REG - Cohort PLC - Acquisition of EM Solutions

CohortAnnouncement

21/11/2024 07:00

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RNS Number : 1389N  Cohort PLC  21 November 2024

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

For immediate release

21 November 2024

COHORT PLC

("Cohort", "the Company" or "the Group")

AUD$144.0 million (c.£75.0 million) acquisition of EM Solutions

Compelling opportunity to access the fast growing naval Satellite
Communications ("SATCOM") market

Cohort plc (AIM: CHRT), the independent technology group, is pleased to
announce that it has entered into a conditional sale and purchase agreement to
acquire the entire issued share capital of EM Solutions Pty Ltd which holds
all of the issued share capital in EM Solutions (Europe) B.V. (together "EM
Solutions") from Electro Optic Systems Holdings Limited, an Australian public
company which is listed on the Australian Securities Exchange (ASX: EOS) (the
"Seller" or "EOS"), for an enterprise value of AUD$144.0 million (c.£75.0
million), subject to customary post-completion adjustments (the
"Acquisition").

Acquisition highlights

·      Proposed acquisition of EM Solutions, a leading Australia-based
developer and producer of high-end SATCOM terminals for global naval and
defence customers

·      Acquisition consideration is to be satisfied from Cohort's
existing cash resources and debt facility and a placing of new ordinary shares
(see separate announcement)

·      EM Solutions will operate as the seventh stand-alone business
within the Group, reporting through the Communications and Intelligence
Division

·      Completion of Acquisition expected by calendar year end

Acquisition rationale

·      Enhance and diversify the Group's proposition with a
complementary defence communication offering

·      Gain exposure to naval surface vessel SATCOM market which has
strong structural growth drivers

·      Further broaden the Group's naval systems offering

·      Accelerate EM Solutions' growth with enhanced position in UK,
NATO Europe, Asia and South America

·      Strengthen Cohort's presence in Australia, a key growing
strategic region for the Group

Financial highlights of the Acquisition and Placing

·      Materially accretive to adjusted EPS in first full financial year
of ownership (2025/26) and onwards

·      Tax adjusted Return on Invested Capital ("ROIC") is expected to
exceed WACC in the third full financial year post Completion (2027/28)

·      EM Solutions achieved revenues of AUD$43.1 million(1) and EBIT of
AUD$11.5 million in the year ended 31 December 2023

·      EM Solutions adds an order book of AUD$175.4 million (£91.4
million)(2), as at 30 September 2024, taking Group pro forma order book to
over £650 million

·      Following Completion, Cohort's pro forma net debt/EBITDA for the
financial year ending 30 April 2025 is expected to be less than 1.0x,
maintaining a strong balance sheet and liquidity

(1)EM Solutions CY23A financials normalised to remove the contribution of the
non-core Documentation services under the SEA1442 contract which generated
c.AUD$14.1 million in revenue in CY23A(2;) Assumed GBP/AUD of 1.92

Placing and Retail Offer (as separately announced)

·      Cohort separately today announces a fully underwritten
non-pre-emptive placing to institutional investors to raise gross proceeds of
£40 million (the "Placing"), the net proceeds of which will be used to
partially fund the Acquisition

·      Additional offer up to £1 million via PrimaryBid to facilitate
retail participation (the "Retail Offer") (together with the Placing the
"Fundraise")

Andy Thomis, Chief Executive of Cohort plc, commented:

"The proposed acquisition of EM Solutions in Australia is highly complementary
and is in line with our stated strategy to accelerate growth by making
targeted acquisitions in the UK and overseas. Australia is an increasingly
important strategic region, reflecting the increased security challenges in
the Indo Pacific, and the creation of the AUKUS alliance.

EM Solutions represents a compelling opportunity to access the fast growing
satellite communications market, further broadening the Group's strong
existing naval systems service offering, whilst bringing new customers and
enhancing our combined position in the UK, NATO Europe, Asia and South
America.

This is our largest acquisition to date, adding Cohort's seventh standalone
business and creating a materially larger Group. With the strong momentum
being reported by Cohort and EM Solutions, together with the substantial
combined orderbook, the Acquisition is expected to be materially enhancing to
adjusted EPS in the first full financial year (2025/26) and onwards.

We are looking forward to welcoming the EM Solutions team to Cohort and
working together to realise the multiple growth opportunities that this
transaction affords."

Andreas Schwer, Chief Executive Officer and Managing Director of EOS,
commented:

"Given the strengthening AUKUS partnership, we believe that Cohort is the
ideal owner for EM Solutions and are confident the business will continue to
strengthen under their stewardship."

Andy Thomis, Chief Executive, and Simon Walther, Finance Director, will host a
short presentation for analysts and investors on Thursday 21 November at
08:30am GMT. To join please follow the link here:
https://brrmedia.news/CHRT_PC
(https://protect.checkpoint.com/v2/___https:/brrmedia.news/CHRT_PC___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpiMDU1OTVkNmQ3MjA1MDVmMjVkMjE4MDE1NjkxODlkODo2OjQ2ZTU6NTdlODJmYjU0MDRkOWFkOGNlOTkyNWJlMGVkMWUyYjJkN2VkZWJiMWNmMjljZDEwYzUwNjQ1NjJlYThiNjcwMDpwOkY6Tg)

For further information please contact:

 Cohort plc                                                                      0118 909 0390
 Andrew Thomis, Chief Executive
 Simon Walther, Finance Director
 Raquel McGrath, Company Secretary

 Investec Bank plc (Sole Financial Adviser, Nominated Adviser, Corporate Broker  020 7597 5970
 and Bookrunner)
 Christopher Baird, Carlton Nelson, Charlotte Young

 MHP                                                                             07817 458 804
 Reg Hoare, Ollie Hoare, Hugo Harris                                             Cohort@mhpgroup.com

Unless the context otherwise provides, capitalised terms used in this
Announcement have the meanings ascribed to them in the section headed
"Definitions" at the end of this Announcement.

Introduction

The Company is pleased to announce that it has entered into the Acquisition
Agreement with the Seller to acquire EM Solutions. EM Solutions manufactures
and designs satellite on-the move ("SOTM") terminals and Radio Frequency
("RF") Subsystems, and provides Contract Manufacturing and Design ("CM&D")
and Sustainment services. Its key focus is on naval defence communications and
its major customers include the Australian Department of Defence, Royal
Australian Navy, Norwegian Navy and Dutch Ministerie van Defensie.

The Board believes that EM Solutions is highly complementary to the existing
Cohort business and that the Acquisition is in accordance with its stated
acquisition approach. The Board believes that EM Solutions would thrive under
Cohort's ownership as the seventh standalone member of the Group, reporting
through the Communications and Intelligence Division, alongside EID, MASS and
MCL.

The consideration payable to the Sellers for EM Solutions is an enterprise
value of AUD$144.0 million (c.£75.0 million) (subject to customary
adjustments) which is to be satisfied from Cohort's existing cash resources
and debt facility and a placing of 4,571,428 new ordinary shares in the
Company to raise £40 million gross proceeds (see separate announcement).

In addition, Cohort separately today announces a Retail Offer to raise gross
proceeds of up to £1 million (before fees and expenses), to allow retail
shareholders an opportunity to participate in the Fundraise at the same price
as the Placing.

The Placing is being fully underwritten by Investec Bank plc ("Investec" or
the "Bookrunner"), subject to the conditions set out in the Placing Agreement.
The Placing is not conditional on the Completion of the Acquisition. The
Placing is conditional upon the Placing Agreement between the Company and the
Bookrunner not having been terminated in accordance with its terms.

If the conditions relating to the issue of the Placing Shares are not
satisfied or the Placing Agreement is terminated in accordance with its terms,
the Placing Shares will not be issued and the Company will not receive the
associated Placing monies. In this scenario, the Retail Offer will similarly
not proceed and the Acquisition is not required to complete.

Background information on EM Solutions

EM Solutions is an Australia-based technology developer of innovative
microwave and on-the-move radio and satellite products that help to deliver
high speed telecommunications across the world. EM Solutions' principal
activity is the design, assembly, test, and support of SOTM terminals for
defence and government customers. It also provides high-end broadband radio
transceivers and other RF Subsystems such as low noise receivers and
solid-state high-power transmitters for defence and commercial customers. EM
Solutions is a wholly owned subsidiary of the Seller which is listed on the
Australian Securities Exchange. Cohort's business EID has worked closely with
EM Solutions in Portugal.

EM Solutions has internally developed technology IP. Its team boasts 59
engineers and technicians with an average tenure for the EM Solutions
engineers being 8 years. EM Solutions has grown its revenue, EBIT and order
book and has a strong order book and a significant pipeline of future
opportunities.

EM Solutions' SATCOM terminals incorporate its in-house designed and
manufactured products and subsystems, so that the total value it can bring to
customers is substantial. The company delivers high-quality products and
services to a customer base including some of the world's largest systems
integrators and telecommunications companies, as well as government agencies.
Its primary focus is on naval communications and its major customers include
the Australian Department of Defence, Royal Australian Navy, Royal Norwegian
Navy and Dutch Ministry of Defence. Other export customers include Japan,
Portugal and the United States.

EM Solutions has vertically integrated systems and market leading expertise.
Its SOTM terminal products are designed for clients who demand resilient and
assured communications operating in high threat environments and accounted for
circa 59% of revenue for the financial year 31 December 2023. Its RF
Subsystems products assist with the assembly of radio components such as
microwave filters, oscillators, mixers and power amplifiers and accounted for
circa 3% of revenue for the financial year 31 December 2023. Additionally, EM
Solutions' CM&D service provides tailored design, engineering and contract
manufacturing of electronic components. For the financial year 31 December
2023, this accounted for circa 15% of revenue. The Sustainment services
provided by EM Solutions are responsible for the repairs and maintenance
across product life cycles and for the financial year 31 December 2023
accounted for circa 22% of revenue. EM Solutions has an integrated domestic
manufacturing facility in Brisbane and a European service facility in the
Netherlands.

EM Solutions can design and manufacture fully customised, defence-quality RF
Subsystems in small volumes. It offers this capability to third-party
customers to supplement its profitability. The CM&D business stream
utilises EM Solutions' Radio Frequency engineering capability and excess
manufacturing capacity to build and assemble equipment for third parties.
Through-the-life support services provide a recurring revenue stream and
continues the customer relationship.

EM Solutions financial summary

Set out below is financial information for the financial years ended 31
December 2023, 2022 and 2021.

                     Financial year ended 31 December(1)
 AUD ($m)            2023          2022          2021
 Revenue             43.1          28.5          25.1
 Revenue growth (%)  51.1          13.7          -
 EBIT                11.5          5.5           6.1
 EBIT margin (%)     26.8          19.1          24.4

(1)EM Solutions CY23A financials normalised to remove the contribution of the
non-core Documentation services under the SEA1442 contract which generated
c.AUD$14.1 million in revenue in CY23A. As prepared by EM Solutions.

For the year ended 31 December 2023, EM Solutions generated a diverse revenue
stream with AUD$21.0 million from Europe and AUD$20.0 million from Australia.
Additional revenue was derived from the UAE, the USA, and the rest of the
world. Specifically, AUD$25.2 million was attributed to SOTM terminal
products, while AUD$9.5 million came from Sustainment products during the same
period. The remaining revenue was generated from CM&D, RF Subsystems, and
other sales. SOTM terminal products are the core of EM Solution's business and
are forecast to grow to approximately 80 per cent. of revenues in the next
five years. The compound average growth rate for revenue and EBIT across the
financial year 2021 to the financial year 2023 was 31.1% and 37.2%
respectively. The order book cover for the calendar year 2025 is expected to
equate to 88 per cent..

Pro forma financials

                      Cohort                                    EM Solutions(1)                              Pro forma

                      Financial year ended 30 April 2024        Financial year ended 31 December 2023        Financial year ended 30 April 2024
                      S & E         C & I         Total         S & E          C & I          Total          S & E         C & I         Total
 Revenue (£m)         119.6         82.9          202.5         0.0            22.5           22.5           119.6         105.4         225.0
 Adjusted EBIT (£m)   10.5          10.6          21.1          0.0            6.0            6.0            10.5          16.6          27.1
 EBIT margin (%)      8.8           12.8          10.4          0.0            26.8           26.8           8.8           15.8          12.1

Note: Pro forma FY24 Cohort financials derived by adding Cohort FY24A
financials with EM Solutions CY23A financials; Assumed GBP/AUD of 1.92; Under
EM Solutions accounting policies. Cohort adjusted EBIT has also been adjusted
for the £4.5 million of central costs (split between both divisions)

(1)EM Solutions CY23A financials normalised to remove the contribution of the
non-core Documentation services under the SEA1442 contract which generated
c.AUD$14.1 million in revenue in CY23A.

The Market opportunity

According to defence intelligence source Janes©(1), military forces are
increasingly adopting both defence and commercial satellite networks in
warfare using high bandwidth multi-band on-the-move terminals. Forecast demand
for Naval SATCOM terminals for a set of forty-four addressable countries is
estimated to be US$1.74 billion between 2024 and 2028 driven by new warship
builds, mid-life upgrades and the emerging use of unmanned systems.

In Europe and Asia there is progressive increase in defence spending as
geopolitical tensions impacting these regions continue to rise. Future growth
opportunities for EM Solutions exist in the Netherlands, Norway, Portugal and
Japan

According to Markets and Markets(2), the global military communications market
is expected to grow at a CAGR of 7.9 per cent. from 2023 to 2028, with the
long-range segment poised for substantial growth. Within the overall sector
the unmanned vehicles segment is expected to grow at a higher CAGR of 10.8 per
cent., reaching US$3.2 billion by 2028.

According to the Australian Government(3), the 2024-25 Australian Defence
Budget has seen a funding increase to AUD$765 billion over the decade and the
annual Defence budget will grow to an estimated AUD$100 billion (2.3 per cent.
of GDP) by 2033-34 compared to AUD$53 billion this financial year.

(1)Janes: Naval SATCOM Market Study; (2)Markets and Markets: Military
Communications Market by System (August 2023); (3)Australian Government
Defence: A generational investment in Australia's Defence (14 May 2024)

 

Background to and reasons for the Acquisition

The Board believes that the Acquisition is highly complementary to Cohort's
existing business, and significantly improves and increases its capability and
offering. The Board also believes that the key attractions of EM Solutions for
the Company are as follows:

·      EM Solutions is positioned to take advantage of the growing
requirement for naval SATCOM as users migrate from low-bandwidth X-band to
faster Ka-band communications, and the number of unmanned surface vessels
increases;

·      EM Solutions' technology (monopulse tracking, multiband,
proprietary RF component design) and products provide a genuine and
sustainable competitive advantage that enables its products to sustain
reliable communications in challenging conditions, especially relevant for the
fast-growing uncrewed vessels market. We expect this to enable the business to
generate continued strong margins going forwards;

·      EM Solutions would bring a national Australian presence to Cohort
and a base to provide local value to defence contracts, an important factor in
that market; and

·      EM Solutions brings a new capability to Cohort, complementary to
the other Group businesses especially in respect to its naval activities.

The enterprise value of AUD$144.0 million (£75.0 million) is to be funded by
net proceeds from the Placing, £15.0 million cash available on the balance
sheet and £20.0 million drawn from Cohort's existing £35.0 million revolving
credit facility arrangement.

Financial effects of the Acquisition

The Acquisition will create a materially larger Group and will be Cohort's
largest acquisition to date. The Directors expect that the Acquisition will be
materially accretive to adjusted EPS in the first full financial year of
ownership (2025/26) and onwards. Tax adjusted ROIC is expected to exceed WACC
in the third full financial year post Completion (2027/28).

Following Completion, pro forma net debt/EBITDA for the financial year ended
30 April 2024 is expected to be less than 1.0x. The Board wishes to maintain a
strong balance sheet and liquidity to help support material capital
expenditure programmes, as referred to in Cohort's AGM Statement on 24
September 2024, and the existing Group's growth plans. Additionally, Cohort's
strong balance sheet gives customers comfort when entering to long term
contracts.

The Acquisition will improve the Board's expectations for mid-teens adjusted
EBIT margin by the financial year ended 30 April 2027. The Acquisition is
expected to positively impact the Group's H1/H2 weighting, resulting in a more
balanced level of trade compared to other businesses; however, the impact will
depend on the specific mix of projects at any given time. Cohort remains
committed to its policy of annual dividend growth, aligned with the growth in
EPS and capital requirements.

There will be an increase in capital expenditure of approximately £1.5
million per year, which excludes research and development. The ongoing
interest charge is expected to increase by approximately £1.5 million with EM
Solutions having an effective tax rate of 30.0 per cent.

There will be other intangible amortisation post Completion, with an estimated
increase between £7 million and £10 million in the annual charge. There will
be circa £3 million of costs relating to the Acquisition, this is inclusive
of transition and integration costs.

FX protection on the consideration due will be secured through AUD$ trade.

Current trading and outlook for Cohort

Cohort released its AGM Statement on 24 September 2024, which provided an
update on current trading and outlook and stated that the Group's strategy
continues to be to grow both organically and through acquisitions. The
following is an extract of that announcement:

"Cohort, the AIM listed independent technology group, is today holding its
Annual General Meeting ("AGM") and issues the following comments on current
trading and outlook.

Cohort achieved record financial results in the year ended 30 April 2024
("FY2024"), with strong performances in revenue, adjusted operating profit,
order intake and net funds. The year ended with a robust cash position and a
record closing order book of £518.7m, stretching out to 2037, with strong
revenue cover for the current financial year ending 30 April 2025 ("FY2025").

Based on trading and order intake to date, we expect the first half trading
performance to be significantly ahead of the same period last year, driven by
the strong order book in Sensors and Effectors. We also expect to see an
improved net margin for the first half. In line with past experience, we
expect to see a continued weighting to the second half in the year as a whole.

Following contract wins since the start of FY2025 of over £120m, the order
book on 20 September 2024 stood at over £575m, representing consensus FY2025
revenue cover of around 90 per cent.. We are optimistic about our prospects
for further significant new orders, given demand for our products and services
from both our domestic and export customers. For FY2025, we now forecast that
the Group's revenue and profit performance will be a little ahead of our
previous expectations.

As previously disclosed in the FY2024 final results announcement, given
planned capital expenditure and expansion in working capital to support our
record order book, net funds at the end of FY2025 are expected to be slightly
lower than the £23.1m reported at the end of FY2024.

The Group's strategy continues to be to grow both organically and through
acquisitions. Current geopolitical tensions are driving increased investment
in defence and those are expected to continue for some years to come, creating
the conditions for organic growth. Our business model is also well adapted to
generating value from carefully targeted acquisitions, and we continue to seek
opportunities for these in the UK and elsewhere."

The Board today provides the following update on H1 2024/25, which are
slightly above management's previous expectation. The Board now expects Group
revenue of at least £105 million (+11 per cent. on H1 FY24), Group adjusted
profit of at least £9 million, (+50 per cent. on H1 FY24) a minimum Group
adjusted profit margin of 8.5 per cent. based on the preceding minimum values
and net cash of circa £30 million. The H1 2024/25 results are due to be
released on 11 December 2024.

Current trading and outlook for EM Solutions

EM Solutions had a strong underlying performance for the six months to 30 June
2024, delivery against budget and strategy(1). Momentum is continuing into the
second half of the financial year, backed by gross margin growth. Up to 30
September 2024, EBITDA(1) exceeded budget with a strong order book maintained.
Costs are lower than budget year-to-date due to favourable product mix.

EM Solutions' order backlog as at 30 September 2024 was AUD$175.4 million.

(1)EM Solutions CY23A financials normalised to remove the contribution of the
non-core Documentation services under the SEA1442 contract which generated
c.AUD$14.1 million in revenue in CY23A

 

EM Solutions integration within Cohort

Under Cohort ownership, EM Solutions will continue to enjoy a significant
degree of operational autonomy in order to further develop its potential. EM
Solutions will be supported by the Group's light touch autonomy and its
effective financial control and governance regime. Subsidiaries are encouraged
to collaborate in terms of business development, manufacturing and support
services which includes opportunities for cross-selling products and sharing
expertise throughout the wider Group. EM Solutions will operate as the seventh
stand-alone business within the Group and will report through the Group's
Communications and Intelligence Division, alongside EID, MASS, and MCL. Cohort
is committed to continue to maintain EM Solutions' headquarters and primary
manufacturing facilities in Brisbane, supporting further investment in
Australian based defence capabilities and jobs for Australians.

Cohort is developing an integration plan for the Acquisition which it intends
to implement from Completion, consistent with its business model of
subsidiaries retaining operational autonomy, whilst ensuring the Group
provides financial and strategic oversight. Cohort plans to maintain EM
Solutions' existing executive leadership team and engage a small number of
experienced, Australia-based non-executive directors to provide support and to
enhance Cohort's oversight over what will be its most geographically distant
operating business.

Principal terms of the Acquisition

On 21 November 2024, Cohort entered into the Acquisition Agreement pursuant to
which it agreed (subject to conditions) to acquire the entire issued share
capital of EM Solutions Pty Ltd (ACN 082 157 846) which holds all of the
issued share capital in EM Solutions (Europe) B.V. (together "EM Solutions")
from Electro Optic Systems Holdings Limited (ACN 092 708 364). The Acquisition
Agreement is governed by the laws of Queensland, Australia.

Pursuant to the terms of the Acquisition Agreement, the purchaser will pay to
the Seller, an enterprise value of AUD$144.0 (c.£75.0 million) million in
consideration, subject to customary adjustments.

EM Solutions will operate as the seventh stand-alone business within the Group
and report through the Group's Communications and Intelligence division,
alongside EID, MASS and MCL. Cohort is a UK company, listed in London and its
directors are all UK nationals. As a close ally of Australia and a fellow
member of the AUKUS alliance and the Commonwealth, the UK's international
security objectives are closely aligned with Australia's.

Australian Foreign Investment Review Board ("FIRB") approval was received in
November 2024 and completion of the Acquisition is expected by calendar year
end, subject to conditions.

Use of Placing proceeds

The Company intends to use the net proceeds of the Placing to finance a
portion of the consideration payable under the Acquisition Agreement, and
payment of the associated professional advisory fees of the Placing and
Acquisition. All other payments due under the Acquisition Agreement are
expected to be funded from the Group's existing cash resources and debt
facility. In the unlikely event the Acquisition does not complete, the Company
may, at its option, decide to use the funds for alternative investments or
most likely consider a tax efficient way to return the net proceeds to
shareholders.

Cohort founders and Board are supportive of the transaction but restricted
from participating in the Placing due to Cohort being in a close period until
the release of its H1 2024/25 results on 11 December 2024.

Principal terms of the Facilities

On 18 July 2022, the Company (as borrower), and Commerzbank, NatWest and
Lloyds (as lenders) entered into the Facilities Agreement. Amounts borrowed
under the RCF are repayable in July 2027, after Cohort exercised its options
to extend the facility. The Facilities Agreement is governed by English law.

Expected timetable of Events

 Announcement of the Acquisition                                                21 November 2024
 Announcement of the Placing                                                    21 November 2024
 Announcement of the Retail Offer                                               21 November 2024
 Announcement of the results of the Fundraise                                   21 November 2024
 Admission and commencement of dealings in the New Ordinary Shares on AIM       25 November 2024
 Expected timing for Completion                                                 By 31 December 2024
 Where applicable, expected date for crediting of the New Ordinary Shares in    As soon as possible following Admission
 uncertificated form to CREST accounts
 Where applicable, expected date for despatch of share certificates in respect  within 10 Business Days of Admission
 of the New Ordinary Shares

Definitions

"Acquisition" means the acquisition by the Company of E M Solutions Pty Ltd
(ACN 082 157 846) from the Seller.

"Acquisition Agreement" means the acquisition agreement entered into on 21
November 2024 between, amongst others, the Company and the Seller, pursuant to
which the Company agreed (subject to conditions) to purchase the entire issued
share capital of E M Solutions Pty Ltd (ACN 082 157 846) from the Seller.

"Admission" means the date on which the New Ordinary Shares are first admitted
to trading on the AIM Market of the London Stock Exchange as part of the
Fundraise.

"AGM" means annual general meeting.

"AGM Update" means the update on the Company's current trading and outlook
provided in an announcement released by the Company on 24 September 2024.

"Board" means the board of directors of the Company.

"Bookrunner" means Investec.

"Cohort" means the Company.

"Communications and Intelligence Division" means the Communications and
Intelligence Division of the Company.

"Company" means Cohort plc, an AIM listed company registered in England and
Wales (Registered No. 05684823).

"Completion" means completion of the sale and purchase of the entire issued
share capital of 3,818,000 fully paid ordinary shares in E M Solutions Pty Ltd
(CAN 082 157 846) contemplated by the Acquisition Agreement.

"EID" means Empresa de Investigação e Desenvolvimento de Electrónica, S.A.

"EM Solutions" means EM Solutions Pty Ltd (ACN 082 157 846) together with EM
Solutions (Europe) B.V.

"EOS" means Electro Optic Systems Holdings Limited (CAN 092 708 364), an
Australian public company which is listed on the Australian Securities
Exchange (ASX: EOS).

"EPS" means earnings per share.

"Facilities Agreement" means the facility agreement originally dated 17
November 2015 between, amongst others, (1) Cohort plc, (2) Lloyds Bank plc
(Lloyds), National Westminster Bank plc (NWB) and Commerzbank
Aktiengesellschaft, London Branch as Mandated Lead Arrangers and current
Lenders, (3) Lloyds and NWB as Bookrunners and (4) NWB as Agent and Security
Agent, as amended and restated most recently 18 July 2022 and subsequently
further amended on 30 September 2022 and 15 December 2023.

"FIRB" means the Australian Foreign Investment Review Board.

"Fundraise" means the Placing together with the Retail Offer.

"Group" means the Company.

"Investec" means Investec Bank plc.

"MAR" means the Market Abuse Regulation (EU) 596/2014 as it forms part of UK
domestic law by virtue of the European Union (Withdrawal) Act 2018.

"MASS" means MASS Consultants Limited, a limited company registered in England
and Wales (Registered No. 01705804).

"MCL" means Marlborough Communications Limited, a limited company registered
in England and Wales (Registered No. 01507639).

"New Ordinary Shares" means the issue of new ordinary shares of 10 pence each
in the Company pursuant to the Fundraise.

"Placing" means the fully underwritten non-pre-emptive placing to
institutional investors to raise gross proceeds of £40 million.

"Placing Agreement" means the placing agreement entered into between the
Company and Investec in respect of the Placing.

"Placing Shares" means the shares to be offered as part of the Placing.

"PrimaryBid" means PrimaryBid Limited, a limited company registered in England
and Wales (Registered No. 08092575).

"Retail Offer" means the additional offer up to £1 million via PrimaryBid to
facilitate retail participation as part of the Fundraise.

"ROIC" means return on invested capital.

"SATCOM" means satellite communications.

"Securities Act" means the U.S. Securities Act of 1933 as amended.

"Seller" means Electro Optic Systems Holdings Limited (CAN 092 708 364), an
Australian public company which is listed on the Australian Securities
Exchange (ASX: EOS)

"WACC" means the Group's weighted average cost of capital.

For the purposes of this Announcement, the following definitions apply unless
the context otherwise requires.

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 1,400 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
(https://protect.checkpoint.com/v2/___http:/www.marlboroughcomms.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzpiMDU1OTVkNmQ3MjA1MDVmMjVkMjE4MDE1NjkxODlkODo2OjlhYTU6NTgxYjQ4NGU2ZjJlZmU5M2UzNmFjN2NjMWE4ZTM0MmM3MGFlZWViMTlmMzgwMWM2NmJiNzc3MDhkNmYwZDUxYTpwOkY6Tg)

 

 

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 primarily for
naval defence customers alongside specialist research and training
services. Acquired by Cohort in October 2007.  www.sea.co.uk

 

IMPORTANT NOTICES

This Announcement is released by Cohort plc and contains inside information
for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as
it forms part of UK domestic law by virtue of the European Union (Withdrawal)
Act 2018 ("MAR"), and is disclosed in accordance with the company's
obligations under Article 17 of MAR. The person responsible for arranging for
the release of this Announcement on behalf of Cohort is Raquel McGrath. Upon
the publication of this Announcement via a Regulatory Information Service,
such information is now considered to be in the public domain. Cohort's LEI is
213800WE61C73LZZNW11.

There can be no certainty that any possible acquisition and/or equity issue
contemplated in this Announcement will proceed nor as to the terms on which
any possible transaction and/or equity issue might be concluded. For the
avoidance of doubt, the issue of this Announcement shall not, in any
circumstances, create any implication that Cohort plc shall be required to
provide further updates on the status of any matters contemplated in this
Announcement (save as may be required by law or regulation).

Neither this Announcement, nor any copy of it, may be taken or transmitted,
published or distributed, directly or indirectly, in, or into the United
States, Australia, Canada, Japan, or South Africa or to any persons in any of
those jurisdictions or any other jurisdiction where to do so would constitute
a violation of the relevant securities laws of such jurisdiction.

The information contained in this Announcement is for information purposes
only and does not purport to be full or complete. No reliance may be placed
for any purpose on the information contained in this Announcement or its
accuracy, fairness or completeness. The information in this Announcement is
subject to change. To the extent permitted by law and regulation, no
undertaking, representation or warranty or other assurance, express or
implied, is made or given by or on behalf of the Company, or any of their
respective parent or subsidiary undertakings or the subsidiary undertakings of
any such parent undertakings or any of their respective directors, officers,
partners, employees, agents, affiliates, representatives or advisers, or any
other person, as to the accuracy, completeness or fairness of the information
or opinions contained in this Announcement.

This Announcement (or any part of it) is not intended to, and does not,
constitute or form part of any offer to issue or sell or otherwise dispose of,
or the solicitation of an offer to acquire, purchase or subscribe for, any
securities in any jurisdiction, whether pursuant to this Announcement or
otherwise. No securities in connection with any possible transaction
contemplated in this Announcement have been or will be registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of any state or other jurisdiction of the United States or any
other jurisdiction where it would be unlawful to do so, and may not be offered
or sold in the United States except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities
Act and in compliance with the securities laws of any state or any other
jurisdiction of the United States and in compliance with the securities law of
any other jurisdiction. No public offering of securities is being made in the
United States or any other jurisdiction where it would be unlawful to do so.

This Announcement does not constitute a prospectus or offering memorandum or
an offer in respect of any securities and is not intended to provide the basis
for any decision in respect of the Company or other evaluation of any
securities of the Company or any other entity and should not be considered as
a recommendation that any investor should subscribe for, purchase, otherwise
acquire, sell or otherwise dispose of any such securities.

No statement in this Announcement is intended to be a profit forecast or
estimate, and no statement in this Announcement should be interpreted to mean
that earnings per share of the Company for the current or future financial
years would necessarily match or exceed the historical published earnings per
share of the Company.

This Announcement may contain and the Company may make verbal statements
containing "forward-looking statements" with respect to the financial
condition, performance, strategic initiatives, objectives, results of
operations and business of the Group. All statements other than statements of
historical facts included in this Announcement are, or may be deemed to be,
forward-looking statements. Without limitation, any statements preceded or
followed by or that include the words ''targets'', ''plans'', ''believes'',
''expects'', ''aims'', ''intends'', ''anticipates'', ''estimates'',
''projects'', ''will'', ''may'', "would", "could" or "should", or words or
terms of similar substance or the negative thereof, are forward-looking
statements. Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues, earnings,
synergies, economic performance, indebtedness, financial condition, dividend
policy, losses and future prospects; and (ii) business and management
strategies and the expansion and growth of the Group's operations. Such
forward-looking statements involve risks and uncertainties that could
significantly affect expected results and are based on certain key
assumptions. Many factors could cause actual results, performance or
achievements to differ materially from those projected or implied in any
forward-looking statements. Nothing in this Announcement is or should be
relied on as a promise or representation as to the future. Cohort, its
affiliates and directors and any person acting on its or their behalf each
expressly disclaim any obligation or undertaking to update or revise publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise, unless required to do so by applicable law or
regulation. Statements contained in this Announcement regarding past trends
or activities should not be taken as representation that such trends or
activities will continue in the future. You should not place undue reliance on
forward-looking statements, which speak only as of the date of this
Announcement.

This Announcement does not identify or suggest, or purport to identify or
suggest, the risks (direct or indirect) that may be associated with an
investment in the Placing Shares. Any investment decisions to buy Placing
Shares in the Placing must be made solely on the basis of publicly available
information, which has not been independently verified by Investec.

Neither the content of the Group's websites (or any other website) nor the
content of any website accessible from hyperlinks on the Group's website (or
any other website) is incorporated into or forms part of this Announcement.

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