Cohort Plc · LSE:CHRT
Cohort — FY2019 Earnings Presentation
36 slides from Cohort's earnings presentation, July 2019
Slide 1: Final Results for the Year Ended 30 April 2019
Final Results for the Year Ended 30 April 2019
Slide 2: Overview and Divisional Highlights
Overview and Divisional Highlights Andrew Thomis, Chief Executive
Slide 3: Financial Highlights
Introduction Financial Highlights • Adjusted1 operating profit £16.2m, up 6% • Adjusted1 earnings per share up 16% to 33.6p • Group revenue of £121.2m, up 10% • Group order book at 30 April 2019 of £190.9m (20182: £103.8m) • Lower than expected Group net debt of £6.4m (2018: net funds of £11.3m) • T
Slide 4: 2019: A year of profit growth and record order intake
Overview 2019: A year of profit growth and record order intake • Record order intake of £189.9m • Strong initial contribution from Chess • Good growth at MASS • MCL profit contribution up on higher revenue • SEA returned to growth following first half restructuring • Weaker performance at EID: late
Slide 5: Chess Highlights
Divisional Highlights Chess Highlights 2018/19 2017/18 (5 months) Revenue (£m) 10.7 - Operating profit (£m) 1.7 - Operating margin 15.8% - • Strong initial contribution • Better than expected due to supply and support of Counter-UAV systems at Gatwick • Continues to deliver on longer term naval and
Slide 6: MASS Highlights
Divisional Highlights MASS Highlights 2018/19 2017/18 Revenue (£m) 39.0 37.5 Operating profit (£m) 8.2 7.1 Operating margin 21.0% 18.9% • Higher margin driven by improved EWOS revenue and completion of support contract • Renewal of long term support contract with UK MOD secured • Record order intake
Slide 7: MCL Highlights
Divisional Highlights MCL Highlights 2018/19 2017/18 Revenue (£m) 21.7 17.4 Operating profit (£m) 2.3 2.1 Operating margin 10.5% 12.1% • Revenue up 25%, driven by initial supply of submarine systems • Lower margin a result of increased bought-in content • Order intake of £26m, 1.2x revenue • Strong
Slide 8: SEA Highlights
Divisional Highlights SEA Highlights 2018/19 2017/18 (restated1) Revenue (£m) 38.3 37.3 Operating profit (£m) 5.5 4.4 Operating margin 14.3% 11.8% • Return to revenue and profit growth • Profitability improvement due to better mix and lower overhead, following restructuring in H1 • Restructuring del
Slide 9: SEA Highlights – ROADflow
Divisional Highlights SEA Highlights – ROADflow ROADflow Sales (Units) 250 200 150 100 50 0 8/9 9/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 UK US 9
Slide 10: EID Highlights
Divisional Highlights EID Highlights 2018/19 2017/18 (restated1) Revenue (£m) 11.5 18.3 Operating profit (£m) 1.3 4.3 Operating margin 11.8% 23.6% • Result weaker than expected due to slippage of delivery into 2019/20 • Order intake of £18m including vehicle intercoms order for Middle East • Net mar
Slide 11: Financial Review
Financial Review Simon Walther, Finance Director
Slide 12: Income statement
Financial Review Income statement Year ended 30 April 2019 2019 2018 2 Variance (restated ) % £m £m Revenue 121.2 110.5 10% Gross profit 42.3 34.9% 39.3 35.5% Overhead (26.1) (24.1) 1 Adjusted operating profit 16.2 15.2 6% Exceptional items (1.5) - 1 Adjusted profit before interest and tax 14.7 15.2
Slide 13: 2017/18 to 2018/19 revenue & profit bridge
Financial Review 2017/18 to 2018/19 revenue & profit bridge Revenue bridge +£10.7m -£6.8m +£6.8m -£1.3m EID Chess 2018/19 2017/18 IFRS 15 UK ex Revenue Revenue 2017/18 Chess £121.2m impact £111.8m Revenue (IFRS 15) £110.5m Operating profit bridge +£1.7m -£3.0m +£2.4m -£0.1m -£0.4m EID Chess Head 201
Slide 14: Quarterly profile of Group revenue
Financial Review Quarterly profile of Group revenue 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 Average % 50 45 40 35 % 30 25 20 15 10 5 0 Q1 Q2 Q3 Q4 14
Slide 15: Earnings per share
Financial Review Earnings per share • 16% increase in adjusted earnings per share from 6% growth in adjusted operating profit • Reconciled as follows: Adjusted Adjusted operating earnings per profit share £m pence 2018 (restated1) 15.2 29.08 Dilution from share options - (0.10) Tax (higher R&D credi
Slide 16: Balance Sheet
Financial Review Balance Sheet • Goodwill test at full year No impairment • Other intangibles reflect contracts and prospects of Chess, EID, MCL & J+S (in SEA) Anticipate amortisation of £7.4m in 2019/20, £6.6m in 2020/21, £3.5m in 2021/22 and around £1.5m in each of the two years thereafter • E
Slide 17: Net Cash Flow
Financial Review Net Cash Flow 1 Year ended 30 April 2019 2019 2018 (restated ) £m £m Adjusted operating profit 16.2 15.2 Working capital (5.0) (0.9) Depreciation and share based payments 1.4 1.4 Net funds inflow from operations 12.6 15.7 Acquisition of Chess (including costs of acquisition & net de
Slide 18: Expected Cash Projection 2019/20
Financial Review Expected Cash Projection 2019/20 £m Opening net debt (6.4) Operating cash flow 9.4 Tax/capex/dividends (10.0) Closing net debt at 30 April 2020 (7.0) 18
Slide 19: Banking and Tax
Financial Review Banking and Tax • Banking facilities £18.4m cash at 30 April 2019 £5m of £30m facility available (renewed with two banks until November 2022) €1.5m dividend from EID to be paid this calendar year • Tax Headline tax charge of £0.6m (2018: charge of £2.1m) Underlying tax rat
Slide 20: Outlook
Outlook Andrew Thomis, Chief Executive
Slide 21: Progress against 2018/19 Strategic Opportunities
Outlook Progress against 2018/19 Strategic Opportunities In-year value Long-term value Achieved UK MOD Strategic Systems Low High Middle East Typhoon EW Support High High Southeast Asia Thurbon sale High Low UK Submarine Tactical Intelligence Low High North Africa Vehicle Intercoms High Medium 21
Slide 22: Market Prospects
Outlook Market Prospects Home markets • UK MOD is less cash constrained but still a tight market • Cohort’s major programmes are stable, long term and operationally important • Developing new markets including civil counter-drone and digital forensics • Portuguese market stable Export markets • Expo
Slide 23: Order Book – Underpinning 2019/20 and Beyond
Outlook Order Book – Underpinning 2019/20 and Beyond £m 190.9 200 MASS SEA EID Chess MCL 14.5 180 20.8 160 140 25.6 120 31.1 81.7 100 0.7 6.4 80 2.8 43.9 36.8 28.5 12.2 60 2.8 2.6 98.9 9.4 3.0 4.9 5.6 40 6.1 7.9 59.6 8.7 6.6 20 8.4 3.9 15.4 13.7 10.2 0 At 30 April 2019 H1 2019/20 H2 2019/20 2020/21
Slide 24: Record order book – good underpinning for coming year
Outlook Record order book – good underpinning for coming year 30 April To be delivered 30 April Last year's to be 1 2019 2019/20 2018 delivered 2018/19 £m £m £m £m Chess 20.8 15.0 - - EID 25.6 16.6 19.0 8.2 MASS 98.9 29.1 40.9 20.2 MCL 14.5 7.7 10.3 9.7 SEA 31.1 12.3 33.6 15.7 190.9 80.7 103.8 53.8
Slide 25: Investing for organic growth
Outlook Investing for organic growth • Well-established private venture and customer-funded R&D activities. Self- funded R&D increased to £2.7m in 2019 (2018: £2.0m) • Group priorities include: Anti-Submarine Warfare (ASW) Roadflow development Next generation vehicle intercom system Upgrades to
Slide 26: Good prospects for orders and organic growth
Overview Good prospects for orders and organic growth • Nearly £81m of orders deliverable in 2019/20, 55% of external forecast revenue • Including recent wins order cover now 60% • Another strong year of order intake expected • Important order opportunities in the year ahead: Export EWOS work at M
Slide 27: 2019/20 Outlook & Summary
Outlook 2019/20 Outlook & Summary • Growth expected across the subsidiaries: • MASS will continue to grow and lead as largest contributor to profits • EID expected to grow with net margin back to historical levels, large follow-on opportunity • Chess expected to grow, with good order prospects • MCL
Slide 28: Appendix
Appendix Cohort plc
Slide 29: Cohort Business Model
Cohort Business Model Subsidiaries enjoy a significant degree of operational autonomy in order to develop their potential fully: • Enables streamlined decision-making and focus on solving customer’s immediate problems • Provides competitive advantage over larger rivals where the decision- making p
Slide 30: Acquisition Strategy
Acquisition Strategy • Continue to see opportunities to accelerate growth by making targeted acquisitions in the UK and overseas • Stand-alone acquisitions Likely to be operating in defence and security markets Ready to join a larger public group Growth potential and sustainable competitive ad
Slide 31: Acquisition Track Record
Acquisition Track Record • 2006: SCS acquisition helped create the Group at IPO (SCS now fully integrated within other divisions) • 2006: MASS acquired for £13m • 2007: SEA acquired for £25m • 2014: Disposal of Space Division for £6.5m • 2014: J+S acquired for £12m (now fully integrated within SEA)
Slide 32: Cohort's Subsidiaries - An Overview (Chess)
Cohort’s Subsidiaries - An Overview Trading History (Under Cohort – 5 months ended 30 April 2019) 25 4.0 20 Trading profit (€m) 2.8 Platforms €m revenue (39%) 15 2.5 Fire control, surveillance and tracking systems for 2.0 10 1.6 naval and land platforms as well as security applications at fixed inst
Slide 33: Cohort's Subsidiaries - An Overview (EID)
Cohort’s Subsidiaries - An Overview Trading History (Under Cohort since June 2016) 30 6.0 5.3 25 5.0 Trading profit (€m) 20 4.0 €m revenue Tactical Communications 15 2.9 (43%) 10 2.0 1.7 EID designs and manufactures sophisticated, 1.4 1.4 1.5 5 reliable Tactical Communication Products, Systems 18.7
Slide 34: Cohort's Subsidiaries - An Overview (MASS)
Cohort’s Subsidiaries - An Overview Trading History Under Cohort 45 10.0 Electronic Warfare (EW) 30% 40 8.2 8.0 Mainly based in Lincoln, delivering EW Operational 35 Trading profit (£m) 7.2 Support solutions (including Thurbon TM) and 30 6.0 5.9 6.0 training. Also operating overseas providing EWOS 2
Slide 35: Cohort's Subsidiaries - An Overview (MCL)
Cohort’s Subsidiaries - An Overview Trading History (Under Cohort since July 2014) 30 4.0 (September year end, April year 2017 onwards) Trading profit (£m) Electronic Warfare £m revenue 34% 20 2.7 Equipment for the UK MOD for use on Astute 2.3 2.0 2.1 2.1 2.0 submarines and in the British army, espe
Slide 36: Cohort's Subsidiaries - An Overview (SEA)
Cohort’s Subsidiaries - An Overview Trading history under Cohort 60 6.0 Defence 5.4 5.5 5.3 (71%) 50 Based in Beckington, Bristol and Barnstaple 40 4.4 4.0 4.0 £m revenue 3.8 Trading profit (£m) delivering software, hardware and through life support to the UK MOD, prime contractors and 30 3.1 overse