Final Results

RNS Number : 5659X

Cohort PLC

26 June 2008

 



25 June 2008

COHORT PLC

PRELIMINARY RESULTS ANNOUNCEMENT 

FOR THE YEAR ENDED 30 APRIL 2008

Cohort plc, the independent technology group, today announces its preliminary unaudited results for the year ended 30 April 2008. Highlights include:

	2008	2007
Revenue:	£57.1m	£34.4m
Adjusted operating profit:	£6.1m	£2.9m
Profit before tax:	£5.6m	£2.7m
Year-end cash balance:	£6.1m	£5.0m
Normalised earnings per share*:	14.24 pence	8.71 pence
Proposed final dividend per share:	1.0 pence	0.9 pence

* Excludes exceptional items (net of tax) and amortisation of other intangible assets.

Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said: 'Cohort has achieved its financial and strategic objectives for the year. Our second acquisition, SEA Group has exceeded expectations, whilst MASS and SCS continued to achieve strong revenue growth. We continue to seek complementary acquisitions, whilst organically growing the existing businesses. Overall the Board is positive about the outlook.'

For further information please contact:

Cohort plc	01491 843150
Stanley Carter, Chief Executive
Simon Walther, Finance Director
Investec Investment Bank	020 7597 5970
Michael Ansell
Hogarth Partnership Limited	020 7357 9477
Julian Walker, Andrew Jaques, Vicky Watkins

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 off-shore 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 450 staff there and at bases in Bristol, Cambridgeshire, Oxfordshire, Lincolnshire and Somerset.

CHAIRMAN'S STATEMENT

I am pleased to announce that Cohort plc has continued to make good progress in its second full year as a publicly quoted company, successfully implementing our strategy of growing both organically and by acquisition in the provision of technical services to defence and related markets. Our existing subsidiaries, MASS Consultants Limited (MASS) and Systems Consultants Services Limited (SCS) again delivered strong revenue growth. Cohort acquired SEA Group Limited (SEA) on 31 October 2007 and the new business has settled in well and performed ahead of expectations in its first six months within the Group.

KEY FINANCIALS

In the year ended 30 April 2008, Cohort achieved revenue of £57.1m (2007: £34.4m) representing a 66% increase on 2007. This included revenue of £26.1m (2007: £22.1m) from SCS, and £18.0m from MASS (2007: £12.3m for nine months), representing annualised organic growth of 18% and 10% respectively, with an initial contribution from SEA of £13.0m.

The Group's adjusted operating profit was £6.1m (2007: £2.9m). This included operating profit from SCS of £2.3m (2007: £2.2m) and from MASS of £2.3m (2007: £1.3m for nine months) representing annualised organic growth of 6% and 30% respectively. The initial contribution from SEA for six months was £2.2m, representing a strong second half performance. Cohort group overheads were £0.7m (2007: £0.6m).  Group operating profit was £5.5m (2007: £2.5m).

Profit before amortisation of other intangible assets, exceptional items, interest and tax was £6.0m (2007: £2.7m) after accounting for the Group's share of joint venture losses of £118,000 (2007: £256,000).

Profit after interest and before tax was £5.6m (2007: £2.7m) and profit after tax was £4.5m (2007: £2.3m).

Basic earnings per share were 12.81p (2007: 8.21p). Normalised earnings per share were 14.24p (2007: 8.71p). The normalised earnings per share were based upon profit after tax, excluding amortisation of other intangible assets and exceptional items.

The Cohort cash balance at year end was £6.1m (2007: £5.0m), reflecting the good operating performance, net of the cash invested in the acquisition of SEA.  The earn out payment for the shareholders of SEA, estimated to be £4.7m is expected to be paid in July 2008.

DIVIDENDS

The Group plans to pay a final dividend of 1.0p per ordinary share (2007: 0.9p), making the full year dividend in respect of the year ended 30 April 2008 1.45p per ordinary share (2007: 1.30p). This will be payable on 3 September 2008 to shareholders on the register at 8 August 2008 subject to approval at the annual general meeting on 28 August 2008.

BOARD AND PERSONNEL

Ian Dale-Staples joined the Cohort executive team and Board on 1 November 2007 following the acquisition of SEA. As well as holding responsibility for SEA, Ian is working closely with Stanley Carter, Simon Walther and me on the group's acquisition plans.

I would like to add a warm welcome to all the employees of SEA who have joined the Cohort group.

I would like to thank all our employees for the efforts which have helped to make this year another successful one.

OUTLOOK

Following a good year for order intake with total orders of £63.8m the Group order book at 1 May 2008 stood at £58.3m. This provided a good platform going into the current year. With the addition of SEA the group now stands with a wide offering to its largest customer, the UK MOD, but has also, through further export orders secured at MASS and through the space, transport and other commercial segments of SEA, positioned itself to grow in additional markets and sectors. And we continue to look for acquisitions to complement the organic development of the business.

Overall the Board is positive about the outlook for the continued progress of the Group.

Nick Prest CBE

Chairman

CHIEF EXECUTIVE'S REVIEW

I am pleased to report that Cohort's trading this year has continued the successful trend of last year. The Group has been significantly expanded and strengthened with the acquisition of SEA in October 2007 and has witnessed continued strong growth from both MASS and SCS. All three companies have achieved record annual revenue and profit.

In the year ended 30 April 2008, Cohort achieved Group revenue of £57.1m (2007: £34.4m) and an adjusted operating profit of £6.1m (2007: £2.9m), representing a full year of trading for MASS and SCS and 6 months for SEA.

GROUP OVERVIEW

Cohort is an independent group whose constituent companies provide a wide range of technical advice, support and managed services and certain niche products, characterised by high tech design and low volume manufacture. It provides an environment in which companies can develop and continue to grow whilst retaining a high degree of autonomy and deriving benefit from being part of the wider Group. This year's expansion of its existing companies and the acquisition of SEA is entirely in line with Cohort's strategy of continuing organic growth and a steady rate of acquisition of successful, complementary companies. These may be either large enough to operate as an additional member within the Group or smaller businesses that can be attached to existing members of the Group.

Organisationally Cohort's head office has been strengthened by Finance Director, Simon Walther and Business Manager, Emily Davies relinquishing their additional shadow roles in SCS with effect from 1 January 2008. This was followed in March by the move of Cohort from shared offices with SCS in Henley-on-Thames to its own offices nearby. Ian Dale-Staples, CEO of SEA was appointed to the Cohort Board on acquisition of SEA in October. Now that the earn-out period for SEA has ended he will take an increasing role in the Group's acquisition process.

Cohort's well established businesses have successfully expanded from their roots in defence and now have a presence in the following market sectors: information systems, security, telecommunications, transport, space and off-shore. In an uncertain financial climate, this diversity both across the Group and within the individual companies, coupled with the ability to keep well abreast of and sometimes lead technology, provides the agility to enable us to respond quickly to market needs. I am confident the Group is well placed to continue to grow both organically and by acquisition.

TRADING SUBSIDIARIES

MASS

MASS Consultants Limited (MASS) is an independent systems house with a strong technology market focus including the design and manufacture of niche technology products.

Based in St Neots near Cambridge with an electronic warfare facility in Lincoln, MASS was founded in 1983 and celebrates its 25th anniversary this year. It is well known in the field of electronic warfare, secure communications and associated specialist managed services.

Andy Thomis, who was formerly Strategy Director at Cohort, was appointed as Managing Director of MASS on 1 May 2007. The three other directors, including one who was a founder of MASS, have remained in post since the acquisition in August 2006.

Significant wins in the year included a contract to provide specialist technical support and training for an overseas customer and a contract to support Ultra Electronics in a secure communications programme for the Tornado aircraft.

SCS

Systems Consultants Services Limited (SCS) is an independent technical advisory and managed service business operating primarily in the defence and security sectors. Its personnel have the appropriate technical expertise combined with practical experience of its application in the user domain. Over 70% of its employees have served in the Armed Forces.

Based in Henley-on-Thames, SCS was founded in 1992 and has consistently grown year on year.

This year is no exception despite major management changes including my handover to Rick Bounsall as Managing Director on 1 May 2007.  John Lyde (a founding Director) stepped down as Technical Director and I take this opportunity to thank him for his invaluable support over many years.  Jim Campbell, a former Divisional Head was appointed Operations Director and Gavin Kilgour, former Weapons Systems Business Area Manager, was appointed Head of Business Development. The Company was restructured from four to three Divisions during the year to streamline management.

Notable contract awards during the year include: The Land Environment Air Picture Programme (LEAPP) a command and control system under Lockheed Martin as prime contractor; the Land Forces Command Mission Rehearsal Exercise (MRX) programme and the Land Systems Reference Centre (LSRC) Managed Service contract.

Revenue growth in 2008 at 18% was good, whilst not as strong as the previous year, and profit grew by just over 6% compared with 2007. Elements of SCS providing specialist manpower to the UK MOD and supporting organisational development, demonstrated very good growth in revenue and profit, partly reflecting the current high level of operational stretch in the armed forces. Elements feeding into major equipment programmes experienced some under-utilisation, partly because of programme delays.  Overheads were also higher, including costs relating to the needed introduction of new IT systems and additional support staff. These changes and the recent streamlining of management at SCS are aimed at improving the operating margin in the current year.

SCS JOINT VENTURES

In the course of the year SCS withdrew from participation in the Digital Millennium Map Limited Liability Partnership, membership of which pre-dated the 2006 flotation of Cohort, as there was no longer an adequate rationale for the investment. We have continued to support Advanced Geographic Systems Limited (AGS), in which SCS holds a 50% stake, as it works to bring its ground-breaking 3D terrain visualisation software to market. Progress was made with contracts being secured for both military/security and commercial applications, the latter in relation to 3D display on mobile phones. We will continue to keep the investment in AGS under close review.

SEA

SEA (Group) Limited (SEA) is an independent systems engineering and software company operating in the defence, space, transport and off-shore markets. It is based in Beckington near Frome, Somerset with further offices close to the main UK MOD establishment at Bristol. The company, which celebrates its 20th anniversary this year was acquired by Cohort in October 2007. Limited management structure changes have been made recently, namely the subdivision of the former Defence Division into four Divisions which, added to the existing Transport, Space and Off-shore, make a total of seven. Paul Phillips, formerly heading the Defence Division, has been appointed SEA Managing Director under Ian Dale-Staples who remains SEA CEO and has a place on the Cohort Board.

Significant wins in the year included: a contract from Astrium for a Broad Band Radiometer instrument for the European Space Agency's (ESA) Earthcare space mission and contract extensions from Thales-Alenia for ESA's Aurora mission to Mars and a framework contract for the roll-out of the new digital traffic enforcement system to Transport for London.

OUTLOOK

Against an uncertain international background, continued stretch of UK MOD personnel and equipment resources, greater commercial and government focus on secure IT and information assurance, fewer providers of independent advice and the need, sometimes urgent, for equipment to fulfil specific needs, Cohort is well placed. The Group is diverse and is in a good business position with a strong order book. I am confident that the wide ranging and complementary expertise and capabilities we have and are building into the Cohort Group make it well positioned to continue to grow, both organically and through acquisition, to meet changing market needs.

A E Stanley Carter

Chief Executive

  FINANCE DIRECTOR'S REVIEW

The following review explains in further detail the significant issues arising during the year ended 30 April 2008 and highlights other matters over and above what is included in the primary financial statements and notes thereto.

REVENUE

The segmental analysis (note 2) presents the Group's revenue by subsidiary. The revenue is further analysed as follows:

By Sector	2008		2007
	£m	%	£m	%
Direct to UK MOD	34.0		23.6
Indirect to UK MOD, where the Group acts as a sub-contractor or partner	13.6		7.4
Total to the UK MOD	47.6	83	31.0	90
Export defence customers	4.2		0.5
Total defence revenue	51.8	91	31.5	92
Transport	1.7		-
Space	1.2		-
Other commercial	2.4		2.9
Non-defence revenue	5.3	9	2.9	8
Total revenue	57.1	100	34.4	100

By type of work	2008		2007
	£m	%	£m	%
Advisory services	21.9	39	18.0	52
Technology solutions	14.9	26	1.1	4
Managed services	8.6	15	6.0	17
Manpower provision	6.9	12	5.3	15
Product	4.8	8	4.0	12
Total revenue	57.1	100	34.4	100

The change in the revenue by sector is due to the acquisition of SEA which on acquisition had approximately 30% of its business in non-defence sectors. This proportion of non-defence revenue is expected to grow following recent significant contract wins in both Space and Transport.  The change in the mix of the type of work delivered by the Group also reflects the acquisition of SEA.

ADJUSTED OPERATING PROFIT

The adjusted operating profit is presented to reflect the trading profit of the Group and excludes amortisation of other intangible assets, joint ventures and exceptional items. This allows the Group to present its trading performance in a comparable format year on year.

The adjusted operating profit is stated after charging the cost of share-based payments of £129,000 (2007: £71,000) which is allocated to each business in proportion to its employee participation in the Group's share option schemes.

The adjusted operating profit of SEA (and the Group) is after crediting £131,000 (2007: £nil) in respect of marking forward foreign exchange contracts to market at 30 April 2008, these contracts being used to hedge the forward sale of currency on Euro denominated trading contracts.

TAX

The Group's tax charge for the year ended 30 April 2008 of £1,089,000 (2007: £454,000) was at an effective rate of 19.6% (2007: 16.7%) of profit before tax. This includes a current year corporation tax charge of 

£710,000 (2007: £449,000), a rate of 12.7% (2007: 16.5%) of profit before tax and deferred tax charge of £379,000 (2007: credit of £28,000).

The Group's overall tax rate was significantly below the standard corporation tax rate of 30%, the majority of the rate reduction was due to the recognition of research and development (R&D) credits at MASS for the year ended 30 April 2008 and SEA for the six months ended 30 April 2008.  The deferred tax charge was mostly in respect of SEA acquired losses, which were part of the fair value balance acquired being utilised in the year.

SEA retained its small and medium sized enterprise (SME) status for the five months ended 31 March 2008.

From 1 April 2007 and 1 April 2008, MASS and SEA respectively no longer qualify under current legislation as SME's for the purposes of R&D tax credits.

From these dates, these businesses are only allowed to claim the lower R&D tax credit allowance available to larger companies, currently 25%.

The R&D tax credit legislation is under review to increase the SME qualifying limits which may benefit the Group's subsidiaries in the future.

During the year the Group applied for R&D tax credits in respect of its subsidiary SCS and its joint venture AGS. The potential credit from these claims is not reflected in the current tax charge due to the claims being at an early stage with HMRC.

Looking forward, the change in the R&D tax credit rates available to the Group's subsidiaries will result in the Group's overall effective corporation tax rate rising from recent levels of below 20% to a higher level, although below the standard rate of 28%, effective from 1 April 2008.

PROVISIONS

The Group's provisions at 30 April 2008 are as per note 8.

The deferred consideration provisions for both MASS and SEA were established at the time of their respective acquisitions and are to be settled in cash in the coming twelve months as follows:

MASS - the deferred consideration may be payable (up to a maximum of £0.5m) during the current year and 2009, if conditions set out at the time of acquisition are met before 31 July 2008.

SEA - due for settlement in July 2008. The deferred consideration is expected to be paid in full at £4.67m, since the profit before tax and interest of SEA for the thirteen months ended 30 April 2008 is expected to exceed the target of £2.5m set at the time of the acquisition.

The Group will settle the deferred consideration using its own cash and facility resources.

TREASURY FACILITIES

At 30 April 2008 the Group had undrawn facilities with its banking provider, RBS as follows:

	£M	Term
Overdraft facility for working capital requirements	2.5	364 day, evergreen
Structured debt facility for acquisitions	7.0	364 day evergreen, 3 year term out

Of the structured debt facility of £10.0m, £3.0m was drawn to part finance the acquisition of SEA.

In addition, the Group has £0.9m of mortgage debt with RBS which was acquired with SEA.

At 30 April 2008, the Group had in place forward foreign exchange contracts to sell Euro 3.0m at a £ Sterling equivalent value of £2.2m.

These forward contracts are used by the Group to manage its risk exposure to foreign currency on trading contracts where it either or both receives and pays currency from customers and suppliers respectively.

These contracts are entered into when contracts are considered effective. The Group does not enter into speculative foreign exchange dealing.

GOODWILL AND OTHER INTANGIBLE ASSETS

The Group has recognised goodwill and other intangible assets in respect of the acquisition of MASS and SEA (see note 7). The other intangible assets are in respect of contracts acquired in each case and are to be amortised over the life of the earnings associated with the contracts 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, intellectual property within the acquired work force, reputation, customer relations, contacts and market synergies with existing Group members. The goodwill relating to the acquisitions of MASS and SEA has been tested for impairment as at 30 April 2008 and no impairment is to be recognised in either case.

WORKING CAPITAL

The working capital of the Group, excluding provisions (which are mostly related to undertakings given on acquisition of MASS and SEA) and tax liabilities have risen from £2.7m net assets to £8.2m net assets, an increase of £5.5m.

Of the increase, £1.9m is due to the acquisition of SEA and £3.6m is an increase at both MASS and SCS reflecting the high volume of revenue in these businesses during the last quarter of the year when compared with 2007.

The year end days debtors in sales has risen from 61 days in 2007 to 75 days in 2008. This calculation is based upon dividing the revenue by month, working backwards from April into the trade debtors balance at the year end, a more appropriate measure as it takes into account the heavy weighting of the Group's revenue in the last quarter of each year.

The Group has a working capital facility of £2.5m with RBS which was not utilised during the year.  The Group had cash at 30 April of £6.1m. Advance receipts on contracts at the year end were £2.2m.

IFRS

The Group changed its accounting standards from UK GAAP to IFRS with effect from 1 May 2006.

The impact of this change upon the Group's reported profit is highlighted in note 7 and is in respect of the changes in capitalisation and acquisition of goodwill and other intangible assets. Other significant changes are mainly presentational in nature with the exception of recognition in the income statement of the gain or 

loss on forward foreign exchange contracts being marked to market; a gain in 2008 of £131,000 (2007: £nil). Under UK GAAP such gains or losses would not have been recognised in the income statement.

Simon Walther

Finance Director

CONSOLIDATED INCOME STATEMENT

For the year ended 30 April 2008

	Notes	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Revenue	2	57,093	34,419
Cost of sales		(40,386)	(26,027)
Gross profit		16,707	8,392
Administrative expenses		(10,597)	(5,481)
Adjusted operating profit*	2	6,110	2,911
Amortisation of other intangible assets	7	(481)	(252)
Exceptional items	3	(17)	114
Share of results of joint ventures		(118)	(256)
Operating profit	2	5,494	2,517
Finance income		231	214
Finance costs		(156)	(8)
Profit before tax		5,569	2,723
Tax expense	4	(1,089)	(454)
Profit for the year		4,480	2,269

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

		Year ended 30 April 2008 Pence	Year ended  30 April 2007 Pence
Earnings per share	5
Basic		12.81	8.21
Diluted		12.66	8.16
Adjusted earnings per share	5
Basic		14.24	8.71
Diluted		14.07	8.65
Dividends per share paid and proposed in respect of the year	6
Interim		0.45	0.40
Final		1.00	0.90
		1.45	1.30

CONSOLIDATED BALANCE SHEET

As at 30 April 2008

	Notes	At 30 April 2008 £000	At 30 April 2007 £000
ASSETS
Non-current assets
Goodwill	7	30,640	12,162
Other intangible assets	7	1,987	1,308
Property, plant and equipment		4,866	282
Deferred tax asset		62	71
		37,555	13,823
Current assets
Inventories		1,041	409
Trade and other receivables		19,952	7,731
Derivative financial instruments		131	-
Cash and cash equivalents		6,081	5,015
		27,205	13,155
Total assets		64,760	26,978
LIABILITIES
Current liabilities
Trade and other payables		(13,103)	(5,713)
Current tax liabilities		(616)	(126)
Other loans		(41)	-
Bank loans and overdrafts		(3,123)	-
Provisions	8	(5,381)	(60)
		(22,264)	(5,899)
Non-current liabilities
Other loans		(32)	-
Bank loans		(792)	-
Deferred tax liability		(662)	-
Provisions	8	(167)	(500)
		(1,653)	(500)
Total liabilities		(23,917)	(6,399)
Net Assets		40,843	20,579
Equity
Share capital		4,046	2,947
Share premium account		29,158	14,155
Share option reserve		200	71
Retained earnings		7,439	3,406
Total equity attributable to the equity shareholders of the parent		40,843	20,579

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 April 2008

Notes		Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
At 1 May as previously stated under UK GAAP		-	8,924
Adjustment on introduction of IFRS		-	-
At 1 May as stated under IFRS		20,579	8,924
Profit for the year reported under IFRS		4,480	2,269
Equity dividends paid		(447)	(236)
Issue of new 10p ordinary shares		16,433	9,906
Costs of new share issue		(361)	(377)
Exercise of share options		30	22
Share-based payments		129	71
At 30 April		40,843	20,579

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 April 2008

	Notes	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Net cash flow from operating activities	10	3,391	2,155
Investing activities
Interest received		231	225
Interest paid		(156)	(8)
Proceeds on disposal of property, plant and equipment		-	-
Purchases of property, plant and equipment		(525)	(87)
Acquisition of subsidiaries, net of cash acquired	9	(11,473)	(11,935)
Investment in a joint venture		-	(220)
Net cash used in investing activities		(11,923)	(12,025)
Financing activities
Dividends paid		(447)	(236)
Repayment of borrowings		(94)	-
Proceeds from finance leases		-	251
Proceeds on issue of shares	9	7,139	9,279
New bank loans raised	9	3,000	-
Net cash from financing activities		9,598	9,294
Net increase/(decrease) in cash and cash equivalents		1,066	(576)

	At 1 May 2007 £000	Acquired £000	Cash Flow £000	At 30 April 2008 £000
Funds reconciliation
Cash and bank	15	-	6,066	6,081
Short term deposits	5,000	-	(5,000)	-
Cash and cash equivalents	5,015	-	1,066	6,081
Overdraft	-	-	-	-
Other loans	-	(104)	31	(73)
Bank loans	-	(978)	(2,937)	(3,915)
Debt	-	(1,082)	(2,906)	(3,988)
Net funds	5,015	(1,082)	(1,840)	2,093

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 2008. The information in this preliminary statement has been extracted from the unaudited financial statements for the year ended 30 April 2008 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards.

This preliminary report is extracted from the Group's Annual Report, which has adopted IFRS for the first time and comparatives have been restated accordingly. The Group's Annual Report for the year ended 30 April 2008 has yet to be delivered to the Registrar of Companies and on which the auditor has yet to issue an opinion. The figures for the year ended 30 April 2008 and 2007 do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985.

On introducing IFRS, the resulting accounting policy changes have had no impact upon the group's equity with the exception of amortisation of goodwill and other intangible assets (see note 7). The impact of IFRS on the goodwill acquired was to require it to be split between other intangible assets, to be written off over their respective lives (note 7 in respect of MASS and note 9 in respect of SEA Group (SEA)) with the remaining balance of unallocated goodwill not being amortised but subject to an annual impairment test. There have been a number of presentational changes, but these are not material, with the exception of the splitting of the goodwill arising on acquisition (note 7).

The introduction of IFRS has had no impact upon the Group cash flows.

The date of transition to IFRS by the Group was 1 May 2006.

SEA was acquired 31 October 2007 and its results have been consolidated from that date. The income statement and the cash flow include the results of SEA from 1 November 2007 to 30 April 2008 inclusive.

The comparative figures for the year ended 30 April 2007 were derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The previous statutory accounts prepared under UK GAAP have been restated to IFRS. Those accounts received an unqualified audit report.  The  preliminary announcement was approved by the Board and authorised for issue 25 June 2008.

2. SEGMENTAL ANALYSIS OF REVENUE AND ADJUSTED OPERATING PROFIT

	Year ended 30 April 2008      £000	Year ended 30 April 2007      £000
Revenue
MASS	17,998	12,275
SCS	26,087	22,144
SEA (acquired 31 October 2007)	13,008	-
	57,093	34,419
Adjusted Operating Profit
MASS	2,271	1,308
SCS	2,343	2,208
SEA (acquired 31 October 2007)	2,249	-
Central costs	(753)	(605)
	6,110	2,911
Amortisation of other intangible assets	(481)	(252)
Exceptional items	(17)	114
Share of results of joint ventures	(118)	(256)
Operating Profit	5,494	2,517

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

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

The operating profit as reported under IFRS is reconciled to the adjusted operating profit as reported above by the exclusion of exceptional items, 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 year to year.

The adjusted operating profit is stated after charging £129,000 in respect of share-based payments (year ended 30 April 2007: £71,000) and after crediting £131,000 (year ended 30 April 2007: £nil) of gain in respect of marking forward foreign exchange contracts to market at 30 April 2008.

3. EXCEPTIONAL ITEMS

	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Write back of provision against joint ventures	-	113
(Loss)/profit on sale of property, plant and equipment	(17)	1
	(17)	114

4. TAX EXPENSE

	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Corporation tax:
Prior year	-	33
Current year	710	449
	710	482
Deferred taxation	379	(28)
	1,089	454

5. EARNINGS PER SHARE

The earnings per share are calculated as follows:

	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Earnings
Basic and diluted earnings	4,480	2,269
Exceptional items	17	(114)
Amortisation of other intangible assets	481	252
Adjusted basic and diluted earnings	4,978	2,407

	Number	Number
Weighted average number of shares
For the purposes of basic earnings per share	34,960,426	27,633,096
Share options	423,731	168,184
For the purposes of diluted earnings per share	35,384,157	27,801,280

	Year ended 30 April 2008 Pence	Year ended 30 April 2007 Pence
Earnings per share
Basic	12.81	8.21
Diluted	12.66	8.16
Adjusted earnings per share
Basic	14.24	8.71
Diluted	14.07	8.65

6. DIVIDENDS

The proposed final dividend for the year ended 30 April 2008 is 1.0p (year ended 30 April 2007: 0.9p) per ordinary share. This dividend will be payable 3 September 2008.

The total paid and proposed dividend for the year ended 30 April 2008 is 1.45p per ordinary share: £587,000 (year ended 30 April 2007 1.3p per ordinary share: £383,000).

The charge for the year ended 30 April 2008 (£447,000) is the final dividend for the year ended 30 April 2007 paid (£265,000) and the interim dividend for the year ended 30 April 2008 paid (£182,000).

7. GOODWILL AND OTHER INTANGIBLE ASSETS

	Goodwill			Other intangible assets
	SEA £000	MASS £000	Total £000	SEA £000	MASS £000	Total £000
Cost
At 1 May 2007 under UK GAAP	-	13,722	13,722	-	-	-
Adjustment for IFRS	-	(1,560)	(1,560)	-	1,560	1,560
At 1 May 2007 under IFRS	-	12,162	12,162	-	1,560	1,560
Recognised on acquisition of a subsidiary (note 9)	18,492	-	18,492	1,160	-	1,160
Adjustment to goodwill of previously acquired subsidiaries	-	(14)	(14)	-	-	-
At 30 April 2008	18,492	12,148	30,640	1,160	1,560	2,720
Amortisation
At 1 May 2007 under UK GAAP	-	(515)	(515)	-	-	-
Adjustment for IFRS	-	515	515	-	(252)	(252)
At 1 May 2007 under IFRS	-	-	-	-	(252)	(252)
Charge for the year ended 30 April 2008	-	-	-	(145)	(336)	(481)
At 30 April 2008	-	-	-	(145)	(588)	(733)
NBV
At 30 April 2008	18,492	12,148	30,640	1,015	972	1,987
At 30 April 2007	-	12,162	12,162	-	1,308	1,308
Under UK GAAP
At 30 April 2007	-	13,207	13,207	-	-	-

The intangible asset of MASS is in respect of acquired contracts (£1,060,000) and contracts to be secured (£500,000).  The intangible asset in respect of acquired contracts is to be amortised over four years, the life of the contracts' earnings.  The intangible asset in respect of contracts to be secured is to be written off over seven years and is in respect of certain overseas contracts for which further consideration would be payable if secured in accordance with the terms of the acquisition of MASS.

The reduction in the goodwill of MASS is due to changes in the fair value of net liabilities acquired.

In accordance with IFRS the goodwill is not amortised but tested annually for impairment.

The amortisation of goodwill and other intangible assets charged to the income statement has been adjusted in adopting IFRS as follows:

	Year ended 30 April 2007 £000
Amortisation for the year previously reported under UK GAAP	515
Adjustment to amortisation on introduction of IFRS	(263)
Amortisation of other intangible assets under IFRS	252

8. PROVISIONS

	Deferred consideration in respect of the acquisition of MASS £000	Deferred consideration in respect of the acquisition of SEA (Note 9)  £000	Warranty and other contract related provisions £000	Total £000
At 1 May 2007	500	-	60	560
Addition on acquisition	-	4,672	-	4,672
Charge to income statement	-	-	316	316
At 30 April 2008	500	4,672	376	5,548
Due less than one year	333	4,672	376	5,381
Due greater than one year	167	-	-	167
	500	4,672	376	5,548

The deferred consideration in respect of SEA is expected to be settled in full in July 2008, in cash in accordance with the acquisition terms and conditions. The deferred consideration in respect of MASS was payable on securing certain overseas contracts at a value in accordance with the terms and conditions of the acquisition. This balance, if payable, is expected to be settled during the financial years ended 30 April 2009 and 30 April 2010.

9. ACQUISITION OF SEA (GROUP) LIMITED

On 7 November 2007, the Group completed the acquisition of 100% of the issued share capital of SEA (Group) Limited (SEA) for an initial consideration of £20.7 million with further performance related deferred consideration of up to £4.7m, payable in cash. SEA (Group) Limited is the parent company of Systems Engineering and Assessment Limited, an independent systems engineering and software company.  SEA has been consolidated by the Group from 31 October 2007.

The transaction has been accounted for during the year ended 30 April 2008 by the purchase method of accounting.

	Book Value £000		Fair Value £000
Net assets acquired:
Intangible assets	15		-
Property, plant and equipment	3,243		4,557
Inventories	1,677		1,455
Trade and other receivables	4,319		4,172
Cash and cash equivalents	1,203		1,203
Trade and other payables	(1,945)		(3,083)
Deferred tax	(32)		(292)
Current tax liabilities	(292)		(292)
Bank loans	(1,082)		(1,082)
	7,106		6,638
Other intangible assets			1,160
Goodwill			18,492
Total consideration			26,290
Total consideration includes acquisition costs of £0.9 million
Satisfied by:			£000
Cash			12,676
5,954,866 ordinary shares issued to vendors at £1.50 per share			8,932
Trade and other payables			10
Provision for deferred consideration (note 8)			4,672
			26,290
Net funds outflow arising on acquisition
Cash consideration			(12,676)
Cash and cash equivalents acquired			1,203
Net cash outflow			(11,473)
Bank loans acquired			(1,082)
Net funds outflow			(12,555)

As part of the acquisition, the Group drew down £3.0 million from its acquisition facility with RBS and raised £6.0m via a vendor placing net of £361,000 of placing costs, which were charged to the Share Premium Account. A further £1.5m was raised under the Venture Capital Trust Scheme, realising net proceeds from the issue of shares of £7,139,000.

The goodwill arising on the acquisition of SEA is attributable to the anticipated profitability of SEA in the future and expected market and customer facing synergies that arise from the combination with the remainder of the Cohort Group. In accordance with IFRS this goodwill will not be amortised but is subject to an annual impairment test. The other intangible asset is in respect of the future profitability of the acquired order book of SEA and will be amortised over the period in which the acquired contracts profitability arises, a period of four years.

10. NET CASH FLOW FROM OPERATING ACTIVITIES

	Year ended 30 April 2008 £000	Year ended  30 April 2007 £000
Profit for the year	4,480	2,269
Adjustments for:
Share of loss of joint ventures	118	242
Tax expense	1,089	454
Depreciation of property, plant and equipment	463	187
Amortisation of other intangible assets	481	252
Exceptional items	17	(114)
Finance revenue (net of finance costs)	(75)	(192)
Derivative financial instruments	(131)	-
Share-based payment	129	71
Increase in provisions	316	-
Operating cash inflows before movements in working capital	6,887	3,169
Decrease/(increase) in inventories	823	(267)
Increase in receivables	(8,138)	(1,180)
Increase in payables	4,326	1,220
	(2,989)	(227)
Cash generated by operations	3,898	2,942
Tax paid	(507)	(787)
Net cash flow from operating activities	3,391	2,155

11.

The financial information set out in the announcement does not constitute the company's statutory accounts for the years ended 30 April 2008 or 2007. The financial information for the year ended 30 April 2007 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors reported on those accounts. Their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 30 April 2008 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the company's Annual General Meeting, to be held 28 August 2008.

Copies of the Annual Report and accounts for the year ended 30 April 2008 will be posted to shareholders on 23 July 2008 and available on the Company's website (www.cohortplc.com) from that date.

 

END

 

 

FR SEWESISASEFM