TIDMCHRT
RNS Number : 4391G
Cohort PLC
19 July 2023
One Waterside Drive
Arlington Business Park
Reading
Berks
RG7 4SW
19 July 2023
COHORT PLC
UNAUDITED PRELIMINARY RESULTS
FOR THE YEARED 30 APRIL 2023
Record operating profit, revenue and order book. Further
progress expected.
Cohort plc today announces its unaudited results for the year
ended 30 April 2023.
2023 2022 %
Revenue GBP182.7m GBP137.8m 33
Adjusted operating profit(1) GBP19.1m GBP15.5m 23
Adjusted earnings per share(1) 36.48p 31.08p 17
Net funds(2) GBP15.6m GBP11.0m 42
Order intake GBP220.9m GBP186.4m 19
Order book (closing) GBP329.1m GBP291.0m 13
Proposed final dividend per
share 9.15p 8.35p 10
Total dividend per share 13.40p 12.20p 10
Statutory 2023 2022 %
Statutory profit before tax GBP13.9m GBP10.2m 36
Basic earnings per share 27.92p 22.55p 24
Highlights include:
-- Record adjusted operating profit of GBP19.1m (2022: GBP15.5m)
on record revenue of GBP182.7m (2022: GBP137.8m)
-- Growth in both reporting divisions:
o Especially strong performance from within the Communications
and Intelligence division, driven by significant uplift in UK MOD
activity at MCL.
o Improved performance within Sensors and Effectors, with Chess
delivering better operational performance.
-- Net funds higher than market expectations at GBP15.6m (2022:
GBP11.0m) with continuing robust cash generation.
-- Dividend increased by 10%; the dividend has been increased
every year since the Group's IPO in 2006.
(1) Excludes exceptional items, amortisation of other intangible
assets, research and development expenditure credits and
non-trading exchange differences, including marking forward
exchange contracts to market.
(2) Excludes IFRS 16 lease liabilities.
Looking forward:
-- Strong order intake of GBP220.9m (2022: GBP186.4m) leading to
a record closing order book of GBP329.1m (2022: GBP291.0m)
-- Underpins a record 80% of current market revenue expectations
for 2023/24 (78% equivalent figure for 2022/23).
-- Encouraging start to the 2023/24 financial year. Expectations
for the full year unchanged.
Commenting on the results, Nick Prest CBE, Chairman of Cohort
plc said:
"This was a record performance for Cohort, which came in
slightly above market expectations, with robust cash generation and
a record closing order book giving us strong revenue cover for the
coming financial year.
Our order book is not only growing in value, but its longevity
continues to increase and we now have orders across the Group
stretching out to 2032. We have good prospects to secure further
long-term orders for our naval systems and support work, including
from the UK MOD, Portugal and in export markets, as recently
exemplified by the GBP26m order announced 9 May 2023 and a first
order for our KDS anti-submarine system of over GBP7m announced on
30 May 2023.
The order book underpins more than GBP140m (80%) of 2023/24
revenue expectations (2022: GBP128m). Following order wins since
the start of the financial year of over GBP60m, that cover now
stands at just over 90%.
We continue to expect that our trading performance for 2023/24
will be ahead of that achieved for the year ended 30 April 2023. As
a result of planned capital expenditure and expansion in working
capital we expect that our net cash balance will decrease, but that
we will maintain positive net funds at the year end.
We are optimistic that the Group will make further progress in
the medium to longer term, based on current orders for long-term
delivery, our continued investment in the businesses and on our
pipeline of opportunities."
A meeting is being held today 19 July 2023 for analysts, hosted
by Andy Thomis, Chief Executive, and Simon Walther, Finance
Director, from 09.00am for a 09:30am start. Please contact MHP via
cohort@mhpgroup.com if you wish to attend.
For those unable to attend in person, there will be a recording
of the presentation available on Cohort's website after the
meeting:
https://www.cohortplc.com/investors/results-reports-presentations
Investor Presentation
Chief Executive, Andy Thomis, and Finance Director, Simon
Walther, will present these results to investors by webinar on
Friday, 21st July at 11am. Registration is free and questions can
be submitted during the presentation which will, if possible, be
addressed at the end of it. A recording will also be made available
afterwards.
To attend the event, please register at
https://us06web.zoom.us/webinar/register/WN_giONcRAoQaavPuq0Q4HW9A
For further information please contact:
Cohort plc 0118 909 0390
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Emily McBride, Head of Corporate
Communications
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 ) 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 1,100 core staff there and at
its other operating company sites across the UK, Germany, and
Portugal.
The Group is split into two divisions - Communications and
Intelligence, and Sensors and Effectors:
Communications and Intelligence
-- EID designs and manufactures advanced communications systems
for naval and military customers. Cohort
acquired a majority stake in June 2016. www.eid.pt
-- MASS is a specialist data technology company serving the
defence and security markets, focused on electronic warfare,
digital services, and training support. Acquired by Cohort in
August 2006. www.mass.co.uk
-- MCL designs, sources, and supports advanced electronic and
surveillance technology for UK end users including the MOD and
other government agencies. MCL has been part of the Group since
July 2014. www.marlboroughcomms.com
Sensors and Effectors
-- Chess Dynamics offers surveillance, tracking and fire-control
systems to the defence and security markets. Chess has been part of
the Group since December 2018. www.chess-dynamics.com
-- ELAC SONAR supplies advanced sonar systems and underwater
communications to global customers in the
naval marketplace. Acquired by Cohort in December 2020. www.elac-sonar.de
-- SEA delivers and supports technology-based products for the
defence and transport markets alongside specialist research and
training services. Acquired by Cohort in October 2007.
https://www.sea.co.uk/
Chairman's statement
"Record performance, slightly above expectations, robust cash,
and a record closing order book with strong revenue cover for the
coming financial year."
Performance
The Group achieved a record adjusted operating profit of
GBP19.1m (2022: GBP15.5m) on record revenue of GBP182.7m (2022:
GBP137.8m), a result that slightly exceeded market expectations.
Compared to 2021/22, significant improvements in performance were
seen in both reporting divisions.
The Group had another strong year of order intake, winning
GBP220.9m of orders (2022: GBP186.4m), resulting in a record
closing order book of GBP329.1m (2022: GBP291.0m). Our order book
now stretches out to 2032 and we expect to extend that further in
the coming year.
Our Communications and Intelligence division had a strong year,
delivering a 21% increase in trading performance on 26% revenue
growth and an operating margin of 17.3% (2022: 17.9%). Sales to UK
MOD offset a weaker performance at our Portuguese business, EID,
which made a marginal trading loss, a result of continuing weak
performance in Portugal due to continuing delays to new programmes,
particularly with the Portuguese Navy. We now expect these orders
to be placed in 2023/24. Most of the improvement in this division
arose at MCL from high demand for hearing protection, communication
equipment and drones from the UK MOD. We also saw good order intake
with MASS securing several order extensions with its UK MOD
customers, continuing work it has been undertaking for many
years.
The Sensors and Effectors division also saw an improved
performance. Adjusted operating profit was up 25% on 39% higher
revenue, producing an operating margin of 9.7% (2022: 10.8%). The
strong order intake in the last financial year, especially for
naval systems and support, was a significant factor in the
improvement. This included an improved result at Chess where a much
better financial performance was achieved alongside resolving the
remaining project issues. ELAC continues to make progress on its
project to provide a world-leading sonar solution to the Italian
Navy's new submarines. At present we are trading this contract at a
low margin whilst moving through the design phase. We expect to
begin production in the coming financial year.
The impact of COVID-19 has now largely dissipated, although we
continue to face higher prices in some of our supply chains.
Face-to-face meetings, including exhibitions and engagement with
customers, have largely returned to pre-pandemic levels.
The Group's statutory operating profit of GBP15.3m (2022:
GBP11.1m) is stated after recognising amortisation of intangible
assets of GBP3.7m (2022: GBP6.9m), no exceptional items (2022:
GBP0.7m income) and research and development expenditure credits of
GBP0.9m (2022: GBP1.0m). Profit before tax was GBP13.9m (2022:
GBP10.2m) and profit after tax was GBP11.3m (2022: GBP8.7m).
The closing net funds of GBP15.6m (2022: GBP11.0m) was better
than our expectation, due to an improved operating cash flow,
particularly in the Communications and Intelligence division.
Within Sensors and Effectors, Chess delivered a welcome improvement
in cash performance, unwinding a significant proportion of its
opening working capital.
International conflict
Russia's invasion of Ukraine has resulted in extraordinary
hardship and suffering for the people of that country and has
brought war to the plains of Europe for the first time in almost 80
years. One of the consequences of this situation is the impact on
public and government perceptions worldwide of the importance of an
effective defence capability. At the time of the invasion, last
year, many governments across the world had to re-learn that the
stability of democracy and maintenance of our freedoms and values
requires strong defence to deter, and if necessary repel, an
aggressive invader. It is also clearer than ever that strong
defence depends on a strong defence industry as well as capable
armed forces. That is something Cohort's leadership and employees
understand well, and for many of us it is a large part of our
motivation at work. By contributing to the security of the UK and
its allies, Cohort generates social value as well as financial
returns. Our customers' response to the situation in Ukraine had a
positive business impact in 2021/22 and, as we expected, this
increased in 2022/23. At this time, the duration and outcome of
this conflict is difficult to predict but, as we stated last year,
we believe that the long-term change in defence stance that has
been catalysed by these events, especially among NATO countries,
will be of benefit to the Group. Study work by McKinsey[1]
forecasts an increase in European defence spending of between 53%
and 65% from 2021 to 2026. To set against this, we expect to see
continuing economic fallout from the war in Ukraine, including
higher inflation and rising interest rates as well as sustained
higher energy costs.
Further afield, the increasingly assertive approach of China in
the South China Sea, Taiwan and beyond, mostly through naval power,
is driving a response among nations in that region. One example is
Australia's AUKUS alliance between the UK, Australia and the US.
Joint development of future nuclear submarines is a key component
of this, and our strong involvement with the UK submarine programme
positions us well to participate. But the scope of the alliance is
much wider, and we are looking to engage in other areas including
electronic warfare and artificial intelligence. Elsewhere Japan has
announced an intention to increase annual defence spending by 65%
by 2027, as well as move towards a wider international supply base.
We already supply Japan through our Sensors and Effectors division
and are looking to build relationships and demonstrate our other
capabilities.
The prospects for the Group in this region, especially in naval
systems supplied mostly through our Sensors and Effectors division,
are good.
Strategic initiatives
When we acquired Chess Dynamics in December 2018, we agreed to
pay further consideration depending on the performance of the
business over the three years ended 30 April 2021. We took control
of the whole of Chess on 30 November 2022 for a further
consideration of GBP1.0m.
The Group continues to review acquisition opportunities as they
arise, in line with our investment criteria.
Shareholder returns
Adjusted earnings per share (EPS) were 36.48 pence (2022: 31.08
pence). The adjusted EPS figure was based on profit after tax,
excluding amortisation of other intangible assets, net foreign
exchange movements and exceptional items. Basic EPS were 27.92
pence (2022: 22.55 pence). The adjusted EPS were 17% higher
primarily due to the stronger adjusted operating profit (up 23%),
partly offset by a higher interest charge and tax charge of 14.8%
(2022: 13.5%).
The Board is recommending a final dividend of 9.15 pence per
ordinary share (2022: 8.35 pence), making a total dividend of 13.40
pence per ordinary share (2022: 12.20 pence) for the year,
representing a 10% increase. The dividend has been increased every
year since the Group's IPO in 2006. It will be payable on 3 October
2023 to shareholders on the register at 25 August 2023, subject to
approval at the Annual General Meeting on 26 September 2023.
Over the medium term, the Group plans to maintain a policy of
growing its dividend each year broadly consistent with the growth
in adjusted earnings per share growth.
Our people
As always, my thanks go to all employees within the Cohort
businesses. Their hard work, skill and ability to satisfy our
customers' needs are what continue to drive the performance of our
Group.
As already highlighted, the impact of COVID-19 has now largely
dissipated, and we have in most instances returned to normal work
and travel practices. Where appropriate we continue to offer
flexibility to our employees as to their location of work,
including hybrid working in some cases.
Andy Thomis, Simon Walther and their senior executive colleagues
have continued their dedicated and skilful work which has helped
the Group to continue its progress.
Governance and Board
We completed our first externally facilitated Board evaluation
in March 2023, the process for and results of which can be found in
the Corporate Governance report. I will work with the Board and
Company Secretary to agree which of those recommendations we will
prioritise for implementation in 2023/24. We continue to adhere to
the QCA Corporate Governance Code (2018 edition) (the QCA
Code).
The Board regularly evaluates and reviews the Group's
environmental, social and governance (ESG) activity and is
committed to maintaining appropriate standards. The Group has
reported for the first time on the Taskforce on Climate-related
Financial Disclosures (TCFD). As one of the first AIM companies to
be required to do this under the legislative timetable, we have
taken a pragmatic approach whilst also anticipating that the
reporting on this matter will no doubt change and develop and
require our future reporting to adjust accordingly.
The Group's values, stakeholder engagement principles and
governance policies are all outlined on our website.
Encouraging outlook for Cohort
Our order intake for the year was strong and as a result of this
success, the Group has entered the new financial year with a record
order book of GBP329.1m. As we have indicated in the last few
years, our order book is not only growing in value, but its
longevity continues to increase. We now have orders across the
Group stretching out to 2032. We have good prospects in the coming
year to secure further long-term orders for our naval systems and
support work, including from the UK MOD, Portugal and in export
markets, as recently exemplified by the GBP26m order announced 9
May 2023 and a first order for our KDS anti-submarine system of
over GBP7m announced on 30 May 2023.
The order book underpins over GBP140m (80%) of current financial
year revenue expectations (2022: GBP128m). Following order wins
since the start of the financial year of over GBP60m, that cover
now stands at just over 90%.
Overall, we continue to expect that our trading performance for
2023/24 will be ahead of that achieved for the year ended 30 April
2023. We have had an encouraging start to the new financial year
and our expectations for the full year are unchanged.
As a result of planned capital expenditure and expansion in
working capital we expect that our net cash balance will decrease,
but that we will maintain positive net funds at the year end.
We are optimistic that the Group will make further progress in
2024/25, based on current orders for long-term delivery and on our
pipeline of opportunities.
Nick Prest CBE
Chairman
Operations Review
"The Group's performance for the year showed a significant
improvement on 2021/22 and was slightly ahead of market
expectations. Both of our reporting divisions performed better than
last year driven by higher UK MOD activity in Communications and
Intelligence and a recovery in Chess's operating performance in
Sensors and Effectors. Cash performance was also better than
expected, resulting in another strong positive net cash position at
the year end. Order intake was a record high, and the resulting
record order book gives us a solid base for 2023/24 and beyond. We
see good prospects for further significant new orders in the year
ahead."
2022/23 highlights
-- Record adjusted operating profit of GBP19.1m (2022: GBP15.5m)
on record revenue of GBP182.7m (2022: GBP137.8m).
-- Growth in both new reporting divisions:
o Especially strong performance from the Communications and
Intelligence division, driven by significant uplift in UK MOD
activity at MCL.
o Sensors and Effectors also performed well, with Chess
delivering an improved performance.
-- Strong order intake of GBP220.9m (2022: GBP186.4m) leading to
a record closing order book of GBP329.1m (2022: GBP291.0m). That
underpins a record 80% of current market revenue expectations for
2023/24 (78% equivalent figure for 2022/23).
-- Strong cash conversion leading to higher net funds at GBP15.6m (2022: GBP11.0m).
-- Dividend increased by 10%.
Operating review
The Group's revenue of GBP182.7m (2022: (GBP137.8m) was 33%
higher than last year and delivered an adjusted operating profit of
GBP19.1m (2022: GBP15.5m), 23% higher than last year.
The Group's statutory operating profit of GBP15.3m (2022:
GBP11.1m) reflects the amortisation of other intangible assets, a
GBP3.7m non-cash charge in 2023 (2022: GBP6.9m charge).
In this review the focus is on the adjusted operating profit of
each division, which we consider to be a more appropriate measure
of performance year on year. The adjusted operating profit is
reconciled to the operating profit in the Consolidated income
statement, and this is broken down by reporting segment in note
2.
The adjusted operating margin of the Group was 10.4%, a small
drop compared to the 11.2% achieved in 2021/22. The net margin was
slightly lower in Communications and Intelligence with stronger UK
MOD sales offset by the weaker performance at EID, which made a
small operating loss. In Sensors and Effectors, the net margin was
also lower, primarily from the mix of work with the Italian
Submarine programme being traded at a low margin whilst the
programme makes its way through its design phase. As expected,
Chess improved its performance, but its net margin remained below
what we expect to see in the longer term as it resolved a number of
project issues. Higher head office costs, mostly due to accruing
for future bonus awards under the new Long Term Incentive Plan,
also contributed to the weaker net margin.
We expect the Group net operating margin to improve going
forward as some of the current inefficiencies, primarily at EID and
Chess, are reversed.
2023 saw another strong year for order intake, with GBP220.9m of
new work contracted compared with GBP186.4m in 2022. That resulted
in a record closing order book of GBP329.1m, an historic high for
the Group, underpinning 80% of the latest market consensus forecast
revenue for 2024. Cash flow was robust, the Group closing the year
with net funds of GBP15.6m (2022: GBP11.0m).
Adjusted operating profit by reporting segments:
Adjusted
operating Adjusted operating
profit margin
------------ --------------------
2023 2022 2023 2022
GBPm GBPm % %
----- ----- --------- ---------
Communications
and Intelligence 14.9 12.2 17.3 17.7
Sensors and
Effectors 9.4 7.5 9.7 10.8
Central costs (5.2) (4.2) - -
------------------ ----- ----- --------- ---------
19.1 15.5 10.4 11.2
------------------ ----- ----- --------- ---------
Communications and Intelligence
-- Revenue - GBP86.2m (2022: GBP68.4m)
-- Adjusted operating profit - GBP14.9m (2022: GBP12.3m)
-- Operating cash flow - GBP8.3m (2022: GBP12.2m)
-- Headcount - 432 (2022: 436)
Communications and Intelligence delivered improved revenue and
adjusted operating profit. Much of this was driven by increased
activity with the UK MOD, primarily through MCL where we saw
significant orders for communication equipment, including hearing
protection and vehicle intercoms. In addition, we supplied a range
of tactical autonomous air vehicles. Elsewhere in this division,
MASS continued to be the largest contributor to group profit
despite delays to some of its activities, the most recent being
caused by the evacuation of UK citizens from Sudan, which
interfered with a major exercise that was planned in that
region.
In Portugal we continued to be affected by a protracted
procurement process for new ships, on which our communications
solution is the preferred solution. Recent Parliamentary approval
should enable this project to now progress and we anticipate
securing orders in the coming financial year. As a result of these
delays and some slippage of work into 2023/24, again due to
procurement delays, EID had another disappointing year and its
small operating loss acted as a drag on the net margin of this
division. We expect EID to deliver an improved 2023/24 performance,
but we expect this will be partly offset by the current high level
of UK MOD activity at MCL falling back nearer to historical
norms.
The Communications and Intelligence division enters 2023/24 with
GBP59.1m (68%) of its consensus revenue on order at 30 April 2023.
We expect to see improvements in Portugal, in terms of both
deliveries and orders as well as a catch up in delayed exercise
support and other service provisions in the UK. We do not expect
the very strong year of product delivery to the UK MOD in 2022/23
to be repeated. Overall the Communications and Intelligence
division is expected to perform at a similar level in 2023/24 as it
did in 2022/23.
Sensors and Effectors
-- Revenue - GBP96.5m (2022: GBP69.4m)
-- Adjusted operating profit - GBP9.4m (2022: GBP7.5m)
-- Operating cash flow - GBP5.9m (2022: GBP6.5m)
-- Headcount - 682 (2022: 592)
The Sensors and Effectors division delivered a much improved
operating performance on significantly higher revenue. Much of the
performance improvement was driven by Chess where management,
operational and process changes made during 2021/22 and further
developed during 2022/23 saw a significant turnaround in its
performance. This was exemplified by its operating cash performance
which was a net inflow of GBP10.1m. Despite this, we had to make
some further provisions for legacy issues at the business which we
now consider closed. In the short term, this should enable Chess to
move its net margin to a level of at least 10%, and to progress
further in the medium term.
Elsewhere in Sensors and Effectors, we have continued to trade
the large Italian sonar project at ELAC at a low margin whilst it
proceeds through its development stage. We anticipate entering
production towards the end of this financial year. ELAC's existing
building in Kiel is being redeveloped by its owner and ELAC has
begun work on a new facility nearby that will significantly enhance
its efficiency and capacity. On current plans this will be
operational in 2025.
We saw growth in revenue to export customers, including in South
America, and in Asia Pacific as well as initial deliveries on a
large long-term support contract for the UK MOD secured in the
year. We won some significant orders with the German and Italian
navies during the year as well as orders for customers in South
America, South East Asia and Japan. Orders for the UK Submarine
programme were received late in the year, restricting the amount of
work we could deliver, but we do expect this revenue stream to grow
over the coming years.
Looking forward, this division is well underpinned for 2023/24
with over GBP83m (91%) of consensus revenue on order at 30 April
2023. Recent wins and some good prospects to expand its order book
in both the UK and export markets lead us to expect this division
to grow in 2023/24.
Our people
All the Group's capabilities and customer relationships
ultimately derive from our people, and the success we have enjoyed
is a result of their efforts. They have risen to the challenge of
the stronger demand we have seen this year, and in doing so have
made a material contribution to the national security and defence
of the UK and its allies as well to the performance of the Group. I
would like to take this opportunity to express my sincere thanks to
all employees of Cohort and its businesses.
We had no changes to our senior management team during the year.
Shortly after the year end, the Managing Director of EID, Frederico
Lemos left the Group. Martin Bennett, EID's Sales and Marketing
Director has taken over in the interim and we have commenced a
process to determine the right way forward in the longer term.
Like many high-skill businesses, we are facing challenges in
recruiting qualified and experienced people to meet our customer
demands and our own investment strategies. As our order book has
grown, so have our employee numbers and the Group now has just over
1,130 staff compared with nearly 1,050 this time last year, an 8%
increase. We will continue to add more resources in the coming
year, especially at Sensors and Effectors.
Andrew Thomis
Chief Executive
FINANCIAL REVIEW
Revenue analysis
As announced on 25 May 2023, the Group has changed its reporting
for the year ended 30 April 2023 with comparative figures being
restated accordingly.
The Group now reports its operating performance through two
divisions:
1. Communications and Intelligence
This division comprises EID, MASS and MCL, being the subsidiary
businesses which design, develop, manufacture, integrate and
support electronic hardware and software solutions used for
collecting, storing, processing, protecting and transferring
information securely. It also includes the provision of domain
expertise, training and supporting services. The division supplies
products, primarily through EID and MCL, and services through
MASS.
2. Sensors and Effectors
This division comprises Chess, ELAC and SEA, being the
subsidiary businesses which provide a range of sensors, including
sonar, radar and visual for land and sea domains. It also provides
effectors for surface ships and land-based users to protect against
sea, air and land-based threats, including submarine, missile and
drone attacks. The focus for the division is on the design,
development, manufacture, integration and support of electronic,
electromechanical and software solutions to detect, measure,
identify, track and prosecute targets of interest.
The revenue for the Group has been analysed into two separate
breakdowns:
1. Market (and geography) - (see table below)
2. Product or service (see table below)
The Group revenue continues to be dominated by defence and
security customers with GBP169.8m (2022: GBP126.5m) to these
markets, representing 93% of Group revenue (2022: 92%).
Overall, the Group's increase in revenue has been driven by an
increase in UK MOD revenue of over 50%. At just short of GBP100m,
this represents 54% of total Group revenue, a marked change in
comparison to recent years when this proportion has generally been
in decline.
Export defence markets grew by 20%, but as a proportion of the
overall revenue, dropped slightly from 35% last year to 32% this
year, as this healthy growth was outpaced by growth in UK MOD
revenue. The increase was in deliveries to European customers, for
land and naval domains.
Although sales to Asia Pacific declined slightly, reflecting the
timing of deliveries from ELAC, we anticipate this will increase in
the coming year following recent order wins.
In our other domestic markets, we saw growth in both Portugal
and Germany. The latter was backed up by some significant order
wins in 2022/23. In Portugal, EID's revenue reflects the current
importance of its domestic customer. Depending upon the timing of
orders we expect this revenue to grow and remain an important
element of EID's revenue stream over the next few years.
Non-defence revenue includes Transport and legacy hydroacoustic
products, both of which are reported within Sensors and Effectors
and saw significant increases. They were offset by a decline in our
low margin education support work, provided through MASS, which is
now coming to an end.
As expected, the Group continues to see the proportion of its
revenue that is product (hardware and/or software) continue to
increase. This has been very marked this year with the significant
increases in delivery of systems and products to the UK MOD by
Communications and Intelligence, mostly MCL, and in Sensors and
Effectors to both European and UK customers. The service element of
the Group is now below 30%, having been steady for some years at
nearer 40%. This decline is in part due to the growth in product,
but also a fall in the actual support work the Group is providing:
this is mostly education at MASS and service support in Portugal
where orders have slipped. The change in the Group's revenue mix
this year has driven a drop in statutory gross margin percentage
from 41% to 36%. The main cause of the drop in statutory reported
gross margin was the smaller contribution, as a percentage of total
Group trading, from the higher margin elements within
Communications and Intelligence. In Sensors and Effectors, the
lower traded margin on the Italian sonar contract as it progresses
through its development stages and the impact of marking foreign
exchange contracts to market, mostly in the same division also had
a downward impact on reported gross margin.
Revenue by market and geography
Communications Sensors and
and Intelligence Effectors Group
------------------- ------------- -----------------------
2023 2022 2023 2022 2023 2022
GBPm GBPm GBPm GBPm GBPm % GBPm %
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Direct to UK MOD 62.1 40.3 0.2 6.0 62.3 34 46.3 34
Indirect to UK MOD where
the Group acts as a sub-contractor
or partner 7.3 5.8 28.9 12.8 36.2 20 18.6 13
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Total UK Defence 69.4 46.1 29.1 18.8 98.5 54 64.9 47
UK Security 3.7 4.7 - 0.3 3.7 2 5.0 4
UK other (non-defence
and security) - 3.1 7.4 7.1 7.4 10.2
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Total UK 73.1 53.9 36.5 26.2 109.6 80.1
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Portuguese defence and
security 4.9 3.9 - - 4.9 3 3.9 3
German defence and security - 0.1 4.3 4.0 4.3 2 4.1 3
Export defence and security
* Other European countries 2.1 3.5 33.7 17.0 35.8 20.5
* Asia Pacific and Africa 5.7 6.9 12.3 16.5 18.0 23.4
* North and South America 0.4 0.1 4.2 4.6 4.6 4.7
Total export defence
and security 8.2 10.5 50.2 38.1 58.4 32 48.6 35
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Export other (non-defence
and security) - - 5.5 1.1 5.5 1.1
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
86.2 68.4 96.5 69.4 182.7 100 137.8 100
------------------------------------ --------- -------- ------ ----- ------ --- ----- ---
Total revenue by type of deliverable:
Year ended Year ended
30 April 2023 30 April 2022
---------------- ----------------
GBPm % GBPm %
--------------------------------------- --------- ----- --------- -----
Product 140.8 77 88.6 64
--------- ----- --------- -----
* Communications and Intelligence 53.8 29 26.7 19
* Sensors and Effectors 87.0 48 61.9 45
Services 41.9 23 49.2 36
--------- ----- --------- -----
* Communications and Intelligence 32.4 18 41.7 30
* Sensors and Effectors 9.5 5 7.5 6
Total revenue 182.7 100 137.8 100
--------------------------------------- --------- ----- --------- -----
Operational outlook
Order intake and order book
Order intake Order book
-------------- ------------
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
------ ------ ----- -----
Communications and Intelligence
and Intelligence 94.5 77.3 126.7 118.3
Sensors and Effectors 126.4 109.1 202.4 172.7
-------------------------------- ------ ------ ----- -----
220.9 186.4 329.1 291.0
-------------------------------- ------ ------ ----- -----
The increase in the Group's order book reflects stronger order
intake in both of our reporting divisions.
The 2022/23 order intake was 121% (2022: 135%) of the Group's
revenue for the year.
The revenue on order (order cover) for the coming year was 80%
(2022: 78%) as at 30 April 2023, based on the latest analyst
consensus revenue forecasts.
The Group's order intake and order book are the contracted
values with customers and do not include any value attributable to
frameworks or other arrangements where no enforceable contract
exists. The order intake and order book take account of contractual
changes to existing orders including extensions, variations and
cancellations.
Communications and Intelligence
Order intake at Communications and Intelligence was 22% higher
than last year and represented 110% of its annual revenue for
2022/23 (2022: 113%). The lower order to revenue cover for this
division is a result of its work through MCL, which is typically
short term and elements of the service provision at MASS,
especially in Digital Services and in short-term additional tasks
on its long-term service contracts.
This division is dominated by activity with the UK MOD where
GBP70.4m of its order intake (2022: GBP51.1m) was ultimately
intended for that customer. Important orders secured in the year
included renewals and extensions of long-term contracts for our
support to the UK's Joint Forces Command (GBP10.6m), Electronic
warfare capability (GBP15.7m) and the UK's strategic deterrent. The
Group has been providing services in all these areas for several
decades.
The division also saw a marked increase in product demand from
the UK MOD for communication equipment including hearing protection
and intercoms. We saw higher levels of orders placed for specialist
electronic warfare equipment, drones and land based autonomous
vehicles including 'Spot' the robot canine. The division has also
begun to see more interest for a range of its products from UK
police forces.
As touched on already, the order delays we saw from the
Portuguese armed forces impacted on EID's operating
performance.
Sensors and Effectors
Order intake at Sensors and effectors was 16% higher than last
year at GBP126.3m, representing 131% of its 2022/23 annual revenue
(2022: 157%). Order cover in this division tends to be greater as
contracts frequently cover long term development and delivery,
especially for naval customers.
Although this division has important work in delivery and
support of the Royal Navy's submarines and surface vessels, its
maritime activity is dominated by export customers. In the land
domain it secured important orders for both the UK MOD and other
European customers (over GBP28m) and won initial deliveries of an
important system for ground-based air defence.
Orders for the UK Royal Navy were nearly GBP40m including the
long-term support contract announced last September and further
work on communication and related systems for the new Dreadnought
class of submarine. The latter work is expected to expand in the
coming years with work continuing, alongside Astute, for rest of
this decade. We are well placed to secure similar work on the new
AUKUS class of submarine, which will eventually replace the Royal
Navy's Astute class.
In Europe we continue to win work, including orders of nearly
GBP10m for the German Navy. In Italy we won orders of GBP8m.Both
extensions to the existing sonar project and some surface ship
work. We also won some key orders in Southeast Asia with the order
book in this region reinforced by further wins after the year
end.
Delivery of the Group's order book into revenue
The table below shows the expected delivery of future revenue
from the current order book.
"The Group order book underpins 80% of the 2023/24 latest
analysts forecast for revenue."
As we saw last year, Cohort's order book has again increased in
size and lengthened. We already have on order for delivery in
2023/24 more revenue than we delivered in 2021/22 and not far short
of what we delivered in 2020/21. The order book for Sensors and
Effectors is both larger and longer than for Communication and
Intelligence, which is what we expect with the greater proportion
of long-term delivery projects for naval customers. In
Communications and Intelligence, the longevity of the order book is
dominated by the multi-year support contracts for the UK MOD
through MASS, the first of which is due for renewal in 2026.
The short-term nature of some of the business in Communications
and Intelligence, especially the product delivery of MCL and the
shorter delivery contracts in training and cyber by MASS mean that
this division will typically enter a financial year with less
revenue on order. This work is often short in duration. We do
expect to see some increase in the longevity of this division's
order book in the coming year when anticipated orders for the
Portuguese Navy arrive.
Sensors and Effectors has a number of large multi-year
programmes, both for delivery and support, with work stretching out
to 2032. The prospects for this division in the coming year to
increase the size and the longevity of the order book are good,
both in the UK and export markets.
As for 2022/23, the Group's businesses are not dependent upon a
single critical order to achieve their respective revenue targets
for 2023/24. The Group infill for the coming year of around 20% is
an historically low level and this had further reduced to below 10%
in July 2023.
We have introduced an analysis this year of the number of orders
secured by a range of order size. This is shown in the chart below.
This shows that just over 95% of the Group's orders (by number)
secured are of less than GBP0.5m in value, accounting for nearly a
quarter of the Group's total order intake value. Of the remaining
5% of orders, which account for 75% of the Group's total order
value, around one third of the order intake value arose from orders
in the value range from GBP1m to GBP5m.
Funding resource and policy
At 30 April 2023, the Group's cash and readily available credit
was GBP50.6m (2022: GBP51.1m). A very high proportion of our
ultimate customers are governments or government agencies, with a
clear need to invest in defence and security. The international and
domestic security environment still calls for greater resources to
be devoted to defence and counterterrorism in the UK and many other
countries, especially in light of continuing events in Ukraine and
rising tensions in the South China Sea. As already mentioned, 80%
of our revenue (based on latest analyst forecasts) for 2023/24 was
on contract at 30 April 2023 providing further assurance. The Board
considers the Group to be a going concern.
The Group retains a robust financial position and continues to
be cash generative enabling it to continue to invest in internal
R&D and other value-adding projects on a carefully considered
basis as well as maintaining its progressive dividend policy. The
Group's cash position and banking facility also provide it with the
resources to conduct its acquisition strategy.
The Group completed a renewal of its banking facility on 18 July
2022. The facility was initially for three years to July 2025, and
this has been extended, following exercise of an option, in June
2023, to July 2026 with an option to extend it for a further year
to July 2027. The revolving credit facility (RCF) is for an initial
GBP35m with an option (accordion) to draw a further GBP15m. The
facility is provided by three banks: NatWest, Lloyds and
Commerzbank.
The Group's bank borrowings have been reported as due after one
year as the facility in place as at 30 April 2023 was due to expire
in July 2025.
The Group's facility in place as at 30 April 2023 was for GBP35m
of which GBP25.8m was drawn, leaving GBP9.2m available to be drawn
down. The facility itself provides the Group with a flexible
arrangement to draw down for acquisitions and overdraft. The
Group's banking covenants were all passed for the year ended 30
April 2023. Looking forward, we expect this to continue out to 31
July 2024 and beyond.
The facility is available to the UK and German members of the
Group and is fully secured over the Group's assets. EID's assets
are excluded but the shares that the Group owns in EID are included
as part of the Group's security package with the banks.
EID's bank facilities are managed locally in Portugal. The cash
is spread across a number of institutions to minimise capital
risk.
EID provides no security over its assets and its wide range of
banks enable it to be well supported in executing export business,
specifically in respect of foreign exchange contracts, guarantees
and letters of credit.
EID has a local overdraft facility of EUR2.5m with Santander.
This was undrawn as at 30 April 2023.
The Group's net funds at 30 April 2023 were GBP15.6m (30 April
2022: GBP11.0m), better than expected due to a marked improvement
in working capital management at Chess and MCL. This has been
partly offset by stock build elsewhere in the Group, especially
ELAC and the timing of receivables at EID. Looking forward, we
expect the Group's net funds at 30 April 2024 to be lower, as the
timing advantage is expected, in part, to unwind. The Group expects
to see an increase in net funds by 30 April 2025 from 2024, if
there is no further corporate activity. Looking forward into 2024
through to 2025, the Group expects to continue to invest in a new
facility for its ELAC business in Kiel. As at 30 April 2023 the
Group had invested GBP1.8m in this facility.
The Group has maintained its progressive dividend policy,
increasing its dividend this year by 10% to a total dividend paid
and payable of 13.40 pence per share (2022: 12.20 pence).
The last five years' annual dividends, growth rate, earnings
cover and cash cover are as follows:
Earnings cover Cash cover
(based upon (based upon
Growth over adjusted net cash
Dividend previous year earnings inflow from
Pence % per share) operations)
---- -------- --------------- -------------- ------------
2023 13.4 10 2.7 3.0
2022 12.2 10 2.6 3.9
2021 11.1 10 3.0 3.6
2020 10.1 11 3.7 2.8
2019 9.1 11 3.8 2.3
2018 8.2 15 3.5 4.0
Looking forward the Group plans to maintain a policy of growing
its dividend each year and we expect the rate of growth over time
to align with the expected growth in adjusted earnings per
share.
In summary, the Group's cash performance in 2022/23 was as
follows:
2023 2022
GBPm GBPm
---------------------------------------------------- ------ ------
Adjusted operating profit 19.1 15.5
Depreciation and other non-cash operating movements 3.0 2.8
Working capital movement (4.2) 4.2
---------------------------------------------------- ------ ------
17.9 22.5
---------------------------------------------------- ------ ------
Acquisition of JSK joint venture - (0.4)
Acquisition of the non-controlling interest of
Chess (1.0) -
Tax, dividends, capital expenditure, interest,
loans and other investments (12.3) (13.6)
---------------------------------------------------- ------ ------
Increase in funds 4.6 8.5
---------------------------------------------------- ------ ------
The lower cash outflow in tax, and dividends, etc. was due to
lower net investment in own shares of GBP0.5m, GBP2.1m lower than
last year, lower tax payments of GBP0.1m, GBP2.0m lower than last
year. These improvements were partly offset by higher capital
expenditure of GBP5.2m, GBP3.2m higher than last year. The lower
tax was due to net receipts in Portugal and recovery of higher tax
payments made on account previously in the UK. The higher capex was
mostly initial investment in our new German facility and key items
of capital equipment for the Italian sonar programme. Looking
forward, we retain the flexibility to use newly issued shares as
well as EBT shares to satisfy employee share options.
The Group's customer base of governments, major prime
contractors and international agencies makes its debtor risk low.
The year-end debtor days in sales were 33 days (2022: 44 days).
This calculation is based upon dividing the revenue by month,
working backwards from April, into the trade debtors balance
(excluding revenue recognised not invoiced) at the year end. This
is a more appropriate measure than calculating based upon the
annual revenue as it takes into account the heavy weighting of the
Group's revenue in the last quarter of each year. The decrease has
been mostly in Sensors and effectors due to the operating
improvement at Chess.
Tax
The Group's tax charge for the year ended 30 April 2023 of
GBP2.7m (2022: charge of GBP1.5m) was at a rate of 19.2% (2022:
15.1%) of profit before tax. This includes a current year
corporation tax charge of GBP3.2m (2022: GBP2.6m), a prior year
corporation tax credit of GBP0.4m (2022: GBP0.3m) and a deferred
tax credit of GBP0.1m (2022: GBP0.7m).
The Group's overall tax rate was below the standard UK
corporation tax rate of 19.5% (2022: 19.00%). The decrease is due
to the loss in Portugal (at 31.0%) and a further R&D credit
recognised in Portugal, as there was in 2022, partly offset by a
higher contribution from Germany (at 31.6%). The Group continues to
take a prudent approach to the potential outcomes of a tax audit in
Portugal and R&D credits recognised in the UK.
The Group has reported research and development expenditure
credits (RDEC) for the UK in accordance with IAS 20 and shown the
credit of GBP0.9m (2022: GBP1.0m) in cost of sales and adjusted the
tax charge accordingly. The RDEC has been reversed in reporting the
adjusted operating profit for the Group to ensure comparability of
operating performance year on year.
Looking forward, the Group's effective current tax rate
(excluding the impact of RDEC reporting) for 2023/24 is estimated
at 23% compared with 15% of the pre-RDEC adjusted operating profit
less interest for 2022/23. This rate going forward reflects a
combination of lower Portuguese derived profits and higher German
profits as well as rising UK rates (to 25%) in late 2022/23. The
Group maintains a cautious approach to previous R&D tax credit
claims for tax periods that are still open, currently 2021/22 and
2022/23.
Exceptional items
The exceptional items this year are GBPnil (2022: GBP0.7m net
income).
Adjusted earnings per share
The adjusted earnings per share (EPS) of 36.48 pence (2022:
31.08 pence) are reported in addition to the basic earnings per
share and excludes the effect of exceptional items, amortisation of
intangible assets and exchange movement on marking forward exchange
contracts to market, all net of tax.
The adjusted earnings per share exclude the non-controlling
interest of EID (20%) and for Chess (18.16%), up until 30 November
2022. The reconciliation from last year to this year is as
follows:
Adjusted Adjusted
operating earnings
profit per share
GBPm Pence
------------------------------------------- ---------- ----------
Year ended 30 April 2022 15.5 31.08
100% owned businesses throughout the
year ended 30 April 2023 4.6 9.10
Impact of businesses with minority holding (1.0) (1.70)
Change in tax rate (excluding RDEC):
14.8% (2022: 13.5%) - (0.61)
Other movements including dilution and
interest - (1.39)
------------------------------------------- ---------- ----------
Year ended 30 April 2023 19.1 36.48
------------------------------------------- ---------- ----------
Increase from 2022 to 2023 23% 17%
------------------------------------------- ---------- ----------
The adjustments to the basic EPS in respect of exceptional
items, exchange movements and other intangible asset amortisation
of EID and Chess (up to 30 November 2022) only reflect that
proportion of the adjustment that is applicable to the equity
holders of the parent.
Accounting policies
There were no significant accounting policy changes in
2022/23.
Simon Walther
Finance Director
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the year ended 30 April 2023
2023 2022
Notes GBP'000 GBP'000
-------------------------------------------------------- ----- --------- --------
Revenue 2 182,713 137,765
Cost of sales (117,852) (81,160)
-------------------------------------------------------- ----- --------- --------
Gross profit 64,861 56,605
Administrative expenses (49,610) (45,515)
-------------------------------------------------------- ----- --------- --------
Operating profit 15,251 11,090
-------------------------------------------------------- ----- --------- --------
Comprising:
Adjusted operating profit 2 19,064 15,525
Amortisation of other intangible assets (included
in administrative expenses) (3,672) (6,865)
Research and development expenditure credits (RDEC)
(included in cost of sales) 941 1,004
(Charge)/credit on marking forward exchange contracts
to market value at the yearend (included in cost
of sales) (1,082) 716
Exceptional items (included in administrative expenses)
Cost of acquisition of JSK - (70)
Gain on the acquisition of JSK - 342
Adjustment to earn-out on acquisition of Chess - 438
-------------------------------------------------------- ----- --------- --------
2 15,251 11,090
-------------------------------------------------------- ----- --------- --------
Finance income 134 6
Finance costs (1,458) (868)
-------------------------------------------------------- ----- --------- --------
Profit before tax 13,927 10,228
Income tax charge 3 (2,675) (1,541)
-------------------------------------------------------- ----- --------- --------
Profit for the year 11,252 8,687
-------------------------------------------------------- ----- --------- --------
Attributable to:
Equity shareholders of the parent 11,356 9,202
Non-controlling interests (104) (515)
-------------------------------------------------------- ----- --------- --------
11,252 8,687
-------------------------------------------------------- ----- --------- --------
All profit for the year is derived from continuing
operations.
Notes Pence Pence
----------------------------- ------ -------- ------
Earnings per share
Basic 4 27.92 22.55
Diluted 4 27.86 22.42
Adjusted earnings per share
Basic 4 36.48 31.08
Diluted 4 36.40 30.90
Dividends per share paid
and proposed in respect of
the year
Interim 5 4.25 3.85
Final 5 9.15 8.35
----------------------------- ------ -------- ------
5 13.40 12.20
----------------------------- ------ -------- ------
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 April 2023
2023 2022
GBP'000 GBP'000
---------------------------------------- --------- ---------
Assets
Non-current assets
Goodwill 50,145 50,145
Other intangible assets 5,969 9,641
Right of use asset 8,521 9,615
Property, plant and equipment 15,304 12,310
Deferred tax asset 1,600 1,361
----------------------------------------- --------- ---------
81,539 83,072
---------------------------------------- --------- ---------
Current assets
Inventories 32,041 22,777
Trade and other receivables 55,612 56,161
Derivative financial instruments 42 793
Cash and cash equivalents 41,454 40,367
----------------------------------------- --------- ---------
129,149 120,098
---------------------------------------- --------- ---------
Total assets 210,688 203,170
----------------------------------------- --------- ---------
Liabilities
Current liabilities
Trade and other payables (58,040) (53,985)
Derivative financial instruments (1,041) (861)
Lease liability (1,660) (1,515)
Bank borrowings (9) (29,362)
Provisions (8,687) (8,878)
Other payables - (1,400)
----------------------------------------- --------- ---------
(69,437) (96,001)
---------------------------------------- --------- ---------
Non-current liabilities
Deferred tax liability (1,467) (1,353)
Lease liability (7,473) (8,631)
Bank borrowings (25,837) (8)
Provisions (1,404) (1,139)
Retirement benefit obligations (5,292) (6,848)
(41,473) (17,979)
---------------------------------------- --------- ---------
Total liabilities (110,910) (113,980)
----------------------------------------- --------- ---------
Net assets 99,778 89,190
----------------------------------------- --------- ---------
Equity
Share capital 4,146 4,121
Share premium account 31,484 30,527
Own shares (3,601) (3,346)
Share option reserve 2,116 1,000
Other reserves - (1,400)
Retained earnings 62,876 53,068
----------------------------------------- --------- ---------
Total equity attributable to the equity
shareholders of the parent 97,021 83,970
Non-controlling interests 2,757 5,220
----------------------------------------- --------- ---------
Total equity 99,778 89,190
----------------------------------------- --------- ---------
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 April 2023
Attributable to the equity shareholders
of the parent
----------------------------------------------------------------------
Share Share Non-
Share premium Own option Other Retained controlling Total
capital account shares reserve reserves earnings Total interests equity
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 1 May 2021 4,104 29,956 (1,068) 923 (2,362) 47,760 79,313 5,738 85,051
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Profit for the year - - - - - 9,202 9,202 (515) 8,687
Other comprehensive
income
for the year - - - - - 583 583 (3) 580
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Total comprehensive
income
for the year - - - - - 9,785 9,785 (518) 9,267
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Transactions with
owners
of Group and
non-controlling
interests, recognised
directly
in equity
Issue of new shares 17 571 - - - - 588 - 588
Equity dividends - - - - - (4,684) (4,684) - (4,684)
Vesting of Restricted
Shares - - - - - 279 279 - 279
Own shares purchased - - (2,923) - - - (2,923) - (2,923)
Own shares sold - - 282 - - - 282 - 282
Net loss on selling
own shares - - 363 - - (363) - - -
Share-based payments - - - 572 - - 572 - 572
Deferred tax
adjustment in
respect
of share-based
payments - - - (204) - - (204) - (204)
Transfer of share
option
reserve on vesting
of options - - - (291) - 291 - - -
Change in option for
acquiring
non-controlling
interest
in Chess - - - - 962 - 962 - 962
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
At 30 April 2022 4,121 30,527 (3,346) 1,000 (1,400) 53,068 83,970 5,220 89,190
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Profit for the year - - - - - 11,356 11,356 (104) 11,252
Other comprehensive
income
for the year - - - - - 849 849 - 849
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Total comprehensive
income
for the year - - - - - 12,205 12,205 (104) 12,101
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
Transactions with
owners
of Group and
non-controlling
interests, recognised
directly
in equity
Issue of new shares 25 957 - - - - 982 - 982
Equity dividends - - - - - (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 selling
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
---------------------- -------- -------- -------- -------- --------- --------- -------- ------------ --------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 April 2023
Group
------------------
2023 2022
Notes GBP'000 GBP'000
------------------------------------------- ----- -------- --------
Net cash from operating activities 5 16,522 19,525
------------------------------------------- ----- -------- --------
Cash flow from investing activities
Interest received 134 6
Purchases of property, plant and equipment (5,231) (2,005)
Acquisition of Chess non-controlling
interest (1,016) -
Acquisition of JSK (50%) - (372)
------------------------------------------- ----- -------- --------
Net cash used in investing activities (6,113) (2,371)
------------------------------------------- ----- -------- --------
Cash flow from financing activities
Issue of new shares 982 588
Dividends paid (5,124) (4,684)
Purchase of own shares (586) (2,923)
Sale of own shares 111 282
Repayment of borrowings (4,000) (50)
Repayment of lease liabilities (1,954) (1,916)
------------------------------------------- ----- -------- --------
Net cash used in financing activities (10,571) (8,703)
------------------------------------------- ----- -------- --------
Net (decrease)/increase in cash and
cash equivalents (162) 8,451
------------------------------------------- ----- -------- --------
Represented by:
Cash and cash equivalents and short-term
borrowings brought forward 40,367 32,294
Cash flow (162) 8,451
Exchange 1,249 (378)
------------------------------------------- ----- -------- --------
Cash and cash equivalents and short-term
borrowings carried forward 41,454 40,367
------------------------------------------- ----- -------- --------
Effect
of
foreign
At exchange At
30 April rate Cash 30 April
2022 changes flow 2023
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- -------- ---------
Net funds reconciliation
Group
Cash and bank 40,367 1,249 (162) 41,454
Short-term deposits - - - -
-------------------------- --------- --------- -------- ---------
Cash and cash equivalents 40,367 1,249 (162) 41,454
-------------------------- --------- --------- -------- ---------
Loan (29,332) (505) 4,000 (25,837)
Finance lease (38) - 29 (9)
-------------------------- --------- --------- -------- ---------
Debt (29,370) (505) 4,029 (25,846)
-------------------------- --------- --------- -------- ---------
Net funds 10,997 744 3,867 15,608
-------------------------- --------- --------- -------- ---------
NOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENT
1. BASIS OF PREPARATION
The unaudited summary financial information contained within
this preliminary report has been prepared using accounting policies
consistent with UK Adopted International Accounting Standards . The
financial information contained in this announcement does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The results for the year ended 30 April 2023
are unaudited. The financial statements for the year ended 30 April
2023 will be finalised on the basis of the financial information
presented by the Board of Directors in this preliminary
announcement and will be delivered to the Registrar of Companies
after the Annual General Meeting. The financial statements are
subject to completion of the audit and may also change should a
significant adjusting event occur before the approval of the
statutory accounts.
The Group owned 80% of EID throughout the period and 81.84% of
Chess to 30 November 2022 before purchasing the remainder of the
non-controlling interest and in both cases had effective control
throughout. Therefore, 100% of EID's and Chess's results and
balances have been consolidated with the non-controlling interest
identified.
The comparative figures for the financial year ended 30 April
2022 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the Company's auditor
and delivered to the Registrar of Companies. The report of the
auditor 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.
At 30 April 2023, the Group's cash and readily available credit
was GBP50.6m (2022: GBP51.1m). A very high proportion of our
ultimate customers are governments or government agencies, with a
clear need to invest in defence and security. The international and
domestic security environment still calls for greater resources to
be devoted to defence and counterterrorism in the UK and many other
countries, especially in the light of recent events in Ukraine. As
already mentioned, 80% of our revenue (based on consensus analyst
forecasts) for 2023/24 was on contract at 30 April 2023 providing
further assurance, and this has since increased to 90%.
As announced on 19 July 2022, the Group has renewed its bank
facility, increasing it from GBP40m to GBP50m and extending it to
July 2025 from November 2022. The Group extended this facility to
July 2026 on 14 June 2023 and has the option to extend it until
July 2027.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus, they continue to adopt the going concern
basis in preparing the annual financial statements.
The preliminary announcement was approved by the Board and
authorised for issue on 19 July 2023.
Copies of the Annual Report and accounts for the year ended 30
April 2023 will be posted to shareholders on 23 August 2023 and
will be available on the Company's website ( www.cohortplc.com )
from that date.
2. SEGMENTAL ANALYSIS OF REVENUE AND OPERATING PROFIT
Year ended Year ended
30 April 2023 30 April 2022
GBP000 GBP000
Revenue
Communications and Intelligence 86,195 68,369
Sensors and Effectors 96,518 69,396
182,713 137,765
---------------- ----------------
Adjusted Operating Profit
Communications and Intelligence 14,911 12,253
Sensors and Effectors 9,320 7,469
Central costs (5,167) (4,197)
19,064 15,525
---------------- ----------------
Amortisation of other intangible
assets (3,672) (6,865)
Research and development expenditure
credit (RDEC) 941 1,004
(Charge)/credit on marking forward
exchange contracts to market value
at the year end (1,082) 716
Exceptional items:
Costs of acquisition of JSK (50%) - (70)
Gain on acquisition of JSK (50%) - 342
Adjustment to earn-out on acquisition
of Chess - 438
Operating Profit 15,251 11,090
---------------- ----------------
The above segmental analysis is the primary segmental analysis
of the Group.
All revenue and adjusted operating profit 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
amortisation of other intangible assets, RDEC, change on marking
forward exchange contracts to market value at the year end and
exceptional items.
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 consistent basis from
year to year.
3. TAX CHARGE
Year ended Year ended
30 April 2023 30 April 2022
GBP000 GBP000
------------------------------------------ -------------- --------------
UK corporation tax: in respect of this
year 3,314 3,112
UK corporation tax: in respect of prior
years (756) (373)
German corporation tax: in respect of
this year - (40)
German corporation tax: in respect of
prior years - 82
Portugal corporation tax: in respect
of this year (249) (491)
Portugal corporation tax: in respect
of prior years 397 (9)
Other foreign corporation tax: in respect
of this year 133 (4)
2,839 2,277
------------------------------------------ -------------- --------------
Deferred tax: in respect of this year (96) (733)
Deferred tax: in respect of prior years (68) (3)
------------------------------------------ -------------- --------------
(164) (736)
------------------------------------------ -------------- --------------
2,675 1,541
------------------------------------------ -------------- --------------
The current year deferred tax credit includes a credit of
GBP987,000 (2022: credit of GBP1,541,000) in respect of the
amortisation of other intangible assets and a current year credit
of GBP271,000 (2022: GBP136,000 charge) in respect of marking
forward exchange contracts to market value at the year end.
4. EARNINGS PER SHARE
The earnings per share are calculated by dividing the earnings
for the year by the weighted average number of ordinary shares in
issue as follows:
Year ended Year ended
30 April 2023 30 April 2022
GBP000 GBP000
Earnings
Basic and diluted earnings 11,356 9,202
Amortisation of other intangible assets
(net of tax of GBP987,000; 2022: GBP1,541,000) 2,672 4,772
Charge/(credit) on non-trading foreign
exchange movements (net of tax charge
of GBP136,000 (2021: credit of GBP78,000) 811 (580)
Cost of acquisition of JSK (nil tax) - 70
Gain on acquisition of JSK (nil tax) - (342)
Adjustment to earn-out on acquisition
of Chess (nil tax) - (438)
Adjusted basic and diluted earnings 14,839 12,684
---------------- ----------------
The adjustment for the amortisation of intangible assets in
respect of EID and Chess for the year ended 30 April 2023 and 30
April 2022 reflects the interests of the equity holders of the
parent only and excludes the proportion allocated to the
non-controlling interest in each year. The Chess non-controlling
interest was acquired in November 2022.
Year ended Year ended
30 April 2023 30 April 2022
Number Number
Weighted average number
of shares
For the purposes of basic
earnings per share 40,673,953 40,813,569
Share options 88,038 230,101
For the purposes of diluted
earnings per share 40,761,991 41,043,670
--------------- ---------------
Year ended Year ended
30 April 2023 30 April 2022
Pence Pence
Earnings per share
Basic 27.92 22.55
Diluted 27.86 22.42
Adjusted earnings per share
Basic 36.48 31.08
Diluted 36.40 30.90
5. NET CASH GENERATED FROM OPERATING ACTIVITIES
Year ended Year ended
30 April 2023 30 April 2022
GBP000 GBP000
Profit for the year 11,252 8,687
Adjustments for:
Tax charge 2,675 1,541
Depreciation of property, plant and
equipment 2,376 2,209
Depreciation of right of use assets 1,776 1,684
Amortisation of goodwill and other intangible
assets 3,672 6,865
Net finance expense 1,324 862
Derivative financial instruments and
other non-trading exchange movements 1,082 (716)
Share-based payment 658 572
Movement in provisions 720 102
Operating cash inflows before movements
in working capital 25,535 21,806
---------------- ----------------
Increase in inventories (8,565) (9,885)
Decrease in receivables 2,999 10,530
(Decrease)/increase in payables (2,112) 22
---------------- ----------------
(7,678) 667
---------------- ----------------
Cash generated by operations 17,857 22,473
---------------- ----------------
Tax paid (111) (2,081)
Interest paid (1,224) (867)
---------------- ----------------
Net cash generated from operating activities 16,522 19,525
---------------- ----------------
Interest paid includes the interest element of lease liabilities
under IFRS 16 of GBP234,000 (2022: GBP251,000).
6. ACQUISITION OF CHESS TECHNOLOGIES LIMITED (CHESS)
As announced on 12 December 2018, Cohort plc acquired 81.84% of
Chess for an initial cash consideration of just over GBP20.0m. The
Group has recognised 100% of Chess' results and net assets from
that date as it has effective control.
The Group acquired the remaining shares (18.16%) of Chess on 30
November 2022 for a total consideration of GBP1.0m (2022: GBP1.4m
expected acquisition price).
[1] McKinsey & Company: "Invasion of Ukraine: Implications
for European defence spending", 19 December 2022
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