Diploma PLC Annual Report and Accounts 2005
Annual Report and Accounts 2005
SPECIALISED INTERNATIONAL DISTRIBUTION Financial Highlights 02
Chairman’s Statement 03
Chief Executive Ofﬁcer’s Review 04
Group at a Glance 06
Review of Operations 08
Finance Director’s Review 14
Board of Directors and Advisors 16
Directors’ Report 18
Corporate Governance 20
Remuneration Report 24
Directors’ Responsibilities for Financial Statements 31
Independent Auditors’ Report 31
Group Proﬁt and Loss Account 32
Balance Sheets 33
Group Cash Flow Statement 34
Statement of Total Recognised Gains and Losses 35
Reconciliation of Movements in Equity Shareholders’ Funds 35
Notes to the Financial Statements 36
Group Accounting Policies 49
Principal Subsidiaries 51
Financial Calendar and Shareholder Information 51
Five Year Record 52 Diploma PLC Annual Report and Accounts 2005 1
Annual Report and Accounts 2005
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. Diploma PLC Annual Report and Accounts 2005 Financial Highlights 2
Financial Highlights
> Basic earnings per share > Adjusted earnings per share
> Dividends per share
> Turnover > Operating profit before exceptional 
items and goodwill amortisation
46.6p
(52.7p — 2004)
> Profit before tax, exceptional 
items and goodwill amortisation
> Profit before tax
£16.6m
(£13.1m — 2004)
£15.3m
(£15.4m — 2004)
52.4p
(41.2p — 2004)
20.0p
(17.0p — 2004)
> Free cash flow per share
52.9p
(42.4p — 2004)
The Group’s strategy is to invest in specialised distribution
businesses with long term growth potential in the UK,
Continental Europe and North America. 
£111.3m
(£100.5m — 2004)
£15.9m
(£12.3m — 2004) Diploma PLC Annual Report and Accounts 2005 Chairman’s Statement 3
Chairman’s Statement
The Group delivered
another strong set of
results in 2005, achieving
a second consecutive 
year of double digit
profit growth and 
strong free cash flow.
Diploma has made good progress again this
year. Each of our business sectors delivered 
a solid performance which demonstrates 
the momentum in the Group as a result
of targeted initiatives implemented during
the past five years. 
STRONG RESULTS
Turnover increased by 11% to £111.3m 
(2004: £100.5m) and operating profits,
before goodwill amortisation and exceptional
items, increased by 29% to £15.9m 
(2004: £12.3m). The operating results
benefited from the full year contribution 
from Somagen, acquired in July 2004 and
from a strong performance from Hercules
Bulldog. Both businesses took full advantage
of favourable market conditions in North
America. The Group’s operating margin,
before goodwill amortisation, increased 
from 12.2% in 2004 to 14.3% in 2005.
Profit before tax, goodwill amortisation 
and exceptional items increased by 27% 
to £16.6m (2004: £13.1m). There were no
exceptional items this year, while last year’s
results benefited from exceptional profits of
£3.9m on the sale of land. As a result profit
before tax was £15.3m compared with
£15.4m last year.
The Group’s free cash flow was exceptionally
strong this year at £11.9m (2004: £9.6m)
benefiting from a continuing close focus on
working capital. Last year’s free cash flow
included cash proceeds of £4.0m from the
sale of land and properties. The Group’s cash
funds increased by £7.8m during the year to
£25.7m at 30 September 2005.
EARNINGS AND DIVIDENDS
Earnings per share, before exceptional items
and goodwill amortisation, grew 27% to 
52.4 pence compared with 41.2 pence last
year. Basic earnings per share were 46.6
pence compared with 52.7 pence last year.
The Directors are recommending an
increased final dividend of 13.0 pence per
share (2004: 11.0 pence). This increases
the total dividend payment for the year to
20.0 pence (2004: 17.0 pence), an increase
of 18%. Subject to approval at the Annual
General Meeting, the final dividend will 
be paid on 18 January 2006 to shareholders
on the register at the close of business on 
2 December 2005.
PEOPLE
On behalf of shareholders and the Board, 
I would like to acknowledge the dedication
of our people across all our operations
whose hard work and commitment have
been key to achieving the progress made
in 2005.
CURRENT TRADING
The outlook for our markets in 2006,
together with wider macro-economic
indicators, is somewhat mixed. The
markets in North America remain positive
and continue to show growth. Market
conditions in the UK and Germany remain
tough and competitive.
We are confident that our focus on improving
operational performance, together with our
strategy of investing for organic growth and
pursuing acquisitions, will continue to deliver
value for Diploma shareholders in 2006. 
John Rennocks
Chairman
14 November 2005 The Group’s strategy is to invest in
specialised distribution businesses with 
long term growth potential in the UK,
Continental Europe and North America.
Superior margins are achieved in the
businesses through the quality of customer
service, depth of technical support and value
adding activities. The objective is to build
more substantial broader based businesses
in our chosen sectors through a combination
of organic growth and acquisitions.
Reviewing the last five years of the Group’s
development, adjusted earnings per share
(before exceptional items and goodwill
amortisation) has grown from 23.4p 
per share to the current level of 52.4p per
share; an average growth rate of 18% p.a.
Underpinning this strong performance has
been the growth of the core continuing
businesses which have grown both sales 
and operating profits (before head office
expenses) by 15% p.a. over the same period. 
Acquisitions have contributed strongly
to this growth and include Bulldog (Pevco),
Clarendon, Dowatronic, Hawco, Filcon and
most recently Somagen. However, over the
same five year period, removing these
acquired earnings, organic growth in sales
and operating profits has been 5% p.a. and
7.5% p.a. respectively.
SECTOR DEVELOPMENT – LIFE SCIENCES
The longest standing business in the Life
Sciences sector has been Anachem, whose
core UK business focuses on pipetting
products, instruments and related services
supplied to public and private sector research
laboratories. Through the 1990s Anachem
benefited from the high levels of research
and development investment by the major
pharmaceutical companies and grew sales by
10-15% p.a. The initial wave of biotechnology
investment then gave a further short term
boost to sales in 2000 and 2001.
Since then, the core Anachem business 
has come under increasing pressure on
both revenues and margins. Although
public research funding has grown steadily,
major pharmaceutical companies have
progressively rationalised their research
operations and cut back on both capital
and operating expenditure. To date there
has been no second wave of investment
by biotechnology companies.
Two strategic initiatives have been
implemented in the sector to diversify
the business and re-introduce growth. 
Firstly, Anachem has extended into 
the environmental business, serving
environmental testing laboratories and
health and safety professionals in a range 
of industries across Europe. The newly
branded a1 envirosciences group now
accounts for 16% of sector sales and 
has more than 40% of its business 
outside the UK.
The acquisition of Somagen Diagnostics
in Canada further extended the sector
activities into hospital pathology
laboratories which are benefiting from
increasing public healthcare expenditure.
Somagen gave an immediate boost to
results but has also grown organically since
acquisition. In 2005 sales growth exceeded
25% and operating margins, already strong,
have improved further. 
With these initiatives, the sector has returned
to growth and is more strongly positioned
strategically, with more of a focus on growing
segments and a broader base in terms of
customers and geographies served.
SECTOR DEVELOPMENT – SEALS
The Seals sector has seen sales growth 
at an average 10% p.a. over the last five
years. This has been achieved over a period
when the main mobile machinery markets 
in North America moved into recession, 
only emerging in early 2004. Taking out the
additional sales acquired with Bulldog in
2001, organic growth has been 5% p.a. over
the same five year period. More importantly,
organic growth in sector operating profits
has been at an average of 15% p.a.
Strategically, the sector activities have been
broadened and strengthened. Investment in
product development has increased the seal
and seal kit range to ca. 75,000 product
lines from a figure of only 30,000 when
Hercules was originally acquired. 
Diploma PLC Annual Report and Accounts 2005 Chief Executive Officer’s Review 4
Chief Executive Officer’s Review
Our strategic objective is to build more substantial, broader based businesses
in our chosen sectors by a combination of organic growth and acquisitions. Bulldog has further extended the product
portfolio of the combined group to include
gaskets for heavy duty specialised diesel
engines and transmissions. Additionally, 
a range of hard parts has been introduced 
in FPE and a new range of lightweight
cylinders has been sourced from China. 
The international elements of Bulldog’s
business, together with the acquisition 
of FPE in the UK and the organic growth 
of Hercules Bulldog Canada, have combined
to extend the business geographically; 
as a result 39% of the sector sales are now
outside the US compared with 26% in 2000.
The infrastructure has also been substantially
upgraded to give a strong platform for
future growth. A total of US$4.2m has 
been invested in property and warehouse
equipment to ensure that Hercules Bulldog 
is operating from modern, efficient
distribution facilities with capacity for
expansion. Bulldog’s gasket production
facility in Reno has benefited from further
investment of US$0.8m in new and more
efficient equipment. Most importantly, the
major investment of US$2.1m in information
technology in 2004 is now bringing benefits
in terms of process efficiency and again 
is adaptable and expandable as the group
grows. Hercules Bulldog is now well
positioned to take advantage of positive
market conditions and to integrate new,
complementary acquisitions.
SECTOR DEVELOPMENT – CONTROLS
The Controls sector has shown the most
dramatic growth over the last five years.
Total growth in sales and operating profits
has been 28% p.a. and 24% p.a. respectively.  
The majority of this growth has come from
acquisitions including Clarendon, Filcon and
Hawco. However, organic growth in sales 
and operating profits has still been 9% p.a.
and 13% p.a. respectively. 
This organic growth has been achieved 
over a period when economic and market
conditions in Germany and more recently
the UK have been very sluggish. It has 
also been a time of dramatic change in 
the key markets of Aerospace, Defence 
and Motorsport. 
The core companies in this sector have been
IS-Rayfast and Sommer. These businesses
have been broadened and strengthened by
the complementary acquisitions of Clarendon
and Filcon. Clarendon has reinforced 
IS-Rayfast’s position in the UK Motorsport
market and added a range of aerospace
quality fasteners. The addition of Filcon has
given Sommer a range of connectors and 
a more substantial presence in the Military
and Aerospace markets in Germany. 
The IS Group in the UK and Sommer
& Filcon in Germany are now strong, 
well managed businesses which have
successfully integrated the acquisitions 
and have good opportunities for further
expansion.
Hawco is the third of the Controls businesses
and has extended the sector into a new
range of customers and applications. 
Hawco supplies a range of instrumentation
and control devices used in the sensing,
measurement and control of temperature 
and pressure.
Since acquisition, Hawco has quickly moved
to restructure the business, improve
operating margins and strengthen the senior
management team. Having established and
consolidated these changes, Hawco is now
ready to take the next step forward.
MANAGEMENT DEVELOPMENT
Our management philosophy is to build
strong self standing management teams
in the operating companies, committed to
and rewarded according to the short and
long term success of their businesses and
with the potential to manage aggressive
growth strategies.
During the year we have further strengthened
our management resources by broadening
the roles and responsibilities for talented
young managers already within the
businesses and through selective external
recruitment. 
The group of 30 managers, who together
make up the senior management cadre
in the operating businesses, demonstrate 
a good blend of energy, ambition and
experience. The average age of these
managers is 43 and they have an average
length of service within their companies 
of 9 years.
Further development and strengthening of
management in the operating businesses 
will remain a priority for us and is key to the
successful implementation of our strategies.
Bruce Thompson
Chief Executive Officer
14 November 2005
Diploma PLC Annual Report and Accounts 2005 Chief Executive Officer’s Review 5
ADJUSTED
EARNINGS
PER SHARE
ADJUSTED
EARNINGS
PER SHARE
TOTAL GROWTH ORGANIC GROWTH
OPERATING
PROFITS*
28%
13%
27%
18%
TOTAL GROWTH ORGANIC GROWTH
15%
7.5%
OPERATING
PROFITS*
1 YEAR GROWTH
* For continuing businesses, on a constant currency basis, before head office expenses
5 YEARS GROWTH (p.a.) Diploma PLC Annual Report and Accounts 2005 Group at a Glance 6
We aim to achieve this with
a combination of organic
growth and acquisitions 
in our three business sectors.
Distributors of instrumentation, 
consumables and related services 
to research, development and
diagnostic laboratories.
Businesses
Anachem Group   
Somagen
Turnover Operating profit
£34.7m £4.7m
(2004: £26.0m) (2004: £3.5m)
Life Sciences
Group at a Glance
Our objective is to build 
more substantial, broader
based businesses. Diploma PLC Annual Report and Accounts 2005 Group at a Glance 7
Next day delivery of hydraulic 
seal kits, gaskets and cylinder
components for the repair and 
maintenance of mobile machinery.
Businesses
Hercules Bulldog Sealing Products 
FPE
Seals
Distributors of specialised wiring,
connectors and control devices for
a range of technically demanding
applications.
Businesses
ISGroup Sommer 
Hawco & Filcon
Controls
Turnover Operating profit
£49.0m £7.2m
(2004: £47.1m) (2004: £6.4m)
Turnover Operating profit
£27.6m £4.0m
(2004: £27.4m) (2004: £2.4m) Diploma PLC Annual Report and Accounts 2005 Life Sciences 8
Life Sciences
Clinical Diagnostics
Laboratory Automation
Bioscience
United Kingdom
North America
Continental Europe & Rest of World
Environmental
37%
17%
30%
52%
38%
10%
16%
Customers Markets Sales of our Life Sciences businesses
increased by 33% to £34.7m (2004: £26.0m).
Operating profits increased by 34% to £4.7m
(2004: £3.5m) giving operating margins of
13.6% (2004: 13.5%).
Somagen made a very strong contribution 
in its first full year in the Group. On a like 
for like basis, sales growth over the prior
year exceeded 25% and operating margins
improved further.
SOMAGEN
Somagen supplies a range of consumables
and instruments used in the diagnostic
testing of blood, tissue and other samples
in hospital pathology laboratories across
Canada.
Capital equipment sales were particularly
strong in the year as new instrument ranges
were introduced and pent-up healthcare
budgets were released. A broader portfolio of
Immunology products was launched and the
bolt-on acquisition of Adaltis was quickly
integrated into the Somagen business. 
Somagen is now consolidating its position
after effectively achieving two years of
planned growth in a single year. Resources
were added in the second half of the year
to ensure service levels are maintained with
the increased level of capital equipment
sales and to cope with pressures from 
Health Canada on product compliance.
ANACHEM GROUP
The core Bioscience consumables business
is the market leader in supplying pipetting
products in the UK and Ireland. It supplies
pipettes, tips and other laboratory plastics
along with associated validation and
calibration services to public and private
sector research laboratories.
Anachem maintained its leadership position
by increasing field sales coverage and
introducing new complementary products
and services. Increased resources were also
applied to direct marketing, with regular
promotions featuring special offers and
“bundles” of products such as the very
successful Pipetman Starter kit. E-commerce
sales increased by over 50% in the year
and electronic ordering now accounts 
for more than 20% of the sales of single
channel pipettes.
Although operating margins have been
squeezed, Anachem is well positioned with 
an experienced sales force, new product
introductions and a sustained and innovative
programme of promotional activity.
Anachem’s Instruments business supplies 
a range of laboratory automation products
used in sample preparation and analysis. 
The products are supported by a
comprehensive package of maintenance 
and validation services.
The Pharmaceutical and Biotechnology
sectors remain subdued, with tightly
controlled capital expenditure budgets.
Publicly funded research however has 
been more robust and Anachem’s sales of
instruments have stabilised after several years
of decline. The launch of the new “T rilution”
software has improved the competitiveness
of the product offering. With new laboratory
automation and Reactarray products also
introduced, Anachem is better placed to
upgrade the installed base of equipment, 
as well as to service new installations.
The service business competed well in its
specialised segment, despite facing increased
competition from more generalist outsourcing
companies. The team successfully retained
the flagship maintenance contract for Pfizer’s
site at Deal.
The environmental business, now branded as
the a1 envirosciences group, supplies a range
of instrumentation, consumables and related
services to environmental testing laboratories
and to health and safety professionals across
a range of industries. Products include gas
detection devices, containment enclosures 
for potent powder handling and specialised
instruments for detecting and measuring
specific elements in liquids, solids and gases.
The gas detection and powder handling
business (branded as a1 safetech) continued 
to grow in the UK benefiting from increasing
regulation to protect laboratory technicians.
The business further expanded with a 
small subsidiary operation established 
in Switzerland and sales resource added 
in Germany and France.
The environmental analysis business in the
UK and Germany (branded as a1 envirotech)
was boosted by strong second half demand
from the Petrochemical sector for analytical
equipment to accurately measure the levels
of nitrogen, sulphur and chlorine in fuels.
Diploma PLC Annual Report and Accounts 2005 Life Sciences 9
Review of Operations Life Sciences
The Anachem Group and Somagen supply instrumentation, consumables 
and related services to research, development and diagnostic laboratories.
AN EXCEPTIONAL LEVEL OF CAPITAL
EQUIPMENT SALES PROPELLED SOMAGEN 
TO A RECORD YEAR.
SUSTAINED DIRECT MARKETING ACTIVITY
MAINTAINED ANACHEM’S MARKET LEADING
POSITION IN PIPETTES.
a1 ENVIROSCIENCES ESTABLISHED DIRECT
SALES OPERATIONS IN SWITZERLAND, 
GERMANY AND FRANCE TO MARKET INNOVATIVE
CONTAINMENT PRODUCTS. Seals
Heavy Construction
Lift Trucks & Fork Lifts 
Industrial & Other 
North America 
United Kingdom & Continental Europe 
Rest of World 
74%
11%
15%
Dump T rucks & Refuse Collection
  61%
14%
14%
11%
Customers Markets
Diploma PLC Annual Report and Accounts 2005 Seals 10 Our Seals businesses increased sales 
and operating profits by 9% and 73%
respectively on a constant currency basis
and adjusted to exclude freight revenues.
Expressed in sterling terms, sales were
£27.6m (2004: £27.4m) and operating
profits increased by 67% to £4.0m (2004:
£2.4m). Operating margins increased to
14.5% (2004: 8.8%).
Hercules Bulldog took full advantage of
the favourable economic environment
in North America. In particular, Hercules
Bulldog Canada achieved a record year,
also benefiting from a strong Canadian
dollar. The major investments made in 
2004 in the operations and in establishing
the new IT infrastructure led to increased
service levels and operating efficiency. 
As a result operating margins improved
substantially.
HERCULES
The core Hercules business based in
Clearwater, Florida provides a next day
delivery service for seals and seal kits 
used in the repair of hydraulic cylinders.
The products are used in heavy mobile
machinery in a range of applications
including heavy construction equipment,
dump trucks and refuse collection, lift
trucks and fork lifts.
Hercules in the US produced a strong
performance, taking good advantage 
of the favourable economy. Significant
improvements in ex-stock availability,
customer service and warehouse efficiency
allowed Hercules to cope with the sales
increase without adding significant
resources.
Hercules took advantage of the buoyant
market conditions to exit the sale of less
profitable heavy hydraulic cylinders. The
reduced sales were more than offset by the
continued development of new lightweight,
competitively priced cylinders imported
from China. In two years, this product
line has grown from zero to over US$2m 
in annual sales at significantly improved
margins. Further new product introductions
are planned for 2006.
BULLDOG
Bulldog operates its distribution business
from Reno, Nevada where it also has an 
in-house gasket production capability.
Bulldog supplies a range of gaskets and
seals for heavy duty specialised diesel
engines, transmission and hydraulic
cylinders.
Bulldog made good progress in delivering
capacity increases and productivity
improvements from investment in product
design and manufacturing equipment.
Bulldog now has the capability and
inventory required to turn round large
orders in competitive timescales.
Sales and marketing resources have been
strengthened with the recruitment of
an industry experienced senior manager
and the focus is now turning to business
development. New customers in the US
and internationally will be developed to
reduce dependence on larger customers
with irregular purchasing patterns.
INTERNATIONAL
In Canada, Hercules took full advantage 
of a strengthening economy and good
inventory availability to grow its business.
A further boost to margins came from the
strength of the Canadian dollar since most
products are purchased from the US or in
US$ denominated currencies.
A good mix of OEM and aftermarket
demand boosted sales in Quebec and the
new Edmonton operation took advantage
of the booming Alberta oil industry to 
make good progress.
FPE worked hard to produce modest
growth in a sluggish UK economy. A major
catalogue update has been completed in
2005 and will be launched in the new year.
Diploma PLC Annual Report and Accounts 2005 Seals 11
LIGHTWEIGHT HYDRAULIC CYLINDERS SOURCED
FROM CHINA PROVED POPULAR WITH HERCULES’
NORTH AMERICAN HEAVY PLANT CUSTOMERS.
INVESTMENT IN GASKET CUTTING EQUIPMENT
AT BULLDOG’S RENO FACILITY INCREASED
PRODUCTIVITY AND THROUGHPUT.
HERCULES CANADA MADE EXCELLENT USE OF 
THE STRONG ECONOMY AND THE GROUP’S
INVESTMENT IN I.T. TO POST A RECORD YEAR.
Review of Operations Seals
Hercules Bulldog and FPE offer a next day delivery service for hydraulic seal kits,
gaskets and cylinder components supplied to maintenance and repair operations
(MROs) serving a broad range of mobile machinery aftermarkets. Controls
Electronics & Other 
Aerospace & Defence
Heating, Cooling & Refrigeration
Medical & Scientific
United Kingdom
Rest of World
Continental Europe
57%
3%
40%
Motorsport
33%
25%
25%
4%
13%
Customers Markets
Diploma PLC Annual Report and Accounts 2005 Controls 12 Sales of our Controls businesses increased
by 4% to £49.0m (2004: £47.1m) with
operating profits up by 13% to £7.2m
(2004: £6.4m). Operating margins increased
to 14.7% (2004: 13.6%).
The Sommer & Filcon businesses 
in Germany performed strongly in the 
core markets of Automotive Diagnostics,
Aerospace and Medical Equipment.
Continued geographic expansion, new
products and cross-selling between 
Sommer and Filcon all contributed 
to the strong performance.
The IS Group and Hawco worked hard 
to maintain sales and profits in difficult
UK markets.
SOMMER & FILCON
Sommer and Filcon supply a range of high
performance wiring and connectors to sectors
including Defence, Aerospace, Automotive
Diagnostics and Medical Equipment. Together
the businesses achieved strong double digit
growth in sales and operating profits.
Sommer continued its steady geographic
expansion within Germany and successfully
introduced a new range of aerospace wires.
Growth was also achieved in the Automotive
Diagnostic and Medical Equipment sectors. 
Filcon continued to support important military
projects including the Tornado upgrade, the
tail end of tranche 1 of the Eurofighter, as
well as several Tank programmes and larger
Helicopter programmes including NH90 
and Tiger. Filcon is also well positioned to
gain connector business as the Eurofighter
tranche 2 build programme starts to 
generate orders in 2006.
Sommer and Filcon have mostly maintained
separate identities with customers and
suppliers but are increasingly managed
together and cross selling opportunities are
actively nurtured. Success has been achieved
in the year with Sommer’s products being
introduced to Filcon’s military aerospace
customers and Filcon extending its customer
relationships into Motorsport with support
from Sommer.
Both companies have also improved their
quality programmes during the year. Filcon
achieved EN9120 approval and Sommer is in
the final stages of ISO EN9001: 2000 approval.
IS GROUP
The IS Group comprises IS-Rayfast, 
IS-Motorsport and Clarendon. It supplies 
high performance wiring and interconnect
products, similar to Sommer & Filcon, but
it also supplies aerospace quality fasteners. 
The core IS-Rayfast business experienced 
a generally sluggish UK manufacturing
environment, but the more specialised
defence markets have proved more resilient.
The main focus for the business has been 
on preparing for the projected demand from
major defence contracts. Major stocking
programmes have been put in place to 
ensure that customer service levels are
maintained and to ensure that IS-Rayfast
is well positioned to benefit from sales now
starting to flow through. The product offering
has also been strengthened with the signing
of the Otto switch franchise for the UK. 
The Motorsport sector has stabilised and 
has been boosted by the launch of the new
A1 Grand Prix series. Both IS-Rayfast and
Clarendon have benefited with increased
sales. The IS-Motorsport operation in the 
US has also continued to grow and expand 
into new Motorsport series. It has recently
signed the Deutsch Motorsport connector
franchise for the US.
HAWCO
Hawco supplies a range of instrumentation
and control devices used in the sensing,
measurement and control of temperature
and pressure. Applications range from
chilled cabinets for supermarkets, bars 
and restaurants to fire detection systems.
Hawco achieved modest growth in the
Refrigeration and Cooling sector, a creditable
performance given general industry
conditions. Demand from refrigeration
manufacturers and contractors held up well,
though sales of air conditioning equipment
were dampened by the mediocre summer
weather. The more broadly based Controls
business was exposed to the general slow
down in UK manufacturing. 
In common with many UK suppliers, Hawco
faces the dual challenge of UK manufacturing
moving offshore and increased competition
from Far Eastern suppliers. Hawco has
demonstrated an ability to compete for new
business and source products itself from Asia
Pacific to meet the demands of its customers.
Review of Operations Controls
The IS Group, Sommer & Filcon and Hawco supply specialised wiring, connectors
and control devices for a range of technically demanding applications.
IS GROUP INVESTED IN INVENTORY TO POSITION
ITSELF TO MEET DEMAND PROJECTED FROM MAJOR
DEFENCE PROGRAMMES.
SPECIALIST WIRES AND TUBING FOR MEDICAL
APPLICATIONS WERE ONE OF THE SUCCESS STORIES
IN AN OUTSTANDING YEAR FOR SOMMER & FILCON.
HAWCO, WITH ITS UNIQUE PRODUCT OFFERING
AND TECHNICAL EXPERTISE, INCREASED ITS SHARE
OF THE COMMERCIAL REFRIGERATION MARKET.
Diploma PLC Annual Report and Accounts 2005 Controls 13 Finance Director’s Review
The Group’s key
measures of financial
performance are strong
free cash flow, robust
operating margins and 
a healthy return on 
trading capital employed
in the businesses.
Results for the Year
Turnover increased by 11% to £111.3m 
and profit before amortisation of goodwill,
exceptional items and taxation increased 
by 26.7% to £16.6m, benefiting from a full
year contribution from Somagen and a
strong trading performance by Hercules
Bulldog. The impact on sales and operating
profits from the change in average exchange
rates used to translate the results of
overseas businesses was negligible.
In 2005 the Group has revised its definition
of turnover to exclude recovery of freight
costs from customers. The impact of this
change has been to reduce turnover in 
2005 by £3.0m; there has been no impact
on profit and the reported turnover for
2004 has not been restated. 
Operating margins increased strongly to
14.3% from 12.2% last year. This reflected
the acquisition of the higher margin
Somagen business, together with a
substantial improvement in the performance
of Hercules Bulldog. The revised definition 
of turnover accounted for 0.4% of the
increase in operating margins.
Exceptional Items
There were no exceptional items this year. 
In 2004 exceptional non-operating profits 
of £3.9m were earned on the sale of
Phase 2 of the Stamford land and £0.8m 
was spent on restructuring the Hawco 
and Anachem businesses.
Taxation
The Group’s effective tax charge represented
28.8% (2004: 29.3%) of the profit before 
tax and exceptional items. The underlying
tax rate, excluding the impact of prior year
tax credits was 30.7%. This rate compares
favourably with the corporate tax rate 
of 30% in the UK and approximately 36% 
on profits earned in North America and
Germany. The Group also has approximately
£6m of capital tax losses available that can
be used to offset future capital gains.
Earnings and Dividends
Earnings per share before goodwill
amortisation and exceptional items
increased 27.2% to 52.4p compared with
41.2p last year. The Board has proposed 
a final dividend of 13.0p per share, which
will give a total dividend for the year of
20.0p, an increase of 3p or 17.6% on last
year. The dividend for the year is covered 
2.6 times from earnings before goodwill
amortisation and exceptional items.
Stamford Land
During the summer the Group concluded 
a Section 106 Agreement with the local
planning authorities for residential
development of the 12 acre former
brickworks site at Stamford, referred 
to as Phase 3 of our Stamford land. 
The Group is now actively marketing this 
site for sale, which it hopes to complete 
in the first half of the new financial year. 
At 30 September 2005 the estimated market
value of the Stamford land, in its present
condition, has increased by £3.5m and is
expected to be not less than £9.0m before
expenses and taxation. The net book value 
of this land is £0.1m.
Diploma PLC Annual Report and Accounts 2005 Finance Director’s Review 14 The Group continues to own a substantial
acreage of agricultural land at Stamford,
some of which may eventually also be
realised for residential development.
However the timescale for such
development is unlikely to be less 
than five years. 
Cash Flow
The Group’s free cash flow, before
acquisitions and dividends, was £11.9m,
which is equivalent to 52.9p per share.
In 2004 the free cash flow was £9.6m,
including proceeds of £4.0m on the 
sale of Phase 2 of the Stamford land. 
Operating cash flow increased by 53% 
to £16.4m and benefited from a close 
focus by all businesses on working capital, 
which increased by £1.8m over the 
previous year. Additions to fixed assets 
were £1.4m, which was equivalent to 93% 
of depreciation. These included £0.3m 
of additional production equipment for
the Seal sector businesses and £0.3m 
for new equipment at Somagen in support
of new reagent rental contracts. 
Deferred purchase consideration of £0.3m
was paid in May 2005 to the vendors 
of Filcon as final settlement of their
performance payment. In November 2005
£1.0m was also paid to the vendors of
Somagen as final settlement of their
performance payment.
At 30 September 2005, the Group’s cash
funds had increased by £7.8m to £25.7m.
Shareholders’ Funds
Shareholders’ funds increased by £8.5m 
to £72.5m at 30 September 2005. This is
equivalent to 320p per share compared 
with 283p last year.
Return on trading capital employed, after
taking account of goodwill, both capitalised
and written off directly to reserves, and
adjusting for the timing of acquisitions,
increased to 22.2% from 21.0% last year.
Pensions
The Group has continued to account for
pension costs under SSAP 24. In accordance
with the transitional arrangements of
FRS17, additional disclosures are included 
in Note 26 to the financial statements.
During the year the 2004 actuarial valuation
of the Anachem scheme was finalised and
the scheme was closed to future accrual. 
The valuation identified a funding deficit
of £1.9m, which the company has agreed 
to fund at a rate of £0.2m per annum,
increasing by 5% per annum. The company
also continues to fund the deficit in the 
PLC scheme at a rate of £0.1m (including
expenses) per annum.
The FRS 17 disclosures show a net deficit
for these two schemes at 30 September
2005 of £3.1m (2004: £2.9m), net of
deferred tax, which equates to 4.3% 
of shareholders’ funds.
International Financial 
Reporting Standards (IFRS)
It is now mandatory for the consolidated
financial statements of all European 
Union listed companies to be reported in
accordance with International Financial
Reporting Standards (IFRS) for periods
commencing on or after 1 January 2005. 
The move to IFRS will not change how
the Group is managed and will have no
impact on cash flow.
The Group is now prepared for the adoption
of IFRS. Both net assets and profit are
impacted by changes to the accounting
treatment of goodwill amortisation, other
intangibles, share based remuneration,
pension costs and deferred tax. However
the amounts will not be significant.
The financial statements for the year ending
30 September 2006 will be reported under
IFRS, as will the interim results for the six
months ending 31 March 2006. 
Nigel Lingwood
Group Finance Director
14 November 2005
Diploma PLC Annual Report and Accounts 2005 Finance Director’s Review 15
12.0
6.9
9.7
9.6
11.9
2003
2001
2002
2004
2005
12.6
13.3
12.1
12.2
14.3
2003
2001
2002
2004
2005
21.6
21.7
20.3
21.0
22.2
2003
2001
2002
2004
2005
OPERATING MARGIN (%) 
RETURN ON TRADING 
CAPITAL EMPLOYED 
(INCLUDING GOODWILL) (%) FREE CASH FLOW (£m) Board of Directors
The Board supports the principles of
Corporate Governance. The Board met six
times during the year with full attendance
at each meeting.
Diploma PLC Annual Report and Accounts 2005 Board of Directors and Advisors 16
From left to right
John Matthews (Non-Executive Director), Nigel Lingwood (Group Finance Director and Company Secretary), 
John Rennocks (Non-Executive Chairman), Bruce Thompson (Chief Executive Officer), 
Iain Henderson (Chief Operating Officer), Lord Stewartby (Non-Executive Director) Board of Directors
Advisors
JL RENNOCKS FCA (60)*†‡
Non-Executive Chairman
Joined the Board in July 2002. He is Chairman
of Nestor Healthcare plc, Deputy Chairman 
of Inmarsat plc and a Director of Foreign 
& Colonial Investment Trust Plc and of other
companies. He has previously been Executive
Director Finance at Corus Group Plc and
Finance Director of PowerGen Plc and Smith
& Nephew plc.
BM THOMPSON (50)
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.
LORD STEWARTBY (70)*†‡
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 Amlin plc and a director of
The Throgmorton T rust PLC.
NP LINGWOOD ACA (46)
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.
JW MATTHEWS FCA (61)*†‡
Non-Executive
Joined the Board in 2003. He is Chairman 
of Crest Nicholson plc and Regus Group plc. 
He has previously been a Managing Director
of County NatWest and Deputy Chairman/
Deputy Chief Executive of Beazer plc.
I HENDERSON (49)
Chief Operating Officer
Joined the Board as a Director
in 1998. He was previously
a Director of Glenchewton plc 
and of ANC Holdings Limited.
* 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
Panmure Gordon & Co
Moorgate Hall
155 Moorgate
London EC2N 6XB
SOLICITORS
Ashurst 
Broadwalk House
5 Appold Street
London EC2A 2HA
AUDITORS
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
BANKERS
Royal Bank of Scotland
62-63 Threadneedle Street
London EC2R 8LA
Diploma PLC Annual Report and Accounts 2005 Board of Directors and Advisors 17 Diploma PLC Annual Report and Accounts 2005 Directors’ Report 18
Directors’ Report
The Directors present their report and the audited financial
statements for the year ended 30 September 2005.
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 pages 6 and 7. 
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 
8 to 15. 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
£10.5m (2004: £11.9m). The Directors recommend a final
dividend of 13.0p per share (2004: 11.0p), to be paid, if
approved, on 18 January 2006. This, together with the interim
dividend of 7.0p per share paid on 15 June 2005, amounts to 20p
for the year (2004: 17.0p). This leaves a retained profit of £6.0m
to be transferred to reserves.
SUBSTANTIAL SHAREHOLDINGS
In addition to the Directors’ shareholdings set out on page 30, 
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
F&C Asset Management plc 8.54
Fidelity International Limited 6.11
Morley Fund Management Limited 5.64
Barclays PLC 5.48
Insight Investments Limited 5.15
UBS Global Asset Management (UK) Limited 5.15
Herald Investment Management Limited 3.53
Epic Asset Management Limited 3.31
Platinum Investment Trust Plc 3.16
As far as the Directors are aware there were no other notifiable
interests.
DIRECTORS
The persons currently serving as Directors of the Company
are shown on page 17. JL Rennocks and BM Thompson retire
from the Board by rotation at the Annual General Meeting on
11 January 2006 and being eligible, offer themselves for
re-election. Lord Stewartby, having reached the age of 70 years,
also retires from the Board and pursuant to Section 293(5) of the
Companies Act 1985, offers himself for re-election. Directors’
beneficial interests in the Company’s ordinary share capital at
30 September 2005 are set out in the Remuneration Report on
page 30. 
CORPORATE SOCIAL RESPONSIBILITY
The Board takes serious account of the social, environmental and
ethical impacts of the Group’s activities and monitors them as
part of the annual risk assessment process. The risk assessments
are led by the Managing Director of each of the Group’s operating
companies and then reviewed by the Board. The Managing
Directors are responsible for complying with the relevant
employment, social and environmental regulations in the
geographical areas in which they operate.
Employment
The Group values the commitment of its employees and
recognises the importance of good working relationships and
communication. The Group is committed to open and regular
communications with employees about business developments
and issues of general interest and concern to them, both on
a formal and informal basis. The performance of the Group is
communicated regularly to all staff. Copies of the annual report
together with details of preliminary and interim announcements
of the Group’s results are available to them.
Both employment policy and practice in the Group are based on
non-discrimination and equal opportunities. Ability and aptitude
are the determining factors in the selection, training, career
development and promotion of all employees. The Group
remains supportive of the employment and advancement of
disabled persons. Applications for employment by disabled
persons are always fully considered, bearing in mind the
respective aptitudes and abilities of the applicants concerned. If
an employee is, or becomes disabled during their period of
employment, the Group will, if necessary and to the extent
possible, adapt the work environment to enable the employee to
continue in their current position or retrain the employee for
duties suited to their abilities following disablement.
Employment policies throughout the Group have been
established to comply with relevant legislation and codes of
practice relating to employment, health and safety and equal
opportunities. The Group provides good quality working
environments and facilities for employees, and training and
development appropriate to each of their roles. The Group keeps
employees informed on matters relating to their employment
and on financial and economic factors affecting the Group.
This is achieved through management briefings, the Group’s
website and by distribution of press releases and internal
announcements. This enables employees to gain a better
understanding of the Group’s business objectives and their roles
in achieving them. Building and developing the skills,
competencies, motivation and teamwork of employees is
recognised by the Board as being key to achieving the Group’s
business objectives.
Health and Safety
The Group places a great deal of importance to the provision of
clean, healthy and safe working conditions. In addition to
compliance with all local regulations, the Group promotes
working practices which protect the health and safety of its
employees. Health and Safety matters are kept under regular
review by local management who report on such matters to the
Chief Operating Officer. Health and Safety training is part of the induction process for
new employees. Specific training is given where relevant, for
example regarding forklift truck operation and chemical handling
as well as general fire safety and first aid matters.
Environmental
The Group regards compliance with relevant environmental laws
as an important part of its responsible approach to the
environment and is committed to good environmental
management practices throughout its operations. The Managing
Directors appointed by the Board have responsibility for the
environmental performance of their operating businesses and
each subsidiary is required to implement initiatives to meet their
responsibilities.
Relationships with suppliers, customers and
other stakeholders
The Group recognises the obligation it has towards the parties
with whom it has business dealings including customers,
shareholders, employees, suppliers and advisors. Dealings with
these groups depend upon the honesty and integrity of the
Group’s employees and every effort is made to ensure that a high
standard of expertise and business principles is maintained in
such dealings. Where appropriate, training is given to maintain
and to raise standards.
The Group’s policy towards suppliers is that each operating
company is responsible for negotiating the terms and conditions
under which they trade with their suppliers. 
Community impact and involvement
The Group contributes to local worthwhile causes and charities
and ensures that the Group’s operations cause minimal negative
impact within the community. In common with all companies,
the Group has limited resources and the amount of money
available for charitable purposes varies over time.
CHARITABLE AND POLITICAL DONATIONS
The Group made donations for charitable purposes during the
year which amounted to £12,425. 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 2005 the amount of trade creditors shown in the
Group balance sheet represents 47 days of average purchases.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at Midday on 
11 January 2006 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 Special Business of the meeting includes a special resolution
to amend certain Articles of Association (“the Articles”). These
amendments arise following a review of the Company’s Articles
in the light of both recent amendments to Company Law and to
allow the Company to take advantage of developments in
electronic communications. The Articles were last updated in
2000. The key principle amendments proposed are designed to:
 allow the Company to take advantage of the Companies
(Audit, Investigations and Community Enterprise) Act 2004
which relaxed the restrictions on companies indemnifying
directors against liabilities;
 to allow the Company to communicate with shareholders
electronically; and
 to clarify how shares held in treasury are to be dealt with.
Further details, including a full transcript of the proposed
amendments to the Articles will be set out in the Notice of
Meeting sent to all shareholders.
In addition to the proposed amendments set out above, there
will also be Special Business of the Meeting to seek authority to
allot shares and the disapplication of pre-emption rights. Both
restrictions have been proposed in accordance with the Pre-
Emption Group Guidelines and will in future be put annually to
shareholders. As in previous years, the Company will again be
seeking authority to make market purchases of shares in the
Company up to a maximum of 10% of the Company’s shares. The
Company will also be proposing resolutions to reappoint Lord
Stewartby who, having reached the age of 70, is standing for re-
election pursuant to Section 293(5) of the Companies Act 1985
and to approve the Remuneration Report which is set out on
pages 24 to 30. Further detail of all these proposals will be set
out in the Notice of Meeting which will be sent to all
shareholders.
INDEPENDENT AUDITORS
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
14 November 2005
Diploma PLC Annual Report and Accounts 2005 Directors’ Report 19
Directors’ Report Continued Diploma PLC Annual Report and Accounts 2005 Corporate Governance 20
Corporate Governance
CORPORATE GOVERNANCE
The Board recognises the importance of high standards of
corporate governance throughout the Group. The Board is
accountable to the Company’s shareholders for good governance
and this statement sets out how the principles identified in the
Combined Code on Corporate Governance (“the Code”) issued in
July 2003 are applied by the Company. The Board confirms that
the Company has complied with all of the Provisions set out in
Section 1 of the Combined Code throughout the year, apart from
the following:
A.3.1 Lord Stewartby’s tenure on the Board has exceeded nine
years; however, as described below, the Board continues
to determine that Lord Stewartby is an independent
Non-Executive Director.
D.1.1 The Chairman and the senior independent Director are
available to meet with major shareholders, if requested.
However, the Chairman has not discussed governance
or strategy with major shareholders nor has the senior
independent director met with shareholders during the
year.
C.3.4 The arrangements by which employees of the Group
may, in confidence, raise concerns about possible
improprieties relating to financial reporting or other
matters was not formally in place until September 2005.
DIRECTORS
The Board
The Board comprises three Non-Executive Directors, including
the Chairman, and three Executive Directors, providing a wide
range of skills and experience. The biographical details of the
Board members are set out on page 17. The Board has six
scheduled meetings each year and meets more frequently as
required. It met on six occasions during the year under review.
The following table sets out the number of meetings of the Board
and its Committees during the year and individual attendance by
Board members at these meetings:
Group Audit Remuneration Nomination
Board Committee Committee Committee
Number of meetings 
during the year 6 3 4 1
Non-Executive Directors:
JL Rennocks 
(Chairman) 6 3 4 1
J Matthews 6 2 4 1
Lord Stewartby 6 3 4 1
Executive Directors*:
BM Thompson 6 - - -
I Henderson 6 - - -
NP Lingwood 6 - - -
*The Executive Directors also attend all the meetings of the Audit Committee.
The duties of the Board and its Committees are set out clearly
in formal terms of reference which are reviewed regularly and
state the items specifically reserved for decision by the Board.
The Board establishes overall Group strategy, including new
acquisitions and withdrawal from existing activities. It approves
the Group’s commercial strategy and the operating budget and
reviews performance through monthly reports and management
accounts.
The approval of acquisitions, for the most part, is a matter
reserved for the Board save that it delegates to the Chief
Executive Officer the responsibility for such activities to a
specified level of authority. Similarly, there are authority levels
covering capital expenditure which can be exercised by the Chief
Executive Officer. Beyond these levels of authority, projects are
referred to the Board for approval.
The Board establishes the Company’s framework of executive
remuneration and its cost in the light of recommendations made
by the Remuneration Committee and the remuneration of Non-
Executive Directors.
Other matters reserved to the Board include treasury policies,
internal control, risk management and the appointment or
removal of the Company Secretary. The Company maintains
appropriate insurance cover in respect of legal action against
its Directors.
Chairman and Chief Executive
The roles of the Chairman, who is Non-Executive, and the Chief
Executive Officer are separate and clearly defined. The Chairman
is also Chairman of Nestor Healthcare plc and has a number
of other Board appointments. The Board is satisfied that the
Chairman’s other Board appointments and commitments do
not place constraints on his ability properly to fulfil his role as
Chairman of Diploma PLC.
Board Balance and Independence
The Non-Executive Directors are appointed for specified terms,
the details of their respective appointments being as set out in
the Remuneration Report on page 27. Non-Executive Directors
are required to inform the Board of any changes to their other
appointments.
The Non-Executive Directors are determined by the Board to
be independent in character and judgement and there are no
relationships or circumstances which could affect, or appear
to affect, a Director’s judgement. The senior independent
Director is Lord Stewartby. Lord Stewartby was appointed to the
Board in 1990 and therefore his length of service exceeds the
nine years referred to in the Code. The Board considers that the
integrity and independence of character of Lord Stewartby is
beyond doubt and that his experience and long perspective on
the Group provide a valuable contribution to the Board. Lord
Stewartby will, having attained the age of 70 years, stand for re-
election annually in accordance with Section 293(5) of the
Companies Act 1985.
The Board therefore continues to determine that Lord Stewartby
is an independent Non-Executive Director and as such, his  Diploma PLC Annual Report and Accounts 2005 Corporate Governance 21
Corporate Governance Continued
membership of the standing Committees to the Board, which are
set out on page 17, is considered appropriate.
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 17 and terms of reference are
available on request and are set out on the Company’s website.
In order to ensure that undue reliance is not placed on particular
individuals, the Board has decided that all its independent Non-
Executive Directors should serve on all Committees. The Board
regularly reviews the chairmanship of its Committees.
During the year the Chairman has had meetings with the
Non-Executive Directors, without the Executive Directors present.
Appointments to the Board
The Board has established a Nomination Committee which leads
the process for Board appointments and makes recommendations
to the Board. The members of the Nomination Committee are 
JL Rennocks, who is the Chairman, and the two Non-Executive
Directors. Membership of the Committee remained constant
throughout the year.
The Committee would be chaired by the senior independent
Director on any matter concerning the chairmanship of the
Company. The Company Secretary is the Secretary to the
Committee.
The Nomination Committee has written terms of reference which
were reviewed and updated during the year, covering the
authority delegated to it by the Board. These include the
following duties:
 To be responsible for identifying and nominating, for the
approval of the Board, candidates to fill Board vacancies as
and when they arise.
 Before making an appointment, the Committee will evaluate
the balance of skills, knowledge and experience on the Board
and, in the light of this evaluation, prepare a description of
the role and capabilities required for a particular
appointment.
 In identifying suitable candidates, the Committee shall
consider candidates on merit and against objective criteria,
taking care that appointees have enough time available to
devote to the position. The Committee may:
– use the services of external advisers to facilitate the
search; and
– consider candidates from a wide range of backgrounds
both internally and externally.
On appointment, Directors undertake an informal induction
process which is designed to develop knowledge and
understanding of the Company’s business, and includes visits
to various Group operating sites.
The Nomination Committee met once during the year under
review.
Information and Professional Development
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 Board meeting.
The training needs of the Directors are periodically discussed at
meetings with briefings as necessary on various elements of
corporate governance and regulatory issues.
The Company Secretary acts as an advisor to the Board on
matters concerning governance and regulatory issues and he
ensures Board procedures are complied with. All Directors have
access to his advice and a procedure also exists for Directors to
take independent professional advice at the Company’s expense.
No such advice was sought during the year. The appointment and
removal of the Company Secretary and his remuneration are
matters for the Board as a whole.
The Board has decided that because of the relative small size of
the Company and to limit its costs, the role of the Company
Secretary should be combined with that of the Group Finance
Director. This matter is regularly reviewed by the Board.
Performance Evaluation
During the year the Board completed the process of evaluating its
own performance, together with that of its Committees and
individual Directors, including the Chairman. The results of the
evaluation process are summarised for presentation to the Board
and areas for improvement are identified and action taken where
necessary.
Re-election
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.
A Director will have to vacate his office at the end of the
following Annual General Meeting of the Company, after he
attains the age of 70, unless the Director is re-appointed by the
members.
REMUNERATION
The Board has established a Remuneration Committee consisting
exclusively of independent Non-Executive Directors. The
application of corporate governance principles in relation to the
Directors’ remuneration is described in the Remuneration Report.
ACCOUNTABILITY AND AUDIT
Financial Reporting
It is a requirement of the Code that the Board should present a
balanced and understandable assessment of the Company’s
position and prospects, a requirement that extends to interim
and other price sensitive public reports and to reports to
regulators, as well as to information required to be presented by
statutory requirements. Diploma PLC Annual Report and Accounts 2005 Corporate Governance 22
In this context, reference should be made to the Statement of
Directors’ Responsibilities on page 31, which includes a
statement in compliance with the Code regarding the Group’s
status as a going concern, and to the Report of the Auditors on
page 31, which includes a statement by the auditors about their
reporting responsibilities.
Internal Control
The Board acknowledges that it is responsible for the Group’s
system of internal control and for reviewing its effectiveness.
Such a system 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 has established a clear organisational structure with
defined authority levels. 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. Each operating unit is required to prepare an annual self
assessment report on internal control and these are reviewed by
the Board.
During the year the Board has carried out a review of the
effectiveness of the Group’s systems of internal control. This
review included 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.
During 2005 the Group continued with its programme of internal
audit reviews at most of its businesses using an experienced
resource from within the Group finance department. The Audit
Committee keeps under review the need for an independent
internal audit function in the Group. The Audit Committee
believes that the Group’s system of internal control is
appropriate for a group of the size and nature of Diploma PLC
and the Audit Committee’s current view is that a separate
independent internal audit function is not necessary.
Audit Committee and Auditors
The Board has established an Audit Committee comprising the
three Non-Executive Directors. In view of the small size of the
Group, the Board considers it valuable to retain JL Rennocks as a
member of the Audit Committee. It was Chaired by Lord
Stewartby throughout the year. The Company Secretary is the
Secretary to the Committee.
The main roles and responsibilities of the Committee are set out
in written terms of reference, which were reviewed and updated
during the year and which generally encompass those set out in
the Code, which are as follows:
 to monitor the integrity of the financial statements of the
Group and any formal announcements relating to the Group’s
financial performance, reviewing significant financial
judgements contained therein;
 to review the Group’s internal financial controls and its
internal controls and risk management systems;
 to make recommendations to the Board, for it to put to
shareholders for approval in general meeting, in relation
to the appointment, re-appointment and removal of the
external auditors and to approve the terms of engagement
of the external auditors;
 to review and monitor the external auditors’ independence
and objectivity and the effectiveness of the audit process
taking into consideration relevant UK professional and
regulatory requirements; and
 to develop and implement policy on the engagement of the
external auditor to supply non-audit services, taking into
account relevant ethical guidance regarding the provision of
non-audit services by the external auditors and to report to
the Board, identifying any matters in respect of which it
considers that action or improvement is needed and making
recommendations as to the steps to be taken.
In addition, the Audit Committee has an important role to
play through its responsibility for, and oversight of, the auditor
relationship and auditor independence. The Committee
recognises that auditor independence is an essential part
of the audit framework and the assurance it provides.
The Committee normally meets at least three times a year and
met three times during the year under review. The external
auditors and the Executive Directors generally attend Audit
Committee meetings. In addition, the Committee meets the
external auditors without management present.
The Audit Committee’s responsibilities are discharged in the
following manner:
 at its meetings in May and November, the focus falls on a
review of the Interim Announcement/Report and the
Preliminary Announcement/Annual Report and Financial
Statements respectively. On both occasions, the Committee
receives reports from the Group Finance Director and from
the external auditors identifying any accounting or
judgmental issues requiring its attention; and
 the external auditors present their audit plan at the
September meeting.
In September 2005 the Committee formally reviewed and
approved the arrangements by which Company employees may,
in confidence, raise concerns about possible irregularities in
financial reporting or other matters (so called “whistleblowing”
procedures).
Corporate Governance Continued Diploma PLC Annual Report and Accounts 2005 Corporate Governance 23
As noted above, one of the primary responsibilities of the Audit
Committee is to make recommendations to the Board in relation
to the appointment, reappointment and removal of the external
auditors. A number of factors are taken into account by the
Committee in assessing whether to recommend the external
auditors for reappointment. These include:
 the quality of reports provided to the Audit Committee and
the Board and the quality of advice given;
 the level of understanding demonstrated of the Group’s
businesses and its sectors; and
 the objectivity of the external auditors’ views on the controls
around the Group and their ability to co-ordinate a global
audit, working to tight reporting deadlines.
The Committee also assesses annually the effectiveness of the
external audit process. This assessment covers all aspects of the
audit service provided by the Company’s external auditors. The
Committee also reviews annually a report on the external
auditors’ own quality control procedures.
The Committee has also established a set of guidelines covering
the type of non-audit work that can be assigned to auditors.
These are:
 Further assurance services – the auditors’ detailed knowledge
of the Group’s affairs means that they may be best placed to
carry out such work. This extends to, but is not restricted to,
shareholder and other circulars, regulatory reports, and on
occasions, work in connection with acquisitions and
disposals.
 Taxation services – the auditors’ knowledge of the Group’s
affairs often provides significant advantages which other
parties would not have.
 General – in other circumstances, proposed assignments are
put out to tender and decisions to award work taken on the
basis of demonstrable competence and cost effectiveness.
The Committee receives reports providing details of assignments
and related fees carried out by the auditors in addition to their
normal audit work, and these are reviewed against the above
guidelines. During the year under review, £0.1m in aggregate was
incurred on taxation services and on reviewing the Company’s
procedures in connection with the transition to International
Financial Reporting Standards (IFRS).
COMMUNICATIONS WITH SHAREHOLDERS 
The Company maintains regular contact with major shareholders
to communicate clearly the Group’s objectives and monitors
movements in significant shareholdings. The Company
recognises the importance of communicating with its
shareholders and does this through its Annual and Interim
Reports, at the Annual General Meeting and through the
processes described below.
Most shareholder contact is with the Chief Executive Officer
and Group Finance Director and presentations are made on the
operating and financial performance of the Group and its longer
term strategy. The slide presentations made to representatives of
the investment community following the announcement of the
full year and interim results are available on the Company’s
website at www.diplomaplc.com
The Non-Executive Directors are given regular updates as to the
views of institutional shareholders and an independent insight
into the views of major shareholders is sought through informed
research carried out twice a year by the Company’s advisors.
Through these processes, the Board is kept abreast of key issues.
There is also a direct line of communication to the Chairman
available to shareholders, particularly if there are issues of
concern, whether about performance, strategy or governance.
Lord Stewartby, the senior independent director, is also available
to meet shareholders, should contact be appropriate.
Notice of the Annual General Meeting is sent to shareholders at
least twenty working days prior to the meeting and includes a
separate resolution on each substantially separate issue. In the
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 Group’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.
Corporate Governance Continued Diploma PLC Annual Report and Accounts 2005 Remuneration Report 24
Remuneration Report
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 and also sets out how the principles of the Combined Code on Corporate
Governance (“the Code”) issued in July 2003 relating to Directors’ remuneration are applied.
A resolution will be put to shareholders at the Annual General Meeting on 11 January 2006 inviting them to consider and approve
this Report.
PERFORMANCE
The Board recognises the importance of linking remuneration policies to the performance of the Group and shareholder return.
The graph below shows the total shareholder return for a holding of the Company’s ordinary shares for the five financial years to
30 September 2005. 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 Remuneration Committee (“the Committee”) believes it is the most appropriate index to
which the Company’s performance can be compared and it is the index which is used for the purposes of the 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.
The five year total shareholder return figures for Diploma and the FTSE mid-250 index were as follows:
FTSE
Diploma mid-250
September 2000 100 100
September 2005 384 141
+284% +41%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
450.0
400.0
Oct 00 Apr 01 Oct 01 Apr 02 Oct 02 Apr 03 Oct 03 Apr 04 Oct 04 Apr 05 Oct 05
 +284%
 +41%
Diploma
FTSE Mid 250 Diploma PLC Annual Report and Accounts 2005 Remuneration Report 25
Remuneration Report Continued
THE REMUNERATION COMMITTEE
The Committee is governed by formal terms of reference agreed
by the Board and comprises two Non-Executive Directors and
the Chairman. The written terms of reference were reviewed and
updated during the year and are available from the Company
Secretary and are also published on the Company’s website.
The Committee comprised JW Matthews (Chairman), JL Rennocks
and Lord Stewartby. The Committee determines the specific
remuneration packages, including share schemes, of the
Executive Directors and also periodically monitors the
remuneration of other senior executives who report to the
Executive Directors. 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 four occasions during the year. The
Committee received advice from Towers Perrin in 2004 on
matters relating to Executive remuneration.
REMUNERATION POLICY
This report sets out the Company’s policy on Directors’
remuneration for 2005 and, so far as practicable, for subsequent
years. In framing this policy the Committee has given full
consideration to the provisions of the 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 2005 will be
described in future Remuneration Reports. All statements in this
Report in relation to remuneration policy for years after 2005
should be considered in this context.
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-salary benefits for Executive Directors is
included in the table of remuneration on page 28 and comprises
life and health insurance and cash payments in lieu of a car. The
value of these benefits is not pensionable, but is assessable to
tax.
Short T erm Incentives
The Company operates an annual performance related bonus
scheme for Executive Directors. The maximum bonus payment
under this scheme in 2005 was 70% of basic salary for the
Chief Executive Officer and 50% for other Executive Directors.
On target bonus was 35-40% for the Chief Executive Officer
and 25-30% for other Executive Directors. The bonus for the
Chief Executive Officer is wholly dependent on the financial
performance of the Group; the bonus for the other Executive
Directors is 80% based on the financial performance of the
Group with the remaining 20% subject to achievement of
specified personal objectives.
In order to encourage share ownership and aid retention, the
Committee again invited the Executive Directors to participate
in the Bonus Share Matching Plan (“BSMP”) in respect of their
annual bonus earned in 2004. The 2004 BSMP relates to bonuses
paid for the year ended 30 September 2004. The outstanding
2003 BSMP related to bonuses paid to Executive Directors for the
year ended 30 September 2003. The Committee has decided that
no further BSMPs will be offered to Executive Directors.
The BSMP was an annual plan which was introduced in January
2004 and related to bonus arrangements in a particular financial
year. Under the BSMP , Executive Directors could voluntarily defer
and invest in shares of Diploma PLC (“Invested Shares”), up to
100% (but not less than 25%) of the bonus awarded to them, net
of tax and national insurance contributions at the marginal rate.
A matching award of shares (“Matching Shares”) equal to the
number of shares which could be bought at the same price with
the Executive’s gross bonus was awarded and vested subject to
certain conditions being met. Diploma PLC Annual Report and Accounts 2005 Remuneration Report 26
Remuneration Report Continued
The conditions applying to the BSMP were that the Invested
Shares were retained until at least the end of the financial year,
following that in which the bonus was earned (“the Performance
Period”); that the Executive Director remained an employee of
the Group; and that the Group satisfied the performance
condition attached to the BSMP , namely that the Company’s
Adjusted EPS increased by 4% or more over the increase in the
UK retail price index in respect of the Performance Period. The
Invested Shares are held by a nominee and released to the
Executive Director after the end of the Performance Period; the
Matching Shares are released after 30 September in the following
year, subject to the performance conditions having been met.
Following the closure of the BSMP , the Committee has decided
that the following change(s) will be made to the annual bonus
scheme with effect from 1 October 2005. The maximum annual
bonus payable to the Chief Executive Officer will increase to
100% of base salary and the maximum annual bonus payable to
other Executive Directors will increase to 70% of base salary. On
target bonus will increase to 60% of base salary for the Chief
Executive Officer and 40% of base salary for other Executive
Directors.
Long Term Incentive Plan (“LTIP”)
The Company operates a Long Term Incentive Plan (“LTIP”) for
Executive Directors. In line with current best practice, the LTIP
provides for annual grants to Executive Directors.
Under the LTIP , Executive Directors are 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% of basic salary. This limit can be
increased to a maximum of 200% in the case of a participant
who within the previous 12 months joined the Group or received
a significant promotion.
Two performance conditions applied to the initial awards so that
the vesting of 50% of the award will be linked to earnings per
share (“EPS”) growth and 50% 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 is 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 annum, over the
same period. At this level of performance, 30% of the award
relating to EPS performance would vest. Full vesting of the award
relating to EPS performance requires that the Company’s average
annual compound growth in EPS exceeds the compound growth
in RPI plus 5% per annum over the period. Between these two
points, an increasing proportion of vesting occurs at RPI plus
3.5%, RPI plus 4% and RPI plus 4.5%. For the purposes of this
condition, EPS will be calculated as earnings per share before
exceptional items and goodwill amortisation.
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 to 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% 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.
Awards under this LTIP were made by the Remuneration
Committee to BM Thompson, I Henderson and NP Lingwood on
7 January 2004 and on 29 November 2004. These awards vest on
30 September 2006 and 2007 respectively, subject to the
performance conditions set out above, measured over three year
performance periods ending on 30 September 2006 and 2007.
Long Term Incentive Scheme (“LTIS”)
For a number of years, the Company operated a Long Term
Incentive Scheme (“LTIS”) for the benefit of Executive Directors.
The LTIS provided that an Executive Director would receive a cash
bonus based upon three performance conditions, measured over
a three year period. On vesting of awards, one-third of the
aggregate amount was paid to the Directors immediately with the
balance being paid in two deferred payments.
The final awards under this LTIS vested on 7 January 2004 for
BM Thompson and I Henderson and on 11 January 2005 for NP
Lingwood. No further awards have been, or will be, made under
this LTIS as the Company has replaced the LTIS with the LTIP with
effect from 1 October 2003. The details relating to the LTIS are set
out in the 2004 Annual Report and have not been repeated here
as the LTIS is now closed. Diploma PLC Annual Report and Accounts 2005 Remuneration Report 27
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 are 17.5% of base remuneration,
excluding bonuses. With effect from 1 October 2005, the pension
contribution made by the Company will increase from 17.5% to
20.0% of base remuneration.
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 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
JW Matthews 24 July 2006 Annual
JL Rennocks 11 July 2006 Annual
Lord Stewartby 11 January 2006 Annual
All Directors’ appointments are subject to approval of the
shareholders in General Meeting sought on a three yearly basis,
apart from Directors who have attained the age of 70 years who
are required to seek re-election on an annual basis.
During the year ended 30 September 2005 the remuneration of
Non-Executive Directors consisted of a base fee of £23,000 per
annum (£25,000 from 1 January 2005). Lord Stewartby, as the
senior Non-Executive Director and Chairman of the Audit
Committee, receives a supplement at an annual rate of
£2,000 per annum. John Matthews, as the Chairman of the
Remuneration Committee receives a supplement at an annual
rate of £1,000 per annum. The Chairman, who is a Non-Executive
Director, received a salary and fees of £50,000 per annum for his
services during the year ended 30 September 2005. Diploma PLC Annual Report and Accounts 2005 Remuneration Report 28
Remuneration Report Continued
TOTAL REMUNERATION OF THE DIRECTORS
The total remuneration of the Directors for the year ended 30 September 2005 is set out below.
Fixed emoluments Performance
Salary Other based 2005 2004
& fees benefits bonus T otal T otal
£000 £000 £000 £000 £000
I Henderson 165 10 80 255 216
NP Lingwood 165 12 80 257 223
JW Matthews 25 - - 25 23
JL Rennocks (Note 1) 50 - - 50 43
Lord Stewartby 27 - - 27 25
AJC Thomas (Note 1) ---- 143
BM Thompson 275 14 193 482 390
707 36 353 1,096 1,063
Note:
1 JL Rennocks was appointed Chairman on 7 January 2004, following the retirement of AJC Thomas.
The pension contributions paid on behalf of the Directors are as follows:
2005 2004
£000 £000
BM Thompson 48 37
I Henderson 29 20
NP Lingwood 29 20
106 77
BONUS SHARE MATCHING PLAN
As explained on page 25, Executive Directors were given the opportunity to defer receipt of their annual bonus and have it invested in
Diploma shares (‘Invested Shares’). In respect of the year ended 30 September 2004, each Executive Director chose to invest a
proportion of their ‘net’ bonus. The Invested Shares so purchased on their behalf are included in the table below and also in the table
of Directors’ Shareholdings. The related Matching Shares under these arrangements are also shown in the table below. They are not
released until the expiry of a two year period and the right to Matching Shares is forfeited if an Executive Director resigns before then.
Invested Matching
shares shares
(Note 1) (Note 1) Vesting
Number Number date
BM Thompson
7 January 2004 (Note 2) 7,459 12,643 30 Sept 2005
18 January 2005 6,996 11,858 30 Sept 2006
I Henderson
7 January 2004 (Note 2) 2,869 4,863 30 Sept 2005
18 January 2005 5,045 8,551 30 Sept 2006
NP Lingwood
18 January 2005 3,110 5,271 30 Sept 2006
Notes:
1 Invested Shares are purchased with the bonus net of tax. The Matching Share awards are made on a gross basis and are taxed at the point of vesting.
2 These Matching Share awards vested on 30 September 2005 and were transferred to the Executive Director from the Diploma Employee Benefit Trust on
26 October 2005. Diploma PLC Annual Report and Accounts 2005 Remuneration Report 29
Remuneration Report Continued
LONG TERM INCENTIVE PLAN
On 29 November 2004 Executive Directors received a share award with a face value of one times salary. Details of awards made to
Directors under the Company’s Long Term Incentive Plan are as follows:
LTIP shares
awarded T otal
LTIP shares during the LTIP shares
awarded at year ended Share price held at
30 Sept 2004 30 Sept 2005 on date of Vesting 30 Sept 2005
Number Number award date Number
BM Thompson
7 January 2004 53,347 - 478p 30 Sept 2006
29 November 2004 - 47,250 582p 30 Sept 2007
100,597
I Henderson
7 January 2004 31,381 - 478p 30 Sept 2006
29 November 2004 - 28,350 582p 30 Sept 2007
59,731
NP Lingwood
7 January 2004 32,427 - 478p 30 Sept 2006
29 November 2004 - 28,350 582p 30 Sept 2007
60,777
LONG TERM INCENTIVE SCHEME
As explained on page 26, the Long Term Incentive Scheme (“LTIS”) preceded the Long Term Incentive Plan. The final award under
the LTIS vested on 11 January 2005 in respect of performance conditions which were measured over a three year period ended
30 September 2004. On vesting, one-third of the award is paid immediately with the balance being paid, unconditionally, in two
deferred payments.
Details of awards made to Directors under the Company’s LTIS are as follows:
LTIS award
LTIS award vested Awards paid LTIS award
vested and during the during the vested and
deferred at year ended year ended deferred at
30 Sept 2004 30 Sept 2005 30 Sept 2005 Vesting 30 Sept 2005
£££ date£
BM Thompson (Note 1) 237,233 - 118,617 7 Jan 2004 118,616
I Henderson (Note 1) 112,533 - 56,267 7 Jan 2004 56,266
NP Lingwood (Note 2) - 193,000 64,333 11 Jan 2005 128,667
Notes:
1 The awards vesting in 2004 for BM Thompson and I Henderson were calculated based on the Company’s Adjusted EPS of 32.2p and average share price in
the three months ended 30 September 2003 of 405p. The base Adjusted EPS for BM Thompson and I Henderson was 23.4p and the base share price was
214.3p. The award under the personal assessment condition for BM Thompson was £150,000 and for I Henderson was £75,000.
2 The award vesting in 2005 for NP Lingwood was calculated based on the Company’s Adjusted EPS of 41.2p and average share price in the three months
ended 30 September 2004 of 556p. The base Adjusted EPS for NP Lingwood was 30.2p and the base share price was 297.0p. The award under the personal
assessment condition for NP Lingwood was £75,000. Diploma PLC Annual Report and Accounts 2005 Remuneration Report 30
DIRECTORS’ SHAREHOLDINGS
Ordinary shares of 5p each
At 14 At 30 At 1
November September October
2005 2005 2004
Number Number Number
I Henderson 35,619 30,756 25,711
NP Lingwood 8,110 8,110 5,000
JW Matthews ---
JL Rennocks 3,500 3,500 -
Lord Stewartby 25,000 25,000 25,000
BM Thompson 127,098 114,455 107,459
Notes:
1 At 30 September 2005 the Diploma Employee Benefit Trust held 183,029 (2004: 105,373) unallocated ordinary shares in the Company on discretionary terms
for the benefit of certain Group employees. The Executive Directors were treated as interested in these shares in their capacity as potential beneficiaries.
2 The above table includes interests in Invested Shares under the Company’s Bonus Share Matching Plan. The table excludes interests in Matching Shares
under the Company’s Bonus Share Matching Plan and interests in the Company’s Long Term Incentive Plan, disclosed above.
3 None of the Directors hold any shares non-beneficially. BM Thompson and I Henderson received 12,643 shares and 4,863 shares respectively on 26 October
2005 in respect of Matching Shares which had vested at 30 September 2005. The shares held by the Diploma Employee Benefit Trust reduced correspondingly
by 17,506 to 165,523 shares.
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.
IMPACT OF IFRS
With effect from 1 October 2005, the Company will be reporting its results in accordance with International Financial Reporting
Standards (“IFRS”). This will affect reported earnings and performance in comparison with past years. Performance targets under the
Company’s incentive plans may be adjusted, if appropriate, to ensure consistency of treatment during the transition from UK GAAP to
IFRS reporting.
This report on remuneration has been approved by the Board and signed on its behalf by:
JW Matthews
Chairman of the Remuneration Committee
14 November 2005
Remuneration Report Continued Diploma PLC Annual Report and Accounts 2005 Directors’ Responsibilities for Financial
Statements/Independent Auditors’ Report
31
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 32 to 51), 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 are satisfied that the Group has adequate resources
to meet its operational needs for the foreseeable future and,
accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
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.
Independent Auditors’ Report
Directors’ Responsibilities 
for Financial Statements
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. 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 into 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 31 and pages 51 and 52.
We review whether the corporate governance statement reflects
the company’s compliance with the nine provisions of the 2003
FRC 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 and the
auditable part of the directors’ remuneration report.
OPINION
In our opinion:
 the financial statements give a true and fair view of the state
of affairs of the company and the group at 30 September
2005 and the profit and cash flows of the group for the year
then ended;
 the financial statements have been properly prepared in
accordance with the Companies Act 1985; and
 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
14 November 2005 Diploma PLC Annual Report and Accounts 2005 Group Profit and Loss Account 32
Group Profit and Loss Account
for the year ended 30 September 2005
30 September 2005 30 September 2004
Before Goodwill and Before Goodwill and
goodwill and exceptional goodwill and exceptional
exceptional items exceptional items
items (note 6) T otal items (note 6) T otal
Note£m£m£m£m£m£m
Turnover 1
Continuing operations 111.3 111.3 100.5 100.5
Operating profit 1,3
Continuing operations 15.9 (1.3) 14.6 12.3 (1.6) 10.7
Non-Operating items 6
Continuing operations
Profit on disposal of tangible fixed assets --- - 3.9 3.9
1 15.9 (1.3) 14.6 12.3 2.3 14.6
Interest income 0.7 - 0.7 0.8 - 0.8
Profit on ordinary activities before tax 16.6 (1.3) 15.3 13.1 2.3 15.4
Taxation 7 (4.4) - (4.4) (3.6) 0.3 (3.3)
Profit on ordinary activities after tax 12.2 (1.3) 10.9 9.5 2.6 12.1
Equity minority interests 21 (0.4) (0.2)
Profit for the financial year 10.5 11.9
Dividends 8 (4.5) (3.8)
Retained profit for the year 20 6.0 8.1
Earnings per 5p share 9
On basic and diluted earnings 46.6p 52.7p
On adjusted earnings 52.4p 41.2p
The notes on pages 36 to 51 form part of these financial statements. Diploma PLC Annual Report and Accounts 2005 Balance Sheets 33
Balance Sheets
as at 30 September 2005
Group Company
2005 2004 2005 2004
Note£m£m£m£m
Fixed assets
Intangible assets: Goodwill 10 23.3 23.5 - -
Tangible assets 11 10.4 10.6 - -
Investments 12 - - 66.4 66.4
33.7 34.1 66.4 66.4
Current assets
Stocks 13 21.3 20.4 - -
Debtors 14 20.3 19.3 - -
Cash and bank deposits 15 25.7 17.9 - -
67.3 57.6 - -
Creditors: Amounts falling due within one year 16 (25.2) (24.4) (57.9) (58.4)
Net current assets/(liabilities) 42.1 33.2 (57.9) (58.4)
Total assets less current liabilities 75.8 67.3 8.5 8.0
Provisions for liabilities and charges 17 (1.6) (2.0) - -
74.2 65.3 8.5 8.0
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 71.2 62.7 7.2 6.7
Equity shareholders’ funds 72.5 64.0 8.5 8.0
Equity minority interests 21 1.7 1.3 - -
74.2 65.3 8.5 8.0
The financial statements were approved by the Board of Directors on 14 November 2005 and signed on its behalf by:
BM Thompson Chief Executive Officer
NP Lingwood Group Finance Director
The notes on pages 36 to 51 form part of these financial statements. 2005 2005 2004 2004
Note£m£m£m£m
Net cash inflow from operating activities 23 16.4 10.7
Returns on investments and servicing of finance
Interest received 0.7 0.8
Taxation
UK corporation tax paid (1.7) (2.5)
Overseas tax paid (2.0) (3.7) (1.4) (3.9)
Capital expenditure and financial investment
Purchase of tangible fixed assets (1.4) (1.5)
Proceeds from the sale of tangible fixed assets 0.4 4.0
Purchase of own shares (0.5) (1.5) (0.5) 2.0
Acquisitions and disposals
Acquisition of businesses 22 (0.3) (17.3)
Equity dividends paid (4.1) (3.6)
Cash inflow/(outflow) before use of liquid resources
and financing 7.5 (11.3)
Management of liquid resources
(Increase)/decrease in short term deposits (5.8) 14.8
Financing
Redemption of Loan Notes – (1.2)
Increase in cash in the year 24 1.7 2.3
The notes on pages 36 to 51 form part of these financial statements.
Diploma PLC Annual Report and Accounts 2005 Group Cash Flow Statement 34
Group Cash Flow Statement
for the year ended 30 September 2005 35
Statement of Total Recognised 
Gains and Losses
for the year ended 30 September 2005
2005 2004
£m £m
Profit for the financial year 10.5 11.9
Exchange rate adjustments on foreign currency net investments 2.2 (0.7)
Total recognised gains and losses for the year 12.7 11.2
Reconciliation of Movements 
in Equity Shareholders’ Funds
for the year ended 30 September 2005
2005 2004
£m £m
Profit for the financial year 10.5 11.9
Dividends (4.5) (3.8)
Retained profit for the year 6.0 8.1
Exchange rate adjustments on foreign currency net investments 2.2 (0.7)
Purchase of own shares (0.5) (0.5)
Cost of employee share schemes 0.8 -
Net increase in equity shareholders’ funds 8.5 6.9
Equity shareholders’ funds at beginning of year 64.0 57.1
Equity shareholders’ funds at end of year 72.5 64.0
The notes on pages 36 to 51 form part of these financial statements.
Diploma PLC Annual Report and Accounts 2005 Statement of Total Recognised Gains and Losses/
Reconciliation of Movements in Shareholders’ Funds Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 36
Notes to the Financial Statements
for the year ended 30 September 2005
1. ANALYSIS OF RESULTS
Operating profit
before goodwill Profit
amortisation, exceptional before interest
T urnover items and taxation and taxation
2005 2004 2005 2004 2005 2004
£m £m £m £m £m £m
By Business
Life Sciences 34.7 26.0 4.7 3.5 4.1 3.1
Seals 27.6 27.4 4.0 2.4 3.9 2.3
Controls 49.0 47.1 7.2 6.4 6.6 5.3
111.3 100.5 15.9 12.3 14.6 10.7
Unallocated items:
Profit on sale of properties – - – - – 3.9
111.3 100.5 15.9 12.3 14.6 14.6
By Geographic Area
United Kingdom 55.7 58.9 7.2 8.3 6.8 10.9
Rest of Europe 17.0 14.6 2.7 2.0 2.5 1.8
North America 38.6 27.0 6.0 2.0 5.3 1.9
111.3 100.5 15.9 12.3 14.6 14.6
In 2005 the Group revised its definition of turnover to exclude recovery of freight costs from customers. Recovered freight costs are
now deducted from distribution costs. Total recovered freight costs in 2005 were £3.0m (Life Sciences £0.6m; Seals £2.1m; Controls
£0.3m). This adjustment has not impacted operating profit or retained profit. The prior year comparatives have not been restated.
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 £4.7m (out of £38.6m) is to customers based outside North America. Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 37
Notes to the Financial Statements Continued
for the year ended 30 September 2005
2. ANALYSIS OF NET ASSETS
2005 2004
United Rest of North United Rest of North
Kingdom Europe America T otal Kingdom Europe America T otal
£m £m £m £m £m £m £m £m
By Business
Life Sciences 5.0 0.6 15.5 21.1 3.7 0.4 14.6 18.7
Seals 2.2 – 12.1 14.3 2.1 - 11.8 13.9
Controls 11.4 6.9 0.2 18.5 10.2 7.0 0.2 17.4
Head Office (5.5) – – (5.5) (2.7) - - (2.7)
13.1 7.5 27.8 48.4 13.3 7.4 26.6 47.3
Discontinued operations 0.1 – – 0.1 0.1 - - 0.1
Trading capital employed 13.2 7.5 27.8 48.5 13.4 7.4 26.6 47.4
Cash and bank deposits 16.6 3.4 5.7 25.7 15.0 1.7 1.2 17.9
29.8 10.9 33.5 74.2 28.4 9.1 27.8 65.3
3. OPERATING PROFIT
2005 2004
£m £m
The Group’s results are analysed as follows:
Turnover 111.3 100.5
Cost of sales (71.8) (65.6)
Gross profit 39.5 34.9
Distribution costs (3.5) (5.7)
Administrative expenses (21.4) (18.5)
Operating profit 14.6 10.7
As explained in Note 1, turnover has been revised in 2005 to exclude freight costs recovered from customers. Goodwill amortisation
of £1.3m (2004: £0.8m) and exceptional costs of £Nil (2004: £0.8m) have been included in administrative expenses. 
The Group’s results include charges for:
2005 2004
£m £m
Depreciation of tangible fixed assets 1.5 1.2
Goodwill amortisation 1.3 0.8
Amounts paid under operating leases 0.6 0.6
Remuneration paid to PricewaterhouseCoopers LLP
– statutory group audit fees 0.2 0.2
– taxation advisors fees 0.1 0.1
Group audit fees include £2,000 (2004: £2,000) in respect of audit fees for the Company. Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 38
Notes to the Financial Statements Continued
for the year ended 30 September 2005
4. GROUP STAFF COSTS
Group staff costs, including Directors’ emoluments:
2005 2004
£m £m
Wages and salaries 19.0 16.2
Social security costs 1.8 1.6
Other pension costs (note 26) 0.7 0.7
21.5 18.5
The average number of employees, including Executive Directors, during the year were:
2005 2004
Number Number
Life Sciences 213 156
Seals 270 276
Controls 178 173
Head Office 8 7
Number of employees – average 669 612
Number of employees – year end 683 647
5. DIRECTORS’ REMUNERATION
Directors’ emoluments and interests are given in the Remuneration Report on pages 24 to 30.
6. GOODWILL AND EXCEPTIONAL ITEMS
Goodwill Exceptional Goodwill Exceptional
amortisation items T otal amortisation items T otal
2005 2005 2005 2004 2004 2004
£m £m £m £m £m £m
Operating profit
Continuing operations
(a)
(1.3) – (1.3) (0.8) (0.8) (1.6)
Non-Operating items
Profit on disposal of tangible fixed assets
(b)
––– - 3.9 3.9
(1.3) - (1.3) (0.8) 3.1 2.3
Tax credit on exceptional items ––– - 0.3 0.3
(1.3) – (1.3) (0.8) 3.4 2.6
(a) In 2004 costs of £0.5m were incurred in restructuring the Controls business of Hawco, acquired in July 2003. Costs of £0.3m were
also incurred in restructuring the Life Sciences business of Anachem.
(b) The profit on disposal of fixed assets arose from the sale of eight acres of land (known as Phase 2) in Stamford, East Midlands. 
No tax liability arose on this disposal due to the availability of capital tax losses. Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 39
Notes to the Financial Statements Continued
for the year ended 30 September 2005
7. TAXATION
(a) Analysis of taxation charge in year:
2005 2004
£m £m
Current tax
The tax charge is based on the profit for the year and comprises:
UK corporation tax at 30% 2.8 2.2
Overseas taxation 2.5 1.3
5.3 3.5
Adjustment in respect of prior periods:
UK corporation tax (0.3) -
Overseas tax – (0.2)
(0.3) (0.2)
Total current tax 5.0 3.3
Deferred tax
Origination and reversal of timing differences:
United Kingdom (0.4) -
Overseas (0.2) -
Total deferred tax (0.6) -
Total tax on profit on ordinary activities 4.4 3.3
(b) Factors affecting the current tax charge for the year:
The difference between the total current tax charge shown above and the amount calculated by applying the standard rate of UK
corporation tax to the profit before tax is as follows:
2005 2004
£m £m
Group profit on ordinary activities before tax 15.3 15.4
Tax on group profit on ordinary activities at standard
UK corporation tax rate of 30% (2004: 30%) 4.6 4.6
Effects of:
Goodwill amortisation 0.4 0.2
Tax relief on overseas goodwill (0.2) (0.2)
Exceptional items relating to disposals of fixed assets - (1.2)
Utilisation of losses brought forward in foreign subsidiaries - (0.2)
Higher tax rates on overseas earnings 0.5 0.3
Adjustments to tax charge in respect of previous periods (0.3) -
Other permanent differences - (0.2)
Total current tax on profit on ordinary activities 5.0 3.3
The group earns its profits in the UK and overseas. The tax rate used for tax on profit on ordinary activities is the standard rate for UK
corporation tax, which is currently 30%. The Group’s overseas tax rates are higher than those in the UK, primarily because the profits
earned in North America and Germany are taxed at a standard rate of approximately 36%.
(c) Deferred tax:
A net deferred tax asset of £0.6m (2004: £Nil) has been recognised and included within Debtors resulting in a credit to the profit and
loss account of £0.6m. The net deferred tax asset is made up of gross deferred tax assets of £0.6m (2004: £0.4m) relating to timing
differences in respect of the LTIP , defined benefit pension schemes and other timing differences and deferred tax liabilities relating to
capital allowances on fixed assets in excess of depreciation of £Nil (2004: £0.4m).
No provision for deferred taxation has been made for taxation payable on the distribution of reserves by overseas subsidiary
undertakings. No deferred tax asset has been recognised on capital losses of £6.0m (2004: £6.0m). Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 40
8. DIVIDENDS
2005 2004 2005 2004
pence pence
per share per share £m £m
Interim paid 7.0 6.0 1.6 1.4
Final proposed 13.0 11.0 2.9 2.4
20.0 17.0 4.5 3.8
Shares held by the Diploma Employee Benefit Trust, amounting to 183,029 (2004: 105,373), are not eligible for dividends.
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 22,513,603 (2004: 22,581,026) and the profit for the financial year, after equity minority interests, of £10.5m
(2004: £11.9m). 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:
2005 2004 2005 2004
pence pence
per share per share £m £m
Profit for the financial year, after equity minority interests 46.6 52.7 10.5 11.9
Goodwill amortisation 5.8 3.5 1.3 0.8
Exceptional items, net of tax – (15.0) – (3.4)
Adjusted earnings 52.4 41.2 11.8 9.3
10. INTANGIBLE ASSETS: GOODWILL
2005
£m
Cost
At 1 October 2004 25.1
Exchange rate adjustments 1.4
Goodwill reduction (note 22) (0.2)
At 30 September 2005 26.3
Amortisation
At 1 October 2004 1.6
Exchange rate adjustments 0.1
Amortisation charge for the year 1.3
At 30 September 2005 3.0
Net Book Value
At 30 September 2005 23.3
At 30 September 2004 23.5
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 (2004: £20.3m) has been written off to reserves in prior years.
Notes to the Financial Statements Continued
for the year ended 30 September 2005 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 41
Notes to the Financial Statements Continued
for the year ended 30 September 2005
11. TANGIBLE ASSETS
Fixtures,
fittings,
Freehold Plant & vehicles &
properties machinery equipment T otal
£m £m £m £m
Cost
At 1 October 2004 8.5 3.3 7.7 19.5
Exchange rate adjustments 0.1 0.3 0.1 0.5
Additions - 0.8 0.6 1.4
Disposals (0.4) (0.1) (0.4) (0.9)
At 30 September 2005 8.2 4.3 8.0 20.5
Depreciation
At 1 October 2004 1.9 2.1 4.9 8.9
Exchange rate adjustments - 0.1 0.1 0.2
Charged in year 0.1 0.5 0.9 1.5
Disposals (0.1) - (0.4) (0.5)
At 30 September 2005 1.9 2.7 5.5 10.1
Net Book Value
At 30 September 2005 6.3 1.6 2.5 10.4
At 30 September 2004 6.6 1.2 2.8 10.6
Land included above but not depreciated is £1.8m (2004: £1.8m). The net book value of assets held which are leased to customers
under operating leases is £0.9m (2004: £0.7m). Capital commitments contracted, but not provided, were £Nil (2004: £Nil).
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 a parcel of this land, known as Phase 3, which comprises 12 acres, which is currently being marketed for sale. In
the directors’ opinion, the market value of Phase 3, with current planning consent, is likely to be not less than £9.0m (2004: £5.5m),
before expenses and tax.
12. INVESTMENTS
Company
£m
Shares in Group undertakings
At 1 October 2004 66.4
Additions during year –
At 30 September 2005 66.4
Details of the principal subsidiaries are set out on page 51.
13. STOCKS
Group
2005 2004
£m £m
Finished goods and goods held for resale 21.3 20.4 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 42
14. DEBTORS
Group
2005 2004
£m £m
Trade debtors 18.3 18.3
Other debtors 0.4 0.3
Deferred tax asset (note 7) 0.6 -
Prepayments and accrued income 1.0 0.7
20.3 19.3
15. CASH AND BANK DEPOSITS
Group
2005 2004
£m £m
Cash at bank 6.1 4.1
Short term deposits 19.6 13.8
25.7 17.9
16. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Company
2005 2004 2005 2004
£m £m £m £m
Trade creditors 10.8 12.6 – -
Amounts owed to Group companies – - 55.0 55.9
Corporation tax 2.9 1.5 – -
Other creditors 1.4 1.1 – -
Other taxes and social security 1.3 1.0 – -
Proposed dividend 2.9 2.5 2.9 2.5
Accruals and deferred income 5.9 5.7 – -
25.2 24.4 57.9 58.4
Notes to the Financial Statements Continued
for the year ended 30 September 2005 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 43
17. PROVISIONS FOR LIABILITIES AND CHARGES
Exchange 30 
1 October Charge to On rate September
2004 Utilised profit acquisition adjustments 2005
£m £m £m £m £m £m
Pensions 0.5 - 0.1 - - 0.6
Onerous lease 0.1 (0.1) - - - –
Deferred consideration 1.4 (0.3) - (0.2) 0.1 1.0
Total 2.0 (0.4) 0.1 (0.2) 0.1 1.6
In May 2005 deferred consideration of £0.3m (h0.4m) was paid to the vendors of Filcon Electronic GmbH. As a result of this
payment, excess deferred consideration of £0.2m was released and goodwill adjusted accordingly. Deferred consideration of £1.0m
(C$2.0m) was paid in November 2005 to the vendors of Somagen Diagnostics Inc. as final settlement of their performance payment.
Pension provisions are held in the respect of the Group’s principal defined benefit pension schemes. These will be amortised to profit
over the average service life of the employees.
18. FINANCIAL INSTRUMENTS
Policy
The Group is exposed to a number of different market risks, including movement in interest rates and foreign currency exchange
rates. The Group’s treasury function seeks to reduce these risks by operating policies and procedures which are regularly reviewed
and approved by the Board.  All transactions entered into by the treasury function are required to be in support of, or as a
consequence of, underlying commercial transactions.
Foreign currency risk
The Group has significant overseas businesses whose revenues are denominated in the currencies of the countries in which the
operations are located. Approximately 50% of the Group’s sales and operating profits generated in the year ended 30 September
2005 were earned in currencies other than Sterling. The Group does not hedge profit translation exposure since such hedges provide
only a temporary deferral of the effect of movements in exchange rates. The Group regularly reviews its foreign exchange exposure in
respect of net tangible assets held in currencies other than Sterling.  At 30 September 2005, its non-Sterling capital employed in
overseas businesses was £35.3m (2004: £34.0m), principally held in the United States and Canada.  At the present time the Group
has decided not to hedge its exposure back into Sterling.
Details of average exchange rates used in the translation of overseas earnings, and of year end exchange rates used in the translation
of overseas balance sheets, for the principal currencies used by the Group are shown in note 28 to the financial statements. In
comparison to the prior year, the net effect of currency translation was to decrease turnover by £0.1m and to reduce operating profit
by £Nil.
The Group’s UK businesses are also exposed to fluctuations in exchange rates as a significant amount of their stock purchases are
denominated in foreign currencies, comprising US Dollars, Euros and Japanese Yen. The Group may hedge such transactions through
foreign exchange forward contracts. 
Interest rate risk
The Group continues to manage the 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 deposited with commercial banks that meet the credit criteria approved
by the Board, for periods of between one to six months. 
Market price risk
The Group regularly monitors its currency and interest rate risk by reviewing the effect on profit before tax of a range of possible
changes in exchange rates and in interest rates. It is estimated that a reduction of 1% in interest rates would reduce the Group’s profit
before tax by a maximum of £0.3m. Similarly, it is estimated that a strengthening of Sterling by 10% against all the currencies in
which the Group does business would reduce operating profit before tax by approximately £0.8m (5.5%) due to currency translation. 
Short term debtors and creditors and provisions have been excluded from the following disclosures, other than the foreign currency
disclosures.
Notes to the Financial Statements Continued
for the year ended 30 September 2005 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 44
Notes to the Financial Statements Continued
for the year ended 30 September 2005
18. FINANCIAL INSTRUMENTS (continued)
Interest rate and currency profile
At the year end, and throughout the year, the Group has maintained cash at bank and short term deposits. The Group has no term
borrowing facilities, but maintains ‘on demand’ bank overdrafts. The current book value of interest bearing assets is as follows:
2005 2004
Sterling US$ Cdn$ Euro T otal Sterling US$ Cdn$ Euro T otal
£m £m £m £m £m £m £m £m £m £m
Cash at bank 0.4 2.1 1.5 2.1 6.1 1.2 0.9 0.3 1.7 4.1
Short term deposits 14.8 1.4 1.5 1.9 19.6 12.0 0.6 0.4 0.8 13.8
15.2 3.5 3.0 4.0 25.7 13.2 1.5 0.7 2.5 17.9
The short term deposits and cash at bank are both interest bearing at rates linked to LIBOR.
Net foreign currency monetary assets/liabilities at 30 September 2005 and 2004
After taking into account the effect of forward contracts entered into to manage currency exposures, the Group’s UK businesses had
an external net asset exposure of £1.9m (2004: £1.2m liability) to the Euro. The Group’s Canadian businesses had an external net
asset exposure of £2.7m (2004: £2.4m asset) to the US dollar. The Group’s US and Continental European businesses had no external
exposure to foreign currencies at the year end.
Fair values of financial instruments
At 30 September 2005 the difference between the book value and the fair value of the Group’s financial assets and liabilities was a
net liability of £0.1m (2004: £0.2m).
19. SHARE CAPITAL
2005 2004 2005 2004
Number Number £m £m
Authorised at 30 September 
Equity – Ordinary shares of 5p each 35,000,000 35,000,000 1.7 1.7
Allotted, issued and fully paid at 30 September
Equity – Ordinary shares of 5p each 22,647,911 22,647,911 1.1 1.1
20. RESERVES
Group Company
Capital Profit and Capital Profit and
redemption loss redemption loss
reserve account T otal reserve account T otal
£m £m £m £m £m £m
At 1 October 2004 0.2 62.7 62.9 0.2 6.7 6.9
Retained profit for the year – 6.0 6.0 – 1.0 1.0
Purchase of own shares – (0.5) (0.5) – (0.5) (0.5)
Cost of employee share schemes – 0.8 0.8 – – –
Exchange rate adjustments – 2.2 2.2 – – –
At 30 September 2005 0.2 71.2 71.4 0.2 7.2 7.4
In May 2005 the Diploma Employee Benefit Trust (“the Trust”) purchased a further 77,656 ordinary shares in the Company at a cost of
£0.5m. These shares were acquired in connection with potential awards under the Group’s Long Term Incentive Plan and Bonus Share
Matching Plan. The purchase of own shares has been deducted in arriving at shareholders’ funds in accordance with UITF 38. At 30
September 2005 the Trust held 183,029 (2004: 105,373) ordinary shares in the Company representing 0.8% of the called up share
capital. The market value of these shares at 30 September 2005 was £1.3m (2004: £0.6m). On 26 October 2005 17,506 of these
shares were transferred out of the Trust following vesting of awards under the Bonus Share Matching Plan.
At 30 September 2005, goodwill written off directly against profit and loss account reserves amounted to £20.3m (2004: £20.3m). Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 45
Notes to the Financial Statements Continued
for the year ended 30 September 2005
21. MINORITY INTERESTS
Group
£m
At 1 October 2004 1.3
Share of profit for the year 0.4
At 30 September 2005 1.7
22. ACQUISITIONS
In May 2005 deferred consideration of £0.3m (£0.4m) was paid to the vendors of Filcon Electronic GmbH. No further consideration is
payable on this acquisition. As a result of this payment excess deferrred consideration of £0.2m has been released and goodwill
adjusted accordingly.
23. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES
2005 2004
£m £m
Operating profit 14.6 10.7
Depreciation 1.5 1.2
Amortisation of goodwill 1.3 0.8
Cost of employee share schemes 0.8 -
(Increase) in stocks (0.6) (2.3)
Decrease/(increase) in debtors 0.6 (1.3)
(Decrease)/increase in creditors (1.8) 1.5
Increase in provisions - 0.1
Net cash inflow from operating activities 16.4 10.7
24. RECONCILIATION OF NET CASH FLOWS TO THE MOVEMENT IN CASH AND BANK DEPOSITS
2005 2004
£m £m
Increase in cash in the year 1.7 2.3
Increase/(decrease) in short term deposits 5.8 (14.8)
Change in cash and bank deposits resulting from cash flows 7.5 (12.5)
Decrease in debt due within one year – 1.2
Exchange rate adjustments 0.3 (0.1)
Cash and bank deposits at beginning of year 17.9 29.3
Cash and bank deposits at end of year 25.7 17.9 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 46
Notes to the Financial Statements Continued
for the year ended 30 September 2005
25. ANALYSIS OF CASH AND BANK DEPOSITS
1 October Exchange rate 30 September
2004 Cash flow adjustments 2005
£m £m £m £m
Cash at bank 4.1 1.7 0.3 6.1
Short term deposits 13.8 5.8 - 19.6
Cash and bank deposits 17.9 7.5 0.3 25.7
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 closed to the accrual of future benefits 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.
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. An actuarial valuation of the defined benefit section of the PLC Scheme was carried
out as at 6 April 2003 using the projected unit method. The principal actuarial assumptions adopted were that, over the long term,
the annual rate of return on investments would be 4.5% 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 £4.1m. The actuarial valuation showed assets sufficient
to cover 88% of the liabilities of the PLC Scheme. The company has agreed with the Trustees to contribute an annual payment of
£50,000 and to meet all expenses of running the PLC Scheme. The next actuarial valuation will be carried out as at 5 April 2006.
The Anachem Scheme was actuarially valued as at 5 April 2004 using the projected unit method. The principal actuarial assumptions
adopted were that, over the long term, the annual investment return would be 2.5% greater than the increase in pensionable
remuneration and 4.5% 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 £5.0m. The actuarial valuation showed assets sufficient to cover 69% of the benefits accruing
to members of the Anachem Scheme. On 31 March 2005, the Anachem Scheme closed to future accrual of benefits and all active
members at 31 March 2005 became deferred members. The company has also agreed with effect from 1 April 2005 to contribute an
annual payment of £233,000 to fund the deficit, increasing at 5% per annum.
The Group’s total pension charge under SSAP 24 was £0.7m (2004: £0.7m) of which £0.4m (2004: £0.5m) related to the defined
benefit schemes.
FRS 17 Accounting
The aggregate fair value of the assets held by the Principal Schemes at 30 September 2005, 2004 and 2003 and the expected rate of
return assumed for the next year are as follows:
Fair value Expected rate of return
2005 2004 2003 2005 2004 2003
£m £m £m
Equities 9.2 6.3 6.1 7.5% 8.0% 8.0%
Bonds 2.3 3.4 2.2 4.5% 5.0% 5.8%
Cash 0.2 0.1 0.5 4.0% 4.0% 4.0%
11.7 9.8 8.8 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 47
Notes to the Financial Statements Continued
for the year ended 30 September 2005
26. PENSION SCHEMES (continued)
On an FRS 17 basis, the major assumptions used by the actuaries of the Principal Schemes to calculate the scheme liabilities at
30 September 2005, 2004 and 2003 were:
2005 2004 2003
Inflation 2.50% 2.75% 2.50%
Rate of increase in pensionable pay – 4.50% 4.00%
Rate of increase in pensions in payment 2.50% 2.75% 2.50%
Rate used to discount scheme liabilities 5.0% 5.50% 5.25%
At 30 September 2005, the present value of scheme liabilities using these assumptions was £16.1m (2004: £13.9m). The implied
deficit in the Principal Schemes on an FRS 17 basis is £4.4m (2004: £4.1m).
If the above amounts had been recognised in the financial statements, the Group’s shareholders’ funds and accumulated profit and
loss reserve at 30 September 2005 and 2004 would have been as follows:
Equity shareholders’ funds Profit and loss reserve
2005 2004 2005 2004
£m £m £m £m
As reported – excluding pension deficit 72.5 64.0 71.2 62.7
Reverse SSAP 24 accounting provision, net of deferred tax 0.4 0.5 0.4 0.5
Pension deficit (4.4) (4.1) (4.4) (4.1)
Related deferred tax asset 1.3 1.2 1.3 1.2
Restated – including pension deficit 69.8 61.6 68.5 60.3
In respect of the Principal Schemes, the following amounts would have been recognised in the primary financial statements in the
year ended 30 September 2005 and 2004 under the requirements of FRS 17:
Profit and Loss Account
2005 2004
£m £m
Operating profit:
Current service cost (0.1) (0.3)
Curtailment gain 0.2 –
0.1 (0.3)
Other finance income/(expense):
Expected return on pension scheme assets 0.8 0.7
Interest on pension scheme liabilities (0.9) (0.8)
(0.1) (0.1)
Net charge in profit and loss account – (0.4)
Statement of Total Recognised Gains and Losses (“STRGL”)
2005 2004
£m £m
Actual return less expected return on pension scheme assets 1.4 0.3
Experience gains and losses arising on the scheme liabilities (0.2) (0.1)
Change in assumptions at 30 September underlying the present
value of the scheme liabilities (1.7) 0.3
Actuarial (loss)/gain recognised in the STRGL (0.5) 0.5 Diploma PLC Annual Report and Accounts 2005 Notes to the Financial Statements 48
Notes to the Financial Statements Continued
for the year ended 30 September 2005
26. PENSION SCHEMES (continued)
The movement in the overall pension deficit, calculated in accordance with the method prescribed in FRS17, is as follows:
2005 2004
£m £m
Deficit in the Principal Schemes at beginning of year: (4.1) (4.6)
Current service cost (0.1) (0.3)
Curtailment gain 0.2 -
Employer contributions 0.2 0.4
Other finance expense (0.1) (0.1)
Actuarial (loss)/gain recognised in STRGL (0.5) 0.5
Deficit in the Principal Schemes at end of year (4.4) (4.1)
Set out below are details of experience gains and losses in respect of the Principal Schemes:
2005 2004
£m £m
(a) Difference between the actual and expected return on scheme assets 1.4 0.3
— as a percentage of scheme assets 12% 3%
(b) Experience gains and losses of scheme liabilities (0.2) (0.1)
— as a percentage of scheme liabilities 1% 1%
(c) Amount recognised in STRGL (0.5) 0.5
— as a percentage of scheme liabilities 3% 4%
27. OPERATING LEASE COMMITMENTS
At the 30 September 2005 the Group was committed to making the following payments during the next year in respect of operating
leases:
Land and Buildings
2005 2004
£m £m
Leases which expire:
Within one year – 0.2
Within two to five years 0.4 0.1
After five years 0.2 0.4
0.6 0.7
28. EXCHANGE RATES
The following exchange rates have been used to translate the results of the overseas business:
Average Closing
2005 2004 2005 2004
US Dollar 1.84 1.81 1.77 1.81
Canadian Dollar 2.27 2.34 2.05 2.29
Euro 1.46 1.48 1.47 1.46 Diploma PLC Annual Report and Accounts 2005 Group Accounting Policies 49
BASIS OF ACCOUNTING
The financial statements are prepared under the historical cost
convention and in accordance with the Companies Act 1985 and
applicable accounting standards, all of which, with the exception
of accounting for turnover, 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 51. 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 or a business, 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 annual
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. Turnover is recognised on the sale of
goods at the date of delivery of the goods to the customer or in
the case of machinery on installation. With effect from 1 October
2004 turnover excludes freight income recoverable from
customers. Turnover relating to services is recognised over the
period that the service is provided. 
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.
Group Accounting Policies Diploma PLC Annual Report and Accounts 2005 Group Accounting Policies 50
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
Operating lease rentals are charged in the profit and loss account
on a straight line basis over the lease term. Income from
operating leases are recognised 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.
EMPLOYEE BENEFIT TRUST AND EMPLOYEE SHARE SCHEMES
Shares held by the Diploma Employee Benefit Trust are stated at
cost and accounted for as a deduction from shareholders’ funds
in accordance with UITF 38. Shares that are held by the Diploma
Employee Benefit Trust are not eligible for dividends and are
treated as if they were cancelled for earnings per share purposes
and excluded from the calculation until such time as they vest
unconditionally to the employees.
Employee share schemes are accounted for in accordance with
UITF 17 (revised). Share based payments made to employees are
charged to the profit and loss account based on the intrinsic
value of the shares at the date of grant.
Group Accounting Policies Continued Diploma PLC Annual Report and Accounts 2005 Principal Subsidiaries 51
Group Country of
percentage of incorporation or
equity capital registration
LIFE SCIENCES
Anachem Limited* 100% England
a1 technologies GmbH 100% Germany
a1 safetech AG 100% Switzerland
Somagen Diagnostics Inc 80% Canada
SEALS
Hercules Bulldog Sealing Products Inc 100% USA
Fluid Power Equipment Limited* 92% England
CONTROLS
IS Rayfast Limited 100% England
IS Motorport Inc 100% USA
Clarendon Engineering Supplies Limited 100% England
Sommer GmbH 100% Germany
Filcon GmbH 100% Germany
HA Wainwright (Group) Limited 95% England
OTHER COMPANIES
Diploma Holdings PLC 100% England
Diploma Holdings Inc 100% USA
The companies marked* are directly held by Diploma Holdings PLC, a 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.
Announcements (provisional dates)
Half Year results announced 8 May 2006
Full Year results announced 13 November 2006
Annual Report and Accounts posted to shareholders 27 November 2006
Annual General Meeting 10 January 2007
Dividends (provisional dates)
Interim announced 8 May 2006
Paid 14 June 2006
Final announced 13 November 2006
Paid (if approved) 17 January 2007
Report and Accounts: Copies can be obtained from the Company Secretary at the address shown below.
Share Registrar – Computershare Investor Services PLC: The Company’s Registrar is Computershare Investor 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 Investor 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
Principal Subsidiaries
Financial Calendar 
and Shareholder Information Diploma PLC Annual Report and Accounts 2005 Financial Calendar and Shareholder Information 52
2005 2004 2003 2002 2001
£m £m £m £m £m
Turnover
– Continuing operations 111.3 100.5 77.1 73.7 66.3
– Discontinued operations – - 0.6 1.9 20.6
111.3 100.5 77.7 75.6 86.9
Operating profit before goodwill and exceptional items
– Continuing operations 15.9 12.3 9.7 8.9 8.8
– Discontinued operations – --- 0.9
15.9 12.3 9.7 8.9 9.7
Interest income 0.7 0.8 0.9 1.0 1.2
Profit before tax, goodwill and exceptional items 16.6 13.1 10.6 9.9 10.9
Goodwill amortisation (1.3) (0.8) (0.3) (0.3) (0.1)
Exceptional credits/(charges), net – 3.1 2.4 0.5 (2.1)
Profit before tax 15.3 15.4 12.7 10.1 8.7
Taxation (4.4) (3.3) (2.9) (2.8) (3.2)
Profit after tax 10.9 12.1 9.8 7.3 5.5
Capital structure
Equity shareholders’ funds 72.5 64.0 57.1 50.9 55.6
Minority interest 1.7 1.3 0.6 0.5 0.4
Less: net cash (25.7) (17.9) (29.3) (26.9) (31.7)
Trading capital employed 48.5 47.4 28.4 24.5 24.3
Cash flow from – operating activities 16.4 10.7 11.1 9.9 9.4
Cash flow from – (acquisitions)/disposals of businesses (0.3) (17.3) (6.1) (2.2) 8.8
Per ordinary share (pence)
Basic earnings 46.6 52.7 42.8 31.2 21.5
Adjusted earnings 52.4 41.2 32.2 29.4 30.2
Dividends 20.0 17.0 15.0 14.0 13.0
Equity shareholders’ funds 320 283 252 225 221
Dividend cover 2.6 2.4 2.1 2.1 2.3
Ratios % %%%%
Return on trading capital employed (including goodwill) 22.2 21.0 21.6 20.3 21.7
Operating profit/sales – continuing operations 14.3 12.2 12.6 12.1 13.3
Notes
1 Equity 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 shareholders’ funds less net cash 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 Equity shareholders’ funds per share have been calculated by dividing equity 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 December 2001 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. 
Five Year Record www.diplomaplc.com
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Telephone: +44 (0)20 7638 0934   
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