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Cohort reaps rewards of Chess acquisition

Despite Covid-19 hitting the end of its financial year, the defence technology group posted a record adjusted operating profit
July 23, 2020

Defence technology group Cohort (CHRT) saw its adjusted operating profit jump by 12 per cent to a record £18m in the year to 30 April, despite a £1m hit from Covid-19. It benefitted from the first full year contribution from Chess Technologies, the electro-optical and electro-mechanical systems supplier purchased in 2018. Boosted by strong export demand for naval systems, Chess more than doubled its profits to £3.9m.

IC TIP: Buy at 571p

The pandemic hit in the group’s traditionally busiest quarter, with the impact most keenly felt at engineering business SEA. Export orders for naval defence products such as torpedo launcher systems were delayed, a trend that has continued into the new financial year. The division’s cost base is now being trimmed by £1.3m.

Cohort is set to acquire German naval sonar business ELAC for €11.3m (£9.8m) by the end of September. The purchase will widen its footprint in the naval market and provide cross-selling opportunities with SEA.

Even with that outlay, it expects net debt will be in line with last year, when (excluding lease liabilities) it came down by 27 per cent to £4.7m. This was aided by the UK Ministry of Defence (MoD), accelerating payments to support suppliers during the pandemic.

House broker Investec anticipates adjusted pre-tax profit of £17.6m and EPS of 22.5p in 2021, versus £17.5m and 36.7p in 2020.

COHORT (CHRT)   
ORD PRICE:571pMARKET VALUE:£ 234m
TOUCH:555-587p12-MONTH HIGH:738pLOW: 420p
DIVIDEND YIELD:1.8%PE RATIO:24
NET ASSET VALUE:184p*NET DEBT:15%**
Year to 30 AprTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161135.319.16.0
20171131.09.17.1
201811010.219.08.2
20191215.713.49.1
202013110.023.510.1
% change+8+75+75+11
Ex-div:13 Aug   
Payment:18 Sep   
*Includes £55m in intangible assets or 135p a share, **Includes £7.5m in lease liabilities