company’s compliance with the seven provisions
of the Combined Code specified for our review by the Listing
Rules of the Financial Services Authority, and we report if it
does not. We are not required to consider whether the board’s
statements on internal control cover all risks and controls, or
to form an opinion on the effectiveness of the company’s or
group’s corporate governance procedures or its risk and
control procedures. 
BASIS OF AUDIT OPINION
We conducted our audit in accordance with auditing standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements and the
auditable part of the directors’ remuneration report. It also
includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies
are appropriate to the company’s circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements and the
auditable part of the directors’ remuneration report are free
from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the
financial statements.
OPINION
In our opinion:
n the financial statements give a true and fair view of the
state of affairs of the company and the group at 30
September 2003 and the profit and cash flows of the group
for the year then ended;
n the financial statements have been properly prepared in
accordance with the Companies Act 1985; and
n those parts of the directors’ remuneration report required by
Part 3 of Schedule 7A to the Companies Act 1985 have been
properly prepared in accordance with the Companies Act
1985.
PricewaterhouseCoopers LLP
Chartered Accountants
and Registered Auditors,
London 17 November 2003 30 September 2003 30 September 2002
Before Goodwill Before Goodwill
goodwill and goodwill and
and exceptional and exceptional
exceptional items exceptional items
items (note 6) Total items (note 6) Total
Note £m £m £m £m £m £m
Turnover 1
Continuing operations 73.5 73.5 73.7 73.7
Acquisitions 3.6 3.6 - -
77.1 77.1 73.7 73.7
Discontinued operations 0.6 0.6 1.9 1.9
77.7 77.7 75.6 75.6
Operating profit 1,3
Continuing operations 9.4 (1.0) 8.4 8.9 (0.6) 8.3
Acquisitions 0.3 - 0.3 - - -
9.7 (1.0) 8.7 8.9 (0.6) 8.3
Discontinued operations - - - - - -
9.7 (1.0) 8.7 8.9 (0.6) 8.3
Non-Operating items 6
Continuing operations – 
Profit on disposal of tangible fixed assets - 3.1 3.1 - 1.1 1.1
Discontinued operations –
Loss on closure of business - - - - (0.6) (0.6)
Profit on sale of businesses - - - - 0.3 0.3
9.7 2.1 11.8 8.9 0.2 9.1
Interest income 0.9 - 0.9 1.0 - 1.0
Profit on ordinary activities 
before tax 10.6 2.1 12.7 9.9 0.2 10.1
Taxation 7 (3.2) 0.3 (2.9) (3.0) 0.2 (2.8)
Profit on ordinary activities 
after tax 7.4 2.4 9.8 6.9 0.4 7.3
Equity minority interests 21 (0.1) (0.1)
Profit for the financial year 9.7 7.2
Dividends 8 (3.4) (3.0)
Retained profit for the year 20 6.3 4.2
Earnings per 5p share 9
On basic and diluted earnings 42.8p 31.2p
On adjusted earnings 32.2p 29.4p
The notes on pages 30 to 46 form part of these financial statements.
26 DIPLOMA PLC Annual Report and Accounts 2003
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 30 September 2003 Group Company
2003 2002 2003 2002
Note £m £m £m £m
Fixed assets
Intangible assets: Goodwill 10 8.2 4.8 - -
Tangible assets 11 9.3 9.8 - -
Investments 12 - - 51.6 51.6
17.5 14.6 51.6 51.6
Current assets
Stocks 13 16.6 14.8 - -
Debtors 14 15.9 12.2 - -
Cash and bank deposits 15 30.5 27.7 - -
63.0 54.7 - -
Creditors: Amounts falling due within one year 16 (22.3) (17.3) (44.3) (45.9)
Net current assets/(liabilities) 40.7 37.4 (44.3) (45.9)
Total assets less current liabilities 58.2 52.0 7.3 5.7
Provisions for liabilities and charges 17 (0.5) (0.6) - -
57.7 51.4 7.3 5.7
Capital and reserves
Called up equity share capital 19 1.1 1.1 1.1 1.1
Capital redemption reserve 20 0.2 0.2 0.2 0.2
Profit and loss account 20 55.8 49.6 6.0 4.4
Equity shareholders’ funds 57.1 50.9 7.3 5.7
Equity minority interests 21 0.6 0.5 - -
57.7 51.4 7.3 5.7
The financial statements were approved by the Board of Directors on 17 November 2003 and signed on its behalf by:
BM Thompson Chief Executive
NP Lingwood Finance Director
The notes on pages 30 to 46 form part of these financial statements.
27 DIPLOMA PLC Annual Report and Accounts 2003
BALANCE SHEETS 
as at 30 September 2003 28 DIPLOMA PLC Annual Report and Accounts 2003
GROUP CASH FLOW STATEMENT
for the year ended 30 September 2003
2003 2003 2002 2002
Note £m £m £m £m
Net cash inflow from operating activities 23 11.1 9.9
Returns on investments and servicing of finance
Interest received 0.9 1.0
Taxation
UK corporation tax paid (2.0) (2.1)
Overseas tax paid (1.1) (3.1) (0.8) (2.9)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1.1) (1.3)
Proceeds from the sale of tangible fixed assets 4.2 3.1 3.0 1.7
Acquisitions and disposals
Acquisition of businesses 22 (6.1) (2.2)
Equity dividends paid (3.2) (3.0)
Cash inflow before use of liquid resources and financing 2.7 4.5
Management of liquid resources
(Increase)/decrease in short term deposits (2.8) 2.6
Financing
Return of capital – (8.5)
Decrease in cash in the year 24 (0.1) (1.4)
The notes on pages 30 to 46 form part of these financial statements. 29 DIPLOMA PLC Annual Report and Accounts 2003
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 30 September 2003
2003 2002
£m £m
Profit for the financial year 9.7 7.2
Currency translation adjustment on foreign currency net investments (0.1) (0.7)
Tax credit on foreign exchange adjustment - 0.3
Total recognised gains and losses for the year 9.6 6.8
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 30 September 2003
2003 2002
£m £m
Profit for the financial year 9.7 7.2
Dividends (3.4) (3.0)
Retained profit for the year 6.3 4.2
Currency translation adjustments on foreign currency net investments, net of tax (0.1) (0.4)
Return of capital - (8.5)
Net increase/(reduction) in shareholders’ funds 6.2 (4.7)
Shareholders’ funds at beginning of year 50.9 55.6
Shareholders’ funds at end of year 57.1 50.9
The notes on pages 30 to 46 form part of these financial statements. 30 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003
1 ANALYSIS OF RESULTS
Operating profit
before goodwill Profit/(loss)
amortisation, exceptional before interest
Turnover items and taxation and taxation
2003 2002 2003 2002 2003 2002
£m £m £m £m £m £m
By Business
Specialised Distribution 77.1 73.7 9.7 8.9 11.8 9.4
Discontinued operations 0.6 1.9 – – – (0.3)
77.7 75.6 9.7 8.9 11.8 9.1
By Geographic Area
United Kingdom 43.4 39.9 6.0 5.5 8.4 6.6
Rest of Europe 8.6 7.6 1.5 0.9 1.5 0.9
North America 25.1 26.2 2.2 2.5 1.9 1.9
Specialised Distribution 77.1 73.7 9.7 8.9 11.8 9.4
Discontinued operations 0.6 1.9 – – – (0.3)
77.7 75.6 9.7 8.9 11.8 9.1
Turnover by geographical area is stated by origin which, with the exception of North America, is not materially different from
turnover by destination. In North America, turnover of £3.7m (out of £25.1m) is to customers based outside North America.
Included in Specialised Distribution is turnover and operating profit, before and after goodwill amortisation and exceptional
items, of £3.6m and £0.3m respectively, which relates to the acquisition of Hawco completed during the financial year.
2 ANALYSIS OF NET ASSETS
2003 2002
North North
Europe America Total Europe America Total
By Business Segment £m £m £m £m £m
Specialised Distribution 17.0 11.3 28.3 12.8 10.7 23.5
Discontinued operations 0.1 – 0.1 1.0 – 1.0
Trading Capital Employed 17.1 11.3 28.4 13.8 10.7 24.5
Net cash 28.2 1.1 29.3 26.1 0.8 26.9
45.3 12.4 57.7 39.9 11.5 51.4
The trading capital employed in Europe includes £3.5m (2002: £3.1m) relating to Continental Europe. 31 DIPLOMA PLC Annual Report and Accounts 2003
3 OPERATING PROFIT
Continuing Discontinued
operations operations Total Total
2003 2003 2003 2002
£m £m £m £m
The Group’s results are analysed as follows:
Sales 77.1 0.6 77.7 75.6
Cost of sales (51.6) (0.6) (52.2) (51.9)
Gross profit 25.5 – 25.5 23.7
Other operating income – – – 0.2
Distribution costs (3.4) – (3.4) (3.7)
Administrative expenses (13.4) – (13.4) (11.9)
Operating profit 8.7 – 8.7 8.3
Continuing operations includes turnover of £3.6m, cost of sales of £2.5m and administrative expenses of £0.8m relating to the
acquisition of Hawco completed during the year.
Goodwill amortisation of £0.3m (2002: £0.3m) has been included in administrative expenses. Exceptional costs of £0.7m (2002:
£0.6m) offset by exceptional income of £nil (2002: £0.3m), have been included in administrative expenses.
The Group’s results include charges/(credits) for:
2003 2002
£m £m
Depreciation of tangible fixed assets 1.1 1.3
Goodwill amortisation 0.3 0.3
Income from property rentals – (0.2)
Remuneration paid to PricewaterhouseCoopers LLP
– Statutory group audit fees 0.2 0.1
– Taxation compliance fees – 0.1
– Due diligence fees 0.2 –
Group audit fees include £2,000 (2002: £2,000) in respect of audit fees for the Company. 32 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003
4 GROUP STAFF COSTS
Group staff costs, including Directors’ emoluments:
2003 2002
£m £m
Wages and salaries 12.9 13.5
Social security costs 1.3 1.3
Other pension costs (note 26) 0.5 0.5
14.7 15.3
The average number of employees, including Executive Directors, during the year were:
2003 2002
Number Number
Specialised Distribution 497 498
Discontinued operations – 54
Number of employees – average 497 552
Number of employees – year end 567 487
5 DIRECTORS’ REMUNERATION
Directors’ emoluments and interests are given in the Remuneration Report on pages 19 to 24.
6 GOODWILL AND EXCEPTIONAL ITEMS
Goodwill Exceptional Goodwill Exceptional
amortisation items Total amortisation items Total
2003 2003 2003 2002 2002 2002
£m £m £m £m £m £m
Operating profit
Continuing operations
(a)
(0.3) (0.7) (1.0) (0.3) (0.3) (0.6)
Non operating items
Profit on disposal of tangible fixed assets – 3.1 3.1 – 1.1 1.1
Loss on closure of business
(b)
– – – – (0.6) (0.6)
Profit on sale of businesses
(c)
– – – – 0.3 0.3
(0.3) 2.4 2.1 (0.3) 0.5 0.2
Tax credit on exceptional items – 0.3 0.3 – 0.2 0.2
(0.3) 2.7 2.4 (0.3) 0.7 0.4
(a) Exceptional costs comprise £0.4m of aborted acquisition costs and £0.3m of costs incurred in connection with the
implementation of new IT systems in the Seals & Components’ North American businesses. Last year, costs of £0.6m were
incurred in restructuring the Group’s US operations. In addition a provision of £0.3m retained in respect of certain
liabilities relating to a defined benefit pension scheme was released to profit. There was a tax credit associated with these
items of £0.3m (2002: £0.2m).
(b) A loss of £0.6m was incurred last year on closing the business of Williamson Cliff, which was announced on 
28 February 2002.
(c) The profit on sale of businesses last year comprised £0.3m of proceeds received on closure of a pension scheme relating to
a divested company. 33 DIPLOMA PLC Annual Report and Accounts 2003
7 TAXATION
(a) Analysis of taxation charge in year:
2003 2002
£m £m
Charge on profit on ordinary activities
UK corporation tax at 30% (2002: 30%) 2.0 2.4
Less: double taxation relief – (0.5)
2.0 1.9
Overseas tax 0.9 0.9
Taxation charge 2.9 2.8
Classified as:
Trading activities 3.2 3.0
Exceptional items, credit (0.3) (0.2)
2.9 2.8
(b) Factors affecting the tax charge for the year:
The tax charge on profit before tax is reconciled to the expected charge based on the standard corporation tax in the UK as
follows:
2003 2002
£m £m
Expected tax charge at 30% 3.8 3.0
Exceptional items relating to disposal of fixed assets (0.9) (0.3)
Goodwill amortisation in UK 0.1 0.1
Differences in overseas taxation rates – 0.1
Tax relief on overseas goodwill (0.1) (0.1)
2.9 2.8
8 DIVIDENDS
2003 2002 2003 2002
pence pence
per share per share £m £m
Interim paid 5.0 5.0 1.1 0.9
Final proposed 10.0 9.0 2.3 2.1
15.0 14.0 3.4 3.0
The dividend charged to profit in 2002 included a credit of £0.2m in respect of an over-accrued final dividend on shares
repurchased and cancelled in December 2001. 34 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003
9 EARNINGS PER ORDINARY SHARE
Basic and Diluted earnings per share
Basic and diluted earnings per ordinary share are calculated on the basis of the weighted average number of ordinary shares in
issue during the year of 22,647,911 (2002: 23,116,726) and the profit for the financial year, after minority interests, of £9.7m
(2002: £7.2m). There were no potentially dilutive shares.
Adjusted earnings per share
Adjusted earnings per share is shown by reference to earnings before goodwill amortisation, exceptional items and related tax.
The Directors consider that this gives a clearer indication of the underlying performance of the Group. Earnings before goodwill
amortisation, exceptional items and related tax are calculated as follows:
2003 2002 2003 2002
pence pence
per share per share £m £m
Profit for the financial year, after minority interests 42.8 31.2 9.7 7.2
Goodwill amortisation 1.3 1.3 0.3 0.3
Exceptional items, net of tax (11.9) (3.1) (2.7) (0.7)
Adjusted earnings 32.2 29.4 7.3 6.8
10 INTANGIBLE ASSETS: GOODWILL
2003
£m
Cost
At 1 October 2002 5.3
Goodwill arising on acquisitions during the year (note 22) 3.7
At 30 September 2003 9.0
Amortisation
At 1 October 2002 0.5
Amortisation charge for the year 0.3
At 30 September 2003 0.8
Net Book Value
At 30 September 2003 8.2
At 1 October 2002 4.8
In accordance with the accounting policy for goodwill, described on page 44, goodwill arising on acquisitions since 1 April 1998
has been capitalised. Goodwill arising on businesses acquired prior to 1 April 1998 amounting to £20.3m (2002: £20.3m) has
been written off to reserves in prior years. 35 DIPLOMA PLC Annual Report and Accounts 2003
11 TANGIBLE ASSETS
Fixtures,
fittings,
Freehold Plant and vehicles &
Group properties machinery equipment Total
£m £m £m £m
Cost
At 1 October 2002 10.1 3.4 6.7 20.2
Assets of businesses acquired (note 22) 0.3 0.2 0.1 0.6
Additions – 0.1 1.0 1.1
Disposals (2.4) (1.5) (0.6) (4.5)
At 30 September 2003 8.0 2.2 7.2 17.4
Depreciation
At 1 October 2002 3.1 3.1 4.2 10.4
Charged in year 0.1 0.2 0.8 1.1
Disposals (1.5) (1.4) (0.5) (3.4)
At 30 September 2003 1.7 1.9 4.5 8.1
Net Book Value
At 30 September 2003 6.3 0.3 2.7 9.3
At 1 October 2002 7.0 0.3 2.5 9.8
Land included above but not depreciated is £1.8m (2002: £2.0m). Capital commitments contracted, but not provided were £0.1m
(2002: £0.4m).
Included in freehold properties is the former brickworks site of Williamson Cliff, together with adjacent land (“the Stamford
land”) with a net book value of £0.1m. A large part of this land comprises environmental and geological sites of special
importance, but the Group has identified two parcels of this land, which in aggregate comprise twenty acres, which have resale
potential. In the directors’ opinion, the market value of the land, with current planning consent, is likely to be not less than
£5.0m, before expenses and tax.
12 INVESTMENTS
Company
£m
Shares in Group undertakings
At 30 September 2003 and 1 October 2002 51.6
Details of the principal subsidiaries are set out on page 46.
13 STOCKS
Group
2003 2002
£m £m
Finished goods and goods held for resale 16.6 14.8 36 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003
14 DEBTORS
Group Company
2003 2002 2003 2002
£m £m £m £m
Trade debtors 14.8 11.1 – –
Other debtors 0.3 0.5 – –
Prepayments and accrued income 0.8 0.6 – –
15.9 12.2 – –
15 CASH AND BANK DEPOSITS
Group
2003 2002
£m £m
Cash at bank 1.8 1.9
Short term deposits 28.7 25.8
30.5 27.7
16 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Company
2003 2002 2003 2002
£m £m £m £m
Unsecured Loan Notes 1.2 0.8 – –
Trade creditors 9.0 5.9 – –
Amounts owed to Group companies – – 42.0 43.8
Corporation tax 2.2 2.5 – –
Other creditors 1.1 1.4 – –
Other taxes and social security 1.3 0.8 – –
Proposed dividend 2.3 2.1 2.3 2.1
Accruals and deferred income 5.2 3.8 – –
22.3 17.3 44.3 45.9
During the year, a further £0.4m of Guaranteed Unsecured Loan Notes 2001 - 2003 (“Notes”) were issued as final consideration
for the acquisition of Clarendon Engineering Supplies Limited. The Notes bear interest at 0.95% below LIBOR. On 24 October
2003 all of the outstanding Notes were redeemed by the Noteholder at par, for cash. 17 PROVISIONS FOR LIABILITIES AND CHARGES
Group
2003 2002
£m £m
Deferred taxation – –
Provisions 0.5 0.6
0.5 0.6
Deferred tax includes a liability of £0.3m (2002: £0.2m) which relates to capital allowances on fixed assets in excess of
depreciation and an asset of £0.3m (2002: £0.2m) relating to other timing differences. No provision for deferred taxation has
been made for taxation payable on the distribution of reserves by overseas subsidiary undertakings.
Provisions includes £0.3m (2002: £0.3m) in respect of a pension provision held against a defined benefit pension scheme which
is being amortised to profit over the average service life of the employees.
Provisions also includes £0.2m (2002: £0.3m) in respect of an onerous property lease. During the year, £64,000 was utilised and
the balance is expected to be utilised over a period of five years.
18 FINANCIAL INSTRUMENTS
Policy
A discussion of the Group’s objectives and policies with regard to financial instruments is set out in the Finance Director’s Review
on page 13. Short term debtors and creditors and provisions have been excluded from the following disclosures, other than the
foreign currency disclosures.
Interest rate and currency profile
At the year end, and throughout the year, the Group has maintained cash funds comprising of cash at bank and short term
deposits. The Group has no term borrowing facilities, but maintains ‘on demand’ bank overdrafts.
2003 2002
Sterling US$ Euro Total Sterling US$ Euro Total
£m £m £m £m £m £m £m £m
Cash at bank 0.3 0.4 1.1 1.8 0.8 0.3 0.8 1.9
Short term deposits 27.1 0.7 0.9 28.7 23.8 0.5 1.5 25.8
27.4 1.1 2.0 30.5 24.6 0.8 2.3 27.7
Unsecured Loan Notes (1.2) – – (1.2) (0.8) – – (0.8)
26.2 1.1 2.0 29.3 23.8 0.8 2.3 26.9
The short term deposits, cash at bank and Unsecured Loan Notes are all interest bearing at rates linked to LIBOR.
Net foreign currency monetary assets/(liabilities) at 30 September 2003 and 2002
After taking into account the effect of forward contracts entered into to manage currency exposures, the Group’s UK businesses
had a net liability exposure of £0.5m (2002: £nil) to the Euro. The Group’s European and North American businesses had no
exposure to foreign currencies at the year end.
Fair values of financial instruments
At 30 September 2003 and 2002 there was no material difference between the book value and the fair value of the Group’s
financial assets and liabilities.
37 DIPLOMA PLC Annual Report and Accounts 2003 19 SHARE CAPITAL
2003 2002 2003 2002
Authorised Number Number £m £m
Ordinary shares of 5p each 35,000,000 35,000,000 1.7 1.7
Allotted, issued and fully paid
Equity – Ordinary shares of 5p each 22,647,911 22,647,911 1.1 1.1
20 RESERVES
Capital Profit and
redemption loss
reserve account Total
£m £m £m
Group
At 1 October 2002 0.2 49.6 49.8
Retained profit for the year – 6.3 6.3
Exchange loss, net of tax – (0.1) (0.1)
At 30 September 2003 0.2 55.8 56.0
Company
At 1 October 2002 0.2 4.4 4.6
Retained profit for the year – 1.6 1.6
At 30 September 2003 0.2 6.0 6.2
At 30 September 2003, goodwill written off directly against profit and loss account reserves amounted to £20.3m 
(2002: £20.3m).
21 MINORITY INTERESTS
Group
£m
At 1 October 2002 0.5
Dividends –
Share of profit for the year 0.1
At 30 September 2003 0.6
38 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003 39 DIPLOMA PLC Annual Report and Accounts 2003
22 ACQUISITIONS
On 29 July 2003, the Group acquired 95% of the share capital of HA Wainwright (Group) Limited (“Hawco’’) for £5.9m, net of
cash acquired of £2.1m. On 20 December 2002, the Group acquired a further 8% of the ordinary share capital of its subsidiary,
FPE Limited, for £0.2m, the Group now owns 88% of the issued share capital.
Set out below is an analysis of assets acquired and consideration paid:
2003
£m
Tangible fixed assets 0.6
Stocks 2.7
Debtors 3.8
Creditors (4.5)
Taxation 0.2
Minority’s share of net asset, net –
Net assets acquired 2.8
Goodwill arising on acquisitions 3.7
6.5
Cash paid 8.2
Cash acquired (2.1)
Cash paid, net of expenses 6.1
Loan Notes issued –
Deferred consideration 0.4
Total consideration paid 6.5
The provisional fair value of assets acquired are set out above.
The book value of assets acquired in respect of Hawco was £3.7m, excluding cash of £2.1. Provisional fair value adjustments of
£1.0m after tax were made to reduce the carrying value of stock and debtors by £0.4m and of tangible fixed assets by £0.2m to
bring the carrying value of the assets into line with the Group’s accounting policies. Provisions of £0.8m were also made in
respect of contractural bonus payments to the existing directors of Hawco. These fair value adjustments, which were reduced by a
tax credit of £0.4m, will be finalised during the following year. Goodwill of £3.6m arose on the acquisition of Hawco and £0.1m
arose on the acquisition of the minority interest in FPE Limited. Goodwill arising on these acquisitions will be amortised over 20
years.
Deferred consideration up to a maximum of £0.4m is payable on the acquisition of Hawco based on the performance of the
company during the year ended 31 December 2003.
In the year ended 31 December 2002, the consolidated financial statements of Hawco reported turnover of £16.9m and profit
after tax and minority interests of £0.4m. In the subsequent period up to the date of acquisition, the consolidated management
accounts reported turnover of £10.2m and profit after tax and minority interests of £0.3m.
These transactions have been accounted for as acquisitions and consolidated in the financial statements from the date of
acquisition. 23 RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES
2003 2002
£m £m
Operating profit 8.7 8.3
Depreciation 1.1 1.3
Amortisation of goodwill 0.3 0.3
Decrease/(increase) in stocks 0.7 (0.9)
Decrease in debtors 0.1 1.1
Increase in creditors 0.5 0.8
Decrease in provisions (0.1) (0.7)
Costs incurred on business closure (0.2) (0.3)
Net cash inflow from operating activities 11.1 9.9
The net cash inflow from operating activities of £11.1m (2002: £9.9m) includes an outflow £0.2m (2002: £nil) relating to
discontinued businesses.
24 RECONCILIATION OF NET CASH FLOWS TO THE MOVEMENT IN NET FUNDS
2003 2002
£m £m
Decrease in cash in the year (0.1) (1.4)
Increase/(decrease) in short term deposits 2.8 (2.6)
Change in net funds resulting from cash flows 2.7 (4.0)
Increase in debt due within one year (0.4) (0.8)
Exchange adjustment 0.1 –
Net funds at start of year 26.9 31.7
Net funds at end of year 29.3 26.9
25 ANALYSIS OF NET FUNDS
Other 
1 October non-cash Exchange 30 September
2002 Cash flow movement movement 2003
£m £m £m £m £m
Cash at bank and in hand 1.9 (0.1) – – 1.8
Short term deposits 25.8 2.8 – 0.1 28.7
27.7 2.7 – 0.1 30.5
Guaranteed Unsecured Loan Notes 2001-2003 (0.8) – (0.4) – (1.2)
Net funds 26.9 2.7 (0.4) 0.1 29.3
40 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003 41 DIPLOMA PLC Annual Report and Accounts 2003
26 PENSION SCHEMES
The Group operates a number of pension schemes in the UK of both the defined benefit and defined contribution type. The
defined benefit schemes are generally contributory schemes covering employees of certain subsidiaries, and the assets of
these schemes are held in separate trustee administered funds. The schemes are funded in accordance with rates
recommended by independent qualified actuaries on the basis of triennial or shorter period reviews using the projected unit
method. All of the schemes were fully funded at the date of their last actuarial review.
The two principal defined benefit schemes operated by the Group (”the Principal Schemes“) are the Diploma Holdings PLC
Permanent Staff Pension and Assurance Scheme (”the PLC Scheme“) and the Anachem Limited Retirement Benefits Scheme
(”the Anachem Scheme“).
Actuarial Valuations
The PLC Scheme is a hybrid scheme with a closed defined benefit section and a defined contribution section. The accrual of
benefits on a final salary basis ceased from 5 April 2000 and the Group does not currently contribute to the defined benefit
section. An actuarial valuation of the defined benefit section of the PLC Scheme was carried out as at 6 April 2000. The
principal actuarial assumptions adopted were that, over the long term, the annual rate of return on investments would be
4% higher than both the annual increase in present and future pensions, and in retail inflation. The market value of the
assets at the date of valuation was £6.8m. The actuarial valuation showed assets sufficient to cover 114% of the liabilities
of the PLC Scheme. A valuation has been carried out based on the position at 6 April 2003 and the draft results indicate
that the assets are sufficient to cover 117% of the liabilities. The valuation will be finalised in 2003/2004.
The Anachem Scheme was actuarially valued as at 5 April 2001 using the projected unit method. Anachem contributes 7.5%
of employee’s pensionable salary in respect of members of the Anachem Scheme. The principal actuarial assumptions adopted
were that, over the long term, the annual investment return would be 3.25% greater than the increase in pensionable
remuneration and 3.75% greater than both the increase in present and future pensions, and in retail inflation. The market
value of the assets at the date of the valuation was £4.2m. The actuarial valuation showed assets sufficient to cover 108%
of the benefits accruing to members of the Anachem Scheme. The next valuation will be carried out based on the position at
5 April 2004.
The Group’s total pension charge, before exceptional items, was £0.5m (2002: £0.5m) of which £0.3m (2002: £0.3m) related
to the defined benefit schemes.
FRS 17 Accounting
The aggregate fair value of the assets held by the Principal Schemes at 30 September 2003 and 2002 and the expected rate
of return assumed for the next year are as follows:
Fair value Expected rate of return
2003 2002 2003 2002
£m £m
Equities 6.1 4.4 8.0% 8.5%
Bonds 2.2 0.6 5.8% 5.5%
Cash 0.5 2.6 4.0% 4.0%
8.8 7.6
On an FRS 17 basis, the major assumptions used by the actuaries of the Principal Schemes to calculate the scheme liabilities
at 30 September 2003 and 2002 were:
2003 2002
Inflation 2.50% 2.25%
Rate of increase in pensionable pay 4.00% 3.75%
Rate of increase in pensions in payment 2.50% 2.25%
Rate used to discount scheme liabilities 5.25% 5.50%
At 30 September 2003, the present value of scheme liabilities using these assumptions was £13.4m (2002: £12.6m). The
implied deficit in the Principal Schemes on an FRS 17 basis is £4.6m (2002: £5.0m). 42 DIPLOMA PLC Annual Report and Accounts 2003
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2003
26 PENSION SCHEMES (continued)
If the above amounts had been recognised in the financial statements, the Group’s shareholders’ funds and profit and loss reserve
at 30 September 2003 and 2002 would have been as follows:
Shareholders’ Funds Profit and Loss Reserve
2003 2002 2003 2002
£m £m £m £m
As reported – excluding pension deficit 57.1 50.9 55.8 49.6
Reverse SSAP 24 accounting provision 0.3 0.3 0.3 0.3
Pension deficit (4.6) (5.0) (4.6) (5.0)
Related deferred tax asset 1.4 1.5 1.4 1.5
Restated – including pension deficit 54.2 47.7 52.9 46.4
In respect of the Principal Schemes, the following amounts would have been recognised in the primary financial statements in
the year ended 30 September 2003 and 2002 under the requirements of FRS 17:
Profit and Loss Account
2003 2002
£m £m
Operating profit:
Current service cost (0.3) (0.3)
Other finance income/(expense):
Expected return on pension scheme assets 0.7 0.6
Interest on pension scheme liabilities (0.9) (0.8)
(0.2) (0.2)
Net charge in profit and loss account (0.5) (0.5)
Statements of Total Recognised Gains and Losses (“STRGL”)
2003 2002
£m £m
Actual return less expected return on pension scheme assets 0.5 (1.5)
Experience gains and losses arising on the scheme liabilities 1.4 (0.6)
Change in assumptions at 30 September 2003 underlying the present value of the
scheme liabilities (1.2) (1.1)
Actuarial gain/(loss) recognised in the STRGL 0.7 (3.2) 43 DIPLOMA PLC Annual Report and Accounts 2003
26 PENSION SCHEMES (continued)
The movement in the overall pension deficit, calculated in accordance with the method prescribed in FRS17, is as follows:
2003 2002
£m £m
Deficit in the Principal Schemes at beginning of year: (5.0) (1.5)
Current service cost (0.3) (0.3)
Employer contributions 0.2 0.2
Other finance expense (0.2) (0.2)
Actuarial gain/(loss) recognised in STRGL 0.7 (3.2)
Deficit in the Principal Schemes at end of year (4.6) (5.0)
Set out below are details of experience gains and losses in respect of the Principal Schemes for the year ended 30 September
2003:
2003 2002
£m £m
(a) Difference between the expected and actual return on scheme assets 0.5 (1.5)
— as a percentage of scheme assets 6% 20%
(b) Experienced gains and losses of scheme liabilities 1.4 (0.6)
— as a percentage of scheme liabilities 10% 5%
(c) Amount recognised in STRGL 0.7 (3.2)
— as a percentage of scheme liabilities 5% 25%
27 EXCHANGE RATES
The following exchange rates have been used to translate the results of the overseas business.
2003 2002
US Dollar 1.61 1.48
Euro 1.47 1.60
28 SUBSEQUENT EVENT
On 17 November 2003 the Group announced the acquisition of Filcon Electronics GmbH for a maximum consideration of £4.3m. 44 DIPLOMA PLC Annual Report and Accounts 2003
GROUP ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements are prepared under the historical cost convention and in accordance with applicable accounting
standards, all of which have been applied consistently throughout the year and the preceding year. The Directors continue to
implement FRS 17 ‘Retirement Benefits’ in accordance with the transitional arrangements set out in this Standard and the
disclosure requirements are set out in note 26 of these financial statements.
CONSOLIDATION
The Group financial statements consolidate the accounts of the Company and its subsidiary undertakings. The principal
subsidiary undertakings are set out on page 46. The results of businesses acquired or sold during the year are included in the
group financial statements from the date of acquisition or to the date of disposal. A separate profit and loss account is not
presented for Diploma PLC as permitted by S230 of the Companies Act 1985.
GOODWILL
On the acquisition of a subsidiary, business or associate, fair values are attributed to the net assets acquired. Where the fair
value of the consideration exceeds the aggregate value of these assets, the difference is treated as goodwill. In accordance
with FRS 10, goodwill arising on acquisitions since 1 April 1998 is capitalised on the Group balance sheet and amortised in
equal instalments over its useful economic life. In the absence of indications to the contrary, the useful economic life is
assumed to be no more than 20 years. As permitted by the transitional provisions of FRS 10, goodwill that arose on
businesses acquired prior to 1 April 1998 will, to the extent not already charged against operating profit, remain written off
to reserves. In the event of subsequent disposal of any of these businesses, the attributable goodwill will be taken into
account in determining the profit or loss on sale. A credit of equal amount to reserves will ensure that there is no impact on
shareholders’ funds.
A review for the potential impairment of capitalised goodwill is carried out if events or changes in circumstances indicate
that the carrying amount of that goodwill may not be recoverable. Such impairment reviews are performed in accordance
with FRS 11. Impairments are recorded in the profit and loss account.
TURNOVER
Turnover represents the value of goods and services sold to third parties, excluding taxes.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost less accumulated depreciation and provision for impairment. A review for the
potential impairment of a tangible fixed asset is carried out if events or changes in circumstances indicate that the carrying
amount of a tangible fixed asset may not be recoverable. Such impairment reviews are performed in accordance with FRS 11.
Impairments are recorded in the profit and loss account.
DEPRECIATION
Depreciation is provided on all tangible fixed assets except freehold land, at annual rates calculated to write-off the cost of
each asset over its estimated useful life on a straight line basis. The estimated useful lives range from four to eight years
with the exception of freehold buildings, which are depreciated over 50 years and leasehold property, which is depreciated
over the period of the lease. INVESTMENTS
All investments are stated at cost. Provision is made to reflect any impairment in the carrying value of a subsidiary in
accordance with FRS 11. Impairments are recorded in the profit and loss account.
STOCKS
Stocks are stated at the lower of cost and net realisable value.
DEFERRED TAXATION
Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet
date and which could give rise to an obligation to pay more or less tax in the future.
Deferred tax assets are recognised to the extent that they are expected to become recoverable.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which
timing differences reverse.
FOREIGN CURRENCIES
Assets and liabilities denominated in foreign currencies are translated into sterling at the rates ruling at the end of the
financial year except when covered by an open foreign exchange contract in which case the rate of exchange specified in the
contract is used.
Profits and losses on exchange arising from the retranslation of the opening balance sheets of overseas subsidiary
undertakings at the beginning of the year, or the date of acquisition, where later, and any foreign currency borrowings used
to finance or hedge long term foreign investments are taken directly to reserves. The results of overseas subsidiary
undertakings are translated into sterling at average rates for the year.
Transactions in foreign currencies are translated at the rate of exchange ruling at the date of transactions, or where
applicable, the contracted rate. All profits and losses on exchange are credited or charged to operating profit.
FINANCIAL INSTRUMENTS
Gains and losses on forward foreign exchange contracts, which hedge future purchases and sales denominated in foreign
currencies, are taken to the profit and loss account on maturity to match the underlying transactions.
The disclosures required under FRS 13 “Derivatives and Other Financial Instruments: Disclosures” relating to the management
of financial instruments and their impact on the Group’s risk profile, performance and financial condition are set out in note
18 to the financial statements.
LEASED ASSETS
Rentals arising on operating leases are charged in the profit and loss account on a straight line basis over the lease term.
PENSIONS
The Group operates defined benefit and defined contribution pension schemes. The expected costs of the defined benefit
schemes are charged against profit so as to spread the cost of pensions over the service lives of the employees in the
schemes. Variations from the regular cost are spread over the expected remaining service lives of employees in each scheme.
Contributions to the defined benefit schemes are determined on the basis of professional actuarial advice in accordance with
statutory requirements.
Payments to defined contribution schemes are charged against profit as incurred.
45 DIPLOMA PLC Annual Report and Accounts 2003 Group Country of
percentage of incorporation or
equity capital registration
SPECIALISED DISTRIBUTION
Life Sciences
Anachem Limited* 100% England
a1 technologies GmbH 100% Germany
Seals & Components
Hercules Bulldog Sealing Products Incorporated 100% USA
Fluid Power Equipment Limited* 88% England
Controls & Interconnect
IS Rayfast Limited 100% England
HA Wainwright (Group) Limited 95% England
IS Motorport Incorporated 100% USA
Clarendon Engineering Supplies Limited 100% England
Sommer GmbH 100% Germany
OTHER COMPANIES
Diploma Holdings PLC 100% England
Diploma Holdings Incorporated 100% USA
The companies marked* are directly held by Diploma Holdings PLC, the sole subsidiary of Diploma PLC. 
A full list of subsidiaries will be annexed to the next Annual Return of Diploma PLC to be filed with the Registrar of
Companies.
46 DIPLOMA PLC Annual Report and Accounts 2003
PRINCIPAL SUBSIDIARIES 47 DIPLOMA PLC Annual Report and Accounts 2003
FINANCIAL CALENDAR AND SHAREHOLDER INFORMATION
Announcements (provisional dates)
Half Year results announced 10 May 2004
Full Year results announced 15 November 2004
Annual Report and Accounts posted to shareholders 29 November 2004
Annual General Meeting 5 January 2005
Dividends (provisional dates)
Interim announced 10 May 2004
Paid 21 June 2004
Final announced 15 November 2004
Paid (if approved) 18 January 2005
Report and Accounts: Copies can be obtained from the Company Secretary at the address shown below.
Share Registrar – Computershare Services PLC: The Company’s Registrar is Computershare Services PLC, PO Box 82, The
Pavilions, Bridgwater Road, Bristol BS99 7NH. Telephone: 0870 7020010.
Shareholders’ enquiries: If you have any enquiry about the Company’s business or about something affecting you as a
shareholder (other than questions dealt with by Computershare Services PLC) you are invited to contact the Company Secretary at
the address shown below.
Secretary and Registered Office:
N P Lingwood ACA, 20 Bunhill Row, London EC1Y 8UD. Telephone: 020 7638 0934. Fax: 020 7638 7651. Registered in England
and Wales, number 3899848.
Web site: Diploma’s web site is www.diplomaplc.com 2003 2002 2001 2000 1999
£m £m £m £m £m
Turnover
– Continuing operations 77.1 73.7 66.3 58.4 52.8
– Discontinued operations 0.6 1.9 20.6 35.2 189.2
77.7 75.6 86.9 93.6 242.0
Operating profit before goodwill and exceptional items
– Continuing operations 9.7 8.9 8.8 7.8 8.0
– Discontinued operations – – 0.9 0.3 2.9
9.7 8.9 9.7 8.1 10.9
Interest income 0.9 1.0 1.2 2.3 0.1
Profit before tax, goodwill and exceptional items 10.6 9.9 10.9 10.4 11.0
Goodwill amortisation (0.3) (0.3) (0.1) – –
Exceptional credits/(charges), net 2.4 0.5 (2.1) (1.9) 9.2
Profit before tax 12.7 10.1 8.7 8.5 20.2
Taxation (2.9) (2.8) (3.2) (4.2) (3.8)
Profit after tax 9.8 7.3 5.5 4.3 16.4
Capital structure
Shareholders’ funds 57.1 50.9 55.6 53.3 93.9
Minority interest 0.6 0.5 0.4 1.8 3.2
Less: net cash (29.3) (26.9) (31.7) (19.1) (19.9)
Trading capital employed 28.4 24.5 24.3 36.0 77.2
Cash flow from – operating activities 11.1 9.9 9.4 10.3 20.9
Cash flow from – (acquisitions)/disposals of businesses (6.1) (2.2) 8.8 43.9 16.6
Per ordinary share (pence)
Basic earnings 42.8 31.2 21.5 10.5 32.0
Adjusted earnings 32.2 29.4 30.2 18.0 14.0
Dividends 15.0 14.0 13.0 12.0 9.0
Net assets 252 225 221 211 187
Dividend cover 2.1 2.1 2.3 1.5 1.6
Ratios % % % % %
Return on trading capital employed (including goodwill) 21.6 20.3 21.7 14.4 10.3
Operating profit/sales – continuing operations 12.6 12.1 13.3 13.4 15.2
Notes
1 Shareholders’ funds represent share capital and reserves.
2 Net cash includes cash at bank and short term deposits less bank overdrafts and loan notes.
3 Trading capital employed is defined as net assets less net funds plus minority interests.
4 Return on trading capital employed represents operating profit as a percentage of trading capital employed (as adjusted for the effect of the timing
of major acquisitions and disposals) including all goodwill arising on acquisitions (whether capitalised or charged to reserves).
5 Adjusted earnings per share is calculated in accordance with note 9 to the financial statements. Comparatives have not been restated to take account
of the returns of capital.
6 Net assets per share have been calculated by dividing shareholders’ funds by the number of ordinary shares in issue at the year end.
7 Dividend cover is calculated on Adjusted earnings as defined in note 9 to the financial statements.
8 Comparatives have not been restated for the impact of new Financial Reporting Standards.
9 In April 2000, a return of capital was completed by means of a Scheme of Arrangement. This achieved the result of returning £50.3m of capital to
shareholders while reducing the number of shares in issue to 25.2m shares. In December 2001 a further 2.5m shares were repurchased reducing the
number of shares in issue to 22.6m shares.
10 The divestment of the Special Steels Division and Abacon Telecommunications was completed in the year ended 30 September 2001. The divestment
of the Electronic Components Division and Robert Lee was completed in the year ended 30 September 2000. The divestment of 
IG was completed in the year ended 30 September 1999.
48 DIPLOMA PLC Annual Report and Accounts 2003
FIVE YEAR RECORD COMPANY STATEMENT
CONTENTS
01 FINANCIAL HIGHLIGHTS
02 GROUP STRUCTURE 
03 CHAIRMAN’S STATEMENT
04 CHIEF EXECUTIVE OFFICER'S REVIEW 
06 REVIEW OF OPERATIONS
12 FINANCE DIRECTOR’S REVIEW 
14 BOARD OF DIRECTORS AND ADVISORS
15 DIRECTORS’ REPORT
17 CORPORATE GOVERNANCE
19 REMUNERATION REPORT
24 DIRECTORS’ RESPONSIBILITIES FOR FINANCIAL STATEMENTS
25 INDEPENDENT AUDITORS’ REPORT
26 GROUP PROFIT & LOSS ACCOUNT
27 BALANCE SHEETS
28 GROUP CASH FLOW STATEMENT
29 STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
29 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
30 NOTES TO THE FINANCIAL STATEMENTS
44 GROUP ACCOUNTING POLICIES
46 PRINCIPAL SUBSIDIARIES
47 FINANCIAL CALENDAR AND SHAREHOLDER INFORMATION
48 FIVE YEAR RECORD
Diploma PLC is a group of specialised 
international distribution businesses 
serving industries with long term growth 
potential and with the opportunity for 
sustainable superior margins through 
the quality of customer service, depth of 
technical support and value adding activities.
Designed by Energy Design Studio Ltd. Produced by Imprima De Bussy Limited 020 7902 7200. DIPLOMA PLC 
ANNUAL REPORT AND ACCOUNTS 2003
DIPLOMA PLC ANNUAL REPORT AND ACCOUNTS 2003
DIPLOMA PLC
20 Bunhill Row
London
EC1Y 8UD
www.diplomaplc.com
Tel 020 7638 0934
Fax 020 7638 7651