Rising geopolitical tensions have forced governments worldwide to use Cohort’s (CHRT) niche range of cutting-edge products. The upshot was a 40 per cent increase in adjusted operating profit as the defence contractor grew revenues 32 per cent to £50m.
Nearly half of group sales came from the surveillance systems and software division, called SEA. Despite a higher proportion of lower-margin single source submarine delivery contracts, and tough offshore energy markets, divisional revenues and adjusted operating profits almost doubled. The integration of sonar system, torpedo launcher and naval equipment specialist J+S was key to this success. Management reckons SEA's margins will return to normal in the historically stronger second half. It also expects a strong second half at electronic warfare support specialist MASS, even though the unit's operating margin widened 3.4 percentage points to 15.7 per cent in the first six months.
Boss Andy Thomis was naturally positive about the government's pledge to spend an extra £12bn on areas where Cohort excels, such as submarines, cyber security and special forces. He’s equally confident that the EID acquisition, which was held up by political uncertainty in Portugal following the October general election, will soon complete.
The average EPS forecast for the year to April 2016 is 21.7p, according to Bloomberg consensus figures, rising to 26.7p in FY 2017.
| COHORT (CHRT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 414p | MARKET VALUE: | £170m | |
| TOUCH: | 410p-417p | 12-MONTH HIGH: | 429p | LOW: 233p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 30 | |
| NET ASSET VALUE: | 149p* | NET CASH: | £11.4m | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 37.6 | 1.3 | 2.8 | 1.6 |
| 2015 | 49.7 | 0.1 | 2.8 | 1.9 |
| % change | +32 | -94 | -2 | +19 |
Ex-div: 4 Feb Payment: 2 Mar *Includes intangible assets of £52.6m, or 128p a share | ||||
