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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cohort | AQSE:CHRT.GB | Aquis Stock Exchange | Ordinary Share | GB00B0YD2B94 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 20.00 | 2.61% | 785.00 | 680.00 | 890.00 | 785.00 | 765.00 | 765.00 | 0.00 | 08:09:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMCHRT
RNS Number : 5123R
Cohort PLC
12 December 2016
Hot Features
Premium
Cohort plc
2 Waterside Drive
Arlington Business Park
Theale, Reading, RG7 4SW
Tel: +44 (0) 118 909 0390
www.cohortplc.com
12 December 2016
COHORT PLC
HALF YEAR RESULTS
FOR THE SIX MONTHSED 31 October 2016
Continued strong performance
Cohort plc today announces its final results for the six months ended 31 October 2016.
Highlights include:
-- Adjusted* operating profit up 11% at GBP3.9m (2015: GBP3.5m). -- Revenue up to GBP50.0m (2015: GBP49.7m). -- Order intake of GBP63.6m including acquired order book of GBP23.1m (2015: GBP55.7m). -- Strong closing order book of GBP129.6m (30 April 2016: GBP116.0m).
-- Net funds of GBP9.9m down on the year end, as expected (31 October 2015: GBP11.4m; 30 April 2016: GBP19.8m).
-- Interim dividend increased by 16% to 2.20 pence per share (2015: 1.90 pence per share).
-- Adjusted* earnings per share 16% lower at 5.99 pence (2015: 7.11 pence), reflecting a significant proportion of the earnings in the period being derived from the partially owned EID and MCL.
Looking forward
-- Stronger second half performance in prospect, maintaining our expectations for the year:
Ø Historic second half weighting to be repeated
Ø GBP49.5m of the 31 October 2016 order book is deliverable in the second half and underpins nearly 80% of the consensus forecast revenue for the full year.
Ø Prospects for further order intake in the second half across the Group are encouraging.
Ø Benefit of a full six months' contribution from EID and elimination of SCS's losses.
-- Agreement in principle to acquire a further 23% of EID from the Portuguese Government. -- Remainder of MCL expected to be acquired on or before 31 December 2016.
* Adjusted figures exclude the effects of marking forward exchange contracts to market value, amortisation of other intangible assets and exceptional items.
Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said:
"The Group's first half operating profit increase was driven by the initial contribution from EID and a much better first half at MCL, balanced by adverse market conditions experienced in some other areas of the business. We are confident of a strong second half performance across the whole Group reflecting our normal seasonality, order book visibility, the benefit of a full second half contribution from EID and the elimination of SCS losses.
"Overall, Cohort's order book and pipeline, market positions, capabilities and strong funding position provide confidence that we will make further progress in 2016/17, and we maintain our expectations for the full year."
A presentation for analysts is being hosted today 12 December 2016 at 9.15am for 9.30am at Investec's offices.
For further information, please contact:
Cohort plc +44 () 0118 909 0390 Andy Thomis, Chief Executive Simon Walther, Finance Director Investec Bank Plc +44 (0)20 7597 5970 Keith Anderson, Daniel Adams MHP Communications +44 (0)20 3128 8710 Reg Hoare, Jamie Ricketts, Ollie Hoare
NOTES TO EDITORS
Cohort is the parent company of four innovative, agile and responsive businesses based in the UK and Portugal, providing a wide range of services and products for domestic and export customers in defence and related markets.
MASS is a specialist defence and technology business, focused on electronic warfare, information systems and cyber security.
www.mass.co.uk
MCL is an expert in the sourcing, design, integration and support of communications and surveillance technology for the defence and security markets.
www.marlboroughcomms.com
SEA is an advanced electronic systems and software house operating in the defence, transport and offshore energy markets.
www.sea.co.uk
EID designs and manufactures advanced communications systems for the defence and security markets.
www.eid.pt
Chairman's statement
Nick Prest CBE, Chairman
The Group's 2016/17 first half adjusted operating profit was 11% higher than last year at GBP3.9m (2015: GBP3.5m) on revenue of GBP50.0m (2015: GBP49.7m). The increase was driven by the initial contribution from EID and a much better first half at MCL. However, adverse market conditions at SCS and delayed customer funded research work at SEA resulted in a weaker like-for-like Group performance, with revenue down 12% and trading profit down 29% compared with the same period last year, after excluding the beneficial impact of EID. We are confident of a strong second half performance across the whole Group reflecting our normal seasonality, order book visibility, the benefit of a full second half contribution from EID and the elimination of SCS losses.
As announced on 28 June 2016, we acquired a controlling interest in EID of 56.89% for a total of GBP5.2m, and we have agreed in principle with the Portuguese Government to increase our holding to 80% on the same terms and at the same Euro valuation. We expect the cash consideration for the additional 23% to be around GBP3.5m. In connection with this proposed transaction, we have substantially agreed the terms of a shareholders' agreement with the Portuguese Government, which will retain the remaining 20% of EID. The agreement will provide certain rights to the Government, most of which are typical for a minority interest, while ensuring Cohort has day-to-day management control over EID.
We are also close to an agreement on acquiring the whole of the minority shareholding (49.999%) of MCL from its management, and we expect to complete this by 31 December 2016. The minority shares will be acquired on the basis agreed in the original agreement of 9 July 2014 and the expected cost for the Group will be GBP5.5m, in line with our estimate as at 30 April 2016. This cost excludes the share of the surplus cash in the business as at 30 April 2017 payable to the minority shareholders, which is estimated at GBP2m.
We announced on 11 October 2016 the reorganisation of SCS. This process has been completed, with the operating divisions of SCS transferred to MASS (Training Support) and SEA (Capability Development and Air Systems). The full cost of the reorganisation, now estimated at GBP2.2m, has been recognised as an exceptional item at 31 October 2016. We expect a positive contribution from this action in the second half trading performance, as well as in future years, mostly from the saving in overhead, which we estimate at GBP1.6m per annum.
The decision to reorganise the operations of SCS was taken after considerable deliberation. The market for the consulting element of SCS had deteriorated over time and worsened considerably in the first half of this year, making a major restructuring essential. I would like to thank all the staff of SCS who have left or will be leaving the Group for their considerable contribution, in some cases made over many years. For those SCS staff who are transferring to MASS and SEA there are opportunities to develop their lines of business in cooperation with colleagues in MASS and SEA working in related activities. From 1 November 2016 the Group will no longer report SCS's results separately.
Key financials
The Group's revenue totalled GBP50.0m (2015: GBP49.7m), including GBP18.0m from SEA, GBP14.5m from MASS, GBP7.9m from MCL, GBP5.0m from SCS and an initial four month contribution of GBP4.6m from EID for the period from 28 June to 31 October 2016.
For the six months ended 31 October 2016, the Group's adjusted operating profit was GBP3.9m (2015: GBP3.5m). This included contributions from MASS of GBP2.4m (2015: GBP2.4m), SEA of GBP1.0m (2015: GBP1.8m), MCL of GBP0.8m (2015: GBPNil) and an initial GBP1.4m from EID. SCS reported a loss of nearly GBP0.5m (2015: profit of GBP0.3m). Central costs were GBP1.2m (2015: GBP1.0m).
Cohort's operating loss, after recognising the reorganisation costs of SCS as an exceptional item (GBP2.2m) and amortisation of intangible assets (GBP5.0m), was GBP3.2m (2015: profit of GBP0.1m).
Adjusted earnings per share for the six months ended 31 October 2016 decreased by 16% to 5.99 pence (2015: 7.11 pence) reflecting the greater proportion of reported Group earnings attributable to the minority in the partially owned EID and MCL businesses. The tax rate in respect of the adjusted operating profit was 18.0% (2015: 18.0%). Basic loss per share was 4.50 pence (2015: earnings per share of 2.77 pence).
As signalled in June of this year when we reported our results for the year ended 30 April 2016, there was an operating cash outflow of GBP3.1m in the first half of the year (2015: outflow of GBP4.9m) reflecting the unwinding of the favourable year end working capital position. This operating cash outflow, along with dividend payments (GBP1.6m), tax payments (GBP1.2m), capital expenditure (GBP0.5m) and the completion of the acquisition of 57% of EID (GBP4.0m), accounts for the lower closing half year net funds of GBP9.9m (30 April 2016: GBP19.8m).
Our order intake for the first half was GBP37.1m (2015: GBP55.7m), excluding the acquired order book of EID (GBP23.1m) and foreign exchange movements, resulting in a closing order book of GBP129.6m (30 April 2016: GBP116.0m). The order intake in the first half was lower than last year, with a number of contracts that we had expected to be renewed slipping into the second half. Some of these renewals are included in nearly GBP16m of orders we have received since the period end. These include the nine year, GBP7m, DTES support contract for Transport for London (TfL) announced on 9 November, an order to extend elements of the Common External Communications System to the Royal Navy's Trafalgar-class submarines and a number of longer term support contracts. These all provide greater long-term visibility of future revenue and further underpin our performance in the second half of this year.
EID
In the four months since our acquisition of just under 57% of EID it has made a positive contribution of GBP1.4m to the Group's adjusted operating profit on revenue of GBP4.6m.
EID's strong performance resulted from long-term projects for various European navies and continued delivery of tactical communications systems for export customers including Egypt and Australia. Since acquisition, EID has secured nearly GBP5m of orders including GBP2.6m from its domestic customer, Portugal. This good order intake, along with the acquired order book of GBP23.1m, underpins GBP10.4m of EID's second half revenue and gives us confidence that it will have a strong second half.
MASS
MASS's adjusted operating profit of GBP2.4m (2015: GBP2.4m) was in line with last year despite slightly lower revenue of GBP14.5m (2015: GBP15.1m). The improved margin resulted from a better mix of revenue, with electronic warfare countermeasures and software development work replacing education and other relatively low margin revenue.
MASS continues to grow its cyber offering with revenue in this market increasing to GBP3.4m (2015: GBP2.4m). MASS continues to be a key supplier to the UK MOD in a number of important strategic areas and this was recently underlined by the extension of its contract to support the Sentry air platform for a further nine years, with a value of GBP12m.
Of MASS's closing order book of GBP43.0m, GBP11.7m is deliverable in the second half of the year. This level of underpinning, recent order progress and other opportunities give us confidence that MASS will have a stronger second half.
MCL
MCL made a much stronger contribution of GBP0.8m (2015: GBPNil) on higher revenue of GBP7.9m (2015: GBP3.2m). This improved performance was a result of the delivery of Tactical Hearing Protection Systems to the British Army, which commenced in the second half of last year. A further order has now been secured to extend deliveries to the end of this financial year and we expect follow-on orders to continue for some time thereafter.
MCL has continued to be a key supplier to the UK's Special Forces and related agencies and has seen increased activity from these customers. MCL's strong position in this market was reinforced by the securing of a contract to design, develop, build and support an Airborne Tactical Communications System with an eventual value expected to be over GBP7m.
As in the past, MCL's performance is expected to be weighted towards the second half of the financial year. Its closing order book of GBP4.5m, almost all of which is deliverable this financial year, along with a pipeline of opportunities that includes further hearing protection contracts, gives us confidence that MCL will deliver a stronger second half.
SCS
SCS's adjusted operating loss of GBP0.5m (2015: profit of GBP0.3m) on revenue of GBP5.0m (2015: GBP9.1m) reflected the challenging market conditions, particularly since the start of the 2016 calendar year, and the loss of one of its air system contracts in a competitive renewal process.
As a result of these market conditions, the Cohort Board took the decision (announced 11 October 2016) to reorganise the SCS business, moving its profitable operating divisions to MASS and SEA and closing its central office function. This process was completed in November (with a number of smaller transition tasks continuing until June next year). The cost of this reorganisation is estimated at GBP2.2m including redundancy and transition costs, asset write-downs and the provision for an onerous lease on SCS's operating site at Theale. In the case of the Theale office, we will look to mitigate this cost by increasing the use of the site by other Cohort companies as well as investigating other options, including sub-letting.
SEA
SEA's adjusted operating profit of GBP1.0m (2015: GBP1.8m) was on lower revenue of GBP18.0m (2015: GBP22.3m). The net margin of 5.7% is lower than the first half of last year (7.4%). This was a reflection of reduced activity in its Research division and the operational gearing effect of lower revenue, mostly due to the timing of deliveries of larger maritime projects.
SEA has experienced a hiatus in its research activity, most of which is for the MOD's research organisation, DSTL. Following completion in March this year of a four year research programme, Delivering Dismounted Effect, the expected follow-on programme has been delayed by the customer until the end of our current financial year. As a result we have seen a sharp fall-off in activity levels that will persist into the second half.
SEA's closing order book of GBP45.8m includes GBP19.5m of revenue to be delivered in the second half, a significant proportion of which is higher margin maritime systems work for export customers. SEA's pipeline of opportunities, and the recently announced renewal and extension of its DTES solution for TfL, gives us confidence that it will have a stronger second half. Challenges remain in the offshore energy market where the low oil price continues to put pressure on customer spending although SEA's activity in this area is continuing to generate profitable revenue.
Overall, we now expect SEA's performance for the full year to be similar to last year's.
Dividend
The Board is proposing an increase of 16% in the interim dividend to 2.20 pence per share (2015: 1.90 pence). This increase reflects the Board's confidence in the outlook for Cohort and its commitment to a progressive dividend policy. The dividend is payable on 1 March 2017 to shareholders on the register at 3 February 2017.
Outlook
The Group's closing order book of GBP129.6m (30 April 2016: GBP116.0m) and recent order wins provide a good level of underpinning to the second half of the year. We therefore expect, as seen in the last few years, a much stronger performance in the second half, which will include the benefit of a full contribution from EID and the elimination of SCS's losses. As already mentioned, we expect to acquire the remainder of MCL and increase our holding in EID to 80% in the next few months.
Our initial view on the impact of Brexit, which we communicated in late June 2016, remains largely unchanged from that time. We are not exposed to significant amounts of EU revenue through our UK operations; this was a total of GBP0.9m in the first half of this year and GBP1.0m in the year ended 30 April 2016. The weakening of Sterling has resulted in an immediate enhancement to the reported value of our Euro operating profit from EID, an improvement of around GBP0.1m compared with our assumptions at the time of the acquisition.
In the longer term, sustained weakness in Sterling would continue to be of net benefit, the enhancement to our export competitiveness outweighing any impact from increased input costs.
In our key markets, we continue to see a focus by the UK MOD on areas in which we have strong and relevant capabilities, in particular submarines, Special Forces, cyber defence and secure communications. Our new subsidiary, EID, has made a very creditable start to life in the Cohort Group. It has a good record of export success and has continued to secure orders from customers around the globe.
Overall, Cohort's order book and pipeline, market positions, capabilities and strong funding position provide confidence that we will make further progress in 2016/17, and we maintain our expectations for the full year.
Nick Prest CBE
Chairman
Consolidated income statement
For the six months ended 31 October 2016
Six Six
months months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ----- ----------- ----------- ---------
Revenue 2 50,039 49,667 112,577
Cost of sales (33,673) (35,049) (79,061)
-------------------------------------- ----- ----------- ----------- ---------
Gross profit 16,366 14,618 33,516
Administrative expenses (19,607) (14,569) (28,270)
-------------------------------------- ----- ----------- ----------- ---------
Operating (loss)/profit 2 (3,241) 49 5,246
-------------------------------------- ----- ----------- ----------- ---------
Operating profit comprises:
Adjusted operating profit 2 3,872 3,476 11,902
Credit on marking forward exchange
contracts to market value at period
end (included in cost of sales) 163 - 7
Foreign exchange gain on marking
cash held (in Euros) for purchase
of EID to market value at the period
end (included in administrative
expenses) 15 - 537
Amortisation of other intangible
assets (included in administrative
expenses) (5,012) (3,246) (6,379)
Exceptional items:
Cost of acquiring EID (included
in administrative expenses) 7 (79) (181) (821)
Reorganisation of SCS (included
in administrative expenses) (2,200) - -
Operating (loss)/profit (3,241) 49 5,246
Finance income 37 36 68
Finance costs (44) - (4)
-------------------------------------- ----- ----------- ----------- ---------
(Loss)/profit before tax (3,248) 85 5,310
Income tax credit/(expense) 3 586 (15) 54
-------------------------------------- ----- ----------- ----------- ---------
(Loss)/profit for the period (2,662) 70 5,364
-------------------------------------- ----- ----------- ----------- ---------
Attributable to:
Equity holders of the parent (1,860) 1,126 7,775
Non-controlling interests (802) (1,056) (2,411)
-------------------------------------- ----- ----------- ----------- ---------
(2,662) 70 5,364
-------------------------------------- ----- ----------- ----------- ---------
(Loss)/earnings per share Pence Pence Pence
-------------------------- ------ ----- -----
Basic 4(4.50) 2.77 19.14
Diluted 4(4.50) 2.71 18.78
-------------------------- ------ ----- -----
All profit for the period is derived from continuing operations.
Consolidated statement of comprehensive income
For the six months ended 31 October 2016
Six Six
months months Year
ended ended ended
31 31 30
October October April
2016 2015 2016
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
------------------------------------- ------ ---------- ---------- --------
(Loss)/profit for the period (2,662) 70 5,364
--------------------------------------------- ---------- ---------- --------
Foreign currency translation
differences on net assets of
EID 459 - -
Other comprehensive income for
the period, net of tax 459 - -
--------------------------------------------- ---------- ---------- --------
Total comprehensive (expense)/income
for the period (2,203) 70 5,364
--------------------------------------------- ---------- ---------- --------
Attributable to:
Equity shareholders of the parent (1,846) 1,126 7,775
Non-controlling interests (357) (1,056) (2,411)
--------------------------------------------- ---------- ---------- --------
(2,203) 70 5,364
-------------------------------------------- ---------- ---------- --------
Consolidated statement of changes in equity
For the six months ended 31 October 2016
Attributable to the equity
shareholders of the parent
---------------------- ---------------------------------------------------------------------- ------------ --------
Share Share Non-
Share premium Own option Other Retained controlling Total
capital account shares reserve reserves earnings Total interests equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 1 May 2015 4,096 29,657 (835) 403 (12,500) 33,805 54,626 8,221 62,847
Profit for the period - - - - - 1,126 1,126 (1,056) 70
Transactions with
owners of Group
and non-controlling
interests recognised
directly in equity:
Equity dividend - - - - - (1,387) (1,387) - (1,387)
Vesting of Restricted
Shares - - - - - 76 76 - 76
Own shares purchased - - (631) - - - (631) - (631)
Own shares sold - - 554 - - - 554 - 554
Net loss on selling
own shares - - 509 - - (509) - - -
Share-based payments - - - 100 - - 100 - 100
Change in option
for acquiring
non-controlling
interest in MCL - - - - 6,500 - 6,500 - 6,500
At 31 October 2015 4,096 29,657 (403) 503 (6,000) 33,111 60,964 7,165 68,129
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 1 May 2015 4,096 29,657 (835) 403 (12,500) 33,805 54,626 8,221 62,847
Profit for the year - - - - - 7,775 7,775 (2,411) 5,364
Transactions with
owners of Group
and non-controlling
interests, recognised
directly in equity:
Equity dividends - - - - - (2,158) (2,158) - (2,158)
Vesting of Restricted
Shares - - - - - 76 76 - 76
Own shares purchased - - (4,162) - - - (4,162) - (4,162)
Own shares sold - - 914 - - - 914 - 914
Net loss on selling
own shares - - 1,348 - - (1,348) - - -
Share-based payments - - - 197 - - 197 - 197
Deferred tax
adjustment
in respect of
share-based
payments - - - 711 - - 711 - 711
Transfer of share
option reserve on
vesting of options - - - (244) - 244 - - -
Change in option
for acquiring
non-controlling
interest in MCL - - - - 7,000 - 7,000 - 7,000
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 30 April 2016 4,096 29,657 (2,735) 1,067 (5,500) 38,394 64,979 5,810 70,789
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 1 May 2016 4,096 29,657 (2,735) 1,067 (5,500) 38,394 64,979 5,810 70,789
Loss for the period - - - - - (1,860) (1,860) (802) (2,662)
Other comprehensive
income - - - - - 14 14 445 459
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Total comprehensive
expense for the
period - - - - - (1,846) (1,846) (357) (2,203)
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Transactions with
owners of Group
and non-controlling
interests recognised
directly in equity:
Equity dividend - - - - - (1,651) (1,651) - (1,651)
Vesting of Restricted
Shares - - - - - 110 110 - 110
Own shares purchased - - (109) - - - (109) - (109)
Own shares sold - - 335 - - - 335 - 335
Net loss on selling
own shares - - 667 - - (667) - - -
Share-based payments - - - 100 - - 100 - 100
Introduction of
non-controlling
interest on
acquisition
of EID - - - - - - - 5,176 5,176 ---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ -------- At 31 October 2016 4,096 29,657 (1,842) 1,167 (5,500) 34,340 61,918 10,629 72,547 ---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Consolidated statement of financial position
As at 31 October 2016
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
------------------------------------ ----- ---------- ---------- --------
Assets
Non-current assets
Goodwill 39,075 36,841 36,961
Other intangible assets 17,727 15,738 12,492
Property, plant and equipment 10,377 10,382 10,227
Deferred tax asset 1,054 104 818
------------------------------------ ----- ---------- ---------- --------
68,233 63,065 60,498
------------------------------------ ----- ---------- ---------- --------
Current assets
Inventories 6,105 682 2,036
Trade and other receivables 31,793 27,157 28,000
Derivative financial instruments 133 - -
Cash and cash equivalents 13,699 11,398 23,109
------------------------------------ ----- ---------- ---------- --------
51,730 39,237 53,145
------------------------------------ ----- ---------- ---------- --------
Total assets 119,963 102,302 113,643
------------------------------------ ----- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (31,259) (23,155) (30,223)
Current tax liabilities (407) (732) (570)
Derivative financial instruments - (38) (31)
Bank borrowings (3,782) (2) (3,297)
Provisions (1,778) (517) (499)
Other creditors 8 (5,500) - (5,500)
---------- --------
(42,726) (24,444) (40,120)
------------------------------------ ----- ---------- ---------- --------
Non-current liabilities
Deferred tax liability (4,111) (3,719) (2,727)
Bank borrowings (6) (10) (7)
Provisions (573) - -
Other creditors 8 - (6,000) -
(4,690) (9,729) (2,734)
------------------------------------ ----- ---------- ---------- --------
Total liabilities (47,416) (34,173) (42,854)
------------------------------------ ----- ---------- ---------- --------
Net assets 72,547 68,129 70,789
------------------------------------ ----- ---------- ---------- --------
Equity
Share capital 4,096 4,096 4,096
Share premium account 29,657 29,657 29,657
Own shares (1,842) (403) (2,735)
Share option reserve 1,167 503 1,067
Other reserve: option for acquiring
non-controlling interest in MCL 8 (5,500) (6,000) (5,500)
Retained earnings 34,340 33,111 38,394
------------------------------------ ----- ---------- ---------- --------
Total equity attributable to
the equity shareholders of the
parent 61,918 60,964 64,979
Non-controlling interests 10,629 7,165 5,810
------------------------------------ ----- ---------- ---------- --------
Total equity 72,547 68,129 70,789
------------------------------------ ----- ---------- ---------- --------
Consolidated cash flow statement
For the six months ended 31 October 2016
Six Six
months months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ----- ----------- ----------- ---------
Net cash (used in)/generated
from operating activities 6 (4,314) (5,621) 6,718
-------------------------------------- ----- ----------- ----------- ---------
Cash flow from investing activities
Interest received 33 38 68
Purchases of property, plant
and equipment (456) (584) (980)
Acquisition of EID, net of cash
acquired 7 (4,045) (670) (744)
Net cash used in investing activities (4,468) (1,216) (1,656)
-------------------------------------- ----- ----------- ----------- ---------
Cash flow from financing activities
Equity dividends paid (1,651) (1,387) (2,158)
Repayment of borrowings (1) (2) (3)
Loan drawdown for acquisition
of EID - - 3,302
Purchase of own shares (109) (631) (4,162)
Sale of own shares 335 554 914
Net cash used in financing activities (1,426) (1,466) (2,107)
-------------------------------------- ----- ----------- ----------- ---------
Net (decrease)/increase in cash
and cash equivalents (10,208) (8,303) 2,955
-------------------------------------- ----- ----------- ----------- ---------
Represented by:
Cash and cash equivalents brought
forward 23,109 19,701 19,701
Cash flow (10,208) (8,303) 2,955
Exchange 798 - 453
-------------------------------------- ----- ----------- ----------- ---------
Cash and cash equivalents carried
forward 13,699 11,398 23,109
-------------------------------------- ----- ----------- ----------- ---------
Notes to the interim report
For the six months ended 31 October 2016
1. Basis of preparation
The financial information contained within this Interim Report has been prepared applying the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the EU and expected to apply at 30 April 2017. As permitted, this Interim Report has been prepared in accordance with the AIM Rules for Companies and is not required to comply with IAS 34 'Interim Financial Reporting' to maintain compliance with IFRS. This Interim Report is presented in Sterling and all values are rounded to the nearest thousand pounds (GBP'000) except where otherwise indicated.
For management and reporting purposes, the Group, for the period just ended, operated through its five subsidiaries, EID, MASS, MCL, SCS and SEA. These subsidiaries are the basis on which the Company, Cohort plc, reports its primary segment information. From 1 November 2016, the Group will no longer report SCS's trading separately.
Going concern
The Company has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing this Interim Report.
In accordance with Section 434 of the Companies Act 2006, the unaudited results do not constitute statutory financial statements of the Company. The six months' results for both years are unaudited.
(A) Statutory accounts
The financial information set out above does not constitute the Group's statutory accounts for the year ended 30 April 2016. KPMG LLP has reported on these accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006.
(B) Statement of compliance
The accounting policies applied by the Group in its consolidated financial statements for the year ended 30 April 2016 are in accordance with IFRS as adopted by the European Union. The accounting policies have been applied consistently to all periods presented in the consolidated financial statements.
The Interim Report was approved by the Board and authorised for issue on 12 December 2016.
2. Segmental analysis of revenue and adjusted operating profit
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- ---------
Revenue
EID 4,630 - -
MASS 14,488 15,126 32,090
MCL 7,911 3,233 13,709
SCS 5,034 9,048 18,148
SEA 18,009 22,275 48,773
Inter-segment revenue (33) (15) (143)
--------------------------------------- ----------- ----------- ---------
50,039 49,667 112,577
--------------------------------------- ----------- ----------- ---------
Operating profit comprises:
Trading profit/(loss) of:
EID 1,406 - -
MASS 2,400 2,372 5,956
MCL 753 19 1,404
SCS (455) 303 1,250
SEA 1,020 1,765 5,442
Central costs (1,252) (983) (2,150)
--------------------------------------- ----------- ----------- ---------
Adjusted operating profit 3,872 3,476 11,902
Credit on marking forward exchange
contracts to market
value at period end 178 - 7
Foreign exchange gain on marking
cash held (in Euros) for the purchase
of EID to market value at period
end - - 537
Amortisation of intangible assets (5,012) (3,246) (6,379)
Exceptional items (2,279) (181) (821)
--------------------------------------- ----------- ----------- ---------
Operating (loss)/profit (3,241) 49 5,246
--------------------------------------- ----------- ----------- ---------
All revenue and adjusted operating profit is in respect of continuing operations. SCS revenue and adjusted operating profit will be reported as part of MASS and SEA as from 1 November 2016.
The operating profit as reported under IFRS is reconciled to the adjusted operating profit as reported above by the exclusion of marking forward exchange contracts to market value at the period end, other exchange gains and losses, exceptional items and the amortisation of other intangible assets.
The adjusted operating profit is presented in addition to the operating profit to provide the trading performance of the Group as derived from its constituent elements on a comparable basis from period to period.
The Group's adjusted operating profit includes the cost of share options of GBP100,000 for the six months ended 31 October 2016 (six months ended 31 October 2015: GBP100,000; year ended 30 April 2016: GBP197,000) and is applied to each reporting segment in proportion to the number of employees in the Group's various share option schemes.
The chief operating and decision-maker as defined by IFRS 8 has been identified as the Board.
Revenue analysis by sector and type of work
Six months Six months
ended ended Year ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
------------------------------ ------------- ------------- ------------
GBPm % GBPm % GBPm %
------------------------------ ------- ---- ------- ---- ------- ---
By sector
UK defence and security 32.2 64 33.8 68 83.2 74
Portugal defence and security 1.7 3 - - - -
Export defence customers 10.6 22 10.2 21 19.8 17
------------------------------ ------- ---- ------- ---- ------- ---
Defence and security revenue 44.5 89 44.0 89 103.0 91
------------------------------ ------- ---- ------- ---- ------- ---
Transport 2.3 1.7 3.5
Offshore energy 1.2 2.2 3.0
Other commercial 2.0 1.8 3.1
------------------------------ ------- ---- ------- ---- ------- ---
Non-defence revenue 5.5 11 5.7 11 9.6 9
------------------------------ ------- ---- ------- ---- ------- ---
Total revenue 50.0 100 49.7 100 112.6 100
------------------------------ ------- ---- ------- ---- ------- ---
By capability
Defence products 26.3 53 17.6 35 47.0 42
Operational support 4.5 9 5.7 12 11.3 10
Training 4.3 9 5.5 11 12.0 11
Secure networks 4.2 8 3.8 8 10.7 9
Provision of specialist
expertise 3.8 8 6.7 13 8.9 8
Application software 3.7 7 2.9 6 7.9 7
Studies and analysis 2.6 5 4.5 9 6.1 5
Applied research 0.6 1 3.0 6 8.7 8
------------------------------ ------- ---- ------- ---- ------- ---
Total revenue 50.0 100 49.7 100 112.6 100
------------------------------ ------- ---- ------- ---- ------- ---
3. Income tax (credit)/expense
The income tax (credit)/expense comprises:
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ----------- ---------
Current tax: in respect of this period 407 681 1,935
Current tax: in respect of prior
periods - (40) (368)
--------------------------------------- ----------- ----------- ---------
407 641 1,567
Deferred taxation: in respect of
this period (993) (626) (1,621)
--------------------------------------- ----------- ----------- ---------
(586) 15 (54)
--------------------------------------- ----------- ----------- ---------
The income tax expense for the six months ended 31 October 2016 is based upon the anticipated charge for the full year ending 30 April 2017.
4. Earnings per share
The earnings per share are calculated as follows:
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------ ----------- ----------- ---------
Earnings
Basic and diluted (loss)/earnings (1,810) 1,126 7,775
Credit on marking forward exchange
contracts to market at period end
(net of income tax) (130) - (6)
Exceptional items (net of income
tax):
Reorganisation of SCS (net of income
tax) 1,840 - -
Cost on acquisition of EID 79 181 821
Foreign exchange gain on marking
cash held (in Euros) for the acquisition
of EID to market value at period
end (net of income tax) (12) - (429)
Group's share of amortisation of
intangible assets (net of income
tax) 2,443 1,581 2,879
------------------------------------------ ----------- ----------- ---------
Adjusted basic and diluted earnings 2,410 2,888 11,040
------------------------------------------ ----------- ----------- ---------
Number Number Number
------------------------------------- ---------- ---------- ----------
Weighted average number of shares For the purposes of basic earnings per share 40,260,946 40,659,768 40,622,496 Share options 601,956 878,989 767,501 ------------------------------------- ---------- ---------- ---------- For the purposes of diluted earnings per share 40,862,902 41,538,757 41,389,997 ------------------------------------- ---------- ---------- ----------
The weighted average number of ordinary shares for the six months ended 31 October 2016 excludes 504,844 ordinary shares held by the Cohort plc Employee Benefit Trust (which do not receive a dividend) for the purposes of calculating earnings per share (six months ended 31 October 2015: 118,311; year ended 30 April 2016: 755,743).
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
pence pence pence
---------------------------- ----------- ----------- ---------
(Loss)/earnings per share
Basic (4.50) 2.77 19.14
Diluted (4.50) 2.71 18.78
---------------------------- ----------- ----------- ---------
Adjusted earnings per share
Basic 5.99 7.11 27.18
Diluted 5.90 6.95 26.67
---------------------------- ----------- ----------- ---------
5. Dividends
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
pence pence pence
---------------------------------------- ----------- ----------- ---------
Dividends per share proposed in respect
of the period
Interim 2.20 1.90 1.90
Final - - 4.10
---------------------------------------- ----------- ----------- ---------
The interim dividend for the six months ended 31 October 2016 is 2.20 pence (six months ended 31 October 2015: 1.90 pence) per ordinary share. This dividend will be payable on 1 March 2017 to shareholders on the register at 3 February 2017.
The final dividend charged to the income statement for the year ended 30 April 2016 was 5.30 pence per ordinary share comprising 1.90 pence of interim dividend for the six months ended 31 October 2015 and 3.40 pence of final dividend for the year ended 30 April 2015.
6. Net cash (used in)/generated from operating activities
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2016 2015 2016
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ----------- ---------
(Loss)/profit for the period (2,662) 70 5,364
Adjustments for:
Tax (credit)/expense (586) 15 (54)
Depreciation of property, plant and
equipment 627 539 1,090
Amortisation of intangible assets 5,012 3,246 6,379
Net finance costs/(income) 7 (36) (64)
Share-based payment 100 100 197
Derivative financial instruments
and foreign exchange movements (178) - (7)
Decrease in provisions (292) (41) (59)
----------------------------------------- ----------- ----------- ---------
Operating cash flow before movements
in working capital 2,028 3,893 12,846
----------------------------------------- ----------- ----------- ---------
(Increase)/decrease in inventories (2,356) 396 (958)
Decrease/(increase) in receivables 2,910 (7,629) (8,585)
(Decrease)/increase in payables (5,652) (1,534) 5,203
----------------------------------------- ----------- ----------- =========
(5,098) (8,767) (4,340)
----------------------------------------- ----------- ----------- ---------
Cash (used in)/generated from operations (3,070) (4,874) 8,506
Tax paid (1,200) (745) (1,784)
Interest paid (44) (2) (4)
----------------------------------------- ----------- ----------- =========
Net cash (used in)/generated from
operating activities (4,314) (5,621) 6,718
----------------------------------------- ----------- ----------- ---------
7. Acquisition of Empresa de Investigação e Desenvolvimento de Electrónica S.A. (EID)
As announced on 28 June 2016, Cohort plc acquired 56.89% of EID for a total consideration of GBP8.9m (EUR10.3m). The Group has recognised 100% of EID's result and net assets from that date as it has effective control.
The acquisition accounting is as follows:
Book Fair
valued valued
GBP'000 GBP'000
------------------------------------------- --------- ----------
Recognised amounts of identifiable assets
acquired and liabilities assumed:
Property, plant and equipment 295 295
Other intangible assets - 10,247
Inventory 1,874 1,874
Trade and other receivables 6,120 6,520
Trade and other payables (7,822) (8,489)
Deferred tax 92 (2,149)
Net cash 3,708 3,708
------------------------------------------- --------- ----------
4,267 12,006
------------------------------------------- --------- ----------
56.89% acquired 6,830
Goodwill 2,114
------------------------------------------- --------- ----------
Total consideration 8,944
------------------------------------------- --------- ----------
Satisfied by:
Cash 8,497
Deferred consideration (paid 23 November
2016) 447
------------------------------------------- --------- ----------
Total consideration transferred 8,944
------------------------------------------- --------- ----------
Net cash outflow arising on acquisition:
Cash consideration paid in the period
ended 31 October 2016 7,753
Cash consideration paid in the year ended
30 April 2016 744
Less: cash and cash equivalents acquired (3,708)
------------------------------------------- --------- ----------
4,789
------------------------------------------- --------- ----------
Actual cash outflow for the six months ended 31 October 2016 was GBP4,045,000.
The exchange rate used on the acquisition of EID in respect of net assets, goodwill and consideration was GBP1:EUR1.2073.
Other intangible assets of GBP10.2m and their estimated useful lives are analysed as follows:
Other
intangible Estimated
assets life
GBP'000 Years
-------------------- ------------ ----------
Contracts acquired 10,247 9
-------------------- ------------ ----------
A deferred tax liability of GBP2.3m in respect of the other intangible assets balance above was established and is disclosed as part of the fair value deferred tax liability.
The goodwill of GBP2.1m arising from the acquisition represents the customer contacts, supplier relationships and know-how to which no certain value can be ascribed. None of the goodwill is expected to be deductible for income tax purposes.
The acquisition costs of GBP0.9m in respect of EID were charged as an exceptional item of GBP0.8m in the income statement for the year ended 30 April 2016 and GBP0.1m for the six months ended 31 October 2016.
EID contributed GBP4.6m of revenue and GBP1.4m of adjusted operating profit for the period from 28 June 2016 to 31 October 2016.
Cohort plc has agreed with the Portuguese Government, the holder of 43.09% of EID to acquire a further 23.09% on the same terms as the original sale and purchase agreement, leaving the Group with 79.98% of EID. On completion of the second part of the acquisition of EID, we will enter into a shareholders' agreement giving the Portuguese Government certain rights, typical of a minority shareholder.
8. Acquisition of Marlborough Communications Ltd (MCL)
The Group acquired 50% plus one share of Marlborough Communications Ltd (MCL) on 9 July 2014.
The Group has recognised 100% of MCL's results and net assets as it has effective control.
In accordance with IFRS 3, the Group has ascribed a value to the option to acquire the non-controlling interest of MCL. This value has been estimated at GBP5.5m and the option is shown as a current liability and as the non-controlling interest has a right to dividends, in the other reserves as "option for acquiring the non-controlling interest in MCL".
The Group has agreed with the holders of the non-controlling interest of MCL to acquire their interest (49.999%), taking the Group holding in MCL to 100%.
This agreement is in line with the original sale and purchase agreement and the estimated cost of acquiring this non-controlling interest is GBP5.5m, unchanged from 30 April 2016 (31 October 2015: GBP6.0m due greater than one year). In addition, and as set out in the original sale and purchase agreement, the non-controlling interest will receive its share of the cash held in MCL as at 30 April 2017 which is in excess of MCL's operational requirements.
Independent review report to Cohort plc
for the six months ended 31 October 2016
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 October 2016 which comprises the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of financial position, the Consolidated statement of changes in equity, the Consolidated cash flow statement and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.
The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 October 2016 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the AIM Rules.
Andrew Campbell-Orde for and on behalf of KPMG LLP Chartered Accountants
Arlington Business Park
Theale
Reading RG7 4SD
12 December 2016
Shareholder information, financial calendar and advisers
Advisers
Nominated adviser and broker
Investec
2 Gresham Street
London EC2V 7QP
Auditor
KPMG LLP
Chartered Accountants
Arlington Business Park
Theale
Reading RG7 4SD
Tax advisers
Deloitte LLP
Abbots House
Abbey Street
Reading RG1 3BD
Legal advisers
Shoosmiths LLP
Apex Plaza
Forbury Road
Reading RG1 1SH
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Public and investor relations
MHP Communications
6 Agar Street
London WC2N 4HN
Bankers
Barclays
Level 27, 1 Churchill Place
London E14 5HP
Lloyds Bank
The Atrium
Davidson House
Forbury Square
Reading RG1 3EU
RBS
Abbey Gardens
4 Abbey Street
Reading RG1 3BA
Shareholders' enquiries
If you have an enquiry about the Company's business, or about something affecting you as a shareholder (other than queries which are dealt with by the registrars), you should contact the Company Secretary by letter to the Company's registered office or by email at info@cohortplc.com.
Share register
Capita Asset Services maintains the register of members of the Company.
If you have any questions about your personal holding of the Company's shares, please contact:
Capita Asset Services
Shareholder Solutions
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300 (calls are charged at standard geographic rate and will vary by provider). (From outside the UK: +44 371 664 0300, calls will be charged at the applicable international rate.) Lines are open 9.00am to 5.30pm, Monday to Friday, excluding public holidays in England and Wales.
Email: shareholderenquiries@capita.co.uk
If you change your name or address or if details on the envelope enclosing this report, including your postcode, are incorrect or incomplete, please notify the registrars in writing.
Daily share price listings
-- The Financial Times - AIM, Aerospace and Defence -- The Times - Engineering -- Daily Telegraph - AIM section -- London Evening Standard - AIM section
Financial calendar
Annual General Meeting
7 September 2017
Final dividend payable
September 2017
Expected announcements of results for the year ending 30 April 2017
Preliminary full-year announcement
June 2017
Half-year announcement
December 2017
Registered office
Cohort plc
2 Waterside Drive
Arlington Business Park
Theale
Reading RG7 4SW
Registered company number of Cohort plc
05684823
Cohort plc is a company registered
in England and Wales.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BDBDDRGBBGLB
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