Final Results

RNS Number : 1061J

Cohort PLC

27 June 2011

 



Arlington House 1025 Arlington Business Park Reading Berks RG7 4SA

Cohort plc

COHORT PLC

PRELIMINARY RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 30 APRIL 2011

Sound platform - improving performance

Multi-million pound Electronic Warfare contract

announced separately today

Cohort plc, the independent technology group, today announces its preliminary results for the year ended 30 April 2011.  Highlights include:

	2011	2010	%
·      Revenue	£65.1m	£78.1m	(17)
·      Adjusted operating profit*	£5.0m	£4.1m	22
·      Adjusted profit before tax*	£4.9m	£4.0m	23
·      Adjusted earnings per share*	10.69 pence	7.67 pence	39
·      Profit before tax	£2.7m	£2.7m	-
·      Net funds	£6.7m	£3.0m	123
·      Order book (closing)	£103m	£112m	(8)
·      Proposed final dividend per share	1.6p	1.4p	14
·      Total dividend per share	2.40p	2.05p	17

* Excludes exceptional items and amortisation of other intangible assets.

Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: "Cohort has improved its profitability despite challenging conditions in some of its markets and operational difficulties at SEA.  The closing order book of £103m provides a good platform for the coming year, and we will maintain the drive for improved operational performance, particularly at SEA."

"Cohort's businesses have strong market positions and the Group has a healthy cash position.  There is a gap between the market capitalisation of Cohort and the Board's view of the aggregate value of Cohort's underlying businesses and the Board's priority is to close this gap."

For further information please contact:

Cohort plc	0118 909 0390
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Investec Bank Plc	020 7597 5970
Keith Anderson, David Adams
MHP Communications Limited	020 3128 8100
Reg Hoare

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) - a 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 and transport 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 Berkshire and, through its operating companies, employs in total around 500 core staff there and at bases in Bristol, Cambridgeshire, Lincolnshire and Somerset. 

CHAIRMAN'S STATEMENT

Cohort has had an improved year overall, though falling short of the Board's expectations at the beginning of the year.  MASS had another strong performance growing revenue and profitability to record levels.  Following management actions taken in early 2010, SCS has returned to profitability.  SEA continued to experience programme difficulties during the year and further management and process changes were made to address these problems in the second half of the year.  The SEA trading result for the year ended 30 April 2011 reflected a cautious stance on programme status and performance.  The positive impact of these changes will be seen in the current financial year.

Key financials

In the year ended 30 April 2011, Cohort posted revenueof £65.1m (2010: £78.1m). This included revenue of £18.4m (2010: £26.4m) from Systems Consultants Services Limited (SCS), £23.5m (2010: £21.5m) from MASS Consultants Limited (MASS) and £23.2m (2010: £30.2m) from SEA Group Limited (SEA).  MASS grew its revenue by nearly 10%.  As previously reported, SCS's revenue was down on 2010 after withdrawing from a number of unprofitable revenue streams as well as experiencing a tougher domestic market, particularly in military manpower substitution.  SEA revenue was down on 2010 due to delays in programmes combined with weaker demand in some of its markets, especially defence research and transport.

The Group's adjusted operating profit was £5.0m (2010: £4.1m). This included adjusted operating profit from SCS of £1.0m (2010: £0.1m), from MASS of £4.2m (2010: £3.5m) and from SEA of £0.9m (2010: £1.6m). Cohort Group overheads were £1.1m (2010: £1.1m).

The Group operating profit of £2.8m (2010: £2.9m) was after charging £0.7m (2010: £0.6m) in respect of restructuring costs at SCS and SEA.

Profit before tax was £2.7m (2010: £2.7m) and profit after tax was £2.8m (2010: £2.3m).

Basic earnings per share were 6.79 pence (2010: 5.63 pence). Adjusted earnings per share were 10.69 pence (2010: 7.67 pence). The adjusted earnings per share were based upon profit after tax, excluding amortisation of other intangible assets and exceptional items, both net of tax.

Order intake for the year was £55.6m (2010: £143.6m).  The prior year included renewals of some long term managed service contracts deliverable over a decade.

The net funds at year end were £6.7m (2010: £3.0m) after the purchase by MASS of Abacus EW for initial cash consideration of £0.9m in May 2010.

Dividends

The Board is recommending a final dividend of 1.6 pence per ordinary share (2010: 1.4 pence), making the full year dividend in respect of the year ended 30 April 2011 2.4 pence per ordinary share (2010: 2.05 pence), a 17% increase. This will be payable on 7 September 2011 to shareholders on the register at 5 August 2011 subject to approval at the Annual General Meeting on 1 September 2011.

MASS

MASS traded strongly in the year and posted record figures for sales, profits and cash generation.  The company moved into its new premises in September 2010 and is well placed to strengthen further its good position.  Abacus EW, which was acquired earlier in the year for an initial consideration of £0.9m, has been successfully integrated by MASS and has fulfilled our expectation in both operating performance and strategic fit.  Abacus EW delivered a strong first year performance of over £0.7m adjusted operating profit on £1.6m of revenue.  MASS's order book of £69.8m gives it a good starting point for the coming year and the recently secured SHEPHERD order underlines MASS's central role in the UK's Electronic Warfare capability as well as providing MASS with a firm base from which to pursue further export opportunities.

SCS

Following a difficult year in 2009/10, SCS has returned to profitability, albeit on a lower level of revenue.  SCS has settled into its new premises and under the leadership of Bill Bird, who was appointed as Managing Director in September 2010, has continued to progress well.

SCS confirmed its strong capabilities in defence by retaining its simulation support contract to the UK MOD's Permanent Joint Headquarters which it won against competition in March 2011.  After shedding around £2.0m of annual running cost last year, SCS further aligned its cost base with its revenue streams during 2010/11 removing a further £0.8m of annual operating cost.  SCS has now consolidated itself in terms of size and offering and is in a position to grow again and improve its margin.

SEA

After a disappointing 2009/10 SEA continued to experience programme difficulties in the first half of 2010/11.  As a result, management changes were made in late 2010, led by Andy Thomis, as acting Managing Director of SEA.  These changes were extensive in respect of organisation and processes and the changes have continued under Steve Hill, who was appointed Managing Director in March 2011.  We expect SEA's performance to improve in the coming year, though some further alignment of costs to revenue may be required.  SEA ended the year with an order book of £23.4m (2010: £24.7m), which underpins a good proportion of the coming year's revenue.

Management

As part of the Executive team's response to performance problems, Andy Thomis acted as Managing Director of both SCS and SEA, in addition to his role as Chief Executive, for short periods until succeeded by the new appointees.  On behalf of the Board I welcome both Bill and Steve to the Group and I would like to thank all our employees for their hard work and dedication during a tough period for Cohort.

Outlook

The closing order book of £103.2m (2010: £112.7m) and pipeline of prospects provide a good platform for the coming year, despite continuing uncertainty in the UK defence market, and we will maintain the drive for improved operational performance, particularly at SEA.  The Group will continue to push the expansion of its business outside the UK as well as its non-defence business.

Cohort's businesses have strong market positions and the Group has a healthy cash position.  There is a gap between the market capitalisation of Cohort and the Board's view of the aggregate value of Cohort's underlying businesses and the Board's priority is to close this gap.

Nick Prest CBE

Chairman

CHIEF EXECUTIVE'S REVIEW

Overall this has been an improved year for Cohort.  MASS again performed well, producing record revenue, operating profit and cash while successfully integrating Abacus EW following its acquisition in May 2010.  MASS's continuing success was underlined by it securing the SHEPHERD contract to deliver key aspects of the information management upgrade for the UK MOD's Electronic Warfare (EW) Centre, keeping MASS at the heart of the UK's EW operational support.  This success underpins MASS's offering to overseas customers keen to develop their own EW capabilities.  At SCS, following the problems reported in 2009/10 I am pleased to report an improvement in profitability, despite a tough market background in the UK defence sector.  SEA had a disappointing year following on from its below expectation performance in 2009/10.  Action we took in 2009/10 to address the programme issues identified at the time did not result in sufficient performance improvement.  As a result more extensive action was taken during the year with major changes to management, organisation and processes, initially under my direction and then Steve Hill's, to whom I handed over as SEA Managing Director in March 2011.

Group overview

The Group's revenue for the year as compared to 2009/10 is summarised as follows:

	2011					2010
	MASS	SCS	SEA	Group	%	MASS	SCS	SEA	Group	%
	£m	£m	£m	£m		£m	£m	£m	£m
By market sector
Defence (including security)
Direct to UK MOD	9.6	12.5	5.7	27.8		10.2	20.3	9.8	40.3
Indirect to UK MOD, where the Group acts as a sub-contractor or partner	5.1	4.5	6.9	16.5		4.6	4.4	7.8	16.8
Total to UK MOD	14.7	17.0	12.6	44.3	68	14.8	24.7	17.6	57.1	73
Export defence	6.5	0.6	-	7.1	11	6.1	1.5	-	7.6	10
Total defence	21.2	17.6	12.6	51.4	79	20.9	26.2	17.6	64.7	83
Transport	-	-	2.1	2.1		-	-	3.3	3.3
Space	-	-	7.8	7.8		-	-	8.2	8.2
Other commercial	2.3	0.8	0.7	3.8		0.6	0.2	1.1	1.9
Total non-defence	2.3	0.8	10.6	13.7	21	0.6	0.2	12.6	13.4	17
	23.5	18.4	23.2	65.1	100	21.5	26.4	30.2	78.1	100
By type of work
Technology solutions	10.1	-	20.3	30.4	47	7.1	-	27.4	34.5	44
Advisory services	2.6	11.3	0.4	14.3	22	1.6	14.9	0.5	17.0	22
Managed services	8.6	-	0.9	9.5	15	9.0	-	0.8	9.8	13
Manpower provision	-	7.1	0.1	7.2	11	-	11.5	0.1	11.6	15
Product	2.2	-	1.5	3.7	5	3.8	-	1.4	5.2	6
	23.5	18.4	23.2	65.1	100	21.5	26.4	30.2	78.1	100

The above table shows the fall in Group revenue from 2010 to 2011 of £13.0m (17%).  The most significant element of the reduction was in revenue received directly from the UK MOD at SCS and SEA.  Military manpower substitution and advisory services were both affected at SCS, and at SEA, there was a reduction in technology solutions work, particularly on research programmes.  This reflects MOD's introduction of an expenditure control regime as it has sought to implement the Government's Strategic Defence and Security Review (SDSR).

More positively the Group maintained the level of revenue received indirectly from MOD, including support to the UK's deployed operations.

The Group continues to position itself to increase its non-UK MOD defence revenue, particularly its export defence revenue.

Trading subsidiaries

MASS

MASS had another record year, growing revenue by nearly 10% to £23.5m and adjusted operating profit by nearly 20% to £4.2m.  It occupied its new operating premises near St Neots in September 2010 and these provide MASS with the capacity to continue to grow into the future.

I am delighted to report a strong maiden contribution from Abacus EW which generated £0.7m of adjusted operating profit and £0.6m cash on £1.6m of revenue after integration with MASS's EW Operational Support business.

As already mentioned, in June 2011 MASS secured the contract to deliver key aspects of the new information management system for the UK's Defence EW Centre.  This will be based upon MASS's own internally developed product, THURBON^TM.  This provides MASS with a strong lever to secure export opportunities based upon THURBON^TM, both inside and outside of NATO.

MASS successfully delivered on the first of the schools for North Lincolnshire under the Building Schools for the Future (BSF) programme.  The coalition government has replaced BSF with a new scheme enabling individual schools to contract under approved framework agreements, on which MASS is accredited.  This new market has a different competitive landscape to the BSF programme and MASS has so far secured one project under this arrangement.

SCS

As I reported last year, SCS underwent considerable restructuring during 2009/10 and this was further refined during the current year.  This achieved our initial goal of returning SCS to a stable, profitable business. In the last eighteen months the business has shed around £2.8m of annual employment cost.  SCS achieved an adjusted operating profit of £1.0m (2010: £0.1m) on £18.4m (2010: £26.4m) of revenue.  Despite the improvement, the operating margin of just over 5% remains too low, and our objective is to move SCS's performance closer to the double-digit margins achieved in past years.  We previously signalled a fall in revenue due to SCS exiting low profitability business but this was compounded by a drop off in military manpower substitution by the UK MOD as well as a reduction in some training exercise work.

Despite the tough market, SCS continued to win some key strategic work in the UK including the renewal of the Permanent Joint Headquarters training simulation for at least the next two years.  SCS has also continued to develop in related markets outside UK defence, securing a framework agreement for NATO, providing training in Africa and support to the security arrangements for the London Olympics.  SCS continues actively to seek further overseas opportunities but the timing of these is always uncertain.  Despite the tight and sometimes unpredictable market conditions, I am confident that SCS's capabilities and business model position it well against its competitors and there are reasonable grounds to think that it will continue to grow from the firm base established this year.

SEA

The trading performance of SEA in the first half of this year revealed that further restructuring was required.  This was begun in October 2010 and so far it has reduced the SEA cost base by £1.3m.  More importantly it changed the management structure, organisation and processes, particularly around project management and 2011/12 is now set to see an improvement.

Despite the difficult defence market, SEA has continued to secure some valuable and important orders.  In defence, it has been awarded further research work in programmes including Future Dismounted Close Combat as well as making further progress with its Common Simulation Framework system.  SEA has continued to deliver to customer requirements on the External Communications System (ECS) for the latest Astute Class Submarine and is well positioned to deliver retrofits to existing platforms as well as new installations onto future builds of this submarine class and elsewhere.

In Transport, SEA has been selected for another key Network Rail software programme and in Space it continues to secure positions on a number of research and flight programmes, although profitable delivery in the Space Division has been one of the weaker elements of SEA's performance.

The underlying SEA result, when the impact of marking forward exchange contracts to market is removed was £0.3m (2010: £1.8m) on revenue of £23.2m (2010: £30.2m).  This result reflects the programme issues encountered in the business during the year and on which management has now taken a cautious view.

Outlook

Action has been taken at SEA to address the programme and organisational issues.  These will take some time to work through the system but the results of this should be evident in SEA's trading performance in the coming year.  I am pleased at the turnaround at SCS and its continuing positive performance, although its visibility of forward revenue in a tight UK MOD market remains limited and it must proceed with caution.  MASS remains a strong business and I expect it to consolidate its recent impressive growth in the year ahead.  The combination of strong order book and good short-term opportunities give me confidence that despite the tight domestic defence market, the Group can continue to improve its growth.

Andy Thomis

Chief Executive

FINANCE DIRECTOR'S REVIEW

This review details the significant financial issues arising during the year ended 30 April 2011.

Adjusted operating profit

The adjusted operating profit is presented to reflect the trading profit of the Group and excludes amortisation of other intangible assets and exceptional items. This enables the Group to present its trading performance in a consistent manner year on year.

The adjusted operating profit is stated after charging the cost of share-based payments of £317,000 (2010: £259,000) which is allocated to each business in proportion to its employee participation in the Group's share option schemes.  The segmental analysis (see note 2) is disclosed for each business after deducting the cost of share-based payments.

The adjusted operating profit of SEA (and the Group) is after a net credit of £595,000 (2010: charge of £231,000) in respect of marking forward foreign exchange contracts to market at 30 April 2011.

The underlying adjusted operating profit of SEA excluding this exchange adjustment was £289,000 for the year ended 30 April 2011 (2010: £1,791,000).

The current year included further cost reduction at both SCS and SEA with SCS reducing its annual operating costs in the second half by a further £0.8m, on top of the £2.0m annual reduction achieved in 2009/10.

SEA also undertook restructuring in the second half of the year reducing its annual operating cost by £1.3m.

MASS's operating costs now reflect its move to its new freehold property in St Neots.

Exceptional items (see note 3)

The key items charged as exceptional items were as follows:

·      Restructuring cost at SCS of £0.2m.  A further 19 posts were removed at SCS, mostly in direct fee earning staff reducing the cost base by approximately £0.8m per year. 

·      The restructuring of SEA of £0.5m was in respect of 26 posts and reflected the restructuring of the business from its previous four market facing, fully integrated operating divisions delivering divisional trading profit (after overhead) to capability focused divisions responsible for delivering gross margin on projects and ensuring resources to deliver those projects is available.  This restructuring required a reduction in management, divisional overhead and direct costs and equates to approximately £1.3m of annual cost saving.

Tax

The Group's tax credit for the year ended 30 April 2011 of £65,000 (2010: charge of £457,000) was at an effective credit rate of 2.4% (2010: charge of 16.6%) of profit before tax. This includes a current year corporation tax charge of £459,000 (2010: £961,000), a rate of 17.0% (2010: 35.0%) of profit before tax, a prior year tax credit of £1,124,000 (2010: charge of £135,000) and a deferred tax charge of £600,000 (2010: credit of £639,000), consisting of £14,000 (2010: £639,000 credit) for the current year and £586,000 (2010: £nil) for prior years.

The reported current tax rate is lower than the standard rate (calculated at 27.83%) due to recognition of research and development (R&D) tax credits.  The effective current tax rate, after taking account of appropriate deferred tax items in respect of the current year is 17.5%.

The Group's overall tax rate was below the standard corporation tax rate of 27.83% (2010: 28.0%). The majority of the reduction in the effective rate of tax was due to the recognition of R&D tax credits at MASS and SEA for the year ended 30 April 2011 and a prior year current tax credit reflecting the release of a tax provision in respect of earlier years R&D credits following closure of the respective tax  years.

The Group's businesses are only allowed to claim the lower R&D tax credit allowance available to larger companies, currently 30%.

Looking forward, the Group's effective current tax rate for 2011/12 and 2012/13 is estimated at 18% and 17% respectively, taking account of the reduction in headline tax rates and assuming the development R&D tax credit regime remains unchanged from its current level and scope.

The Group maintains a cautious approach to previous R&D tax credit claims for tax periods that are still open.

Capital structure of the Group and funding

The Group's access to capital comprises the following:

1. Share Capital

The Group has in issue 40.8m ordinary shares of 10p each.  Of these shares just under 0.4m are owned by the Cohort plc Employee Benefit Trust and waive their rights to dividends.

In addition the Group has issued options over ordinary shares through Key Employee Share Option and SAYE schemes to the level of 3.0m at 30 April 2011.

2. Treasury

At 30 April 2011 the Group had facilities with its banking provider, RBS as follows:

	£m	Term at commencement of facility
Overdraft facility for working capital requirements	5.0	364 days
Structured debt facility for acquisitions	7.5	364 days with 3 year term out

Of the structured debt facility of £7.5m, £3.0m was drawn to part finance the acquisition of SEA and remains drawn at 30 April 2011.  The £5.0m overdraft facility was not drawn at 30 April 2011 (2010: £nil drawn).  In addition, the Group has £0.4m of mortgage debt with RBS which was acquired with SEA.

The Group's facilities are due for renewal in October 2011 and the Board expects these to be renewed on broadly similar terms.  The Group's bank facilities were changed at 1 October 2010 when £2.5m was switched from the structured acquisition facility to the overdraft facility.

The Group's foreign exchange exposure is mainly at SEA and primarily relates to receivables from the European Space Agency, this exposure is hedged using forward contracts.

At 30 April 2011, the Group had in place forward foreign exchange contracts as follows:

Sell	Buy
€ 12.1m	£ 10.3m
£ 0.5m	US$ 0.9m
€ 1.7m	US$ 2.4m

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 forward exchange contracts are entered into when customer contracts are considered highly probable.  The Group does not enter into speculative foreign exchange dealing.

As mentioned above, the marking of forward contracts to market at the spot rate on 30 April 2011 resulted in the recognition of a derivative financial asset of £542,000 (2010: liability of £53,000) and a credit to the income statement of £595,000 (2010: charge of £231,000).  In both years, the change in the derivative financial instrument was recognised as part of the adjusted operating profit of SEA.

The Group's bank covenants were all satisfied at 30 April 2011 based upon its latest internal forecasts the Group does not anticipate any breaches.  The covenants are assessed quarterly with a measured and reported twelve month look back and an assessment of the next twelve months.

The Group takes a prudent approach to treasury policy with its overriding objective being protection of capital.  In implementing this policy, deposits are held with at least A rated institutions and deposits are generally held on short (less than 3 months) duration to maturity on commencement.  This matches the Group's cash resources with its internal 13 week cash forecasts retaining flexibility whilst trying to ensure an acceptable return on its cash.  All of the Group's cash is managed through a set-off arrangement enabling the most efficient use of the Group's cash from day to day, under the supervision of the Group's finance function.

Deposit rates during 2010/11 have been low, typically below 0.5% (2010: 0.4%) compared with the Group's weighted interest rate on its borrowings of 3.10% (2010: 3.17%).  The Group has retained its debt during the period despite the unfavourable comparative interest rates to ensure it has had facilities available to support its working capital demands and to allow the Group to make small, cash only acquisitions, such as it did in the case of Abacus EW during the year.

The Group has an interest swap over £0.4m of its mortgage debt (acquired with SEA) fixing the interest rate on this loan at 6.38%.

The Group's liquidity remains good with profit conversion to cash remaining well above 100% (See KPIs on page 11).  The Group has historically had low levels of working capital with many of its contracts being less than one year in duration and the reliability of its customer base making debt risk low.  During 2011, working capital levels have fallen, as described below.

Working capital

The working capital of the Group, defined as inventory plus trade and other receivables less trade and other payables, has fallen from £8.2m net assets to £5.5m net assets, a decrease of £2.7m (33%). The decrease in working capital was partly due to a fall in revenue (17% down) but also reflected a good improvement in working capital at SCS following its improvement in processes and an increase in advance payments at SEA by £1.5m.

The year-end days' debtors in sales have increased from 50 days in 2010 to 63 days in 2011. 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 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 increase in debtor days is due in part to a slowing of UK MOD payments at the end of April 2011 due to the extended holiday period.

The Group has a working capital facility of £5.0m with RBS which was not utilised during the year. The Group had cash at 30 April 2011 of just under £10.2m (2010: £6.6m). Advance receipts on contracts at the year end were £3.2m (2010: £1.7m).

The Group generated £6.5m of cash from operating activities (operating profit was £4.3m before amortisation of intangible assets) which was offset by an investment of £1.8m in total on fixed assets, own shares and acquired businesses and £0.9m of dividends paid.

Performance indicator	Description	2011	2010
Change in revenue	Change in total Group revenue compared to the prior year	(17%)	2%
Change in adjusted operating profit	Change in Group profit before tax, amortisation of other intangible assets and exceptional items.	23%	(34%)
Order book visibility	Orders for next financial year expected to be delivered as revenue, presented as a percentage of consensus market revenue forecasts for the year.	58% cover on forecast 2012 revenue of £73.8m	58% cover on forecast 2011 revenue of £76.7m
Change in adjusted earnings per share	Annual change in earnings per share, before amortisation of other intangible assets and exceptional items.	39%	(40%)
Operating cash conversion	Net cash generated from operations before tax as compared to the profit before tax.	254%	155%

The indicators shown above have been identified by the Directors as giving the best overall indication of the Group's long-term success. Revenue growth gives a quantified indication of the rate at which the Group's business activity is expanding.  The adjusted profit trend provides an indication of whether additional revenue is being gained without profit margins being compromised, and whether any acquisitions are value enhancing. Order book visibility, based upon expected revenue during the year to come, provides a measure of confidence in the likelihood of achievement of future forecasts. Change in adjusted earnings per share is an absolute measure of the Board's management of the Group's return to shareholders including tax and interest. Operating cash conversion measures the ability of the Group to convert profit to cash.

The Group's KPI's demonstrate clearly the reduction in revenue at SCS and SEA but the improvement in the  Group's adjusted operating profit, driven by the continued strong performance at MASS and the significant restructuring at SCS in 2009/10 now producing an improved return. The Group enters 2011/12 with good coverage of its forecast revenue on order.

As mentioned already, the Group has had another strong cash performance in 2010/11 with the operating cash conversion better than in 2009/10.

Simon Walther

Finance Director

CONSOLIDATED INCOME STATEMENT

For the year ended 30 April 2011       

	Notes	Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Revenue	2	65,135	78,129
Cost of sales		(45,217)	(56,931)
Gross profit		19,918	21,198
Administrative expenses (including amortisation of other intangible assets and exceptional items)		(17,079)	(18,308)
Operating profit	2	2,839	2,890
Comprising:
Adjusted operating profit	2	5,034	4,109
Amortisation of other intangible assets		(1,477)	(595)
Exceptional items	3	(718)	(624)
Operating profit	2	2,839	2,890
Finance income		27	38
Finance costs		(170)	(180)
Profit before tax		2,696	2,748
Income tax credit/(expense)	4	65	(457)
Profit for the year		2,761	2,291

All profit for the year is attributable to equity shareholders of the parent and derived from continuing operations.

		Year ended 30 April 2011 Pence	Year ended 30 April 2010 Pence
Earnings per share	5
Basic		6.79	5.63
Diluted		6.79	5.62
Adjusted earnings per share	5
Basic		10.69	7.67
Diluted		10.69	7.66
Dividends per share paid and proposed in respect of the year	6
Interim		0.80	0.65
Final		1.60	1.40
		2.40	2.05

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 April 2011

	Notes	At 30 April 2011 £000	At 30 April 2010 £000
ASSETS
Non-current assets
Goodwill		31,395	31,043
Other intangible assets		2,155	632
Property, plant and equipment		7,820	7,930
Deferred tax asset		118	1,015
		41,488	40,620
Current assets
Inventories		356	440
Trade and other receivables		20,339	22,837
Derivative financial instruments		575	15
Cash and cash equivalents		10,177	6,656
		31,447	29,948
Total assets		72,935	70,568
LIABILITIES
Current liabilities
Trade and other payables		(15,220)	(15,117)
Current tax liabilities		(973)	(1,804)
Derivative financial instruments		-	(53)
Bank borrowings		(3,131)	(3,171)
Provisions	7	(3,339)	(2,411)
		(22,663)	(22,556)
Non-current liabilities
Bank borrowings		(313)	(444)
Deferred tax liability		(1,601)	(1,053)
Provisions	7	(103)	(155)
		(2,017)	(1,652)
Total liabilities		(24,680)	(24,208)
Net Assets		48,255	46,360
Equity
Share capital		4,079	4,079
Own shares		(302)	-
Share premium account		29,519	29,519
Hedge reserve		24	11
Share option reserve		555	379
Retained earnings		14,380	12,372
Total equity attributable to the equity shareholders of the parent		48,255	46,360

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 April 2011

		Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Profit for the year		2,761	2,291
Cash flow hedges - gains taken to equity (net of tax charge of £5,000; 2010: £23,000)		13	60
Comprehensive income for the year		2,774	2,351

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 April 2011

		Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
At 1 May as previously reported		46,360	45,585
Prior year adjustment at SCS		-	(1,323)
At 1 May restated		46,360	44,262
Comprehensive income for the year		2,774	2,351
Equity dividends paid		(894)	(754)
Total recognised income and expense		1,880	1,597
Exercise of share options		-	242
Share-based payments		317	259
Purchase of own shares		(302)	-
At 30 April		48,255	46,360

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 April 2011

	Notes	Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Net cash generated from operating activities	8	6,512	3,961
Investing activities
Interest received		27	38
Proceeds on disposal of property, plant and equipment		-	35
Purchases of property, plant and equipment		(599)	(3,795)
Acquisition of subsidiaries, net of cash acquired		(918)	(280)
Purchase of own shares		(302)	-
Net cash used in investing activities		(1,792)	(4,002)
Financing activities
Dividends paid		(894)	(754)
Repayment of borrowings		(171)	(199)
Proceeds on issue of shares		-	242
Net cash out flow from financing activities		(1,065)	(711)
Net increase/(decrease) in cash and cash equivalents		3,655	(752)

	At 1 May 2010 £000	Exchange losses £000	Cash Flow £000	At 30 April 2011 £000
Funds reconciliation
Cash and bank	456	(134)	9,855	10,177
Short term deposits	6,200	-	(6,200)	-
Cash and cash equivalents	6,656	(134)	3,655	10,177
Bank loans	(3,615)	-	171	(3,444)
Debt	(3,615)	-	171	(3,444)
Net funds	3,041	(134)	3,826	6,733

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 2011.  The information in this preliminary statement has been extracted from the financial statements for the year ended 30 April 2011 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with IFRS.

The Group's Annual Report for the year ended 30 April 2011 has yet to be delivered to the Registrar of Companies.  The auditors have reported on these accounts.  Their report was not qualified and did not contain a statement under Section 498 of the Companies Act 2006 . The figures for the year ended 30 April 2011 and 2010 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 2010 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies.  Those accounts received an unqualified audit report.  The preliminary announcement was approved by the Board on 27 June 2011 and authorised for issue on 27 June 2011.

2.         SEGMENTAL ANALYSIS OF REVENUE AND OPERATING PROFIT

	Year ended 30 April 2011 £000	Year ended 30 April 2010                  £000
Revenue
MASS	23,526	21,484
SCS	18,450	26,398
SEA	23,159	30,247
	65,135	78,129
Adjusted Operating Profit
MASS	4,231	3,549
SCS	1,025	90
SEA	884	1,560
Central costs	(1,106)	(1,090)
	5,034	4,109
Amortisation of other intangible assets	(1,477)	(595)
Exceptional items	(718)	(624)
Operating Profit	2,839	2,890

The above segmental analysis is the primary segmental analysis of the Group.

All revenue and adjusted operating profit is in respect of continuing operations.

The operating profit as reported under IFRS is reconciled to the adjusted operating profit as reported above by the exclusion of 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 consistent basis from year to year.

The adjusted operating profit is stated after charging £317,000 in respect of share-based payments (year ended 30 April 2010: £254,000) and after crediting £595,000 in respect of marking forward foreign exchange contracts to market at 30 April 2011 (year ended 30 April 2010: charge of income £231,000) within SEA.

3.         EXCEPTIONAL ITEMS

	Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Restructuring at SCS	177	310
Restructuring at SEA	538	291
Relocation of MASS's operation	-	148
Cost of acquisition of Abacus EW	13	75
Profit on sale of AGS's business	(10)	(200)
	718	624

All in respect of continuing operations.

4.         TAX (CREDIT)/EXPENSE

	Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Corporation tax:
Prior year	(1,124)	135
Current year	459	961
	(665)	1,096
Deferred taxation:
Prior year	586	(639)
Current year	14	-
	600	(639)
	(65)	457

The current year corporation tax charge includes a credit of £200,000 (year ended 30 April 2010: credit of £210,000) in respect of continuing exceptional items and the current year deferred tax charge includes a credit of £414,000 (2010: credit of £177,000) in respect of the amortisation of other intangible assets.

5.         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 30 April 2011 £000	Year ended 30 April 2010 £000
Earnings
Basic and diluted earnings	2,761	2,291
Exceptional items (net of tax of £200,000; 2010: £210,000)	518	414
Amortisation of other intangible assets (net of tax of £414,000; 2010: £177,000)	1,063	418
Normalised basic and diluted earnings	4,342	3,123

		Number	Number
Weighted average number of shares
For the purposes of basic earnings per share		40,633,523	40,727,969
Share options		1,143	55,361
For the purposes of diluted earnings per share		40,634,666	40,783,330

	Year ended 30 April 2011 Pence	Year ended 30 April 2010 Pence
Earnings per share
Basic	6.79	5.63
Diluted	6.79	5.62
Adjusted earnings per share
Basic	10.69	7.67
Diluted	10.69	7.66

6.         DIVIDENDS

The proposed final dividend for the year ended 30 April 2011 is 1.60 pence (year ended 30 April 2010: 1.40) per ordinary share.  This dividend will be payable 7 September 2011 to shareholders on the register at 5 August 2011.

The total paid and proposed dividend for the year ended 30 April 2011 is 2.40 pence per ordinary share; a cost of £970,000 (year ended 30 April 2010 2.05p per ordinary share: £836,000).

The charge for the year ended 30 April 2011 of £894,000 is the final dividend for the year ended 30 April 2010 paid (£571,000) and the interim dividend for the year ended 30 April 2011 paid (£323,000).

7.         PROVISIONS

	Restructuring	Withdrawal from AGS	Abacus EW earn out	Warranty and other contract related provisions	Total
	£000	£000	£000	£000	£000
At 1 May 2010	105	22	-	2,439	2,566
Established on acquisition	-	-	1,400	111	1,511
Utilised/released	(581)	-	-	(653)	(1,234)
Charge to income statement	538	-	-	61	599
At 30 April 2011	62	22	1,400	1,958	3,442
Due less than one year	62	22	1,400	1,855	3,339
Due greater than one year	-	-	-	103	103
	62	22	1,400	1,958	3,442

The warranty and other contract related provisions are management's best estimates of contract related costs and undertakings which are in addition to contract accruals and include provisions for loss making contracts.  The timing of these is uncertain but expected to be resolved within twelve months of the balance sheet date.

The Abacus EW earn out provision is dependent upon the performance of Abacus EW up to April 2013.  It has been disclosed as due in less than one year as the earn out is potentially still payable in full at 30 April 2012.

8.         NET CASH GENERATED FROM OPERATING ACTIVITIES

	Year ended 30 April 2011 £000	Year ended 30 April 2010 £000
Profit for the year	2,761	2,291
Adjustments for:
Tax (credit)/expense	(65)	457
Depreciation of property, plant and equipment	707	557
Amortisation of other intangible assets	1,477	595
Net finance costs	143	142
Share-based payment	317	259
Derivative financial instruments	(595)	231
(Decrease)/increase in provisions	(635)	1,318
Operating cash inflows before movements in working capital	4,110	5,850
Decrease/(increase) in inventories	84	(288)
Decrease/(increase) in receivables	2,802	(399)
Decrease in payables	(148)	(736)
	2,738	(1,423)
Cash generated by operations	6,848	4,427
Tax paid	(166)	(286)
Interest paid	(170)	(180)
Net cash generated from operating activities	6,512	3,961

9.                The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 April 2011 or 2010. The financial information for the year ended 30 April 2010 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies and which have been restated for a prior year overstatement at SCS. The auditors reported on those accounts. Their report was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The statutory accounts for the year ended 30 April 2011 will be delivered to the Registrar of Companies following the company's Annual General Meeting, to be held 1 September 2011.  The auditors have reported on these accounts.  Their report was not qualified and did not contain a statement under Section 498 of the Companies Act 2006.

Copies of the Annual Report and accounts for the year ended 30 April 2011 will be posted to shareholders on 29 July 2011 and available on the Company's website (www.cohortplc.com) from that date.

 

END

 

 

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