REG - Cohort PLC - Half Yearly Report <Origin Href="QuoteRef">CHRT.L</Origin> - Part 1

CohortAnnouncement

14/12/2015 07:11

RNS Number : 8860I
Cohort PLC
14 December 2015
14 December 2015
COHORT PLC 
("Cohort" or "the Group")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2015
Cohort plc, the independent technology group, today announces its unaudited results for the six months ended 31 October 2015. 
Highlights include:
 Adjusted* operating profit up 40% at 3.5m (2014: 2.5m).
 Revenue up 32% to 49.7m (2014: 37.6m).
 Order intake of 55.7m (2014: 64.5m).
 Strong closing order book of 140.0m (30 April 2015: 134.0m).
 Net funds of 11.4m (31 October 2014: 6.7m; 30 April 2015: 19.7m).
 Interim dividend increased by 19% to 1.90 pence per share (2014: 1.60 pence per share).
 Adjusted* earnings per share 29% higher at 7.11 pence (2014: 5.50 pence).
Operational highlights:
 Contract wins announced since final results:
 MoD Hearing Protection 11.2m
 Electronic Warfare Operational Support Services to overseas customer > 3m
 Training and Exercise Support for MoD 9.7m
 New banking facility agreed since period end of 25m.
Looking forward:
 48.4m of 31 October 2015 order book is deliverable in the second half and underpins 90% of the 
 consensus forecast revenue (excluding EID) for the full year.
 Prospects for further order intake in the second half across the Group are encouraging.
 Revised agreement to acquire 57% of EID with agreement to acquire the balance once Portuguese
 Government approval is given
* Adjusted figures exclude the effects of marking forward exchange contracts to market value, amortisation of other intangible assets and exceptional items.
Commenting on the results, Nick Prest, Chairman of Cohort, said:
"The closing order book of 140.0m (30 April 2015; 134.0m) and recent order wins provide a good underpinning to the second half of the year. We expect, as seen in the last few years, a much stronger performance than in the first half."
"The Strategic Defence and Security Review recently concluded in the UK gives support to existing programmes, such as submarines, in which Cohort is engaged and foresees greater expenditure in areas such as Cyber and Special Forces in respect of which Cohort has strong and relevant capabilities."
"We expect to complete the initial stage of the EID acquisition, giving Cohort control, early in 2016. We will report 100% of the EID result from the time of this acquisition, and we expect EID to deliver a small but positive contribution to Cohort's 2015/16 financial year with more significant contributions thereafter."
"Overall, Cohort's order book and pipeline, market positions and strong funding position continue to provide confidence for its future prospects."

For further information, please contact
Cohort plc
Andrew Thomis, Chief Executive
Simon Walther, Finance Director
+44 (0)118 909 0390



Investec
Keith Anderson, Daniel Adams
+44 (0)20 7597 5970



MHP Communications 
Reg Hoare, Jamie Ricketts, Ollie Hoare
+44 (0)20 3128 8100
Cohort plc (www.cohortplc.com) (@Cohortplc) 
Cohort is an independent technology group working primarily for defence (air, land and sea), wider government and industry clients, through four market-facing subsidiary companies:
MASS - a specialist systems house with considerable experience in the defence market and a focus on electronic warfare operational support and secure information systems. Based in Cambridgeshire, MASS was acquired by Cohort in August 2006;
MCL - an expert provider of communications and surveillance technology. MCL sources, designs, manufactures, supports and provides training on systems for end users including the UK armed forces and other government agencies. Based in Surrey, MCL has been part of the Group since July 2014;
SCS - a defence technical advisory business, combining technical expertise with practical experience and domain knowledge. Based in Berkshire, SCS has been owned by Cohort since flotation in March 2006;
SEA - an advanced surveillance systems and software house with hardware development capability operating in the defence, transport and offshore energy market sectors. Based in Somerset, Devon, Bristol and Aberdeen, SEA was acquired by Cohort in October 2007.
Cohort(AIM: CHRT) was admitted to London's Alternative Investment Market in March 2006. It has its headquarters in Berkshire and employs in total around 600 core staff there and at its other operating company sites in Aberdeen, Bristol, Cambridgeshire, Devon, Lincolnshire, Somerset and Surrey.



Chairman's statement
Nick Prest CBE, Chairman
The Group's 2015/16 first half adjusted operating profit was 40% higher than last year at 3.5m (2014: 2.5m) on increased revenue of 49.7m (2014: 37.6m). The increase was driven primarily by increased revenue and profit at SEA and an improved mix at MASS, delivering a higher net margin.
We announced on 13 October 2015 that we expected to complete the acquisition of EID, which is conditional on Portuguese government approval, by mid-December. In the event, the political situation in Portugal following its 4 October general election has taken much longer than we expected to resolve itself, with a government commanding parliamentary support only sworn in on 26 November. With other urgent priorities for the new government, political approval of the transaction could take some time. Consequently we have agreed to acquire a stake of approximately 57% of EID, the entire stake of its private sector shareholders, which together with changes to the existing shareholders' agreement will give Cohort management control of the business. This is expected to take place no later than the end of January 2016, though a limited further delay is possible in the event that Portuguese competition clearance is required. The 57% stake is being acquired at a cost of 10.8m (7.7m), in line with the original acquisition terms.
Cohort has agreed to acquire the Portuguese government stake as and when approval is given, provided this is no later than 30 June 2016. Both transactions will be on the same terms as announced on 5 August 2015.
Key financials
The Group's revenue totalled 49.7m (2014: 37.6m), including 22.3m from SEA, 15.1m from MASS, 9.1m from SCS and a full six month contribution from MCL of 3.2m. In the six months ended 31 October 2015, the Group's adjusted operating profit was 3.5m (2014: 2.5m). This included contributions from MASS of 2.4m (2014: 1.9m), SEA of 1.8m (2014: 1.1m), SCS of 0.3m (2014: 0.3m) and MCL of just above break even (2014: 0.2m) with central costs of 1.0m (2014: 1.0m).
Cohort's operating profit after recognising exceptional items (0.2m) and amortisation of intangible assets (3.2m) was 0.1m (2014: 1.3m). The exceptional item was in respect of the costs incurred to date in acquiring EID.
Adjusted earnings per share for the six months ended 31 October 2015 increased by 29% to 7.11 pence (2014: 5.50 pence). The tax rate in respect of the adjusted operating profit was 18.0% (2014: 18.0%). Basic earnings per share were 2.77 pence (2014: 2.84 pence).
As signalled in June of this year when we reported our results for the year ended 30 April 2015, there was an operating cash outflow of 4.9m in the first half of this year (2014: inflow of 6.2m) reflecting the expected unwinding of the year end favourable working capital position. This operating cash outflow, along with dividend (1.4m) and tax payments (0.7m), capital expenditure (0.5m) and an initial consideration payment of 0.7m in respect of EID, accounts for the lower closing cash of 11.4m (30 April 2015: 19.7m).
During the period, the Group successfully concluded its negotiation with its banks (RBS, Barclays and Lloyds) and has recently put in place a new 25m revolving credit facility. This facility will be partly utilised to fund the acquisition of EID and provides the Group with further acquisition capacity as well as sufficient funding for its day to day operations, especially in respect of export opportunities.
Order intake for the first half was 55.7m (2014: 64.5m excluding acquired order books of MCL (5.4m) and J+S (32.6m)), resulting in a closing order book of 140.0m (30 April 2015: 134.0m). As expected, the order intake was lower than last year which included a large order to extend SEA's External Communication Systems (ECS) to the whole UK submarine fleet. Further orders in respect of ECS are expected in the second half of the year.
MASS
MASS had a stronger first half delivering 2.4m (2014: 1.9m) of adjusted operating profit on a slightly lower level of revenue, 15.1m compared with 15.6m in 2014. The improved performance arose from increased revenue from higher margin electronic warfare support contracts, including the recently announced contract win in the Middle East. MASS's first half operating margin of 15.7% (2014: 12.3%) is below what we expect to see for the full year.
Of MASS's closing order book of 52.4m, 15.0m is deliverable in the current financial year. This strong underpinning along with some good opportunities give us confidence that MASS will have a stronger second half.
MCL
MCL made a positive, albeit small, contribution this first half, slightly down on its maiden contribution last year. This performance was a result of slower order intake, with the revenue as a consequence only slightly higher than that reported in 2014/15, which covered a period of only four months. 
Although historically MCL has had a good record of growth, it has typically had less visibility of future performance compared to other Cohort companies as it has had fewer long running contracts and a shorter order to delivery cycle. The recent hearing protection order for 11.2m, together with other programmes for which the company is bidding, will help to give it better forward visibility in the future.
Traditionally MCL has had a stronger second half, reflecting the usual UK MoD's in-year spend pattern. This, combined with its 13.9m of closing order book of which 7.2m is deliverable in the current financial year, gives us confidence that MCL will deliver a stronger second half.
The agreement to acquire the initial 50% plus one share of MCL included a mechanism for Cohort to acquire the remaining shares at a price based upon MCL's performance for the two years ending 30 September 2016. Cohort expects to acquire these shares on or before 30 April 2017.
SCS
SCS's adjusted operating profit of 0.3m was in line with the first half of last year on higher revenue of 9.1m (2014: 7.2m).
The lower net margin of 3.3% (2014: 4.3%) reflects a weaker mix, with higher levels of Air Systems work and less overseas support work as a result of the cessation of UK operations in Afghanistan.
SCS's recently announced win to continue to provide support to the UK's Joint Warfare Centre, a service SCS has been providing for 15 years, confirms its strong capabilities in this area. Its closing order book of 17.7m includes 7.2m of revenue which is deliverable in the current financial year. Combined with other opportunities this gives us confidence that SCS, under its recently appointed Managing Director, Christian Cullinane, will perform strongly in the second half and make further progress this year.
SEA
Following a busy year last year, SEA has continued its integration of the J+S business and this is reflected in the improved performance as well as another good performance in order intake.
SEA's improved adjusted operating profit of 1.8m (2014: 1.1m) was on higher revenue of 22.3m (2014: 12.2m). The net margin of 7.9% was lower than the first half last year (8.8%) and was a reflection of a mix of slightly lower margin work and a tough market for our Offshore Energy business.
SEA's closing order book of 56.1m includes 19.0m of revenue to be delivered in the current financial year. This, along with a pipeline of good opportunities and the expectation of the usual stronger second half in its research, support areas and transport, give us confidence that SEA will make further progress in the second half as well as returning to a more usual operating margin for the year as a whole.
Dividend
The Board is proposing an increase of 19% in the interim dividend to 1.90 pence per share (2014: 1.60 pence). This increase reflects the Group's good cash position and the Board's confidence in the outlook for Cohort and commitment to a progressive dividend policy. The dividend will be paid on 2 March 2016 to shareholders on the register at 5 February 2016.


Outlook
The closing order book of 140.0m (30 April 2015; 134.0m) and recent order wins provide a good underpinning to the second half of the year. We expect, as seen in the last few years, a much stronger performance than in the first half.
The Strategic Defence and Security Review recently concluded in the UK gives support to existing programmes, such as submarines, in which Cohort is engaged and foresees greater expenditure in areas such as Cyber and Special Forces in respect of which Cohort has strong and relevant capabilities.
We expect to complete the initial stage of the EID acquisition, giving Cohort control, early in 2016. We will report 100% of the EID result from the time of this acquisition, and we expect EID to deliver a small but positive contribution to Cohort's 2015/16 financial year with more significant contributions thereafter.
Overall, Cohort's order book and pipeline, market positions and strong funding position continue to provide confidence for its future prospects.
Nick Prest CBE
Chairman

Consolidated income statement
for the six months ended 31 October 2015
Notes
Six months
ended
31 October
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Revenue
2
49,667
37,581
99,938
Cost of sales (including marking forward exchange contracts 
to market value at period end)

(35,049)
(26,393)
(69,988)
Gross profit

14,618
11,188
29,950
Administrative expenses (including amortisation of intangible 
assets and exceptional items)

(14,569)
(9,921)
(24,085)
Operating profit
2
49
1,267
5,865
Operating profit comprises:




Adjusted operating profit
2
3,476
2,463
10,085
Expense on marking forward exchange contracts 
to market value at period end

-
-
(38)
Amortisation of intangible assets

(3,246)
(549) 
(3,602)
Exceptional items:




Cost to date of acquiring EID (included in administrative expenses)
7
(181) 
-
-
Cost of acquisition of MCL (included in administrative expenses)

-
(197)
(197)
Cost of acquisition of J+S (included in administrative expenses)

-
(417)
(427)
Disposal of SEA's Space business 
(included in administrative expenses)

-
(33)
44
Operating profit

49
1,267
5,865
Finance income

36
56
82
Profit before tax

85
1,323
5,947
Income tax expense
3
(15)
(304)
(707)
Profit for the period

70
1,019
5,240
Attributable to:




Equity holders of the parent

1,126
1,132
5,628
Non-controlling interests

(1,056)
(113)
(388)


70
1,019
5,240
Earnings per share

Pence
Pence
Pence
Basic
4
2.77
2.84
14.04
Diluted
4
2.71
2.78
13.74
All profit for the period is derived from continuing operations.
The comprehensive income for each of the periods attributable to equity shareholders of the parent and non-controlling interests is the same as the profit for the period attributable to the equity shareholders of the parent and non-controlling interests.

Consolidated statement of financial position
as at 31 October 2015
Notes
31 October
2015
Unaudited
'000
31 October
2014
Unaudited
'000
30 April
2015
Audited
'000
Assets




Non-current assets




Goodwill

36,841
34,798
36,841
Other intangible assets

15,738
21,924 
18,871
Property, plant and equipment

10,382
11,399
10,338
Deferred tax asset

104
301
104


63,065
68,422
66,154
Current assets




Inventories

682
2,284
1,078
Trade and other receivables

27,157
19,411
19,528
Cash and cash equivalents

11,398
6,745
19,701


39,237
28,440
40,307
Total assets

102,302
96,862
106,461
Liabilities




Current liabilities




Trade and other payables

(23,155)
(17,239)
(25,373)
Current tax liabilities

(732)
(865)
(786)
Derivative financial instruments

(38)
-
(38)
Bank borrowings

(2)
(88)
(4)
Provisions

(517)
(2,176)
(558)


(24,444)
(20,368)
(26,759)
Non-current liabilities




Deferred tax liability

(3,719)
(4,977)
(4,345)
Bank borrowings

(10)
(71)
(10)
Other creditors
8
(6,000)
(12,500)
(12,500)


(9,729)
(17,548)
(16,855)
Total liabilities

(34,173)
(37,916)
(43,614)
Net assets

68,129
58,946
62,847
Equity




Share capital

4,096
4,096
4,096
Share premium account

29,657
29,656
29,657
Own shares

(403)
(1,216)
(835)
Share option reserve

503
626
403
Other reserve: option for acquiring non-controlling interest in MCL
8
(6,000)
(12,500)
(12,500)
Retained earnings

33,111
29,787
33,805
Total equity attributable to the equity shareholders of the parent

60,964
50,449
54,626
Non-controlling interests

7,165
8,497
8,221
Total equity

68,129
58,946
62,847

Consolidated statement of changes in equity
for the six months ended 31 October 2015
Attributable to the equity shareholders of the parent
Share
capital
'000
Share
premium
account
'000
Own
shares
'000
Share
option
reserve
'000
Other
reserves
'000
Retained
earnings
'000
Total
'000
Non-
controlling
interests
'000
Total
equity
'000
At 1 May 2014
4,096
29,656
(2,274)
526
-
30,194
62,198
-
62,198
Profit for the period
-
-
-
-
-
1,132
1,132
(113)
1,019
Transactions with owners of Group and non-controlling interests recognised directly in equity:









Equity dividend
-
-
-
-
-
(1,119)
(1,119)
-
(1,119)
Vesting of restricted shares
-
-
-
-
-
43
43
-
43
Own shares sold
-
-
595
-
-
-
595
-
595
Net loss on selling own shares
-
-
463
-
-
(463)
-
-
-
Share-based payments
-
-
-
100
-
-
100
-
100
Option for acquiring non-controlling interest in MCL
-
-
-
-
(12,500)
-
(12,500)
-
(12,500)
Introduction of non-controlling interest on acquisition of MCL
-
-
-
-
-
-
-
8,610
8,610
At 31 October 2014
4,096
29,656
(1,216)
626
(12,500)
29,787
50,449
8,497
58,946
At 1 May 2014
4,096
29,656
(2,274)
526
-
30,194
62,198
-
62,198
Profit for the year
-
-
-
-
-
5,628
5,628
(388)
5,240
Transactions with owners of Group and non-controlling interests recognised directly in equity:









Equity dividends
-
-
-
-
-
(1,765)
(1,765)
-
(1,765)
New shares issued
-
1
-
-
-
-
1
-
1
Vesting of Restricted shares
-
-
-
-
-
44
44
-
44
Own shares sold
-
-
822
-
-
-
822
-
822
Net loss on selling own shares
-
-
617
-
-
(617)
-
-
-
Share-based payments
-
-
-
198
-
-
198
-
198
Transfer of share option reserve on vesting of options
-
-
-
(321)
-
321
-
-
-
Option for acquiring non-controlling interest in MCL
-
-
-
-
(12,500)
-
(12,500)
-
(12,500)
Introduction of non-controlling interest on acquisition of MCL
-
-
-
-
-
-
-
8,609
8,609
At 30 April 2015
4,096
29,657
(835)
403
(12,500)
33,805
54,626
8,221
62,847
At 1 May 2015
4,096
29,657
(835)
403
(12,500)
33,805
54,626
8,221
62,847
Profit for the period
-
-
-
-
-
1,126
1,126
(1,056)
70
Transactions with owners of Group and non-controlling interests recognised directly in equity:









Equity dividend
-
-
-
-
-
(1,387)
(1,387)
-
(1,387)
Vesting of restricted shares
-
-
-
-
-
76
76
-
76
Own shares purchased
-
-
(631)
-
-
-
(631)
-
(631)
Own shares sold
-
-
554
-
-
-
554
-
554
Net loss on selling own shares
-
-
509
-
-
(509)
-
-
-
Share-based payments
-
-
-
100
-
-
100
-
100
Charge in option for acquiring non-controlling interest in MCL
-
-
-
-
6,500
-
6,500
-
6,500
At 31 October 2015
4,096
29,657
(403)
503
(6,000)
33,111
60,964
7,165
68,129

Consolidated cash flow statement
for the six months ended 31 October 2015
Notes
Six months
ended
31 October
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Net cash (used in)/generated from operating activities
6
(5,621)
5,458
18,798
Cash flow from investing activities




Interest received

38
58
87
Purchases of property, plant and equipment

(584)
(449)
(1,063)
Consideration paid to date for acquisition of EID
7
(670)
-
-
Acquisition of MCL, net of cash acquired

-
(4,715)
(5,698)
Acquisition of J+S, including overdraft acquired

-
(11,878)
(11,688)
Disposal of SEA's Space business

-
2,500
4,000
Net cash used in investing activities

(1,216)
(14,484)
(14,362)
Cash flow from financing activities




Equity dividends paid

(1,387)
(1,119)
(1,765)
Repayment of borrowings

(2)
(43) 
(131)
Purchase of own shares

(631)
- 
-
Sale of own shares

554
595
822
Issue of new shares

-
-
1
Net cash used in financing activities

(1,466)
(567)
(1,073)
Net (decrease)/increase in cash and cash equivalents

(8,303)
(9,593)
3,363
Represented by:




Cash and cash equivalents brought forward

19,701
16,338 
16,338
Cash flow

(8,303)
(9,593)
3,363
Exchange

-
- 
-
Cash and cash equivalents carried forward

11,398
6,745
19,701

Notes to the interim report
For the six months ended 31 October 2015
1. Basis of preparation
The financial information contained within this Interim Report has been prepared applying the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted by the EU and expected to apply at 30 April 2016. As permitted, this Interim Report has been prepared in accordance with AIM Rules for Companies and is not required to comply with IAS 34 'Interim Financial Reporting' to maintain compliance with IFRS. This Interim Report is presented in sterling and all values are rounded to the nearest thousand pounds ('000) except where otherwise indicated
For management and reporting purposes, the Group currently operates through its four subsidiaries MASS, MCL, SCS and SEA. These subsidiaries are the basis on which the Company, Cohort plc, reports its primary segment information.
Going concern
The Company has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.
The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing this Interim Report.
In accordance with Section 434 of the Companies Act 2006, the unaudited results do not constitute statutory financial statements of the Company. The six months' results for both years are unaudited. 
(A) Statutory accounts
The financial information set out above does not constitute the Group's statutory accounts for the year ended 30 April 2015. KPMG LLP has reported on these accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.
(B) Statement of compliance
The accounting policies applied by the Group in its consolidated financial statements for the year ended 30 April 2015 are in accordance with IFRS as adopted by the European Union. The accounting policies have been applied consistently to all periods presented in the consolidated financial statements.
The Interim Report was approved by the Board and authorised for issue on 14 December 2015.


2. Segmental analysis of revenue and adjusted operating profit
Six months
ended
31 October
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Revenue



MASS 
15,126
15,545 
32,553
MCL
3,233
2,594 
10,143
SCS 
9,048
7,233 
16,948
SEA
22,275
12,222
40,375
Inter-segment revenue
(15)
(13)
(81)

49,667
37,581
99,938
Operating profit comprises:



Trading profit of:



MASS 
2,372
1,914 
5,492
MCL
19
164 
1,327
SCS 
303
308 
1,319
SEA
1,765
1,074
3,964
Central costs
(983)
(997)
(2,017)
Adjusted operating profit
3,476
2,463 
10,085
Expense on marking forward exchange contracts 
to market value at period end
-
-
(38)
Amortisation of intangible assets
(3,246)
(549)
(3,602)
Exceptional items
(181)
(647)
(580)
Operating profit
49
1,267
5,865
All revenue and adjusted operating profit is 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, exceptional items and the amortisation of other intangible assets.
The adjusted operating profit is presented in addition to the operating profit to provide the trading performance of the Group, as derived from its constituent elements on a comparable basis from period to period.
The SEA trading profit of 1,765,000 (six months ended 31 October 2014: 1,074,000; year ended 30 April 2015: 3,964,000) is after excluding exceptional charges of Nil in respect of the disposal of its Space business (six months ended 31 October 2014: charge of 33,000; year ended 30 April 2015: income of 44,000), and Nil for the acquisition of J+S Ltd (six months ended 31 October 2014: charge of 417,000; year ended 30 April 2015: charge of 427,000) and amortisation of other intangible assets of 650,000 (six months ended 31 October 2014: 43,000; year ended 30 April 2015: 1,378,000).
The Group's adjusted operating profit includes the cost of share options of 100,000 for the six months ended 31 October 2015 (six months ended 31 October 2014: 100,000; year ended 30 April 2015: 198,000) and is applied to each reporting segment in proportion to the number of employees in the Group's various share option schemes. It excludes the exceptional charge of 181,000 in respect of the acquisition of EID (197,000 in respect of the acquisition of MCL for the six months ended 31 October 2014 and the year ended 30 April 2015) and amortisation of other intangible assets of 2,596,000 (six months ended 31 October 2014: 506,000; year ended 30 April 2015: 2,224,000).
The chief operating and decision-maker as defined by IFRS 8 has been identified as the Board.


Revenue analysis by sector and type of work
Six months ended
31 October 2015
Unaudited
Six months ended
31 October 2014
Unaudited
Year ended
30 April 2015
Audited
m
%
m
%
m
%
By sector






UK defence and security
33.8
68
27.2
72
70.0
70
Export defence customers
10.2
21
5.5
15
19.4
19
Defence and security revenue
44.0
89
32.7
87
89.4
89
Transport 
1.7

1.4

3.9

Offshore energy
2.2

0.2

2.0

Other commercial
1.8

3.3

4.6

Non-defence revenue
5.7
11
4.9
13
10.5
11
Total revenue
49.7
100
37.6
100
99.9
100
By capability






Defence products
14.4
29
8.3
22
34.8
35
Operational support
8.9
18
3.2
8
9.7
10
Specialist expertise
6.7
13
4.9
13
10.4
10
Training
5.5
11
4.2
11
10.6
11
Studies and analysis
4.5
9
3.8
10
8.4
8
Secure networks
3.8
8
5.6
15
9.1
9
Applied research
3.0
6
2.9
8
6.8
7
Application software
2.9
6
4.7
13
10.1
10
Total revenue
49.7
100
37.6
100
99.9
100
3. Income tax expense
The income tax expense comprises:
Six months
ended
31 October
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Current tax: in respect of this period
681
443
1,485
Current tax: in respect of prior periods
(40)
-
(204)

641
443
1,281
Deferred taxation: in respect of this period
(626)
(139)
(518)

15
304
763
The income tax expense for the six months ended 31 October 2015 is based upon the anticipated charge for the full year ended 30 April 2016.
4. Earnings per share
The earnings per share are calculated as follows:
Six months
Ended
31 October
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Earnings



Basic and diluted earnings
1,126
1,132
5,628
Charge on marking forward exchange contracts to market at period end (net of income tax)
-
- 
23
Exceptional items (net of income tax):



Cost incurred to date on acquisition of EID
181
-
-
Cost on acquisition of MCL
-
197
197
Cost on acquisition of J+S
-
417
427
Loss/(profit) on disposal of SEA's Space business (net of income tax)
-
5
(72)
Group's share of amortisation of intangible assets (net of income tax)
1,581
437
1,992
Adjusted basic and diluted earnings
2,888
2,188
8,195
Number
Number
Number
Weighted average number of shares



For the purposes of basic earnings per share
40,659,768
39,808,740
40,071,658
Share options
878,989
880,587
894,739
For the purposes of diluted earnings per share
41,538,757
40,689,327
40,966,397
The weighted average number of ordinary shares for the six months ended 31 October 2015 excludes 118,311 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 2014: 728,180; year ended 30 April 2015: 500,041).
Six months
ended
31 October 
2015
Unaudited
Pence
Six months
ended
31 October
2014
Unaudited
Pence
Year
ended
30 April
2015
Audited
Pence
Earnings per share



Basic
2.77
2.84
14.04
Diluted
2.71
2.78
13.74
Adjusted earnings per share



Basic
7.11
5.50
20.45
Diluted
6.95
5.38
20.00
5. Dividends
Six months
ended
31 October
2015
Unaudited
Pence
Six months
ended
31 October
2014
Unaudited
Pence
Year
ended
30 April
2015
Audited
Pence
Dividends per share proposed in respect of the period



Interim
1.90
1.60
1.60
Final
-
-
3.40
The interim dividend for the six months ended 31 October 2015 is 1.90 pence (six months ended 31 October 2014: 1.60 pence) per ordinary share. This dividend will be payable 2 March 2016 for shareholders on the register at 5 February 2016.
The final dividend charged to the income statement for the year ended 30 April 2015 was 4.40 pence per ordinary share comprising 1.60 pence of interim dividend for the six months ended 31 October 2014 and 2.80 pence of final dividend for the year ended 30 April 2014.


6. Net cash (used in)/generated from operating activities
Six months
ended
31 October 
2015
Unaudited
'000
Six months
ended
31 October
2014
Unaudited
'000
Year
ended
30 April
2015
Audited
'000
Profit for the period
70
1,019
5,240
Adjustments for:



Tax expense
15
304
707
Depreciation of property, plant and equipment
539
372
957
Amortisation of intangible assets
3,246
549
3,602
Net finance income
(36)
(56)
(82)
Share-based payment
100
100
198
Derivative financial instruments
-
- 
38
(Decrease)/increase in provisions
(41)
473
(356)
Operating cash flows before movements in working capital
3,893
2,761
10,304
Decrease/(increase) in inventories
396
(491)
450
(Increase)/decrease in receivables
(7,629)
5,967
1,861
(Decrease)/increase in payables
(1,534)
(1,995)
7,890

(8,767)
3,481
10,201
Cash (used in)/generated from operations
(4,874)
6,242
20,505
Tax paid
(745)
(782)
(1,702)
Interest paid
(2)
(2)
(5)
Net cash (used in)/generated from operating activities
(5,621)
5,458
18,798
7. Acquisition of Empresa de Investigao e Desenvolvimento de Electrnica S.A. (EID)
On 5 August 2015, Cohort announced it had agreed to acquire 99.98% of EID, a Portugal based supplier of advanced electronics, communications and command and control products and systems for the global defence market.
At the same time, Cohort paid 949,000 (670,000), representing 5% of the total gross consideration (19.0m; 13.3m). This payment is refundable in full if the acquisition does not complete. This initial consideration has been recognised in other debtors.
The costs to date incurred in acquiring EID of 181,000 have been recognised as an exceptional item. The total expected costs of the acquisition, including renewing the Group's bank facility are estimated at 650,000 and will be disclosed as an exceptional item in the year ended 30 April 2016.
As the Group has no control over EID at this stage, none of the result of EID has been consolidated by the Group in the six months ended 31 October 2015.
8. Acquisition of Marlborough Communications Ltd (MCL)
The Group acquired 50% plus one share of Marlborough Communications Ltd (MCL) on 9 July 2014.
The Group has recognised 100% of MCL's result and net assets as it has effective control.
The Sale and Purchase Agreement in respect of the acquisition of MCL includes an option for the purchase of the remaining shares (just under 50%) in MCL, the non-controlling interest.
This option is exercisable by 31 December 2016 and is capped at 12.5m. If the performance of MCL in the two years ending 30 September 2016 is such that the amount payable for the non-controlling interest's shares exceeds the cap, the Group has the right to negotiate the amount payable at that time or not to acquire the non-controlling interest.
The non-controlling interest is entitled to participate in any dividends payable by MCL during the two years ending 30 September 2016.
In accordance with IFRS 3, the Group has ascribed a value to the option to acquire the non-controlling interest of MCL. This value has been estimated at 6.0m and the option is shown as a non-current liability and as the non-controlling interest has a right to dividends, in the other reserves as 'option for acquiring the non-controlling interest in MCL.
The reduction in the value of the 'option for acquiring the non-controlling interest in MCL' from 12.5m (at 30 April 2015) reflects the latest estimate of MCL's performance for the two years ending 30 September 2016.


Independent review report to Cohort plc
for the six months ended 31 October 2015
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly report for the six months ended 31 October 2015 which comprises the Consolidated Income Statement, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The half-yearly report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.
The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly report for the six months ended 31 October 2015 is not prepared, in all material respects, in accordance with the recognition and measurement requirements of IFRSs as adopted by the EU and the
AIM Rules.
Andrew Campbell-Orde 
for and on behalf of KPMG LLP
Chartered Accountants
Arlington Business Park
Theale
Berkshire
RG7 4SD
14 December 2015

This information is provided by RNS
The company news service from the London Stock Exchange
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