REG-Cohort PLC Final Results - Part 1
Released: 25/06/2009
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20090625:RnsY4680U
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RNS Number : 4680U
Cohort PLC
25 June 2009
COHORT PLC
PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 30 APRIL 2009
"Continued growth, positive outlook"
Cohort plc, the independent technology group, today announces its preliminary
results for the year ended 30 April 2009. Highlights include:
2009 2008 %
* Revenue £78.6m £57.1m +38
* Adjusted operating profit £8.1m £6.1m +33
* Profit before tax £6.5m £5.6m +16
* Net funds £3.7m £2.1m +76
* Adjusted earnings per share* 16.1 pence 14.6 pence +10
* Proposed final dividend per share 1.2 pence 1.0 pence +20
* Excludes exceptional items (net of tax), amortisation of other intangible
assets and share of results of joint ventures (net of tax).
Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: "Cohort
has continued to make good progress. All of our businesses generated strong
revenue growth, and achieved record results for the year. We continue to seek
complementary acquisitions, whilst organically growing the existing businesses.
Overall the Board is positive about the outlook."
For further information please contact:
Cohort plc 01491 845 630
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Investec Investment Bank 020 7597 5970
Keith Anderson
Hogarth Partnership Limited 020 7357 9477
Julian Walker
NOTES TO EDITORS
Cohort plc (www.cohortplc.com) is an independent technology group working
primarily for defence (air, land and sea), wider government and industry
clients, through three market-facing subsidiary companies:
* SCS (www.scs-ltd.co.uk) - an independent defence consultancy, combining
technical expertise with practical experience and domain knowledge. Owned by
Cohort since flotation in March 2006.
* MASS (www.mass.co.uk) - a specialist defence and aerospace business focused
mainly on electronic warfare, information systems and electronic systems
development. Acquired by Cohort in August 2006.
* SEA (www.sea.co.uk) - an advanced surveillance systems and software house
with hardware development capability operating in the defence, space, transport
and offshore market sectors. 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 Oxfordshire and, through its operating
companies, employs in total around 500 core staff there and at bases in Bristol,
Cambridgeshire, Oxfordshire, Lincolnshire and Somerset.
CHAIRMAN'S STATEMENT
I am pleased to announce that Cohort plc had a strong year with all of our
subsidiaries achieving record results. This was the Group's first year of full
returns from all three subsidiaries and each continued to grow strongly,
reinforcing their presence in key existing markets whilst at the same time
breaking into new areas.
KEY FINANCIALS
In the year ended 30 April 2009, Cohort achieved revenue of £78.6m (2008:
£57.1m) representing a 38% increase on 2008. This included revenue of £31.1m
(2008: £26.1m) from Systems Consultant Services Ltd (SCS), £20.6m (2008: £18.0m)
from MASS Consultants Ltd (MASS) and £26.9m (£13.0m for the six months ended 30
April 2008) from SEA Group Limited (SEA). These represent annual growths of 19%,
15% and 18% respectively.
The Group's adjusted operating profit was £8.1m (2008: £6.1m). This included
operating profit from SCS of £3.3m (2008: £2.3m), from MASS of £2.8m (2008:
£2.3m) and SEA £3.1m (2008: £2.2m for six months). Cohort group overheads were
£1.2m (2008: £0.7m), which included some non-recurring personnel related costs.
The Group operating profit of £6.9m (2008: £5.6m) is after charging as an
exceptional item £0.7m (2008: £nil) in respect of withdrawing from the Group's
joint venture interest in AGS.
Profit before tax was £6.5m (2008: £5.6m) and profit after tax was £5.1m (2008:
£4.5m).
Basic earnings per share were 12.55p (2008: 12.81p). Adjusted earnings per
share were 16.10p (2008: 14.58p). The adjusted earnings per share were based
upon profit after tax, excluding amortisation of other intangible assets,
exceptional items and share of result of joint ventures.
The net funds at year end were £3.7m (2008: £2.1m), reflecting the good
operating performance net of the earn out payment for the shareholders of SEA of
£4.7m, which was earned in full and paid in July 2008.
DIVIDENDS
The Board is recommending a final dividend of 1.2p per ordinary share (2008:
1.0p) a 20% increase, making the full year dividend in respect of the year ended
30 April 2009 1.75p per ordinary share (2008: 1.45p), a 21% increase. This will
be payable on 2 September 2009 to shareholders on the register at 7 August 2009
subject to approval at the annual general meeting on 27 August 2009.
The Board continues to maintain a progressive dividend policy.
BOARD AND PERSONNEL
After successfully taking Cohort to the AIM market in 2006 and three years
establishing the Group and overseeing its growth to this point, Stanley Carter
decided to step aside from his role as Chief Executive. He has moved to the role
of non-executive Co-Chairman, in which capacity I look forward to continuing to
work with him in the development of the business. The Board is grateful to
Stanley for his immense contribution to the success of Cohort to date.
Andy Thomis rejoined the Board of Cohort plc and succeeded Stanley as Chief
Executive in May 2009. Andy, along with Stanley and I, led Cohort to the AIM
market before becoming Managing Director of MASS in May 2007. The Board looks
forward to working with Andy in developing and expanding Cohort.
Ashley Lane, who previously led the Systems Development division of MASS, has
taken over from Andy as Managing Director of MASS. Ashley has considerable
experience of MASS's technical offering and business and is well placed to take
the business forward.
As separately announced, Ian Dale-Staples, having joined the Board following the
acquisition of SEA in 2007, resigned from the Board for personal reasons on 24
June 2009. On behalf of the Board I would like to thank him for his contribution
to the Group and wish him well for the future.
In the course of the year Paul Phillips was appointed Managing Director of SEA,
having previously been responsible for its Defence division. Paul has been with
the Company for many years and has a background in technology, project
management and business development which equips him well to lead the business.
I would like to thank all our employees for the efforts which have helped to
make this year another successful one for the Group.
OUTLOOK
Following a good year for order intake with total orders of £67.5m the Group
order book at 1 May 2009 stood at £47.2m. This provides a good platform going
into the current year. Success in new markets plus continuing strong performance
in our primary markets, position the Group well for achievement of its growth
objectives. We continue to look for acquisitions to complement the organic
development of the business.
Overall the Board is positive about the outlook for the continued progress of
the Group.
Nick Prest CBE
Chairman
CHIEF EXECUTIVE'S REPORT
Cohort's trading this year has continued the successful trend of last year. All
three companies have achieved record annual revenues and profits.
In the year ended 30 April 2009, Cohort achieved Group revenue of £78.6m (2008:
£57.1m) and an adjusted operating profit of £8.1m (2008: £6.1m), reflecting a
full year of trading for all three subsidiaries.
GROUP OVERVIEW
Cohort is an independent group whose constituent companies provide a wide range
of technical advice, support and managed services and certain niche products,
characterised by high tech design and low volume manufacture. It provides an
environment in which companies can develop and continue to grow whilst retaining
a high degree of autonomy and deriving benefit from being part of the wider
Group. We continue to seek opportunities to acquire complementary businesses.
These may be either large enough to operate as an additional member within the
Group or smaller businesses that can be integrated with one of the existing
members.
Cohort's well established businesses have continued to expand successfully
through a combination of innovation, responsiveness and agility. Building from
their core markets of defence and security, Cohort companies now provide
technology and services in such markets as space, transport and offshore
technology. In an uncertain financial climate, this diversity both across the
Group and within the individual companies, coupled with the ability to keep well
abreast of and sometimes lead technology, enables us to respond quickly to
market needs. We are confident the Group is well placed to continue to grow
both organically, as demonstrated this year and by acquisition.
Cohort has completed its first full year as a group of three companies since its
foundation three years ago. It is now firmly established and recognised as a
defence and related technologies group, which I see as completing the first
stage of its development. I felt this was a sensible time to hand on the reins
of Chief Executive and I am confident that Andy Thomis, supported by a strong
Board and executive team, will successfully take the business forward. I look
forward to continuing to play an active part in this in my new capacity as
Co-Chairman.
TRADING SUBSIDIARIES
MASS
MASS Consultants Limited (MASS) is an independent systems house with a strong
defence focus including the design and manufacture of niche technology
products.
Based in St Neots near Cambridge with an electronic warfare facility in Lincoln,
MASS was founded in 1983. It is well known in the field of electronic warfare,
secure communications and associated specialist managed services.
Ashley Lane, Managing Director of MASS and the two other directors, including
Malcolm Lowes, a founder of MASS, have remained in post since the acquisition in
August 2006.
MASS has had a strong year, securing a niche position with a number of prime
contracts in being a first choice systems house for outsourced technologically
demanding design and development. MASS continued to support its key managed
service customers in the UK MOD and overseas.
In Electronic Warfare (EW), MASS continued to develop its own EW database
(Thurbon) and secured strategically important support from Saab for developing
Thurbon to support the Gripen combat aircraft EW system.
MASS finished the year by being selected as preferred bidder to provide the ICT
implementation and managed service for North Lincolnshire's Building School for
the Future programme. This programme should be on contract in the late summer.
MASS enters an important year with the renewal of its UKSF managed service
provision and its part in the development of the UK's new EW database as key
objectives.
SCS
Systems Consultants Services Limited (SCS) is an independent technical advisory
and managed service business operating primarily in the defence and security
sectors. Its personnel have the appropriate technical expertise combined with
practical experience of its application in the user domain. Over 70% of its
employees have served in the Armed Forces.
Based in Henley-on-Thames, SCS was founded in 1992 and has consistently grown
year on year. 2008/9 was no exception, with another near 20% growth in revenue.
Notable contract awards during the year included winning the re-competition of
the UK Land Command Brigade Mission Rehearsal exercises, training provision to
the Royal Saudi Air force, technical and procurement support to the Police
National CBRN centre and, along with MASS and SEA, forming part of the team
leading a key UK MOD concept study.
Over the last few years SCS has invested in its internal system and business
development resource. These investments have now begun to show a return with a
19% revenue growth driving a profit growth of over 40% this year, much of it
from higher utilisation of core staff.
SEA
SEA (Group) Limited (SEA) is an independent systems engineering and software
company operating in the defence, space, transport and off-shore markets.
Founded in 1988, it is based in Beckington near Frome, Somerset with further
offices close to the main UK MOD establishment at Bristol. During the year
SEA's sales have grown by 18% over the equivalent period for 2008, producing a
record profit for the business.
SEA continued to develop its offering in defence, securing a number of key
programmes in its traditional maritime markets, including DART and an underwater
detection system for the French Navy. In other defence areas, SEA continued to
lead on a number of land based research programmes, which have the potential to
pull through our own technology as well as securing a software simulation
programme for land based training and simulation.
In the space market, SEA continued to progress its broad band radiometer
instrument for the European Space Agency's Earth Care Mission as well as
securing elements of a number of other programmes including the European
Sentinel 3 mission.
In transport, SEA successfully launched its Roadflow product with sales to a
number of local authorities in the UK. Prospects for the product going forward
look promising and SEA continues to develop both the Roadflow product and its
wider offering in the area of traffic enforcement.
OUTLOOK
Against an uncertain international and economic background, the Group remains
agile and responsive to the needs of its customers. Cohort continues to exploit
its position in key niche markets where customer need and focus remains high.
The Group is diverse and is in a good business position with a strong order
book. We are confident that the wide ranging and complementary expertise and
capabilities we have in the Cohort Group make it well positioned to continue to
grow, both organically and through acquisition, to meet changing market needs.
Stanley Carter Andy Thomis
Co-Chairman Chief Executive from 25 May 2009
Chief Executive to 24 May 2009
FINANCE DIRECTOR'S REVIEW
The following review explains in further detail the significant financial issues
arising during the year ended 30 April 2009 and highlights other matters over
and above what is included in the primary financial statements and notes
thereto.
REVENUE
The segmental analysis (note 2) presents the Group's revenue by subsidiary. The
revenue is further analysed as follows:
By Sector 2009 2008
£m % £m %
Direct to UK MOD 44.3 34.0
Indirect to UK MOD, where the Group acts as a sub-contractor 16.4
or partner 13.6
Total to the UK MOD 60.7 77 47.6 83
Export defence customers 6.0 4.2
Total defence revenue 66.7 85 51.8 91
Transport 4.6 1.7
Space 4.2 1.2
Other commercial 3.1 2.4
Non-defence revenue 11.9 15 5.3 9
Total revenue 78.6 100 57.1 100
By type of work 2009 2008
£m % £m %
Technology solutions 30.4 39 14.9 26
Advisory services 23.8 30 20.1 35
Manpower provision 10.0 13 8.7 16
Managed services 9.0 11 8.6 15
Product 5.4 7 4.8 8
Total revenue 78.6 100 57.1 100
The change in the revenue by sector is due to reporting a full year of SEA,
which has approximately 40% of its business in non-defence sectors.
ADJUSTED OPERATING PROFIT
The adjusted operating profit is presented to reflect the trading profit of the
Group and excludes amortisation of other intangible assets, share of result of
joint ventures and exceptional items. This allows the Group to present its
trading performance in a comparable format year on year.
The adjusted operating profit is stated after charging the cost of share-based
payments of £184,000 (2008: £129,000) which is allocated to each business in
proportion to its employee participation in the Group's share option schemes.
The adjusted operating profit of SEA (and the Group) is after a net charge of
£57,000 (2008: credit of £131,000) in respect of marking forward foreign
exchange contracts to market at 30 April 2009 and revaluing currency monetary
assets and liabilities at the year end. The forward foreign exchange contracts
are used to hedge the forward sale of currency on Euro denominated trading
contracts.
TAX
The Group's tax charge for the year ended 30 April 2009 of £1,372,000 (2008:
£1,089,000) was at an effective rate of 21.3% (2008: 19.6%) of profit before
tax. This includes a current year corporation tax charge of £1,299,000 (2008:
£710,000), a rate of 20.1% (2008: 12.7%) of profit before tax and a deferred tax
charge of £73,000 (2008: charge of £379,000).
The Group's overall tax rate was below the standard corporation tax rate of 28%.
The majority of the reduction in the effective rate of tax was due to the
recognition of research and development (R&D) credits at MASS and SEA for the
year ended 30 April 2009.
The Group's businesses are only allowed to claim the lower R&D tax credit
allowance available to larger companies, currently 30% and this accounts for the
higher current year corporation tax rate compared with 2008 when the Group was
able to receive the larger relief available to smaller and medium sized
entities.
SCS and the Group's joint venture AGS applied for and received R&D tax credits
during 2009 for earlier periods. These credits have not yet been recognised in
the tax charge as the matter is still to be finalised.
Looking forward, the Group's tax charge may fall further over the next year or
two subject to outstanding claims being accepted by HMRC and recognised by the
Group. Beyond this, the Group's R&D tax credit will be at the lower rate
associated with a large Group (30% uplift on qualifying spend) and I would
expect the Group tax charge to be at or around the low 20% level and certainly
below the standard rate of 28% based upon expected R&D spend and reliefs
available.
PROVISIONS
The Group's provisions at 30 April 2009 are as per note 8.
The provision for the MASS earn out was established at the time of acquisition
(for £500,000) and was settled in cash for £280,000 (including costs) on 5 June
2009.
TREASURY FACILITIES
At 30 April 2009 the Group had undrawn facilities with its banking provider, RBS
as follows:
£M Term
Overdraft facility for working capital requirements 2.5 364 days
Structured debt facility for acquisitions 10.0 364 days with 3 year term out
Of the structured debt facility of £10.0m, £3.0m was drawn to part finance the
acquisition of SEA and remains drawn at 30 April 2009.
In addition, the Group has £0.8m of mortgage debt with RBS which was acquired
with SEA.
At 30 April 2009, the Group had in place forward foreign exchange contracts to
sell Euro 4.1m at a £ Sterling equivalent value of £3.5m.
These forward contracts are used by the Group to manage its risk exposure to
foreign currency on trading contracts where it either or both receives and pays
currency from customers and suppliers respectively.
These contracts are entered into when contracts are considered effective. The
Group does not enter into speculative foreign exchange dealing.
The Group's bank covenants were all satisfied at 30 April 2009.
GOODWILL AND OTHER INTANGIBLE ASSETS
The Group has recognised goodwill and other intangible assets in respect of the
acquisition of MASS and SEA (see note 7). The other intangible assets are in
respect of contracts acquired in each case and are to be amortised over the life
of the earnings associated with the contracts acquired.
The goodwill, which is not subject to amortisation but to annual impairment
testing, arises from the intangible elements of the acquired businesses for
which either the value or life is not readily derived. This includes, but is not
limited to, intellectual property within the acquired work force, reputation,
customer relations, contacts and market synergies with existing Group members.
The goodwill relating to the acquisitions of MASS and SEA has been tested for
impairment as at 30 April 2009 and no impairment is to be recognised in either
case.
WORKING CAPITAL
The working capital of the Group, excluding provisions and tax liabilities, has
risen from £8.0m net assets to £8.6m net assets, an increase of £0.6m (8%),
despite a rise in revenue of 38%.
The year-end days debtors in sales have fallen from 65 days in 2008 to 52 days
in 2009. This calculation is based upon dividing the revenue by month, working
backwards from April into the trade debtors balance (excluding unbilled income
and work in progress) at the year end, a more appropriate measure as it takes
into account the heavy weighting of the Group's revenue in the last quarter of
each year.
The Group has a working capital facility of £2.5m with RBS which was not
utilised during the year. The Group had cash at 30 April 2009 of £7.5m, (2008:
£6.1m). Advance receipts on contracts at the year-end were £2.5m (2008: £2.2m).
Simon Walther
Finance Director
CONSOLIDATED INCOME STATEMENT
For the year ended 30 April 2009
Year ended Year ended
30 April 2009 30 April 2008
Notes £000 £000
Revenue 2 78,571 57,093
Cost of sales (54,001) (40,386)
Gross profit 24,570 16,707
Administrative expenses (16,470) (10,597)
Adjusted operating profit* 2 8,100 6,110
Amortisation of other intangible assets 7 (540) (481)
Exceptional items 3 (674) (17)
Operating profit 2 6,886 5,612
Share of result of joint ventures (224) (118)
Finance income 95 231
Finance costs (303) (156)
Profit before tax 6,454 5,569
Tax expense 4 (1,372) (1,089)
Profit for the year 5,082 4,480
All profit for the year is attributable to equity shareholders of the parent and
derived from continuing operations, with the exception of the exceptional item
and share of result of joint ventures which are discontinued.
*Adjusted operating profit is the operating profit before exceptional items and
amortisation of other intangible assets.
Year ended Year ended
30 April 2009 30 April 2008
Pence Pence
Earnings per share 5
Basic 12.55 12.81
Diluted 12.46 12.66
Adjusted earnings per share 5
Basic 16.10 14.58
Diluted 15.98 14.40
Dividends per share paid and proposed in respect of
the year 6
Interim 0.55 0.45
Final 1.20 1.00
1.75 1.45
CONSOLIDATED BALANCE SHEET
As at 30 April 2009
At At
30 April 2009 30 April 2008 restated
Notes £000 £000
ASSETS
Non-current assets
Goodwill 7 31,043 31,043
Other intangible assets 7 1,227 1,987
Property, plant and equipment 4,727 4,866
Deferred tax asset 266 49
37,263 37,945
Current assets
Inventories 359 146
Trade and other receivables 24,275 20,879
Derivative financial instruments 178 131
Cash and cash equivalents 7,511 6,081
32,323 27,237
Total assets 69,586 65,182
LIABILITIES
Current liabilities
Trade and other payables (16,164) (13,133)
Current tax liabilities (1,507) (619)
Derivative financial instruments (68) -
Other loans (32) (41)
Bank borrowings (3,167) (3,123)
Provisions 8 (1,528) (5,783)
(22,466) (22,699)
Non-current liabilities
Other loans - (32)
Bank borrowings (615) (792)
Deferred tax liability (920) (649)
Provisions 8 - (167)
(1,535) (1,640)
Total liabilities (24,001) (24,339)
Net Assets 45,585 40,843
Equity
Share capital 4,059 4,046
Share premium account 29,297 29,158
Hedge reserve (49) -
Share option reserve 266 200
Retained earnings 12,012 7,439
Total equity attributable to the equity shareholders 45,585
of the parent 40,843
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 April 2009
Year ended
Year ended 30 April 2008
30 April 2009 £000
£000
At 1 May 40,843 20,579
Profit for the year 5,082 4,480
Equity dividends paid (627) (447)
Total recognised income and expense 4,455 4,033
Issue of new 10p ordinary shares - 16,433
Cost of new share issue - (361)
Exercise of share options 152 30
Share-based payments 184 129
Cash flow hedges - losses taken to equity (net of tax) (49) -
At 30 April 45,585 40,843
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2009
Year ended
Year ended 30 April 2008
30 April 2009 £000
Notes £000
7,271
Net cash generated from operating activities 9 3,235
Investing activities
Interest received 95 231
Proceeds on disposal of property, plant and equipment 6
-
Purchases of property, plant and equipment (432) (525)
Acquisition of subsidiaries, net of cash acquired (4,673) (11,473)
(5,004)
Net cash used in investing activities (11,767)
Financing activities
Dividends paid (627) (447)
Repayment of borrowings (174) (94)
Proceeds on issue of shares 152 7,139
New bank loans raised - 3,000
(649)
Net cash (out)/in from financing activities 9,598
1,618
Net increase in cash and cash equivalents 1,066
At 1 May 2008
£000 Exchange Cash Flow At 30 April 2009
£000 £000 £000
Funds reconciliation
Cash and bank 6,081 (188) (4,582) 1,311
Short term deposits - - 6,200 6,200
Cash and cash equivalents 6,081 (188) 1,618 7,511
Other loans (73) - 41 (32)
Bank loans (3,915) - 133 (3,782)
Debt (3,988) - 174 (3,814)
Net funds 2,093 (188) 1,792 3,697
NOTES TO THE PRELIMINARY RESULTS ANNOUNCEMENT
1. BASIS OF PREPARATION
The financial information contained within this preliminary report has been
prepared using accounting policies consistent with International Financial
Reporting Standards (IFRS) as adopted by the EU and applying at
30 April 2009. The information in this preliminary statement has been extracted
from the financial statements for the year ended 30 April 2009 and as such, does
not contain all the information required to be disclosed in the financial
statements prepared in accordance with the International Financial Reporting
Standards.
The Group's Annual Report for the year ended 30 April 2009 has yet to be
delivered to the Registrar of Companies and the auditor has yet to issue an
opinion in relation to it. The figures for the year ended 30 April 2009 and 2008
do not constitute statutory accounts within the meaning of section 434 of the
Companies Act 2006.
The comparative figures for the year ended 30 April 2008 were derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies and have been restated for appropriate adjustments in respect of
goodwill. Those accounts received an unqualified audit report. The preliminary
announcement was approved by the Board and authorised for issue on 24 June
2009.
2.SEGMENTAL ANALYSIS OF REVENUE AND OPERATING PROFIT
Year ended 30 April 2009 Year ended 30 April 2008
£000 £000
Revenue
MASS 20,622 17,998
SCS 31,045 26,087
SEA 26,904 13,008
78,571 57,093
Adjusted Operating Profit
MASS 2,832 2,271
SCS 3,343 2,343
SEA 3,124 2,249
Central costs (1,199) (753)
8,100 6,110
Amortisation of other intangible assets (540) (481)
Exceptional items (674) (17)
Operating Profit 6,886 5,612
The above segmental analysis is the primary segmental analysis of the Group.
All revenue and adjusted operating profit is in respect of continuing
operations, with the exception of the exceptional items which is in respect of
AGS, which is now discontinued.
The operating profit as reported under IFRS is reconciled to the adjusted
operating profit as reported above by the exclusion of exceptional items and
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 year to year.
More to follow, for following part double-click [nRn2Y4680U]