Final Results

RNS Number : 6456H

Cohort PLC

24 June 2013

 



Arlington House 1025 Arlington Business Park Reading Berks RG7 4SA

Cohort plc

COHORT PLC

PRELIMINARY RESULTS ANNOUNCEMENT

FOR THE YEAR ENDED 30 APRIL 2013

Improved performance - maintained momentum

Cohort plc today announces its preliminary results for the year ended 30 April 2013.  Highlights include:

	2013	2012	%
·      Revenue	£70.9m	£75.4m	(6)
·      Adjusted operating profit*	£7.3m	£6.5m	13
·      Adjusted profit before tax*	£7.5m	£6.5m	15
·      Adjusted earnings per share*	17.94p	15.52p	16
·      Profit before tax	£8.5m	£4.2m	105
·      Net funds	£16.4m	£14.1m	16
·      Order book (closing)	£96m	£107m	(11)
·      Proposed final dividend per share	2.3p	1.9p	21
·      Total dividend per share	3.5p	2.9p	21

* Excludes exceptional items, amortisation of other intangible assets and exchange differences on marking forward exchange contracts to market.

Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: "Cohort continued to improve its performance in the year, achieving a record trading profit and increasing its net funds, despite difficult conditions in some parts of the Defence market."

"The Cohort businesses are now on a sound operational footing and the management emphasis is shifting to driving growth, both organically and by acquisition. Despite uncertainties in the wider Defence market, the Board considers that Cohort's order book and near term prospects provide the base for further progress in the current year."

A presentation for analysts is being hosted today (24 June 2013) at 9.30am at Investec. For further information, please contact MHP Communications.

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, Daniel Adams
MHP Communications Limited	020 3128 8100
Reg Hoare Ben Griffiths

NOTES TO EDITORS

Cohort plc (www.cohortplc.com) is the parent company for three innovative, agile and responsive businesses working primarily for defence (air, land and sea), wider government and industry clients. 

·      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 continued to improve its performance in the year, achieving a record trading profit and increasing its net funds despite difficult conditions in some parts of the Defence market.  Of Cohort's trading subsidiaries, MASS achieved another record result and SEA made significant further progress.  SCS remained profitable in a tight market, although its performance was down on last year.

Key financials

In the year ended 30 April 2013, Cohort posted revenue of £70.9m (2012: £75.4m), including revenue of £24.8m (2012: £26.1m) from MASS Consultants Limited (MASS), £31.9m (2012: £31.8m) from SEA (Group) Limited (SEA) and £14.1m (2012: £17.5m) from Systems Consultants Services Limited (SCS).  The reduction in revenue was due to customer rescheduling of planned milestones on certain long-term projects, slippage on specific projects, primarily at SEA's Space division, out of the period and, notably at SCS, reduced technical support work as a result of MOD policies to restrain such spending.

The Group's adjusted operating profit was £7.3m (2012: £6.5m). This included adjusted operating profit from SCS of £0.5m (2012: £1.3m), from MASS of £5.0m (2012: £4.8m) and from SEA of £3.1m (2012: £1.7m).  Cohort Group overheads were £1.3m (2012: £1.3m).  The higher profitability reflected improved operational efficiency at MASS and, particularly, SEA where the extensive management and organisational changes made over the last two years are now showing results.

The Group operating profit of £8.4m (2012: £4.2m) was after recognising amortisation of intangible assets, differences arising on marking forward exchange contracts to market value at the year end and an exceptional item.  Profit before tax was £8.5m (2012: £4.2m) and profit after tax was £8.3m (2012: £4.6m). 

Basic earnings per share were 20.76 pence (2012: 11.30 pence). Adjusted earnings per share were 17.94 pence (2012: 15.52 pence). The adjusted earnings per share were based upon profit after tax, excluding amortisation of other intangible assets, marking forward exchange contracts to market value at the year end and exceptional items, all net of tax.  The basic earnings per share for the year ended 30 April 2013 includes a benefit from the exceptional item of 3.48 pence per share.

Order intake for the year was £59.6m (2012: £79.3m).  The net funds at the year end were £16.4m (2012: £14.1m).

Dividends

The Board is recommending a final dividend of 2.3 pence per ordinary share (2012: 1.9 pence), making a total dividend of 3.5 pence per ordinary share (2012: 2.9 pence) in respect of the year ended 30 April 2013, a 21% increase. This will be payable on 25 September 2013 to shareholders on the register at 30 August 2013 subject to approval at the Annual General Meeting on 18 September 2013.

MASS

MASS, again, posted record figures for profit and cashgeneration.  MASS's revenue was down on last year due to the timing of deliveries in its Building Schools for the Future program in North Lincolnshire, which have moved into 2013/14 at the customer's instigation.  This change in revenue mix accounts for the improved net return of MASS, 20.3% compared with 18.5% last year.

MASS's order book declined during the year, partly due to run-off of longer term contracts not due to be replenished in the year.  Progress was made in developing export opportunities for Electronic Warfare Operational Support (EWOS).

SCS

SCS has continued to experience a tight domestic market for its services, evidenced by a 19% fall in revenue year on year.  The majority of this revenue fall was in its provision of technical support services to backfill gapped posts in the UK MOD, where restrictions were in place on the procurement of such support.

SCS was able to mitigate some of this revenue and margin loss through expansion of its business in other areas and by reducing its cost base to align with its revenue levels and making use of its flexible cost associate labour pool.  However, these actions could not fully alleviate SCS's profit deterioration in the year.

The £0.5m (2012: £1.3m) of trading profit was after incurring £0.1m of restructuring costs which are expected to realise over £0.6m of annual cost saving in 2013/14.

SCS, despite the tight market ended the year with an order book of £7.7m, almost in line with its opening order book for the year.

SEA

SEA continued to improve its profitability following the organisational and management changes made in 2010/11.  SEA's trading profit of £3.1m (2012: £1.7m) represented a much better level of net return of 9.8% (2012: 5.4%).

SEA continued to be hampered by some poorly performing Space projects which are now expected substantially to complete in 2013/14 and therefore we expect the net return to continue to improve.

SEA secured nearly £34m (2012: £38m) of orders in the year pushing its closing order book up to nearly £32m.

Cash

Cash generated from operations in the period was £4.1m (2012: £8.4m).  The reduction was largely due to an adverse working capital movement arising from the continued lock-up of work in progress on the delayed space projects in SEA.  The Board and Executive Management have a strong focus on cash and we expect an improved performance in 2013/14.  In the meantime, the Group's healthy cash position provides flexibility for investment, and since the year end, SEA has purchased the freehold of one of its Bristol sites for £1.9m.

Management and staff

The Group's improving performance reflects the impact of the management changes made over the last three years. The senior management teams at Cohort and within the subsidiaries have steered the business through some difficult times and deserve credit for maintaining focus and morale. My thanks also go to all the staff within the businesses, whose hard work and ability to deliver what our customers need, within tight budgets, are what ultimately continue to drive our performance.

Outlook

The closing order book of £95.7m (2012: £107.1m) is in line with the opening position on a like-for-like basis after taking account of the run-off of approximately £11m of multi-year orders in 2013.  Although the UK defence market remains tight, especially for shorter term in year spend, the Cohort businesses have strong and relevant capabilities, established positions on some key long term UK MOD programmes, and a good pipeline of new opportunities.  Export prospects are also strengthening.  Outside Defence, MASS is making progress in its secure networks business and SEA in transport.  Overall we expect order intake to be stronger in 2013/14 than 2012/13.

The Cohort businesses are now on a sound operational footing and the management emphasis is shifting to driving growth, both organically and by acquisition. Despite uncertainties in the wider Defence market, the Board considers that Cohort's order book and near term prospects provide the base for further progress in the current year.

Nick Prest CBE

Chairman

BUSINESS REVIEW

Operating review

2012/13 has been another year of continued progress for Cohort, building on the improvements made in the last two years. This progress has resulted in delivery of a record level of adjusted operating profit and cash.

The Group's adjusted operating profit of £7.3m (2012: £6.5m) on revenue of £70.9m (2012: £75.4m) was a net return of 10.3% (2012: 8.6%).

The improved operating performance reflects the improvements made in what have been weaker areas of the business, primarily at SEA. There has also been a contribution from the mix of work, with a smaller proportion of revenue coming from lower margin areas such as space and education.

There remain some areas of the business where performance needs to improve further and we will continue to work on these in the year ahead.

Adjusted operating profit by subsidiary:

	Adjusted operating profit			Net return of revenue
	2013 £m	2012 £m	Change %	2013 %	2012 %
MASS	5.0	4.8	4	20.3	18.5
SCS	0.5	1.3	(62)	3.7	7.5
SEA	3.1	1.7	82	9.8	5.4
Central costs	(1.3)	(1.3)	-	-	-
	7.3	6.5	13	10.3	8.6

 

Operating strategy

Cohort operates as a group of three medium-sized businesses, operating primarily in defence and security markets, and with a strong emphasis on technology, innovation and specialist expertise:

·      MASS is a leading international provider in the fields of electronic warfare (EW) and secure communications, including cyber security. Its products include the THURBON™ electronic warfare database and it provides EW operational support services to a number of customers in the UK and overseas. MASS has some unique capabilities that have enabled it to establish strong niche positions in these important areas of defence and security, as well as gaining an increasing reputation as a provider of secure networks to educational and other non-defence markets. MASS is led by its Managing Director Ashley Lane. It celebrates its 30^th anniversary in 2013.

·      SCS is a provider of independent expert advisory services to defence and related markets. It serves both government and private sector customers in the UK and internationally. Its highly experienced people combine experience in the armed forces with a wide range of technical specialisations, enabling the business to provide rapid expert support in areas including information systems, training, airworthiness, delivery and management of complex systems and support to operations in high threat areas. It was founded in 1992. SCS's Managing Director is Bill Bird.

·      SEA specialises in providing systems engineering and specialist design solutions to government and industry. SEA is an expert in naval and tactical communications providing solutions for the UK submarine flotilla and tactical battlefield data systems. It provides a range of simulation-based training solutions and middleware to provide realistic training for complex environments. SEA also provides software and systems for the transport market and high-integrity space-flight hardware for scientific missions. It was founded in 1988 and is led by Managing Director Steve Hill.

Cohort's strategy is to allow its subsidiary businesses a significant degree of operational autonomy in order to fully develop their potential, while providing light-touch but rigorous financial and strategic controls at Group level. Our experience is that our customers prefer to work with businesses where decision-making is streamlined and focused on solving their immediate problems. This model provides us with a degree of competitive advantage over some larger rivals where the decision-making process can be more extended.  It is also cost-effective as it avoids the need for additional layers of management involved in coordination activities and for a large headquarters team.  And it is attractive to high calibre employees who find it more rewarding to be involved in decisions affecting the business, even at a relatively junior level, rather than being constrained to a narrow or purely technical role. The characteristics we look to in our people were recently recognised in the Group's inaugural Business Excellence Awards.  This approach is more difficult for very large prime contractors  for whom co-ordination of large teams through repeatable and enforceable processes can be more important than speed or innovation.  But it positions us well to supply systems and services to our customers where these attributes are highly valued.

Within our markets we have sought to use our agility and innovation to identify niches where future prospects are attractive and where we have some sustainable competitive advantage.  These can be for products, services or high value one-off projects to design bespoke equipment or software.  Examples include MASS's electronic warfare operational support offerings and SEA's Roadflow product range.  We have also been active in finding new customers for the capabilities we have developed, both in export markets and for non-defence purposes.  

Being part of the Cohort Group adds significant value to our businesses compared to being an independent operation. The strong Group balance sheet gives customers the confidence to award large or long-term contracts that we are technically well-able to execute but which would otherwise be perceived as risky. Examples include MASS's £50m in-service support contract awarded in 2010, and the £20m of contracts awarded to SEA so far for the Astute submarine External Communications System. The Group executive and non-executive directors have long experience of operating in the defence sector and have contacts and working relationships with senior customers in the UK and internationally which it would be hard for independent smaller businesses to establish.  The three operating businesses, while remaining operationally independent, have close working relationships and are able to benefit from each other's technical capabilities, customer relationships and market knowledge.

These strategies have allowed us to grow our profit at a time when UK defence expenditure, our largest source of revenue, has been tightly constrained. They have also generated long term customer relationships and good opportunities that give us confidence that we can continue to prosper despite the difficult and unpredictable market conditions.

Acquisitions

Alongside our organic growth strategy we see opportunities to accelerate our growth by making targeted acquisitions. We believe that there are good small businesses in the UK and elsewhere that would thrive under Cohort ownership, whether as new members of the Group or as "bolt-in" acquisitions to our existing operations.

The most likely candidates for bolt-in acquisitions are small, innovative businesses with capabilities and/or customer relationships that are closely linked to one of our existing subsidiaries. We would expect to integrate an acquired business of this nature fully within the relevant subsidiary. This could lead to both cost savings and benefits from shared access to markets and technologies. The acquisition by MASS of Abacus EW Consultancy in 2010 is a good example of this, and was successful for the Group in terms of its immediate financial return and the access it has provided for MASS into new markets.

For stand-alone acquisitions we are looking for agile, innovative businesses of comparable size to MASS, SCS and SEA and which have reached a stage of development where there will be mutual benefit in joining Cohort. It is likely that candidates will be operating in the defence and security markets either in the UK or internationally as that is where the Group can add most value. Growth prospects, sustainable competitive advantage and the ability to operate as part of a publicly quoted UK group will all be key evaluation criteria.  

Divisional Review

MASS

	2013 £m	2012 £m
Revenue	24.8	26.1
Adjusted operating profit	5.0	4.8
Operating cash flow	4.4	3.9

MASS had another successful year under Ashley Lane's leadership, once again achieving a record level of trading profit despite a 5% reduction in revenue compared to 2011/12.

Early in the year it became clear that work to provide secure networks for several schools under the North Lincolnshire Building Schools for the Future contract would be postponed into the next financial year. Some significant export prospects have also slipped, and one of MASS's Middle East contracts has been extended for successive short periods in place of the expanded contract that had been expected.  MASS also saw a decrease in its Electronic Systems work, experiencing a tighter market and a taking back in-house of some of the work it has traditionally done for prime contractors.  These areas have been the main contributors to the reduced revenue at MASS. 

These reductions in revenue have been partly compensated by increases in activity on the UK SHEPHERD program, which is a key project for the UK's Defence EW centre with MASS's own proprietary EW data management system, THURBON™, at its core.

MASS's net return of 20.3% was due to the mix of revenue and the release of risk contingency as certain projects came to a conclusion. MASS's net return is expected to return to a more usual level in the coming year.

During the year MASS completed and opened a new dedicated Electronic Warfare (EW) training centre at its Lincoln office to provide state-of-the-art training facilities to UK and overseas customers.  MASS has now delivered over 40,000 EW training days to customers from around 20 countries.  MASS continues to have a good pipeline of training opportunities and these often provide openings to promote its capabilities of EW Operational Support (EWOS), EW application software  (THURBON™) and secure network provision. EWOS revenues were slightly down compared to 2011/12 due to timing of orders. 

MASS also continues to develop its business in the secure networks area with key wins including a further University Technical College at Sheffield.  To further enhance MASS's offering to Government, education and commercial customers in this field, MASS has trained and qualified a number of IT consultants to be accredited to the listed adviser scheme run by the Government's Communications Electronics Security Group (CESG), known as CLAS. CLAS consultants are used by government and other organisations to provide high level cyber security assurance. MASS has also secured a position on the UK Government G-Cloud-3 framework, a contracting mechanism to deliver security-related and other information systems services to the public sector.

At the end of the year MASS reorganised its divisional structure to reflect its capabilities and markets.  It now has two main market-facing divisions, Electronic Warfare Operational Support and Secure Information Systems. In addition there is a third division focused on developing the THURBON™ product for Project SHEPHERD and also for export customers.

Looking forward MASS's export pipeline for THURBON™ projects, whether alone or as part of a larger SHEPHERD type offering, remains good.  We are also expecting an expansion of the EWOS work done by MASS in certain export markets during the coming year.  As always with export prospects the timing of these is hard to predict and MASS takes a prudent view in its internal forecasts.  Redevelopment of three further schools has now been formally approved by North Lincolnshire Council, and MASS has been awarded a 3 year contract to be the Council's ICT and business partner; accordingly we expect our secure networks activity to increase this year. 

SCS

	2013 £m	2012 £m
Revenue	14.1	17.5
Adjusted operating profit	0.5	1.3
Operating cash flow	0.1	2.2

SCS, under Managing Director Bill Bird, has experienced a sharp decline in revenue and profit compared to 2011/12. This reflects developments within the UK MOD, SCS's main customer. MOD has imposed tight restrictions on manpower substitution work as it reduces its own workforce.  Furthermore, additional MOD review processes and shortages of experienced commercial staff have slowed down the contracting process for technical support work, creating delays and additional cost.  As a result SCS's revenue from provision of technical experts to the UK MOD suffered a marked decline from around £4.4m in 2011/12 to £1.8m in 2012/13.    We have recently seen some of the restrictions ease a little, but we are not expecting a rapid recovery in this line of business in the coming year.

Other areas of SCS's work have been more buoyant. Applied research for the NATO Communications and Information Agency more than doubled in 2012/13 to around £1.5m of revenue and the prospects for the current year appear good.  SCS continues to provide exercise support to the UK's Joint Forces Command, a program it has run now for over 10 years and recently secured a further extension of this work for 2013/14.  It was this capability which enabled SCS to win and deliver a key piece of high level command and co-ordination training for the UK Government and its stakeholders for the 2012 London Olympics.  This work was a one-off project delivered in 2011/12, and so accounts for part of the drop in revenue this year. 

There was a slight reduction in SCS's work in air domain hazard analysis for MOD, mostly due to limited customer resource pushing our effort into 2013/14.  SCS's pipeline for activity in the independent technical evaluation and other air domain work remains strong. SCS recently secured its first contract in Oman, where it will be supporting the National Defence College with similar services to those it provides for the Royal College of Defence Studies in the UK.

Recognising the continuing squeeze on its main source of revenue, SCS cut its cost base last year, reducing the number of operating divisions from four to three. The full benefit of this should be seen in 2013/14.

SEA

	2013 £m	2012 £m
Revenue	31.9	31.8
Adjusted operating profit	3.1	1.7
Operating cash flow	2.1	3.5

SEA, under the leadership of Managing Director Steve Hill, has had a successful year with profit increasing substantially on a similar level of revenue. Sharply increasing revenue in areas such as transport and a reduction in relatively low margin space electronics work resulted in much improved profitability.

SEA made good progress on its External Communications System (ECS) for the Astute Class of submarines.  This included testing of integration with the submarines' combat system, which is expected to complete in the first half of 2013/14.  SEA also delivered and installed ECS on Astute Boat 3.

SEA's activities in the transport market have seen a marked increase with deliveries on two key software projects for Network Rail. These were ISP Scheme and Network Rail Operational Logistics (NROL); ISP Scheme is a state of the art signalling design tool for the UK signalling design industry, designed to replace legacy tools and increase the efficiency of signalling design and is due to complete in 2013/14.  NROL will be used by Network Rail to plan the delivery of heavy resources across the rail network in order to carry out essential maintenance and engineering.  NROL is a significant project in Network Rail with £800m worth of resources to be processed through the system each year and to be used by over 1,500 Network Rail employees, customers and suppliers.  This system is due to be deployed by Network Rail in the coming year.

The Roadflow products also had a successful year with sales increasing from £0.8m in 2011/12 to £1.7m in 2013/14, including a first export customer.  A variant of Roadflow is currently undergoing approval tests for use as an enforcement system for level crossing offences, a high profile application that has the potential to prevent a significant number of serious accidents.

SEA's applied research activity for the Defence Science and Technology Laboratory (DSTL) decreased slightly compared to 2011/12.  The DSTL framework effort was on Expeditionary Logistics & Support, a program which concludes next month and Delivering Dismounted Effects, the follow on to Future Dismounted Close Combat (FDCC).  The decrease from last year was mainly due to 2011/12 including an exceptional level of activity on FDCC as the program approached its conclusion. This capability provides an entry for promoting other capabilities and services to the customer (DSTL) including products for development by the ultimate customer, the UK MOD. 

The lower space revenue was due to slippage of milestones, primarily on the various Earthcare missions.  We have made progress in addressing many of the project issues in SEA's Space division by introducing additional project management resource and stronger commercial oversight.  Some of the delivery delays were a result of this more robust commercial approach taken by SEA with both customers and suppliers, as we have worked to maintain and where possible improve our margins.  The delays in Space have affected the SEA's operating cash performance this year, and we expect this to improve in 2013/14.  The progress we have made in Space has enabled us to deliver newly won space projects to expectations.

SEA's pipeline of opportunities remains strong in both defence and non-defence markets.

Revenue by market and business

	MASS		SCS		SEA		GROUP
	2013 £m	2012 £m	2013 £m	2012 £m	2013 £m	2012 £m	2013 £m	%	2012 £m	%
Defence & Security	23.0	22.5	14.1	17.5	22.3	21.0	59.4	84	61.0	81
Transport	-	-	-	-	4.3	2.8	4.3	6	2.8	4
Space	-	-	-	-	5.1	7.6	5.1	7	7.6	10
Other commercial	1.9	3.6	-	-	0.2	0.4	2.1	3	4.0	5
	24.9	26.1	14.1	17.5	31.9	31.8	70.9	100	75.4	100

 

The defence and security revenue is further broken down as follows:

	MASS		SCS		SEA		GROUP
	2013 £m	2012 £m	2013 £m	2012 £m	2013 £m	2012 £m	2013 £m	%	2012 £m	%
Direct to UK MOD	10.8	10.0	6.9	9.1	11.3	11.6	29.0		30.7
Indirect to UK MOD where the Group acts as a sub-contractor or partner	8.1	8.1	4.6	5.3	10.5	9.1	23.2		22.5
Total to UK MOD	18.9	18.1	11.5	14.4	21.8	20.7	52.2	74	53.2	71
Export & other	4.1	4.4	2.6	3.1	0.5	0.3	7.2	10	7.8	10
	23.0	22.5	14.1	17.5	22.3	21.0	59.4	84	61.0	81

 

Revenue breakdown by capability

		2013	%	2012	%
Electronic systems	Electronic systems: the design and supply of such equipment and its associated embedded software, as well as the integration of commercial "off the shelf" equipment for specialist applications.	15.7	23	18.5	24
Secure networks	Secure networks: the provision of advice and system implementation to protect against cyber attack and other threats. Both MASS and SCS provide these services for a range of clients.	12.3	17	14.1	19
Specialist expertise	Specialist expertise: the provision of expert individuals as part of a customer's team. All three of our businesses are active in this area, most notably SCS.	10.1	14	12.2	16
Applied research	Applied research: the management and execution of scientific investigation work aimed at specific objectives, such as SEA's leadership of the Expeditionary Logistic Support research programme for MOD.	9.2	13	9.1	12
Application software	Application software: the design and supply of specialist software systems such as MASS's work on Project SHEPHERD and SEA's work for its transport customers.	8.8	12	5.5	7
Training	Training: this includes formal, on-the-job and scenario-based training services. An example is SCS's provision of exercise-based training for the UK's Joint Forces Command.	7.2	10	7.6	10
Operational support	Operational support: the provision of direct support to active operations which takes place at both MASS (including its Electronic Warfare Operational Support activities) and SCS.	4.3	6	5.0	7
Studies and analysis	Studies and analysis: other self-contained studies, consultancy and analytical work such as SCS's Hazard Analysis work on the Joint Combat Aircraft.	3.3	5	3.4	5
		70.9	100	75.4	100

Notable changes between 2012 and 2013 were:

·      A significant increase in Application Software work both in absolute terms and as a proportion of total revenue. This was driven primarily by the increased work at SEA on the ISP Scheme and NROL projects for Network Rail, and by Project SHEPHERD at MASS.

·      A drop in revenue from Secure Networks in both absolute and relative terms. This is a capability area where we expect to see growth in the medium term, but the 2012/13 result was affected by the decision by North Lincolnshire Council to delay its acquisition of new secure networks for schools into 2013/14.

·      A drop in revenue from Specialist Expertise, again in both absolute and relative terms. This was entirely a result of the sharp drop in revenue from this source at SCS.

Our people

All of the Group's capabilities and customer relationships ultimately derive from our people. We are very much a people business and such success as we achieve is entirely due to the technical excellence, managerial skills and business acumen of our employees. We are very grateful for the many examples of hard work and dedication we have seen, from the senior management group to individuals and teams delivering what our customers need.

Operational Outlook

Order intake and order book

	Order intake		Order book
	2013 £m	2012 £m	2013 £m	2012 £m
MASS	11.7	25.6	56.1	69.2
SCS	14.2	15.8	7.7	7.8
SEA	33.7	38.5	31.9	30.1
	59.6	79.9	95.7	107.1

The fall in the Group's order intake, and consequently order book, is a result of delays to some significant orders, primarily at MASS.

Last year MASS secured the Project SHEPHERD order which is deliverable over several years as well as multi-year refreshes on its support to the UK Air Warfare Centre.  These contracts have not been due for renewal in 2012/13.  However, MASS is awaiting some key multi-year export orders which have been covered during this year by successive short-term orders as the work has been delivered. Further export opportunities for THURBON™ and Electronic Warfare operational support and training are in the pipeline but the timing of these, as with all export orders, is unpredictable.  Of MASS's order book at 30 April 2013, over £17m is deliverable in 2013/14, a similar level of underpinning as last year.

SCS's order intake was affected by a considerable tightening of its technical support offering through the former Logistics division, a fall of £2m year on year.  However in other areas, SCS's order intake grew by around 4% compared to last year and its closing order book of £7.7m is virtually all deliverable in 2013/14 representing a similar level of underpinning to 2012/13. The visibility of SCS's pipeline, as in the past, remains short (typically around six months) and so SCS retains a flexible resource model to enable it to respond quickly to changes in market conditions.  SCS's pipeline of opportunities includes extension and expansion of its air domain offering through independent technical evaluation, both on the Joint Strike Fighter and other air platforms.

SEA's order intake was also down on 2011/12 but much of the drop was due to the receipt last year of nearly £9m of ECS orders for Astute Boats 3 and 5.  Orders for the next batch of ECS systems for Astute Boats 6 and 7 are expected soon and the prospects for further deliveries of this system on other submarine platforms are good.

SEA's order intake included a new research framework for the UK MOD's research arm, DSTL, Delivering Dismounted Effects.  This £10m plus framework is a follow on to its successful four year research project, Future Dismounted Close Combat and a strong endorsement of SEA's continuing capability to manage expert teams and deliver leading research to the customer's requirements.

SEA's Roadflow product goes from strength to strength with orders of nearly £2m this year compared with under £1m in 2011/12.  This year also saw it secure its first export order and further export opportunities exist. 

SEA's Space division order intake was down on 2011/12 with some key programs slipping into 2013/14.  The pipeline for Space is good and the recently announced increased financial commitment of the UK Government to Space, through the UK Space Agency, is an encouraging signal for future growth.

SEA's closing order book of nearly £32m underpins over £20m of revenue in 2013/14.

After adjusting for revenue delivered from multi-year orders secured previously (an amount of around £11m), the closing order book of the Group on a like-for-like basis is in line with last year and provides a similar level of underpinning of revenue at MASS and SCS to that seen historically.  At SEA, the level of revenue for 2013/14 underpinned by the 30 April 2013 order book is slightly less than that seen historically, primarily due to the timing of ECS orders.

In the near term, the majority of Cohort's business will continue to derive, either directly or indirectly, from the UK MOD.  There are continuing uncertainties as to both the volume and the future procurement system in this market.  The Government continues to examine the merits of moving to a Government Owned Contractor Operated (GOCO) defence equipment and support organisation and the implications of this for Cohort are not yet clear.  Despite these uncertainties, high priority programs, several of which are important to Cohort, remain focussed and have progressed.  Good examples are submarines, the nuclear deterrent and combat aircraft.  

We are also increasingly active in export markets, some of which have growing demands for defence equipment with resources to match.  This market background, together with our improved operational performance and the pipeline of opportunities and underpinning for the coming year give us confidence that we will continue to make progress in 2013/14.

Funding resource and policy

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 provides it with the firepower to conduct its acquisition strategy and has also enabled it, after year end, to secure its operational facilities in Bristol from which some of its key defence and most of its transport capabilities are sourced.  The purchase of one of its offices in the North Bristol Business Park for a total cost of £1.9m will enable SEA to continue to grow its business as well as deliver some immediate operational savings.

At 30 April 2013 the Group had facilities with its banking provider, RBS, as follows:

	£m	Term at commencement of facility
Overdraft facility for working capital requirements	7.5	364 days

During the year ended and at 30 April 2013 none of the above facility had been drawn by the Group.

The overdraft facility is renewable 1 October 2013 and the Board expects it to be renewed on broadly similar terms.

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 institutions with credit ratings of at least A3.  Deposits are generally held on short (less than three 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 (that is not on short term deposit) 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.

The Group regularly reviews the ratings of the institutions with which it holds cash and always considers this when placing a new deposit.

The Group's return on net funds during the period was 0.6% to 2.1% (2012: 0.5% to 2.1%).

In addition to its cash resources, the Group has in issue 40.8m ordinary shares of 10 pence each. Of these shares just over 0.7m 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 3.1m at 30 April 2013.

The Group maintains a progressive dividend policy with dividends having increased by approximately 20% per annum over the last three years and dividend cover being maintained in the current year at over five times (2012: five times) based upon the adjusted earnings per share.

The Group's cash generation in 2012/13 has not been as strong as during 2011/12.  In summary, the Group's cash performance was as follows:

	2013 £m	2012 £m
Adjusted operating profit	7.3	6.5
Depreciation and other non-cash operating movements	0.9	1.1
Working capital movement	(3.1)	1.2
	5.1	8.8
Tax, dividends, capital expenditure, interest and investments	(2.8)	(1.4)
Increase in net funds	2.3	7.4

The primary reason for the weaker cash performance has been an increase of working capital at both MASS and SEA, mostly due to an unwinding of cash advances and an increase in work in progress.  These were partly offset by a reduction in trade debtors.  The unwinding of advances was as expected but the increase in work in progress in the year was not as milestones failed to complete on some legacy Space projects and have now slipped into 2013/14.  Tax payments were also higher by £0.8m as the Group's profitability and consequently current year's tax charge have risen.

The Group's customer base of Governments, major prime contractors and international agencies make its debtor risk low.  The year end debtor days in sales were 42 days (2012: 51 days).  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 decrease in debtor days is a reflection of the tighter control over working capital across the Group.

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 2013, the Group had in place forward foreign exchange contracts as follows:

	Sell	Buy
Euro to GBP	€10.0m	£8.5m
US$ to GBP	$0.8m	£0.5m

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 to 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. The marking of forward exchange contracts to market at the spot rate on 30 April 2013 resulted in the recognition of a derivative financial liability of £39,000 (2012: liability of £413,000) and a credit to the income statement of £374,000 (2012: charge of £955,000). In both years, the change in the derivative financial instrument has been recognised separately within operating profit and is not disclosed as part of the adjusted operating profit of the Group.

Tax

The Group's tax charge for the year ended 30 April 2013 of £168,000 (2012: credit of £411,000) was at an effective rate of 2.0% (2012: credit rate of 9.9%) of profit before tax. This includes a current year corporation tax charge of £1,158,000 (2012: £1,268,000), a rate of 13.6% (2012: 30.5%) of profit before tax, a prior year corporation tax credit of £411,000 (2012: credit of £1,001,000) and a deferred tax credit of £579,000 (2012: credit of £678,000).

Including the current year deferred tax, the effective current tax rate for the year ended 30 April 2013 is 6.8% (2012: 14.2%), lower than the standard rate (calculated at 23.92%; 2012: 25.83%), primarily due to recognition of Research & Development (R&D) tax credits, an exceptional income of £1.4m which is not taxable and recognising a deferred tax asset on unutilised trading losses at SEA.

The Group's overall tax rate was below the standard corporation tax rate of 23.92% (2012: 25.83%).  The reduction is due to the reasons given above for the current year's rate and in addition, prior year tax credit in respect of additional R&D tax credits claimed.  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 2013/14 and 2014/15 is estimated at 16% and 15% respectively, taking account of the reduction in headline tax rates and assuming the 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, currently 2010/11 through to 2012/13.

Exceptional items (see note 3)

The Group incurred minor restructuring costs in the year ended 30 April 2013 (over £0.1m) and in this particular case are considered to be part of the ongoing business of the Group and, as such, have not been disclosed separately.

The release of the earn out provision (£1.4m) in respect of the acquisition of Abacus by MASS was a result of the business not achieving the high targets set for the earn out.

Adjusted earnings per share

The adjusted earnings per share of 17.94 pence (2012: 15.52 pence) is reported in addition to the basic earnings per share and excludes the effect of amortisation of intangible assets, exchange movement on marking forward exchange contracts to market and exceptional items, all net of tax.  The adjusted earnings per share, excluding the prior year tax credit and the deferred tax credit in respect of unutilised trading losses, £835,000 in total (2012: £1,001,000), was 15.86 pence (2012: 13.04 pence), an increase of 22%.

Financial estimates and judgements

In preparing the Annual Report and Accounts of Cohort plc for 2013, a number of financial estimates and judgements have been made including:

Revenue recognition on fixed-price contracts

The judgement applied in recognising revenue on a fixed-price contract is made by reference to the cost incurred, including contingency for risk and the demonstrable progress made on delivering key stages (often referred to as milestones) of the contract. The Group uses best estimates in applying this judgement and where uncertainty of progress on a stage exists, revenue is not recognised for that stage.

Cost contingency on fixed-price contracts

In addition to the judgement applied to revenue recognition, the cost of delivering a contract to a particular stage represents the actual costs incurred and committed plus an estimate of cost contingency for risk still present in the contract at that stage. This cost contingency takes account of the stage that the contract has reached and any judgement and uncertainty remaining to deliver the remainder of the contract. It is usual for these cost contingencies to reduce as the contract progresses and risk and uncertainty reduces.

Goodwill and other intangible assets

The Group has recognised goodwill and other intangible assets in respect of the acquisition of MASS (including Abacus EW) and SEA. The other intangible assets are in respect of contracts acquired, intellectual property rights and specific opportunities and in each case are amortised over the expected life of the earnings associated with the other intangible asset 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, reputation, customer relations, contacts and market synergies with existing Group members. The goodwill relating to the acquisitions of MASS (including Abacus EW) and SEA has been tested for impairment as at 30 April 2013. In both cases there was no impairment. 

Provisions

The Group makes estimates of provisions for existing commitments arising from past events. In estimating these provisions, the Group makes judgements as to the quantity and likelihood of the liability arising. Certain provisions require more judgement than others.  In particular warranty provisions and contract loss provisions have to take account of future outcomes arising from past deliveries of products and services. In estimating these provisions, the Group makes use of management experience, precedents and specific contract and customer issues.

Accounting policies

There were no significant changes in accounting policies applying to the Group for the year ended 30 April 2013.

Additional financial reporting disclosure

As in the past, the Group makes reference to additional financial reporting over and above that required by IFRS, specifically:

Adjusted operating profit

The adjusted operating profit is presented to reflect the trading profit of the Group and excludes amortisation of other intangible assets, exchange differences on marking forward exchange contracts to market 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 £292,000 (2012: £353,000) 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 exchange adjustment on marking forward exchange contracts to market at the year end is a requirement of IFRS and has no economic impact upon the Group's performance or assets and liabilities.  

CONSOLIDATED INCOME STATEMENT

For the year ended 30 April 2013       

	Notes	Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Revenue	2	70,866	75,408
Cost of sales		(47,646)	(53,386)
Gross profit		23,220	22,022
Administrative expenses		(14,837)	(17,828)
Operating profit	2	8,383	4,194
Comprising:
Adjusted operating profit	2	7,336	6,513
Amortisation of other intangible assets (included in administrative expenses)		(727)	(1,364)
Income/(charge) on marking forward exchange contracts to market value at the year end (included in cost of sales)		374	(955)
Exceptional items (included in administrative expenses)	3	1,400	-
Operating profit	2	8,383	4,194
Finance income		128	77
Finance costs		-	(115)
Profit before tax		8,511	4,156
Income tax (charge)/credit	4	(168)	411
Profit for the year		8,343	4,567

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

		Year ended 30 April 2013 Pence	Year ended 30 April 2012 Pence
Earnings per share	5
Basic		20.76	11.30
Diluted		20.46	11.28
Adjusted earnings per share	5
Basic		17.94	15.52
Diluted		17.68	15.50
Dividends per share paid and proposed in respect of the year	6
Interim		1.20	1.00
Final		2.30	1.90
		3.50	2.90

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 April 2013

	Notes	At 30 April 2013 £000	At 30 April 2012 £000
ASSETS
Non-current assets
Goodwill		31,395	31,395
Other intangible assets		64	791
Property, plant and equipment		6,892	7,252
Deferred tax asset		479	157
		38,830	39,595
Current assets
Inventories		228	215
Trade and other receivables		19,385	20,468
Cash and cash equivalents		16,426	14,140
		36,039	34,823
Total assets		74,869	74,418
LIABILITIES
Current liabilities
Trade and other payables		(13,075)	(16,492)
Current tax liabilities		(1,101)	(1,086)
Derivative financial instruments		(39)	(413)
Provisions	7	(911)	(3,318)
		(15,126)	(21,309)
Non-current liabilities
Deferred tax liability		(696)	(953)
Provisions	7	-	(56)
		(696)	(1,009)
Total liabilities		(15,822)	(22,318)
Net Assets		59,047	52,100
Equity
Share capital		4,079	4,079
Share premium account		29,519	29,519
Own shares		(731)	(302)
Share option reserve		571	703
Hedge reserve		-	-
Retained earnings		25,609	18,101
Total equity attributable to the equity shareholders of the parent		59,047	52,100

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 April 2013

		Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Profit for the year		8,343	4,567
Cash flow hedges - expense taken to equity (net of tax credit of £nil; 2012:£9,000)		-	(24)
Comprehensive income for the year		8,343	4,543

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 April 2013

		Share		Share
	Share	premium	Own	option	Hedge	Retained
	capital	account	shares	reserve	reserve	Earnings	Total
Group	£000	£000	£000	£000	£000	£000	£000
At 1 May 2011	4,079	29,519	(302)	555	24	14,380	48,255
Profit for the year	-	-	-	-	-	4,567	4,567
Other comprehensive income for the year	-	-	-	-	(24)	-	(24)
Total comprehensive income for the year	-	-	-	-	(24)	4,567	4,543
Equity dividends	-	-	-	-	-	(1,051)	(1,051)
Share-based payments	-	-	-	353	-	-	353
Transfer of share option reserve on vesting of options	-	-	-	(205)	-	205	-
At 30 April 2012	4,079	29,519	(302)	703	-	18,101	52,100
Profit for the year	-	-	-	-	-	8,343	8,343
Other comprehensive expense for the year	-	-	-	-	-	-	-
Total comprehensive income for the year	-	-	-	-	-	8,343	8,343
Equity dividends	-	-	-	-	-	(1,247)	(1,247)
Share-based payments	-	-	-	292	-	-	292
Own shares acquired	-	-	(532)	-	-	-	(532)
Own shares sold	-	-	91	-	-	-	91
Loss on own shares sold	-	-	12	-	-	(12)	-
Transfer of share option reserve on vesting of options	-	-	-	(424)	-	424	-
At 30 April 2013	4,079	29,519	(731)	571	-	25,609	59,047

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 April 2013

	Notes	Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Net cash generated from operating activities	8	4,090	8,424
Investing activities
Interest received		128	77
Proceeds on disposal of property, plant and equipment		3	2
Purchases of property, plant and equipment		(256)	(141)
Net cash used in investing activities		(125)	(62)
Financing activities
Dividends paid		(1,247)	(1,051)
Repayment of borrowings		-	(3,444)
Purchase of own shares		(532)	-
Sale of own shares		91	-
Net cash out flow from financing activities		(1,688)	(4,495)
Net increase in cash and cash equivalents		2,277	3,867

	At 1 May 2012 £000	Exchange gain £000	Cash Flow £000	At 30 April 2013 £000
Funds reconciliation
Cash and bank	10,137	9	263	10,409
Short term deposits	4,003	-	2,014	6,017
Cash and cash equivalents	14,140	9	2,277	16,426
Bank loans	-	-	-	-
Debt	-	-	-	-
Net funds	14,140	9	2,277	16,426

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 2013.  The information in this preliminary statement has been extracted from the financial statements for the year ended 30 April 2013 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 2013 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 2013 and 2012 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 2012 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 24 June 2013 and authorised for issue on 24 June 2013.

Copies of the Annual Report and accounts for the year ended 30 April 2013 will be posted to shareholders on 1 August 2013 and available on the Company's website (www.cohortplc.com) from that date.

2.         SEGMENTAL ANALYSIS OF REVENUE AND OPERATING PROFIT

	Year ended 30 April 2013                 £000	Year ended 30 April 2012                  £000
Revenue
MASS	24,843	26,117
SCS	14,098	17,508
SEA	31,925	31,783
	70,866	75,408
Adjusted Operating Profit
MASS	5,033	4,831
SCS	517	1,320
SEA	3,118	1,723
Central costs	(1,332)	(1,361)
	7,336	6,513
Amortisation of other intangible assets	(727)	(1,364)
Income/(charge) on marking forward exchange contracts to market value at the year end	374	(955)
Exceptional items	1,400	-
Operating Profit	8,383	4,194

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 amortisation of other intangible assets, income/(charge) 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.

The adjusted operating profit is stated after charging £292,000 in respect of share-based payments (year ended 30 April 2012: £353,000).

3.         EXCEPTIONAL ITEM

	Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Release of earn out provision in respect of the acquisition of Abacus EW Consultancy	1,400	-

All in respect of continuing operations.

4.         TAX CHARGE/(CREDIT)

	Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Corporation tax:
Current year	1,158	1,268
Prior year	(411)	(1,001)
	747	267
Deferred taxation:
Current year	(579)	(678)
	168	(411)

The current year corporation tax charge includes a charge of £nil (year ended 30 April 2012: charge of £nil) in respect of continuing exceptional items and the current year deferred tax credit includes a credit of £175,000 (2012: credit of £370,000) in respect of the amortisation of other intangible assets and a charge of £90,000 (2012: credit of £240,000) in respect of marking forward exchange contracts to market value at the year end.

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 2013 £000	Year ended 30 April 2012 £000
Earnings
Basic and diluted earnings	8,343	4,567
Amortisation of other intangible assets (net of tax of £175,000; 2012: £370,000)	552	994
(Income)/charge in respect of marking forward exchange contracts to market value at the year end (net of tax of £90,000; 2012: £240,000)	(284)	715
Exceptional items (net tax of £nil; 2012: £nil)	(1,400)	-
Adjusted basic and diluted earnings	7,211	6,276

		Number	Number
Weighted average number of shares
For the purposes of basic earnings per share		40,195,916	40,425,342
Share options		582,251	70,022
For the purposes of diluted earnings per share		40,778,167	40,495,364

	Year ended 30 April 2013 Pence	Year ended 30 April 2012 Pence
Earnings per share
Basic	20.76	11.30
Diluted	20.46	11.28
Adjusted earnings per share
Basic	17.94	15.52
Diluted	17.68	15.50

6.         DIVIDENDS

The proposed final dividend for the year ended 30 April 2013 is 2.3 pence (year ended 30 April 2012: 1.9 pence) per ordinary share.  This dividend will be payable 25 September 2013 to shareholders on the register at 30 August 2013.

The total paid and proposed dividend for the year ended 30 April 2013 is 3.5 pence per ordinary share; a cost of £1,403,000 (year ended 30 April 2012 2.9p per ordinary share; cost of £1,170,000).

The charge for the year ended 30 April 2013 of £1,247,000 is the final dividend for the year ended 30 April 2012 paid (£766,000) and the interim dividend for the year ended 30 April 2013 paid (£481,000).

7.         PROVISIONS

		Withdrawal from AGS	Abacus EW earn out	Warranty and other contract related provisions	Total
		£000	£000	£000	£000
At 1 May 2012		16	1,400	1,958	3,374
Utilised		-	-	(798)	(798)
Credit to the income statement		(16)	(1,400)	(249)	(1,665)
At 30 April 2013		-	-	911	911
Due less than one year		-	-	911	911
Due greater than one year		-	-	-	-
		-	-	911	911

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 has been released to the income statement in the year ended 30 April 2013, as an exceptional item (see note 3) following completion of the earn out period.  No earn out was paid in respect of this acquisition.

8.         NET CASH GENERATED FROM OPERATING ACTIVITIES

	Year ended 30 April 2013 £000	Year ended 30 April 2012 £000
Profit for the year	8,343	4,567
Adjustments for:
Tax charge/(credit)	168	(411)
Depreciation of property, plant and equipment	610	699
Amortisation of other intangible assets	727	1,364
Net finance (income)/cost	(128)	38
Share-based payment	292	353
Derivative financial instruments	(374)	955
Decrease in provisions	(2,463)	(68)
Operating cash inflows before movements in working capital	7,175	7,497
(Increase)/decrease in inventories	(13)	141
Decrease/(increase) in receivables	1,083	(129)
(Decrease)/increase in payables	(3,092)	1,236
	(2,022)	1,248
Cash generated by operations	5,153	8,745
Tax paid	(1,063)	(206)
Interest paid	-	(115)
Net cash generated from operating activities	4,090	8,424

 

END

 

 

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