REG - Cohort PLC - Half Year Results
13/12/2023 07:15
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RNS Number : 5510W Cohort PLC 13 December 2023
One Waterside Drive
Arlington Business Park
Reading
Berks
RG7 4SW
13 December 2023
COHORT PLC
("Cohort" or "the Group")
HALF YEAR RESULTS
FOR THE SIX MONTHS ENDED 31 OCTOBER 2023
Strong growth in operating profit, revenue and order book; further progress
expected
Cohort plc, the independent technology group, today announces its half year
results for the six months ended 31 October 2023.
The Group achieved a strong first half, with growth in revenue, profit, and
order book compared with 2022. The increase in the interim dividend reflects
the Board's confidence in the Group's growth prospects and continued
commitment to a progressive dividend policy.
Financial highlights
· Revenue up 22% to £94.3m (2022: £77.5m).
· Adjusted* operating profit up 20% to £6.0m (2022: £5.0m).
· Adjusted* earnings per share of 10.36 pence (2022: 10.12 pence)
impacted by a higher tax rate and higher net interest charge.
· Order intake of £119.1m (2022: £88.6m), 1.3x the
period's revenue.
· Record closing order book of £353.9m
(30 April 2023: £329.1m).
· Interim dividend increased by over 10% to 4.70 pence per share
(2022: 4.25 pence per share) continuing the Group's long standing track record
of progressive dividend growth.
· Net funds of £13.3m at 31 October 2023 (31 October 2022: £0.6m
net debt; 30 April 2023: £15.6m net funds).
Operational highlights
· Increased revenue was driven by higher UK MOD sales within both
divisions.
· The strong growth in adjusted* operating profit was driven by the
Communications and Intelligence division, with profit performance in the
Sensors and Effectors division slightly lower than last year.
· Order intake benefited from strong performances within the
Sensors and Effectors division, particularly at SEA which continues to grow
its naval business stream.
Looking forward
· The record order book of £353.9m includes over £90m of revenue
deliverable in the second half:
• Taking into account revenue recognised in the first half, this
covers over 95% of consensus forecast revenue for the full financial year.
• Revenue deliverable in future years from committed orders
continues to grow, and the duration of the order book now extends to 2033.
· The current year outlook for the Group remains unchanged:
• In line with previous experience, we anticipate a stronger
Group performance in the second half.
• Increased delivery in Sensors and Effectors division expected
to drive growth in Group performance.
· We continue to see a positive outlook for organic growth in the
medium term.
New non-executive director appointment
· Peter Lynas, formerly Finance Director of BAE Systems, will join
the Board as a Non-Executive Director and Audit Chair designate in January
2024.
* Adjusted figures exclude the effects of marking forward exchange
contracts to market value (£6k charge; 2022: £1.6m charge), amortisation of
other intangible assets (£1.6m; 2022: £1.8m).
Commenting on the results, Nick Prest CBE, Chairman of Cohort, said:
"Cohort delivered a stronger performance for the first half compared to the
same period last year with growth in both revenue and adjusted operating
profit. Strong order intake has driven a record closing order book which
underpins most of the second half of this financial year. Consequently, in
line with previous experience and given the 95% visibility the current order
book gives us over current year forecast revenues, we anticipate a stronger
performance in the second half and thus remain on track to achieve our
expectations for the full year.
"The continued expansion of the order book is a strong indicator that we are
offering competitive products in a growing market. On-order revenue is now
deliverable out to 2033. The pipeline of order opportunities for the remainder
of the year also looks strong. Demand for our solutions and services
continues to be driven by international tensions in the Asia-Pacific region
and Europe. This backdrop is driving increased spending on defence and
security in Europe, including the UK, other NATO countries and the
Asia-Pacific region. Overall, we continue to see a positive outlook for
organic growth in the years ahead."
Dividend timetable:
Interim dividend announcement date
13 December 2023
Record
date
5 January 2024
Dividend payment
date
13 February 2024
A Dividend Reinvestment Plan ('DRIP') is provided by Equiniti Financial
Services Limited. The DRIP enables the Company's shareholders to elect to
have their cash dividend payments used to purchase the Company's shares. The
latest election date is 23 January 2024. More information can be found at
www.shareview.co.uk/info/drip (http://www.shareview.co.uk/info/drip) .
Analyst Presentation
A meeting is being held today, for analysts, hosted by Andy Thomis, Chief
Executive, and Simon Walther, Finance Director, at 9.15am for a 09:30am start.
Please contact MHP via cohort@mhpgroup.com (mailto:cohort@mhpgroup.com) if you
wish to attend.
For those unable to attend in person, a recording of the presentation will be
made available on Cohort's website:
https://www.cohortplc.com/investors/results-reports-presentations
(https://www.cohortplc.com/investors/results-reports-presentations)
Investor Presentation
Andy Thomis (Chief Executive) and Simon Walther (Finance Director) will be
giving an investor presentation hosted by Equity Development at 4.15pm today.
The webinar is open to all existing and potential shareholders. Questions can
be submitted during the presentation, or sent beforehand by email to
info@equitydevelopment.co.uk (mailto:info@equitydevelopment.co.uk)
Please register to attend the event via the following link: Cohort: Investor
Presentation (Interim Results) - 13th December 2023 (equitydevelopment.co.uk)
(https://www.equitydevelopment.co.uk/news-and-events/cohort-investor-presentation-13december2023?utm_campaign=Cohort&utm_medium=email&_hsmi=285417265&_hsenc=p2ANqtz--qSscA-7WS-CMQqsHIaNtJzhajrFluNLcv1a3HWoPKjdgZ1mXoKxA1q5cBSP-gKnZlugz2XlNjbfV7leFHqvY7TqkhYw&utm_content=285417265&utm_source=hs_email)
For further information please contact:
Cohort plc 0118 909 0390
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Emily McBride, Group Head of Marketing and Corporate Communications
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 cohort@mhpgroup.com
NOTES TO EDITORS
Cohort plc (www.cohortplc.com (http://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 1,200 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 (http://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
(http://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 (http://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 (http://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 (http://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
(http://www.sea.co.uk/)
Chairman's statement
Compared to the same period last year Cohort delivered a stronger performance
for the six months ended 31 October 2023 with growth in both revenue and
adjusted operating profit.
Overall, the Group's adjusted operating profit grew by 20% to £6.0m (2022:
£5.0m) on 22% higher revenue of £94.3m (2022: £77.5m).
The re-prioritisation of defence spending within Europe seen last year,
following events in Ukraine and persistent tensions in the Asia-Pacific
region, has driven continued impetus for defence spending. That has resulted
in an increased tempo of order intake across the Group, at 1.3x first half
revenue (2022/23: 1.1x). Recent events in the Middle East, while also
contributing to an increased regional focus on defence spending, have led to
some delays in delivery as a result of diverted customer focus. That has been
particularly noticeable in relation to training work in the Communications and
Intelligence division.
Although there remain pockets of supply challenges, notably in relation to our
Portuguese business, these have lessened over the period. Recruitment
pressures have likewise eased considerably, reflecting the positive impact of
initiatives such as apprentice and graduate schemes, a focus on employee
engagement and the support of STEM initiatives in local schools and
communities. Recruitment of certain specialist professionals with high-level
security clearances remains the most challenging aspect of people resourcing,
and this is particularly relevant to the Communications and Intelligence
division. Overall we have seen our employee headcount increase from 1,075 last
October to 1,243 this October.
We continue to see some inflationary pressures, particularly affecting
specialist materials and expertise. We have been able to mitigate some of
this effect through price escalation clauses in longer term contracts. In
shorter term contracts the impact is less serious, but our ability to mitigate
inflationary pressures depends on our ability to increase our prices, which is
sometimes but not always the case.
Geographically, the improvement in the Group's adjusted operating profit was
driven by the Group's UK operations. This was partly offset by delays to
orders and deliveries within the Group's Portuguese business, EID. We also saw
weaker revenue mix at ELAC as the Group continued to take a cautious approach
to the margin traded on the Italian sonar project, which is still in
development.
The Group's order intake was strong at £119.1m (2022: £88.6m), and the
closing order book of £353.9m was a record high for the Group. On-contract
revenue now stretches out to 2033. We saw particularly strong order intake
within Sensors and Effectors of £93.6m. There are further good order
prospects for the Group in the second half and beyond. These include
opportunities with the Portuguese Navy, and export customers in Southeast Asia
and Australasia, as well as communications and surveillance systems for
customers in the UK and Europe. Since the period end the order book has grown
to over £365m including the third boat for the Italian sonar project
announced on 5 December 2023.
At 31 October 2023, net funds were £13.3m, compared to net funds of £15.6m
at 30 April 2023. As at 10 December 2023, the Group's net funds were £10.3m.
We expect the Group to see a net cash outflow in the second half the of the
year, a result of planned capital investment.
Governance
The Board regularly evaluates and reviews the Group's environmental, social
and governance (ESG) activity and is committed to maintaining appropriate
standards. We continue to make good progress with a wide range of initiatives
at subsidiary level with MCL, MASS and Chess working towards ISO 14001
accreditation. Each UK subsidiary has published its net zero carbon plans. The
Group's values, customer engagement principles and governance policies are all
outlined on Cohort's website and in the Annual Report and Accounts.
The Board remains committed to open communications with investors. Shortly
after the AGM the Board hosted an institutional investor site visit at Chess
giving the audience a chance to view some of the work being undertaken within
the Group and an opportunity to talk face to face with Chess's management
team.
As separately announced today, Peter Lynas will be joining the Cohort Board as
a Non-Executive Director on 2 January 2024 and will replace Jeff Perrin as
Chairman of the Audit Committee when Jeff retires in September 2024. Peter
Lynas has deep experience of the defence industry as the former Finance
Director of BAE Systems, and we are pleased to welcome him to the Board.
Key financials
For the six months ended 31 October 2023 the Group's revenue was £94.3m
(2022: £77.5m), comprised of £43.9m in Communications and Intelligence
(2022: £33.2m) and £51.0m in Sensors and Effectors (2022: £44.5m).
The Group's adjusted operating profit in the period was £6.0m (2022: £5.0m).
Central costs were £2.3m (2022: £2.6m). Cohort made an operating profit
after recognising amortisation of intangible assets (£1.6m) of £4.4m (2022:
operating profit of £1.6m, after amortisation of intangible assets of £1.8m
and a charge on marking forward exchange contracts to market value of £1.6m).
Adjusted earnings per share for the six months ended 31 October 2023 increased
to 10.36 pence (2022: 10.12 pence). The tax rate in respect of the adjusted
operating profit was 20.0% (2022: 17.0%). Basic earnings per share were 7.46
pence (2022: 2.73 pence). The lower growth in adjusted earnings per share
when compared with adjusted operating profit was due to the higher tax rate
and higher net interest charge.
The cash inflow from operations of £10.5m (2022: outflow of £4.9m) is
significantly higher than last year's equivalent period due to timing of
working capital movements, with advanced payments received, particularly
within Sensors and Effectors, ahead of project work deliverable in the rest of
the year. The Group made payments in respect of dividends (£3.7m) and capital
expenditure (£2.7m) resulting in net funds at 31 October 2023 of £13.3m (30
April 2022: net funds of £15.6m). The capital expenditure included a further
spend of £1.5m on ELAC's new facility. The total spend for this project is
expected to be around £17m over the three years from 2022 to 2025.
Communications and Intelligence
Driven largely by increased UK MOD spend, largely at MCL, the Communications
and Intelligence division posted an improved trading profit of £6.0m for the
six months to 31 October 2023 (2022: £5.2m) on revenue of £43.9m (2002:
£33.2m), a net margin of 13.7% (2022: 15.7%). The weaker net margin has
been mostly driven by performance at MASS, where some of its higher margin
EWOS work has slipped into the second half.
The division's order book reduced to £108.3m (30 April 2023: £126.7m) as
much of MCL's outstanding UK MOD order backlog was delivered in the first
half. Long-awaited orders from the Portuguese Navy were further delayed, but
we expect that the division will deliver a performance for the whole year in
line with 2022/23.
Sensors and Effectors
Despite higher revenue of £51.0m (2022: £44.5m) within Sensors and
Effectors, the trading profit of £2.3m was slightly lower than that achieved
last year (£2.5m) with a net margin of 4.5% (2022: 5.6%). This was a result
of revenue mix, with a greater proportion of lower margin sales at SEA and
continued low margin trading of the Italian sonar project as it progresses
through its development phase. Last year also included a £0.5m contribution
from Wärtsilä, the final payment under the scheme agreed at the time of the
acquisition of ELAC.
The division's order book increased to £245.6m (30 April 2023: £202.4m) with
£93.7m of order intake in the first half of the year. SEA in particular saw
several large naval orders placed, including an order with the Royal New
Zealand Navy. The pipeline of opportunities for this division is strong with
further large orders possible in the second half of the year.
The order book covers over £60m of revenue to be delivered in the second half
of the year and we expect this division to deliver a stronger performance in
the second half, driving the Group's overall growth compared to 2022/23.
Dividend
The Board has declared an interim dividend increase of over 10% to 4.70 pence
per share (2022: 4.25 pence per share). The interim dividend is payable on 13
February 2024 to shareholders on the register as at 5 January 2024.
Outlook
The Group's order book at 31 October 2023 stood at £353.9m (30 April 2023:
£329.1m), underpinning most of the second half of this financial year. In
line with previous experience, we anticipate a stronger Group performance in
the second half and thus remain on track to achieve our expectations for the
full year.
The continued expansion of the Group's order book is a strong indicator that
we are offering competitive products in a growing market. On-order revenue
is now deliverable out to 2033. The pipeline of order opportunities for the
remainder of the year also looks strong. Demand for our solutions and
services continues to be driven by international tensions in the Asia-Pacific
region and Europe. This backdrop is driving increased spending on defence and
security in Europe, including the UK, other NATO countries and the
Asia-Pacific region. Overall, we continue to see a positive outlook for
organic growth in the years ahead.
Nick Prest CBE
Chairman
13 December 2023
Consolidated income statement
for the six months ended 31 October 2023
Notes Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue 2 94,304 77,467 182,713
Cost of sales (63,154) (53,184) (117,852)
Gross profit 31,150 24,283 64,861
Administrative expenses (26,721) (22,675) (49,610)
Operating profit 2 4,429 1,608 15,251
Operating profit comprises:
Adjusted operating profit 2 5,996 5,011 19,064
Charge on marking forward exchange contracts to market value at the period end (6) (1,567) (1,082)
(included in cost of sales)
Amortisation of other intangible assets (included in administrative expenses) (1,561) (1,836) (3,672)
Research and development expenditure credits (RDEC) (included in cost of - - 941
sales)
Operating profit 4,429 1,608 15,251
Finance income 227 29 134
Finance costs (988) (552) (1,458)
Profit before tax 3,668 1,085 13,927
Income tax expense 3 (734) (184) (2,675)
Profit for the period 2,934 901 11,252
Attributable to:
Equity shareholders of the parent 3,017 1,109 11,356
Non-controlling interests (83) (208) (104)
2,934 901 11,252
Earnings per share Pence Pence Pence
Basic 4 7.46 2.73 27.92
Diluted 4 7.44 2.72 27.86
All profit for the period is derived from continuing operations.
Consolidated statement of comprehensive income
for the six months ended 31 October 2023
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period 2,934 901 11,252
Foreign currency translation differences on net assets of overseas (49) 305 (1,070)
subsidiaries
Changes in retirement benefit obligations - - 1,919
Other comprehensive (expense)/income for the period, net of tax (49) 305 849
Total comprehensive income for the period 2,885 1,206 12,101
Attributable to:
Equity shareholders of the parent 2,957 1,414 12,205
Non-controlling interests (72) (208) (104)
2,885 1,206 12,101
Consolidated statement of changes in equity
for the six months ended 31 October 2023
Attributable to the equity shareholders of the parent
Share Share Own Share Other Retained Total Non- Total
capital premium shares option reserves earnings £'000 controlling equity
£'000 account £'000 reserve £'000 £'000 interests £'000
£'000 £'000 £'000
At 1 May 2022 4,121 30,527 (3,346) 1,000 (1,400) 53,068 83,970 5,220 89,190
Profit/(loss) for the period - - - - - 1,109 1,109 (208) 901
Other comprehensive income for the period - - - - - 305 305 - 305
Total comprehensive income/(expense) for the period - - - - - 1,414 1,414 (208) 1,206
Transactions with owners of the Group and non-controlling interests recognised
directly in equity:
Issue of new shares 16 622 - - - - 638 - 638
Equity dividend - - - - - (3,393) (3,393) - (3,393)
Vesting of Restricted Shares - - - - - 189 189 - 189
Own shares purchased - - - - - - - - -
Own shares sold - - 111 - - - 111 - 111
Net loss on disposal of own shares - - 198 - - (198) - - -
Share-based payments - - - 312 - - 312 - 312
(including deferred tax and foreign exchange)
Change in option for acquiring non-controlling interest in Chess - - - - 384 - 384 - 384
At 31 October 2022 4,137 31,149 (3,037) 1,312 (1,016) 51,080 83,625 5,012 88,637
At 1 May 2022 4,121 30,527 (3,346) 1,000 (1,400) 53,068 83,970 5,220 89,190
Profit for the period - - - - - 11,356 11,356 (104) 11,252
Other comprehensive income for the period - - - - - 849 849 - 849
Total comprehensive income/(expense) for the period - - - - - 12,205 12,205 (104) 12,101
Transactions with owners of the Group and non-controlling interests recognised
directly in equity:
Issue of new shares 25 957 - - - - 982 - 982
Equity dividend - - - - - (5,124) (5,124) - (5,124)
Vesting of Restricted Shares - - - - - 218 218 - 218
Own shares purchased - - (586) - - - (586) - (586)
Own shares sold - - 111 - - - 111 - 111
Net loss on disposal of own shares - - 220 - - (220) - - -
Purchase of non-controlling interest - - - - - 2,359 2,359 (2,359) -
Share-based payments - - - 1,522 - - 1,522 - 1,522
Deferred tax adjustment in respect of share-based payments - - - (36) - - (36) - (36)
Transfer of share option reserve on vesting of options - - - (370) - 370 - - -
Change in option for acquiring non-controlling interest in Chess - - - - 1,400 - 1,400 - 1,400
At 30 April 2023 4,146 31,484 (3,601) 2,116 - 62,876 97,021 2,757 99,778
At 1 May 2023 4,146 31,484 (3,601) 2,116 - 62,876 97,021 2,757 99,778
Profit/(loss) for the period - - - - - 3,017 3,017 (83) 2,934
Other comprehensive (expense)/income for the period - - - - - (60) (60) 11 (49)
Total comprehensive income/(expense) for the period - - - - - 2,957 2,957 (72) 2,885
Transactions with owners of the Group and non-controlling interests recognised
directly in equity:
Issue of new shares 3 127 - - - - 130 - 130
Equity dividend - - - - - (3,697) (3,697) - (3,697)
Vesting of Restricted Shares - - - - - 202 202 - 202
Own shares purchased - - (1,917) - - - (1,917) - (1,917)
Own shares sold - - 115 - - - 115 - 115
Net loss on disposal of own shares - - 159 - - (159) - - -
Transfer of reserves - - - - - 1,556 1,556 (1,556) -
Share-based payments - - - 420 - - 420 - 420
(including deferred tax and foreign exchange)
At 31 October 2023 4,149 31,611 (5,244) 2,536 - 63,735 96,787 1,129 97,916
Consolidated statement of financial position
as at 31 October 2023
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 50,145 50,145 50,145
Other intangible assets 4,409 7,806 5,969
Right of use asset 8,053 8,804 8,521
Property, plant, and equipment 17,177 13,829 15,304
Deferred tax asset 1,531 1,364 1,600
81,315 81,948 81,539
Current assets
Inventories 33,831 22,755 32,041
Trade and other receivables 61,060 59,573 55,612
Current tax assets 1,793 138 -
Derivative financial instruments 78 128 42
Cash and cash equivalents 36,094 29,030 41,454
132,856 111,624 129,149
Total assets 214,171 193,572 210,688
Liabilities
Current liabilities
Trade and other payables (62,945) (44,343) (55,897)
Current tax liabilities (2,876) (659) (2,143)
Derivative financial instruments (766) (1,711) (1,041)
Lease liabilities (1,541) (1,264) (1,660)
Bank borrowings - (19) (9)
Provisions (10,378) (8,835) (8,687)
Other current liabilities - (1,016) -
(78,506) (57,847) (69,437)
Non-current liabilities
Deferred tax liability (1,100) (985) (1,467)
Lease liabilities (7,154) (8,131) (7,473)
Bank borrowings (22,779) (29,612) (25,837)
Provisions (1,449) (1,294) (1,404)
Retirement benefit obligations (5,267) (7,066) (5,292)
(37,749) (47,088) (41,473)
Total liabilities (116,255) (104,935) (110,910)
Net assets 97,916 88,637 99,778
Equity
Share capital 4,149 4,137 4,146
Share premium account 31,611 31,149 31,484
Own shares (5,244) (3,037) (3,601)
Share option reserve 2,536 1,312 2,116
Other reserves - (1,016) -
Retained earnings 63,735 51,080 62,876
Total equity attributable to the equity shareholders of the parent 96,787 83,625 97,021
Non-controlling interests 1,129 5,012 2,757
Total equity 97,916 88,637 99,778
Consolidated cash flow statement
for the six months ended 31 October 2023
Notes Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Net cash generated from/(used by) operating activities 6 7,598 (5,846) 16,522
Cash flow from investing activities
Interest received 227 29 134
Purchases of property, plant, and equipment (2,720) (2,612) (5,231)
Purchase of non-controlling interest in Chess - - (1,016)
Net cash used in investing activities (2,493) (2,583) (6,113)
Cash flow from financing activities
Issue of new shares 130 638 982
Dividends paid (3,697) (3,393) (5,124)
Purchase of own shares (1,917) - (586)
Sale of own shares 115 111 111
Repayment of borrowings (3,000) (17) (4,000)
Repayment of lease liabilities (1,006) (941) (1,954)
Net cash used in financing activities (9,375) (3,602) (10,571)
Net decrease in cash and cash equivalents (4,270) (12,031) (162)
Represented by:
Cash and cash equivalents brought forward 41,454 40,367 40,367
Net decrease in cash and cash equivalents (4,270) (12,031) (162)
Exchange (losses)/gains (1,090) 694 1,249
Cash and cash equivalents carried forward 36,094 29,030 41,454
Net funds/(debt) reconciliation
At 1 May Effect of foreign Cash flow At 31 October
2023 exchange rate £'000 2023
£'000 changes £'000
£'000
Cash and cash equivalents 41,454 (1,090) (4,270) 36,094
Loan (25,837) 58 3,000 (22,779)
Finance leases (9) - 9 -
Bank borrowings (25,846) 58 3,009 (22,779)
Net funds 15,608 (1,032) (1,261) 13,315
The above analysis excludes IFRS 16 leases which are disclosed on the face of
the statement of financial position.
Notes to the interim report
for the six months ended 31 October 2023
1. Basis of preparation
The financial information contained within this Interim Report has been
prepared applying the recognition and measurement requirements of UK-adopted
International Accounting Standards expected to apply at 30 April 2024. 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'. This Interim Report is presented in Sterling and all
values are rounded to the nearest thousand pounds (£'000) except where
otherwise indicated.
For management and reporting purposes, the Group, for the period just ended,
operated through two divisions, each containing three of our six small and
medium-sized businesses, operating primarily in defence and security markets,
and with a strong emphasis on technology, innovation and specialist expertise.
These divisions are the basis on which the Company, Cohort plc, currently
reports its primary segmental information and are as follows:
• Communications and Intelligence, comprising EID, MASS and MCL,
and;
• Sensors and Effectors, comprising Chess, ELAC and SEA
The Group's first half trading is in line with historical trends for the Group
where typically we see a first half of a third or less of the full year in
respect of earnings.
Going concern
The Group meets its day-to-day working capital requirements through a facility
which was renewed in July 2022 and recently extended to run until July 2026
with an option to extend by a further year until July 2027. The new facility
is for a £35m revolving credit facility with an accordion (option) to draw
another £15m. Both the current domestic economic conditions and continuing UK
Government budget pressures create uncertainty, particularly over the level of
demand for the Group's products and services, specifically in respect of UK
defence spending (UK MOD represents 52% of the Group's 2023/24 first half
revenue). The current heightened international security situation, especially
the ongoing conflict in Ukraine, has increased the focus of governments,
particularly in NATO, on defence capability and how this should be enhanced,
including increased investment. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance for a period of
at least 12 months from the date of signing this Interim Report, show that the
Group should be able to operate within the level of its current facility.
The Directors have a reasonable expectation that the Company and Group have
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.
(A) Statutory accounts
The financial information set out above does not constitute the Group's
statutory accounts for the year ended 30 April 2023. RSM UK Audit LLP has
reported on these accounts; its report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis, or material uncertainty, without qualifying its report and (iii)
did not contain a statement under Sections 498(2) or (3) of the Companies Act
2006. 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.
(B) Statement of compliance
The accounting policies applied by the Group in this Interim Report are
consistent with its consolidated financial statements for the year ended 30
April 2023 and are in accordance with UK-adopted International Accounting
Standards. The accounting policies have been applied consistently to all
periods presented in the consolidated financial statements of this Interim
Report.
Critical accounting estimates and judgements
In the application of the Group's accounting policies, the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of certain assets and liabilities.
Estimates and judgements as applied to items, including goodwill, revenue
recognition, recoverability of trade and other receivables, provisions and
taxation have not materially changed since the year end.
The Interim Report was approved by the Board for issue on 13 December 2023.
2. Segmental analysis of revenue and adjusted operating profit
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue
Communications and Intelligence 43,888 33,176 86,379
Sensors and Effectors 50,990 44,464 97,031
Inter-segment revenue (574) (173) (697)
94,304 77,467 182,713
Operating profit comprises:
Adjusted operating profit of:
Communications and Intelligence 5,998 5,189 14,911
Sensors and Effectors 2,295 2,451 9,320
Central costs (2,297) (2,629) (5,167)
Adjusted operating profit 5,996 5,011 19,064
Charge on marking forward exchange contracts to market value at the period end (6) (1,567) (1,082)
Amortisation of intangible assets (1,561) (1,836) (3,672)
Research and development expenditure credits (RDEC) - - 941
Operating profit 4,429 1,608 15,251
All revenue and adjusted operating profits are in respect of continuing
operations.
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 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
£393,000 for the six months ended 31 October 2023 (six months ended 31
October 2022: £310,000; year ended 30 April 2023: £1,522,000).
The chief operating decision maker as defined by IFRS 8 has been identified as
the Board.
Revenue analysis by sector and type of deliverable
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£m % £m % £m %
By sector
UK Defence 49.4 52 36.8 47 98.5 54
UK Security 1.1 1 0.8 1 3.7 2
UK Other 4.2 5 5.2 7 7.4 4
Total UK 54.7 58 42.8 55 109.6 60
Portuguese defence and security 3.7 4 0.4 1 4.9 3
German defence and security 2.9 3 0.8 1 4.3 2
Home market revenue 61.3 65 44.0 57 118.8 65
Export defence and security 29.3 31 29.7 38 58.4 32
Export other (non-defence and security) 3.7 4 3.8 5 5.5 3
Total revenue 94.3 100 77.5 100 182.7 100
The Group's total revenue in terms of type of deliverable is analysed as
follows:
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£m % £m % £m %
Product 70.2 74 57.4 74 140.8 77
Services 24.1 26 20.1 26 41.9 23
Total revenue 94.3 100 77.5 100 182.7 100
3. Income tax expense
The income tax expense comprises:
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
UK corporation tax: in respect of this period 1,878 556 3,314
UK corporation tax: in respect of prior periods - - (756)
German corporation tax: in respect of this period (354) 2 -
Portugal corporation tax: in respect of this period (488) (6) (249)
Portugal corporation tax: in respect of prior periods - - 397
Other foreign corporation tax: in respect of this period - - 133
1,036 552 2,839
Deferred taxation: in respect of this period (302) (368) (96)
Deferred taxation: in respect of prior periods - - (68)
(302) (368) (164)
734 184 2,675
The income tax charge for the six months ended 31 October 2023 is based upon
the anticipated charge for the full year ending 30 April 2024.
4. Earnings per share
The earnings per share are calculated as follows:
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Earnings
Basic and diluted earnings attributable to owners 3,017 1,109 11,356
Charge on marking forward exchange contracts to market at the period end (net 5 1,660 811
of income tax)
Group's share of amortisation of intangible assets (net of income tax) 1,165 1,342 2,672
Adjusted basic and diluted earnings 4,187 4,111 14,839
Number Number Number
Weighted average number of shares
For the purposes of basic earnings per share 40,419,052 40,616,350 40,673,953
Share options 113,791 130,673 88,038
For the purposes of diluted earnings per share 40,532,843 40,747,023 40,761,991
The weighted average number of ordinary shares for the six months ended 31
October 2023 excludes 1,048,353 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 2022: 602,590;
year ended 30 April 2023: 718,157).
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
Pence Pence Pence
Earnings per share
Basic 7.46 2.73 27.92
Diluted 7.44 2.72 27.86
Adjusted earnings per share
Basic 10.36 10.12 36.48
Diluted 10.33 10.09 36.40
5. Dividends
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
Pence Pence Pence
Dividends per share proposed in respect of the period
Interim 4.70 4.25 4.25
Final - - 9.15
The interim dividend for the six months ended 31 October 2023 is 4.70 pence
(six months ended 31 October 2022: 4.25 pence) per ordinary share. This
dividend will be payable on 13 February 2024 to shareholders on the register
at 5 January 2024.
The dividend paid during the year ended 30 April 2023 was 12.60 pence per
ordinary share, comprising 4.25 pence of interim dividend for the six months
ended 31 October 2022 and 8.35 pence of final dividend for the year ended 30
April 2022.
6. Net cash generated from/(used by) operating activities
Six months ended Six months ended Year ended
31 October 2023 31 October 2022 30 April 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the period 2,934 901 11,252
Adjustments for:
Tax expense 734 184 2,675
Depreciation of property, plant and equipment 1,281 1,171 2,376
Depreciation of right of use assets 901 898 1,776
Amortisation of intangible assets 1,561 1,836 3,672
Net finance expense 761 523 1,324
Derivative financial instruments and other non-trading exchange movements 6 1,567 1,082
Share-based payment 393 310 1,522
Increase in provisions 1,740 278 720
Operating cash flow before movements in working capital 10,311 7,668 26,399
(Increase)/decrease in inventories (1,567) 223 (8,565)
(Increase)/decrease in receivables (5,738) (4,090) 2,999
Increase/(decrease) in payables 7,513 (8,726) (2,976)
208 (12,593) (8,542)
Cash generated from/(used by) operations 10,519 (4,925) 17,857
Income taxes paid (2,068) (500) (111)
Interest paid (853) (421) (1,224)
Net cash generated from/(used by) operating activities 7,598 (5,846) 16,522
Independent review report to Cohort plc
Conclusion
We have been engaged by Cohort plc ('the Company') to review the condensed set
of financial statements of the Company and its subsidiaries (the 'Group') in
the interim financial report for the six months ended 31 October 2023 which
comprises the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Statement of Changes in Equity,
Consolidated Statement of Financial Position, Consolidated Cash Flow Statement
and accompanying notes. We have read the other information contained in the
interim financial report and considered whether it contains any apparent
material misstatements of fact or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 31 October 2023 is not prepared, in
all material respects, in accordance with the presentation, recognition and
measurement criteria of UK-adopted International Accounting Standards and the
AIM Rules for Companies.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ('ISRE (UK) 2410') issued for use in
the United Kingdom. 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 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.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted International Accounting Standards.
The condensed set of financial statements included in this interim financial
report has been prepared in accordance with the presentation, recognition and
measurement criteria of UK-adopted International Accounting Standards.
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group and
the Company to cease to continue as a going concern.
Responsibilities of Directors
The interim financial report is the responsibility of and has been approved by
the directors. The directors are responsible for preparing the interim
financial report in accordance with the presentation, recognition and
measurement criteria of UK-adopted International Accounting Standards and the
AIM Rules for Companies.
In preparing the interim financial report, the directors are responsible for
assessing the Group's and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's Responsibilities for the Review of the Financial Information
In reviewing the interim financial report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial statements in
the interim financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK) 2410 "'Review of Interim Financial
Information performed by the Independent Auditor of the Entity". Our review
work has been undertaken so that we might state to the Company those matters
we are required to state to them in an independent review 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 formed.
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London
EC4A 4AB
13 December 2023
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