Final Results
Cohort PLC
06 July 2006
COHORT PLC
MAIDEN PRELIMINARY RESULTS ANNOUNCEMENT
FOR THE YEAR ENDED 30 APRIL 2006
STRONG PLATFORM FOR GROWTH ESTABLISHED
Cohort plc, owner of Systems Consultants Services Limited ('SCS'), a leading
independent defence technical services business, today announces its maiden set
of preliminary results since floating on AIM for the 12 months ended 30 April
2006. Highlights include:
• Turnover up 23% to £18.0m
• Operating profit £1.8m*
• Profit after tax £1.3m*
• Year-end cash balance £5.6m
• Basic earnings per share 5.47 pence
• Proposed maiden dividend 0.4 pence per share
* excluding share of joint ventures and exceptional items
Commenting of the results, Nick Prest CBE, Chairman of Cohort plc said: 'We have
a strong business model and we will continue to push for organic growth while
seeking complementary acquisitions of businesses which can benefit from the
Cohort group concept. Overall the Board is positive about the outlook.'
For further information please contact:
Cohort plc 01491 843150
Nick Prest, Chairman
Investec 020 7597 5970
Michael Ansell, Martin Smith
Gainsborough Communications 020 7190 1705
Julian Walker
Notes to Editors
Cohort has been established to capitalise on opportunities to grow, both
organically and through acquisition, in the defence technical services market.
The directors of Cohort believe that the accessible UK market for such services
is large and offers scope for expansion, whilst a portion of the supplier base
is fragmented and provides opportunities for consolidation. Cohort will seek to
make targeted acquisitions of complementary businesses.
Cohort's sole initial trading subsidiary, Systems Consultants Services Limited
('SCS'), is a leading independent defence technical services business based in
Henley-on-Thames, Oxfordshire in the United Kingdom. SCS provides a range of
technical services to clients in the defence and security sectors, its principal
client being the UK Ministry of Defence ('MOD') and its agencies. Its other
clients include other UK government departments, NATO, major defence contractors
and non-defence businesses.
Cohort plc was listed on London's Alternative Investment Market (AIM) on 8 March
2006.
CHAIRMAN'S STATEMENT
I am pleased to announce this maiden set of results for Cohort plc since listing
on AIM in March 2006. Cohort has traded in accordance with our expectations at
flotation.
KEY FINANCIALS
In the year ended 30 April 2006, Cohort achieved turnover of £18.0m (2005:
£14.6m) representing a 23% increase on the level achieved by Systems Consultants
Services Limited (SCS), Cohort's sole operating subsidiary, in 2005.
Group operating profit before accounting for the share of joint ventures and
exceptional items was £1.8m (2005: £2.0m). This reduction was due primarily to
an increase in staff costs as new revenue generating personnel and support staff
were recruited to manage the increased scale of the business, provide a base for
further expansion and meet the reporting and governance requirements of a public
company.
Profit before interest and tax was £1.3m (2005: £1.6m) after accounting for the
Group's share of joint venture losses and exceptional items in relation to
venture capital activities of £467k (2005: £401k).
As a private company, SCS had invested in some venture capital activities. At
flotation, the decision was taken to provide fully for the maximum commitment to
these activities so that Cohort could go forward on a firm financial and
strategic basis.
The profit after tax and before share of joint ventures and exceptional items
was £1.3m (2005: £1.5m). Profit after interest and before tax was £1.4m (2005:
£1.6m) and profit after tax was £0.9m (2005: £1.1m).
Basic earnings per share were 5.47p (2005: 6.97p)
The Cohort cash balance at year end was £5.6m, reflecting primarily the proceeds
of the share placing net of costs.
DIVIDENDS
The Group plans to pay an initial dividend of 0.4p, being approximately one
third of the dividend which would have been paid had the Company's shares traded
publicly for the whole of the financial year. This will be payable on 6
September 2006 to shareholders on the register at 4 August 2006 subject to
approval at the annual general meeting on 31 August 2006. The Group plans to
follow a progressive dividend policy in future and to pay interim and final
dividends in respect of the current financial year in March and September 2007.
BOARD AND PERSONNEL
We were pleased to welcome Simon Walther, who joined as Finance Director in May
2006. Simon has experience in the defence industry and in mergers and
acquisitions as well as in the finance function in a quoted company environment.
This has released Andy Thomis, who handled the finance function during the
listing, to concentrate on his intended roles in strategic and business
development.
The new board of Cohort, brought together specifically to pursue the strategy of
flotation followed by expansion, both organic and through acquisition in the
defence technical services market, has bedded in well. The operating team under
Stanley Carter is busy and productive and the transition from a private to a
quoted company environment is being well handled. Whilst Stanley is in the day
to day charge of the business, I am spending significant time with the company,
particularly in relation to acquisitions and business development.
OUTLOOK
Cohort's business is at present largely concentrated in the UK defence market.
In overall terms the market is reasonably stable but growth is concentrated in
certain areas. The view set out at the time of flotation, namely that the
provision of independent technical services to the UK Ministry of Defence (MOD)
and industry is one such growth area, has been borne out by the many customer
contact meetings which have been held since March. SCS has a strong business
model and we will continue to push for organic growth. At the same time we will
seek complementary acquisitions of businesses which can benefit from the Cohort
group concept.
Overall the Board is positive about the outlook.
Nick Prest
Chairman
CHIEF EXECUTIVE'S REVIEW
The formation of Cohort, whose sole trading subsidiary is currently Systems
Consultants Services (SCS), and its listing on AIM in March this year marked
another successful year for SCS. It led to changes in the composition of the
SCS Board and other senior posts and placed increased demands on SCS senior
management. Despite the potentially unsettling effect common in these
circumstances, SCS achieved a creditable growth of 23% in revenue and 17% in
gross profit. Employee response to the change in status of SCS and to the staff
changes has been very positive and is reflected by the high take-up of share
options and the SAYE share scheme in June 2006. This augurs well for the
continuing organic growth of SCS.
Notable contract awards won in competition during the year include: a year's
contract as part of a five year support agreement to the Joint Warfare Training
Centre with SCS heading a consortium of EDS Defence, Cubic and Titan; a two year
exclusive agreement to provide support to the NATO Consultation, Command and
Control Agency in the Hague with SCS heading a consortium of six companies; SCS
key membership of a consortium of QinetiQ, Thales and others to provide human
factors support in an exclusive pan-MOD agreement and SCS winning with Roke
Manor an urban warfighting research support contract with the MOD Research
Acquisition Agency. SCS continues to play a central role in two major Network
Enabled Capability programmes: the Land Environment Air Picture and the Joint
Effects Tactical Targeting System in consortiums headed by Lockheed Martin and
Raytheon respectively. Another notable contract was won to support the National
Audit Office study into a major defence communications programme. The Company
is alert to opportunities to apply its expertise in non-defence areas and was
awarded a contract to supply crisis management advice to a cruise liner
operator.
The recent and continuing trends to integrate and consolidate in the wider
defence market, has included the absorption of some private technical advisory
businesses by major international defence suppliers. This has led to a
significant reduction in the availability of impartial and independent technical
advice available to the MOD and correspondingly increased opportunities to
companies remaining in the field. Also the MOD has declared an intention to
compete in future much of the research work historically mandated to QinetiQ,
which will result in opportunities both in the research programme itself and in
related advisory work. At the same time the sustained high levels of
operational commitment of HM Forces coupled with a natural 'front-line first'
policy is tending to leave gaps in military technical posts in the MOD, which is
already having to cope with reduced technical support arising from the
significant reduction of the scientific civil service brought about by
privatisation. All of these factors have benefited the Group and will continue
to do so in the future.
I am confident that the comprehensive, first-hand defence market knowledge and
experience of the Cohort team make it well able to recognise and respond to
these and future trends and to meet the increasing need for independent
technical advice and support.
Stanley Carter
Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 April 2006
2006 2005
Notes £000 £000
Turnover of the Group including its share
of joint ventures 1 18,008 14,595
Less share of turnover of joint ventures 2 (185) (163)
--------- ---------
Group turnover 17,823 14,432
Cost of sales (13,318) (10,576)
--------- ---------
Gross Profit 4,505 3,856
Administrative expenses (2,708) (1,841)
--------- ---------
Group operating profit 1,797 2,015
Share of operating result of joint ventures 2 (148) (120)
--------- ---------
Total operating profit 1,649 1,895
Exceptional items 3 (319) (281)
--------- ---------
Profit on ordinary activities before
interest 1,330 1,614
Interest receivable 105 48
Interest payable and similar charges (76) (85)
--------- ---------
29 (37)
--------- ---------
Profit on ordinary activities before taxation 1,359 1,577
Tax on profit on ordinary activities 4 (440) (473)
--------- ---------
Profit on ordinary activities after taxation 919 1,104
--------- ---------
Basic earnings per share 5.47p 6.97p
Diluted earnings per share 5.45p 6.97p
The profit on ordinary activities before taxation arises from the continuing
operations of the Group which merged with Systems Consultants Services Limited
on 9 February 2006 There are no recognised gains or losses other than as
stated in the profit and loss account.
BALANCE SHEET
As at 30 April 2006
Notes 2006 2005
£000 £000
Fixed Assets
Tangible Fixed Assets 6 99 1,036
--------- ---------
Investments 2
Share of gross assets of joint ventures 101 215
Share of gross liabilities of joint ventures (192) (228)
--------- ---------
(91) (13)
Provision against joint venture investments - (33)
--------- ---------
Net investments in joint ventures (91) (46)
8 990
--------- ---------
Current Assets
Debtors 6,375 3,947
Cash at bank 5,591 571
--------- ---------
11,966 4,518
Creditors: amounts falling due within one year (2,830) (2,572)
--------- ---------
Net current assets 9,136 1,946
--------- ---------
Total assets less current liabilities 9,144 2,936
Creditors: amounts falling due after more
than one year - (469)
Provision for liability and charges 2 (220) (270)
--------- ---------
Net assets 8,924 2,197
--------- ---------
Capital and Reserves
Called up share capital 2,212 1
Share premium account 5,339 -
Profit and loss account 1,373 2,196
--------- ---------
Equity shareholders' funds 7 8,924 2,197
--------- ---------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2006
2006 2005
Notes £000 £000
Net cash inflow from operating activities 8 893 1,337
Net interest received/(paid) 28 (24)
Taxation paid (603) (335)
Purchase of tangible fixed assets (66) (36)
Sale of tangible fixed assets 868 -
Investment in joint ventures 2 (50) (130)
Investment in related parties 10 (339) (121)
Equity dividend paid (159) (228)
--------- ---------
Cash inflow before financing 572 463
Issue of ordinary shares (net of costs) 7 5,323 -
Finance lease asset 85 -
Repayment of secured loan (514) (43)
(Repayment)/drawdown of Directors' loans 10 (446) 89
--------- ---------
Increase in cash 5,020 509
Finance lease asset 251 -
Secured loan 514 43
Directors' loans 446 (89)
--------- ---------
Increase in net funds 6,231 463
Opening net funds (389) (852)
--------- ---------
Closing net funds 9 5,842 (389)
--------- ---------
ACCOUNTING POLICIES
Basis of accounting
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards.
Accounting period
The Group has adopted merger accounting and presents the accounts for the year
ended 30 April 2006 with comparatives restated accordingly for the year ended 30
April 2005
Consolidation
The Group has adopted merger accounting and presented Group results for the year
ended 30 April 2006.
In preparing the Group accounts, the Group's interest in joint ventures has been
accounted for in accordance with the gross equity method and the comparatives
have been restated accordingly.
The comparative figures for the Group are the audited accounts for Systems
Consultants Services Limited (SCS) for the year ended 30 April 2005 as restated
for changes in accounting methods in preparing Group accounts. The impact of
this accounting change and the restatement which arises from the change is the
recognition of the Group's share of losses in joint ventures and is further
explained in note 11.
Tangible Fixed Assets
Depreciation is provided on cost in annual instalments over the estimated useful
life of assets which are reviewed annually. The rate of depreciation for
equipment, fixtures and fittings is 25% per annum on cost on a straight line
basis. For the property sold in the year, the depreciation rate was 2% per
annum on cost (excluding land) on a straight line basis.
Finance Lease
The Group has a finance lease asset with its 25% joint venture undertaking,
Digital Millennium Map LLP. In this instance, where the Group acts as a lessor
and substantially all the risks and rewards of ownership of the related assets
are transferred to the lessee, the net present of the future lease payments are
recognised as a debtor and the interest value is recognised over the period
which it is earned on an actuarial basis.
Operating Lease Agreements
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits on a
straight line basis over the period of the lease.
Deferred Taxation
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right to
pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the Group's taxable profits and its results
as stated in the financial statements that arise from the inclusion of gains and
losses in tax assessments in periods different from those in which they are
recognised in the financial statements.
Deferred tax is measured at the average tax rates that are expected to apply in
the periods in which timing differences are expected to reverse, based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date. Deferred tax is measured on a non-discounted basis.
Pension Contributions
Payments are made to the Group's stakeholder pension scheme, a defined
contribution scheme. Amounts are charged to the profit and loss account as
incurred.
Turnover
Turnover represents amounts receivable for services provided, net of Value Added
Tax. In accordance with Urgent Issues Task Force 40 (Revenue recognition and
service contracts), the Group recognises contract revenue as the activity
progresses to reflect the partial performance of contractual obligations.
Financial Instruments
Income and expenditure arising on financial instruments are recognised on an
accruals basis and credited or charged to the profit and loss account in the
financial period to which they relate.
1. TURNOVER
The Group's turnover was derived from its principal activity undertaken wholly
within the UK.
2. JOINT VENTURES
The Group has two joint ventures
Name Share of Equity Principal Activity
SCS Mothership Limited (SML) 50% 3D Mapping technology
Digital Millennium Map LLP (DMM) 25% 2D Mapping and photography
SML DMM Total investment in joint
ventures
£000 £000 £000
At 1 May 2005 (46) - (46)
Additions - 83 83
Profit and loss account:
Share of joint ventures (15) (146) (161)
Release of provision against joint venture investment - 33 33
---------------------------------------------
At 30 April 2006 (61) (30) (91)
---------------------------------------------
The Group's share of joint ventures was as follows:
2006 2005
Profit and loss account
SML DMM Total SML DMM Total
£000 £000 £000 £000 £000 £000
Turnover 144 41 185 157 6 163
--------------------------- ----------------------------
Share of operating result (7) (141) (148) (18) (102) (120)
Share of interest (8) (5) (13) (10) (3) (13)
--------------------------- ----------------------------
Share of profit before tax (15) (146) (161) (28) (105) (133)
--------------------------- ----------------------------
Balance Sheet
SML DMM Total SML DMM Total
£000 £000 £000 £000 £000 £000
Share of assets 15 86 101 67 148 215
Share of liabilities (76) (116) (192) (113) (115) (228)
--------------------------- ----------------------------
(61) (30) (91) (46) 33 (13)
Provision against investment in
joint ventures - - - - (33) (33)
--------------------------- ----------------------------
(61) (30) (91) (46) - (46)
--------------------------- ----------------------------
In addition to the above, the Group has provided £220,000 (2005: £270,000)
against its investment commitment in DMM. During the year the Group invested
£50,000 (2005: £130,000) in DMM.
3. EXCEPTIONAL ITEMS
2006 2005
£000 £000
Release of provision against joint venture investments and commitments (116) -
Provision against joint venture investments and commitments 14 160
(102) 160
Provision against costs incurred on behalf of related party 339 121
undertakings (see note 10)
Loss on sale of fixed assets (see note 6) 82 -
---------- ---------
319 281
---------- ---------
The Group current tax charge includes £101,700 credit (2005: £4,000 charge) in
respect of exceptional items.
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
2006 2005
£000 £000
Corporation tax in current year 406 550
Deferred tax 34 (77)
---------- ---------
440 473
---------- ---------
5. EARNINGS PER SHARE
The basic earnings per share is calculated on profit after tax of £919,000
(2005: £1,104,000) and a weighted average number of shares of 16,791,727 (2005:
15,840,000). The diluted earnings per share is calculated on profit after tax
of £919,000 (2005: £1,104,000) and a weighted average number of shares, after
taking into account share options, of 16,857,038 (2005: 15,840,000).
6. TANGIBLE FIXED ASSETS
During the year ended 30 April 2006 the Group sold its freehold property for
£880,000 realising an exceptional loss after selling costs of £82,000
7. EQUITY SHAREHOLDERS' FUNDS
Share capital Share premium Profit and loss Total
account account
£000 £000 £000 £000
1 May 2005 (restated) 1 - 2,196 2,197
Profit after tax - - 919 919
Dividends paid - - (159) (159)
Bonus issue of shares on merger of 1,583 - (1,583) -
Cohort plc with Systems Consultants
Services Limited
Issue of new shares 628 6,175 - 6,803
Cost of new share issue - (836) - (836)
--------- --------- --------- ---------
At 30 April 2006 2,212 5,339 1,373 8,924
--------- --------- --------- ---------
The reserves at 1 May 2005 have been restated to take account of the Group's
equity interest in joint ventures, a net reduction to reserves of £46,000 from
£2,242,000 to £2,196,000.
The issue of the new shares raised cash in the year ended 30 April 2006 as
follows:
Shares Issue Net
issued costs
£000 £000 £000
New shares 6,803 (836) 5,967
Shares issued for debt receivable from N M Prest (750) - (750)
(see note 10)
Costs to be paid in year ended 30 April 2007 - 106 106
--------- --------- ---------
Net cash raised 6,053 (730) 5,323
--------- --------- ---------
8. NET CASH INFLOW FROM OPERATING ACTIVITIES
2006 2005
£000 £000
Operating profit 1,797 2,015
Depreciation 54 47
Increase in debtors (1,428) (692)
Increase/(decrease) in creditors 470 (33)
--------- ---------
Net cash inflow from operating activities 893 1,337
--------- ---------
9. MOVEMENT IN NET FUNDS
At 1 May 2005 Cash Flow At 30 April
2006
£000 £000 £000
Cash and bank 571 (258) 313
Short term deposits - 5,278 5,278
--------- --------- ---------
571 5,020 5,591
--------- --------- ---------
Finance lease - 251 251
Directors loans (446) 446 -
Secured loan (514) 514 -
--------- --------- ---------
(389) 6,231 5,842
--------- --------- ---------
The short term deposits held by the Group are all less than one month in
duration.
10. RELATED PARTIES
Costs incurred in respect of related
party
2006 2005
£000 £000
Sentinel Programmes Limited (now SP Residual Limited) 172 92
Centre for Defence and International Security Studies 87 29
SCS South Africa 80 -
--------- ---------
339 121
--------- ---------
The above costs incurred have been fully provided against in the respective year
by the Group (see note 3).
During the year ended 30 April 2006, Directors' loans have been fully repaid and
interest charged and paid in full as follows:
Loan Interest
£000 £000
A E S Carter 323 21
J Lyde 122 7
J Tydeman 1 -
--------- ---------
446 28
--------- ---------
At 30 April 2006, £750,000 (2005: £Nil) was payable by N M Prest in respect of
979,790 10 pence ordinary shares. This debt is payable on or before 31 January
2007.
11. PRIOR YEAR RESTATEMENT
The figures presented for the year ended 30 April 2005 are based upon the SCS
statutory accounts. These have been adjusted to take account of the Group's
equity interest in joint ventures. The impact of the adjustments are to:
i. Increase headline turnover by £163,000
ii. Reduce net profit by £28,000, comprising a net share of the
loss of joint ventures (including interest) of £133,000 offset
by a reduction in the loss on exceptional items of £105,000
12. The financial information presented in this announcement does not
constitute statutory accounts as defined by Section 240 of the Companies Act
1985. The financial information for the year ended 30 April 2006 is derived
from the statutory accounts for that period, which have not yet been delivered
to the Registrar of Companies. The auditor has reported on those accounts;
their report was unqualified and did not contain statements under section 237(2)
or (3) of the Companies Act 1985.
This information is provided by RNS
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