Cohort Plc AIM:CHRT, the AIM-listed defence company reported its results today. The Reading-based security-focused technology company announced an increase in pre-tax profits from GBP 7.1m in 2021 to 10.2m. Basic earnings per share was up from 13.38p to 22.55p in 2022. The company reported orders of GBP 186.4m, up from 180.3m in 2021.
Andrew Thomis, chief executive of Cohort said: “We’re particularly pleased with the growth of our order book, which we have extended out to 2030. Our cash position is strong, and we’re confident that this year’s trading expectations will surpass the year just ended.”
Revenue fell from GBP 143.3m in 2021 to 137.8m, but dividends were up, with total dividend per share up from 11.1p to 12.2p and proposed final dividends up from 7.6p to 8.35p.
The company recently announced that it had renegotiated its debt facility to GBP 50m, which will run for three years to July 2025. The previous debt facility was for GBP 40m and was due to expire in November 2022. Three new banks joined the syndication: NatWest, Lloyds Bank and Commerzbank.
The increased facility should allow Cohort more headroom to service its overdrafts and make ad hoc acquisitions, should the opportunity emerge.
Net funds available increased from GBP 2.5m in 2021 to 11m.
Chess gambit
There were a few clouds on the horizon, however. As previously explained, some of Cohort’s divisions underperformed, specifically Chess, which provides tracking, fire control and anti-drone solutions for maritime and land platforms and EID, a division that offers integrated communications systems to personnel deployed in the field.
Thomis said: “EID performed less well than last year. It was something we communicated to the market. Part of that was that we won a significant contract in 2021, which was a one-off and not something we expected to be repeated. We appointed a new CEO, and this year he’s been on a quest to make sure that the equipment we’re providing through EID is the very best in the world, and the most competitively priced.”
“At Chess, we’ve been experiencing ‘growing pains’ as the company changes from a pretty small niche technology business, to winning and delivering on substantial contracts. It’s been a steep growth curve, and the business has had to quickly adapt its organisational, management and commercial processes this year,” Thomis said.
“The technology at Chess is great. We’re now skilling-up our people. We recruited a new managing director, and he’s brought in a significantly refreshed management team – especially on the commercial and operational side. We’re working through our problems this year, and I feel a lot more confident about the prospects for Chess next year.”
Blühe, deutsches Vaterland!
Germany was a top performing market for Cohort, especially through ELAC Sonar, based in Kiel on Germany’s Baltic Coast, in close proximity to the headquarters of the German Navy and NATO Centre of Excellence for Confined and Shallow Waters. ELAC provides passive and active sonar systems to submarines and surface ships.
Confidence in Cohort was underlined by Commerzbank AG joining a syndicate of lenders to the company. ELAC recently won a significant contract with the Italian Navy, and Thomis said: “ELAC has done better than expected, our priority now is to deliver on the Italian programme, as it’s a very important contract for the group.”
Other wins for the group were in Portugal, and Thomis said that the company was looking forward to visiting strategic partners in Oceania and South Asia in the Autumn, where the company expected a surge of orders to originate.
State security
Recession is looming globally, and in the balancing act governments must do when prioritising spending on Defence is a harder sell to the general public than schools, hospitals and social care. However, Cohort is not perturbed.
“Spending is a political choice, but that said, the first responsibility of any government is to ensure the safety and security of the State. This was highlighted in the UK’s recent strategic defence review, and that sentiment is being echoed around the world – especially in Germany,” Thomis said.
“The strategic defence review highlighted Russia as the greatest short-term threat – which was correct – however, it said the greatest threat to the security of the nation was economic, and China looms as the principal adversary in the longer term. China’s Asian neighbours, worried at what they’ve seen in Russia-Ukraine are trying to protect themselves and their freedom from increased Chinese aggression in the Pacific, and we think we are in a good position to benefit from this sentiment.”Thomis rubbished suggestions that the new government in Australia had cooled on the AUKUS deal (a bilateral defence pact between Australia, the United States and UK) to develop new nuclear submarine technology. “This is the opposite to what we’ve heard from our contacts in government. The Australians are still really keen on developing their fleet to counter Chinese naval power in their shared waters,” said Thomis.
Cohort opened trading today (28th July) at 567.2p, offering a year-to-date return of 5.28% and one-year return of 8.95%. The company’s market capitalisation was GBP 227.1m
