Half Yearly Report

RNS Number : 9288J

Cohort PLC

11 December 2008

 



11 December 2008

COHORT PLC

UNAUDITED INTERIM RESULTS FOR THE HALF YEAR ENDED

31 OCTOBER 2008

CONTINUED PROGRESS

Cohort plc, a leading independent technology group, today announces unaudited interim results for the half year to 31 October 2008. Highlights include:

	6 months ended  31 October  2008	6 months ended  31 October  2007
Revenue	£33.9m	£20.9m
Adjusted operating profit*	£3.2m	£1.4m
Profit before tax	£2.6m	£1.3m
Order book	£57.6m	£56.1m
Adjusted earnings per share*	5.71p	4.12p
Interim dividend per share	0.55p	0.45p
* Excludes exceptional items (net of tax), share of joint ventures and amortisation of other intangible assets.

Commenting on the result, Nick Prest CBE, Chairman of Cohort plc said:

'Cohort has achieved good organic growth in the first half with all three of its subsidiaries posting revenue and profit increases. The Board is positive about the outlook'.

For further information, please contact

Cohort plc  Stanley Carter, Chief Executive Simon Walther, Finance Director	01491 845 630
Investec  Michael Ansell	020 7597 5970
Hogarth Partnership Limited     Julian Walker, Andrew Jaques, Vicky Watkins	020 7357 9477

NOTES TO EDITORS

Cohort plc (www.cohortplc.com) is a technology group working primarily for defence (air, land and sea), wider government and industry clients, through three market-facing subsidiary companies:  

• MASS (www.mass.co.uk) - a specialist defence and aerospace systems developer focused mainly on Electronic Warfare, Information Systems, Managed Services and Secure Communications. Acquired by Cohort in August 2006.  
  

• SCS (www.scs-ltd.co.uk) - an independent defence consultancy, combining technical expertise with practical experience and domain knowledge.  
  

• SEA (www.sea.co.uk) - an advanced surveillance systems and software house with hardware development capability operating in the defence, space, transport and offshore market sectors. Acquired by Cohort in October 2007.  

Cohort (AIM: CHRT) was admitted to London's Alternative Investment Market in March 2006. It has its headquarters in Oxfordshire and, through its operating companies, employs in total around 500 staff there and at bases in Bristol, Cambridgeshire, Oxfordshire, Lincolnshire and Somerset.  

CHAIRMAN'S STATEMENT

OVERVIEW

Cohort has continued to make good progress during the first six months of this year. The SEA (Group) Ltd (SEA) acquired this time last year has had a strong first year in the Group. MASS Consultants Ltd (MASS) and Systems Consultants Services Ltd (SCS) both continued to grow their revenue and profits at good rates.

FINANCIALS

In the six months ended 31 October 2008, Cohort achieved revenue of £33.9m (2007: £20.9m), a 62% increase. The revenue for the first half included £13.7m from SCS, which represented growth of 8% on 2007, £9.6m from MASS, an increase of 16%, and £10.6m from SEA (acquired 31 October 2007). 

The Group's adjusted operating profit was £3.2m (2007: £1.4m). This included contribution from MASS of £1.3m (2007: £0.9m), SCS of £1.2m (2007: £0.9m) and from SEA £1.2m. SEA was acquired 31 October 2007 and hence no contribution for the six months ended 31 October 2007.

The Group's profit before tax and amortisation of other intangible assets was £2.9m (2007: £1.5m) after charging £0.2m (2007: £0.1m) in respect of the Group's share of its joint venture undertaking, Advanced Geospatial Solutions Ltd (AGS). The future of the Group's investment in AGS is currently under review.

The adjusted earnings per share (before exceptional items and amortisation of other intangible assets) for the six months ended 31 October 2008 are 5.71 pence per ordinary share (2007: 4.12 pence).

Net cash flow from operating activities was £1.2m (2007: £0.3m).  Working capital increased in the first half but we expect it to reduce in the second half as deliveries are made.  The period ended with the Group holding £1.8m of net debt, having paid £4.7m in cash for the deferred consideration of SEA, which was earned in full.

MASS

MASS has continued to perform well, producing a 47% increase in net profit from a 16% increase in revenue, over the same period last year. Good progress on the main MoD secure communications project contributed to a good performance in the Systems Development division, exceeding our expectations. MASS has also secured some important systems and electronic warfare business with some new key customers, including Thales and Saab. The order book of MASS at 31 October 2008 was £25.9m, underpinning £10.0m of second half revenue.

SCS

SCS revenue grew 8% over the same period in 2007, another creditable performance, delivering net profit of £1.2m, a growth of 35%. SCS has benefited from the investment made over the last two years and the record high order book at April 2008 now feeding into revenue, especially in the Systems division through contracts such as Land Environment Air Picture Provision (LEAPP) and Joint Effects Tactical Targeting System (JETTS). The order book of SCS at 31 October 2008 was £11.0m, underpinning £8.8m of second half revenue.

SEA

Acquired 31 October 2007, this is SEA's first contribution to the Group's first half performance and was in line with expectations.  The Space division and the Land and Air division within Defence performed particularly well.  As stated at the year end, SEA has a strong weighting of its operating profit to the second half. SEA order book at 31 October 2008 was £20.7m, underpinning £11.7m of the second half revenue.  

BOARD AND PERSONNEL

Ian Dale-Staples, who joined the Board in October 2007 following the acquisition of SEA, has relinquished his role as Chief Executive Officer of SEA and has now taken up a full time role on the Cohort Board as Group Corporate Development Director. Paul Phillips, who has been at SEA for 19 years and was previously in charge of SEA's Defence business, has been appointed Managing Director of SEA, taking over from Ian.

DIVIDENDS

In accordance with the Group's progressive dividend policy, it plans to pay an interim dividend of 

0.55 pence (2007: 0.45 pence) per ordinary share on 6 March 2009 to shareholders on the register at 27 February 2009.

OUTLOOK

The Group's order book at 31 October 2008 stood at £57.6m. £30.5m of this order book is deliverable in the second half. We expect the profits of SCS and SEA to be weighted towards the second half, as in previous years.

Cohort provides technical advisory and support services, high tech design and low volume manufacture of niche products to government and industry clients, primarily in the defence and security sectors, independent of major producer interests.  

The Group companies are agile and able to respond quickly to changing customer requirements in the UK MoD. We see continuing opportunities both for organic growth and complementary acquisitions. The Board is positive about the overall outlook.

CONSOLIDATED INCOME STATEMENT

For the six months ended 31 October 2008

	Notes	Six months  ended  31 October 2008  Unaudited  £000	Six months  ended  31 October 2007  Unaudited £000	Year ended  30 April 2008 Audited £000
Revenue	2	33,860	20,902	57,093
Cost of sales		(22,763)	(15,427)	(40,386)
Gross profit		11,097	5,475	16,707
Administrative expenses		(7,868)	(4,029)	(10,597)
Adjusted operating profit*	2	3,229	1,446	6,110
Amortisation of other intangible assets		(312)	(168)	(481)
Exceptional items		-	-	(17)
Share of results of joint ventures		(216)	(101)	(118)
Operating profit	2	2,701	1,177	5,494
Finance income		90	143	231
Finance costs		(177)	(14)	(156)
Profit before tax		2,614	1,306	5,569
Tax expense	3	(613)	(260)	(1,089)
Profit for the period attributable to the equity shareholders of the parent.		2,001	1,046	4,480

All profit for the period is from continuing operations.

*Adjusted operating profit is the operating profit before exceptional items, amortisation of other intangible assets and share of results of joint ventures.

		Six months ended  31 October 2008  Unaudited  Pence	Six months ended  31 October 2007  Unaudited Pence	Year ended  30 April 2008 Audited Pence
Earnings per share	4
Basic		4.94	3.55	12.81
Diluted		4.92	3.52	12.66
Adjusted earnings per share	4
Basic		5.71	4.12	14.24
Diluted		5.69	4.09	14.07
Dividends per share proposed in respect of the period	5
Interim		0.55	0.45	0.45
Final		-	-	1.00

CONSOLIDATED BALANCE SHEET

As at 31 October 2008

	Notes	31 October 2008  Unaudited  £000	31 October 2007  Unaudited  (Restated) £000	30 April 2008 Audited  (Restated) £000
ASSETS
Non-current assets
Goodwill	6	31,042	31,042	31,042
Other intangible assets		1,675	2,300	1,987
Property, plant and equipment		4,754	4,904	4,866
Deferred tax asset		62	71	62
		37,533	38,317	37,957
Current assets
Inventories		3,563	4,629	1,041
Trade and other receivables		17,535	11,235	19,952
Derivative financial instruments		121	-	131
Cash and cash equivalents		2,134	4,603	6,081
		23,353	20,467	27,205
Total assets		60,886	58,784	65,162
LIABILITIES
Current liabilities
Trade and other payables		(11,047)	(10,224)	(13,103)
Current tax liabilities		(1,475)	(552)	(616)
Other loans		(42)	(51)	(41)
Bank loans and overdrafts		(3,126)	(3,358)	(3,123)
Provisions		(1,266)	(5,518)	(5,783)
		(16,956)	(19,703)	(22,666)
Non-current liabilities
Other loans		(11)	(53)	(32)
Bank loans		(728)	(864)	(792)
Deferred tax liabilities		(662)	(292)	(662)
Provisions		-	(500)	(167)
		(1,401)	(1,709)	(1,653)
Total liabilities		(18,357)	(21,412)	(24,319)
Net assets		42,529	37,372	40,843
Equity
Share capital		4,048	4,035	4,046
Share premium account		29,186	29,019	29,158
Share option reserve		260	131	200
Retained earnings		9,035	4,187	7,439
Total equity attributable to the equity shareholders of the parent		42,529	37,372	40,843

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 31 October 2008

	Six months ended  31 October 2008  Unaudited  £000	Six months ended 31 October 2007  Unaudited  £000	Year ended  30 April 2008 Audited £000
At beginning of period	40,843	20,579	20,579
Profit reported (total recognised income and expense)	2,001	1,046	4,480
Equity dividends paid	(405)	(265)	(447)
Issue of new 10p ordinary shares	-	16,313	16,433
Costs of new share issue	-	(361)	(361)
Exercise of share options	30	-	30
Share-based payments	60	60	129
At end of period	42,529	37,372	40,843

  CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 31 October 2008

		Six months ended  31 October 2008  Unaudited	Six months ended  31 October 2007  Unaudited	Year ended  30 April 2008 Audited
	Notes	£000	£000	£000
Net cash inflow from operating activities	7	1,233	316	3,235
Investing activities
Interest received		90	143	231
Purchases of property, plant and equipment		(141)	(161)	(525)
Acquisition of subsidiaries, net of cash acquired		(4,673)	(10,945)	(11,473)
Net cash used in investing activities		(4,724)	(10,963)	(11,767)
Financing activities
Dividends paid		(405)	(265)	(447)
Repayment of borrowings		(81)	-	(94)
Proceeds on issue of shares		30	7,500	7,139
New bank loans raised		-	3,000	3,000
Net cash (outflow)/inflow from financing activities		(456)	10,235	9,598
Net (decrease)/increase in cash and cash equivalents		(3,947)	(412)	1,066
		At 1 May 2008 Audited	Cash flow Unaudited	At 31 October 2008 Unaudited
		£000	£000	£000
Funds reconciliation
Cash and bank		6,081	(4,947)	1,134
Short term deposits		-	1,000	1,000
Cash and cash equivalents		6,081	(3,947)	2,134
Other loans		(73)	20	(53)
Bank loan		(3,915)	61	(3,854)
Debt		(3,988)	81	(3,907)
Net funds		2,093	(3,866)	(1,773)

NOTES TO THE INTERIM REPORT

              1.             BASIS OF PREPARATION

The financial information contained within this interim report has been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the EU and expected to apply at 30 April 2009. This interim report is condensed with respect to IFRS requirements. As permitted, this interim report has been prepared in accordance with AIM Rules for companies and not in accordance with IAS34 'Interim Financial Reporting' and is therefore not fully compliant with IFRS.  This interim report is presented in sterling and all values are rounded to the nearest thousand pounds (£000) except where otherwise indicated.

In accordance with s240(3) of the Companies Act 1985, the unaudited results do not constitute statutory financial statements of the Company. The six months results for both years are unaudited.  

The comparative figures for the year ended 30 April 2008 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not include statements under section 237(2) or (3) of the Companies Act 1985.

The interim report was approved by the Board and authorised for issue on 10 December 2008.  Copies of the interim report will be sent to shareholders on 19 December 2008.

               2.             SEGMENTAL ANALYSIS OF REVENUE AND ADJUSTED OPERATING PROFIT

	Six months ended  31 October 2008  Unaudited  £000	Six months ended  31 October 2007  Unaudited £000	Year ended  30 April 2008 Audited £000
Revenue
MASS	9,561	8,240	17,998
SCS	13,688	12,662	26,087
SEA (acquired 31 October 2007)	10,611	-	13,008
	33,860	20,902	57,093
Net profit
MASS	1,322	901	2,271
SCS	1,171	866	2,343
SEA (acquired 31 October 2007)	1,231	-	2,249
Central Costs	(495)	(321)	(753)
Adjusted operating profit	3,229	1,446	6,110
Amortisation of other intangible assets	(312)	(168)	(481)
Exceptional items	-	-	(17)
Share of results of joint ventures	(216)	(101)	(118)
Operating profit	2,701	1,177	5,494

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, the Group's share of joint ventures and amortisation of other intangible assets.

The adjusted operating profit is presented in addition to the operating profit to provide the trading performance of the Group, as derived from its constituent elements on a comparable basis from period to period.

The adjusted operating profit is stated after charging £60,000 in respect of share-based payments (six months ended 31 October 2007: £60,000, year ended 30 April 2008: £129,000)

REVENUE ANALYSIS BY SECTOR AND TYPE OF WORK

	Six months ended  31 October 2008  Unaudited		Six months ended  31 October 2007  Unaudited		Year ended  30 April 2008 Unaudited
	£m	%	£m	%	£m	%
By sector
Direct to UK MoD	18.9		13.8		34.0
Indirect to UK MoD, where the Group acts as a sub-contractor or partner	7.4		4.3		13.6
Total to UK MoD	26.3	78	18.1	87	47.6	83
Export defence customers	2.5		1.8		4.2
Defence revenue	28.8	85	19.9	95	51.8	91
Transport	2.2		-		1.7
Space	1.6		-		1.2
Other commercial	1.3		1.0		2.4
Non defence revenue	5.1	15	1.0	5	5.3	9
Total revenue	33.9	100	20.9	100	57.1	100
By type of work
Advisory services	11.8	35	10.0	48	21.9	39
Technology solutions	12.1	36	2.1	10	14.9	26
Managed services	4.3	13	4.0	19	8.6	15
Manpower provision	3.7	11	3.4	16	6.9	12
Product	2.0	5	1.4	7	4.8	8
Total revenue	33.9	100	20.9	100	57.1	100

               3.             TAX EXPENSE

	Six months ended  31 October 2008  Unaudited  £000	Six months ended  31 October 2007  Unaudited £000	Year ended  30 April 2008 Audited £000
Current tax: in respect of this year	613	256	710
Current tax: in respect of prior periods	-	4	-
	613	260	710
Deferred taxation	-	-	379
	613	260	1,089

The tax expense for the six months ended 31 October 2008 is based upon the anticipated charge for the full year.

4.             EARNINGS PER SHARE

The earnings per share are calculated as follows:

	Six months ended  31 October 2008  Unaudited  £000	Six months ended  31 October 2007  Unaudited  £000	Year ended  30 April 2008 Audited £000
Earnings
Basic and diluted earnings	2,001	1,046	4,480
Exceptional items	-	-	17
Amortisation of other intangible assets	312	168	481
Adjusted basic and diluted earnings	2,313	1,214	4,978

	Number	Number	Number
Weighted average number of shares
For the purposes of basic earnings per share	40,477,758	29,477,161	34,960,426
Share options	172,644	224,308	423,731
For the purposes of diluted earnings per share	40,650,402	29,701,469	35,384,157

	Six months ended  31 October 2008  Unaudited  Pence	Six months ended  31 October 2007  Unaudited Pence	Year ended  30 April 2008 Audited Pence
Earnings per share
Basic	4.94	3.55	12.81
Diluted	4.92	3.52	12.66
Adjusted earnings per share
Basic	5.71	4.12	14.24
Diluted	5.69	4.09	14.07

5.             DIVIDENDS

The interim dividend for the six months ended 31 October 2008 is 0.55p (six months ended 31 October 2007: 0.45p) per ordinary share. This dividend will be payable 6 March 2009.

The final dividend for the year ended 30 April 2008 was 1.45p per ordinary share (£587,000).

6.            GOODWILL

The goodwill on the acquisition of SEA has been adjusted by £402,000 in respect of finalisation of provisional fair values in respect of inherited contractual obligations acquired with the business at 31 October 2007.  The comparative figures for 31 October 2007 and 30 April 2008 have been restated accordingly.  

7.            NET CASH FROM OPERATING ACTIVITIES

	Six months ended  31 October 2008  Unaudited  £000	Six months ended  31 October 2007  Unaudited £000	Year ended  30 April 2008 Audited £000
Profit for the period	2,001	1,046	4,480
Adjustments for:
Share of loss of joint ventures	216	101	118
Tax expense	613	260	1,089
Depreciation of property, plant and equipment	249	93	463
Amortisation of other intangible assets	312	168	481
Exceptional items	-	-	17
Derivative financial instruments	10	-	(131)
Finance costs (net of finance income)	87	(129)	(75)
Share-based payment	60	60	129
Increase in provisions	341	64	316
Operating cash flows before movements in working capital	3,889	1,663	6,887
(Increase)/decrease in inventories	(2,874)	(1,400)	823
Decrease/(increase) in receivables	2,417	33	(8,138)
(Decrease)/increase in payables	(2,270)	363	4,326
	(2,727)	(1,004)	(2,989)
Cash generated by operations	1,162	659	3,898
Tax received/(paid)	249	(341)	(507)
Interest paid	(178)	(2)	(156)
Net cash inflow from operating activities	1,233	316	3,235

INDEPENDENT REVIEW REPORT TO COHORT PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the interim report for the six months ended 31 October 2008, which comprises the Consolidated Income Statement, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Consolidated Statement of Changes in Equity and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report, including the conclusion, has been prepared for and only for the Company for the purpose of meeting the requirements of the AIM Rules for Companies and for no other purpose. We do not, therefore, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Directors' Responsibilities

The interim report, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing and presenting the interim report in accordance with the AIM Rules for Companies.

As disclosed, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements, as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 31 October 2008 is not prepared, in all material respects, in accordance with the measurement and recognition criteria of International Financial Reporting Standards and International Financial Reporting Interpretations Committee ('IFRIC') pronouncements as adopted by the European Union, and the AIM Rules for Companies.

Baker Tilly UK Audit LLP

Chartered Accountants
12 Gleneagles Court
Brighton Road
Crawley
West Sussex

RH10 6AD

10 December 2008

 

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