Cohort PLC Full Year Trading Update (5806A)

TIDMCHRT

RNS Number : 5806A

Cohort PLC

25 May 2023

 
 One Waterside Drive 
  Arlington Business Park 
  Reading 
  Berks 
  RG7 4SW 
 
 
  25 May 2023 
 

COHORT PLC

("Cohort" or "the Group")

Full Year Trading Update

Cohort, the independent technology group, today announces an unaudited trading update for its financial year ended 30 April 2023.

Summary

-- Trading performance for the year ended 30 April 2023 is slightly ahead of expectations on higher revenue.

-- Strong net funds of c.GBP15m, ahead of expectations (30 April 2022: GBP11.0m; 31 October 2022: net debt GBP0.6m).

   --      Strong order intake of c.GBP218m (2022: GBP186.7m). 
   --      Closing order book of over GBP325m (30 April 2022: GBP291.0m) 

-- Order book underpins c.GBP145m (84%) of current market revenue expectations for the year ended 30 April 2024 (2023: GBP113m, 69%).

The Group also announces today that it will be changing its segmental reporting practice. Future financial reports and announcements will cover two new segments:

   --      Communications and Intelligence , comprising the businesses EID, MASS and MCL, and; 
   --      Sensors and Effectors , comprising Chess Dynamics, ELAC Sonar and SEA. 

Further details, including a presentation of historic results for the new segments, are provided below. The first application of this change will be for results for the year ended 30 April 2023, including this Full Year Trading Update.

FY23 year-end update

As we signalled last year, the Group has returned to growth, and we expect to deliver a record trading profit performance for the year ended 30 April 2023. The Group has seen growth in both new reporting segments.

In Communications and Intelligence, strong demand from the UK MOD has offset a continuing weak performance in Portugal where we have seen further order slippage. Weaker performance at EID, accounted for the slight deterioration in the net margin percentage of this segment, when compared with last year.

The Sensors and Effectors segment saw strong growth across all its constituent businesses. This included increased work at ELAC Sonar on the Italian Submarine programme, which is trading at a low margin whilst the programme makes its way through its design phase. As expected, Chess improved its performance despite closing out a small number of project issues and we expect this improvement to continue into the coming financial year.

The closing net funds position was much stronger than we expected and arose from timing of working capital flows in Communications and Intelligence and the improved cash performance of the Chess business within Sensors and Effectors.

The order intake is 1.2x the annual revenue (2022: 1.3x) and the order book of the Group continues to grow and lengthen with deliveries out to 2032. The order intake performance was over 15% higher than last year.

The year end order book underpins c.GBP145m (84%) of the current consensus market revenue expectations for 2024, an improvement on the year just finished. Since the year end, we have secured further orders including an order for GBP26m (announced 9 May 2023), further improving our visibility for the coming financial year.

Outlook for FY24

The on-going conflict in Ukraine and the tensions in the South China Sea and around Taiwan have provided drivers for increased investment in defence, both in NATO and further afield. We continue to see demand for our products and services from our domestic customers, especially the UK, and overseas.

In Sensors and Effectors, we expect growth in this coming year, driven by continued performance improvement at Chess and increased delivery of systems for UK and export naval customers. We expect the net margin percentage of this segment to improve in the coming year.

In Communications and Intelligence, we expect certain long-delayed communication system orders for the Portuguese Navy to be secured which should enable EID to improve its performance materially. Elsewhere in this segment, we expect the high level of UK MOD sales we have seen in the current financial year to drop back to a more normal historical level. Overall, we expect the Communications and Intelligence sector to trade in line with 2022/23.

We maintain our expectations for the coming financial year.

Notice of FY23 results

It is the Group's intention to issue its preliminary announcement for the year ended 30 April 2023 in late July 2023.

Andrew Thomis, Chief Executive of Cohort, said:

"Cohort's performance was slightly above our expectations for the year. Strong order intake, record closing order book and strong closing net funds provided a good start to the new financial year, and we expect to continue our organic growth in 2023/24 and beyond."

Segmental reporting re-presentation

The Board believes that the revised segmental reporting, which amalgamates the existing six business units into two reporting segments, will provide a clearer understanding of the underlying performance of the Group, as well as a simplified reporting structure. These new segments will provide sufficient scope for expansion as the Group continues to grow, both organically and through acquisition, whilst ensuring the business units can continue to operate as standalone entities, retaining their agility and flexibility.

The two new reporting segments are:

   --      Communications and Intelligence , comprising EID, MASS and MCL, and; 
   --      Sensors and Effectors , comprising Chess, ELAC and SEA 

These segments represent the Group's core specialisms and the business units have been grouped accordingly to reflect their complementary technologies and products.

Below is the historical financial information for the five years ended 30 April 2022 restated on the basis of this new segmental reporting.

 
                                            2022      2021     2020     2019     2018 
---------------------------------------  -------  --------  -------  -------  ------- 
Headline results (GBP'000) 
Revenue                                  137,765   143,308  131,059  121,182  111,798 
                                         -------  --------  -------  -------  ------- 
 
  *    Communications and Intelligence    68,369    78,419   74,199   72,181   74,018 
 
        *    EID                           8,219    20,952   18,020   11,530   19,084 
 
        *    MASS                         38,405    39,487   41,115   38,936   37,553 
 
        *    MCL                          21,745    17,980   15,064   21,715   17,381 
 
 
  *    Sensors and Effectors              69,396    64,889   56,860   49,001   37,780 
 
        *    Chess                        16,905    28,641   25,155   10,674        - 
 
        *    ELAC                         21,518     8,290        -        -        - 
 
        *    SEA                          30,973    27,958   31,705   38,327   37,780 
                                         -------  --------  -------  -------  ------- 
 
Adjusted operating profit                 15,525    18,609   18,223   16,164   15,602 
                                         -------  --------  -------  -------  ------- 
 
  *    Communications and Intelligence    12,253    15,647   13,682   11,814   13,862 
 
        *    EID                             860     4,834    3,108    1,357    4,677 
 
        *    MASS                          9,138     8,742    8,914    8,175    7,113 
 
        *    MCL                           2,255     2,071    1,660    2,282    2,072 
 
 
  *    Sensors and Effectors               7,469     6,544    7,455    7,174    4,433 
 
        *    Chess                           314     3,018    3,923    1,682        - 
 
        *    ELAC                          3,770     1,173        -        -        - 
 
        *    SEA                           3,385     2,353    3,532    5,492    4,433 
 
 
  *    Corporate                         (4,197)   (3,582)  (2,914)  (2,824)  (2,693) 
                                         -------  --------  -------  -------  ------- 
 
Operating profit                          11,090     7,808   10,731    5,944    9,960 
                                         -------  --------  -------  -------  ------- 
 
  *    Communications and Intelligence    12,310    15,978   12,401    8,375    9,785 
 
        *    EID                             644     4,597    2,292      367    3,115 
 
        *    MASS                          9,400     9,004    8,596    8,209    7,113 
 
        *    MCL                           2,266     2,377    1,513    (201)    (443) 
 
 
  *    Sensors and Effectors               2,395   (4,519)    1,650    1,302    2,918 
 
        *    Chess                       (3,130)   (3,863)  (2,423)  (3,129)        - 
 
        *    ELAC                            496   (2,449)        -        -        - 
 
        *    SEA                           5,029     1,793    4,073    4,431    2,918 
 
 
  *    Corporate                         (3,615)   (3,651)  (3,320)  (3,733)  (2,743) 
                                         -------  --------  -------  -------  ------- 
 
Amortisation of intangibles              (6,865)  (10,103)  (7,354)  (9,514)  (5,312) 
                                         -------  --------  -------  -------  ------- 
 
  *    Communications and Intelligence     (216)     (237)    (816)  (3,420)  (3,992) 
 
        *    EID                           (216)     (237)    (816)    (990)  (1,562) 
                                               -         -        -        -        - 
        *    MASS 
 
        *    MCL                               -         -        -  (2,430)  (2,430) 
 
 
  *    Sensors and Effectors             (6,649)   (9,866)  (6,538)  (6,094)  (1,320) 
 
        *    Chess                       (3,288)   (6,319)  (6,538)  (4,870)        - 
 
        *    ELAC                        (3,274)   (3,547)        -        -        - 
 
        *    SEA                            (87)         -        -  (1,224)  (1,320) 

                                         -------  --------  -------  -------  ------- 
 

ENDS

For further information please contact:

 
 Cohort plc                              0118 909 0390 
 Andy Thomis, Chief Executive 
 Simon Walther, Finance Director 
 Raquel McGrath, Company Secretary 
 
 Investec Bank Plc (NOMAD and Broker)    020 7597 5970 
 Carlton Nelson, Christopher Baird 
 
 MHP                                     020 3128 8276 
 Reg Hoare, Ollie Hoare, Hugo Harris     [e-mail] 
 

NOTES TO EDITORS

Cohort plc ( www.cohortplc.com ) is the parent company of six innovative, agile and responsive businesses based in the UK, Germany and Portugal, providing a wide range of services and products for domestic and export customers in defence and related markets.

Cohort (AIM: CHRT) was admitted to London's Alternative Investment Market in March 2006. It has headquarters in Reading, Berkshire and employs in total over 1,000 core staff there and at its other operating company sites across the UK, Germany, and Portugal.

The group is split into two segments - Communications and Intelligence, and Sensors and Effectors:

Communications and Intelligence

-- EID designs and manufactures advanced communications systems for naval and military customers. Cohort

acquired a majority stake in June 2016.   www.eid.pt 

-- MASS is a specialist data technology company serving the defence and security markets, focused on electronic warfare, digital services, and training support. Acquired by Cohort in August 2006. www.mass.co.uk

-- MCL designs, sources, and supports advanced electronic and surveillance technology for UK end users including the MOD and other government agencies. MCL has been part of the Group since July 2014. www.marlboroughcomms.com

Sensors and Effectors

-- Chess Dynamics offers surveillance, tracking and fire-control systems to the defence and security markets. Chess has been part of the Group since December 2018. www.chess-dynamics.com

-- ELAC SONAR supplies advanced sonar systems and underwater communications to global customers in the

naval marketplace.  Acquired by Cohort in December 2020.   www.elac-sonar.de 

-- SEA delivers and supports technology-based products for the defence and transport markets alongside specialist research and training services. Acquired by Cohort in October 2007. www.sea.co.uk

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May 25, 2023 02:00 ET (06:00 GMT)