Cohort Plc · LSE:CHRT
Cohort — H1 2019/20 Earnings Presentation
37 slides from Cohort's earnings presentation, Dec 12, 2019
Slide 1: Results for the six months ended 31 October 2019
Results for the six months ended 31 October 2019 Acquisition of Wärtsilä ELAC Nautik GmbH Cohort plc Interim Results Presentation 12 December 2019
Slide 2: Highlights
Highlights Andrew Thomis, Chief Executive Cohort plc Interim Results Presentation 12 December 2019
Slide 3: Financial Highlights
Introduction Financial Highlights Adjusted Revenue Adjusted EPS Operating Profit Half Year trading result ahead of last year £60.2m £4.0m 6.94p (% like for like growth) +17% +120% (H1 18: £39.5m) (H1 18: £1.0m) (H1 18: 1.99p) Order intake Order book Revenue cover Strong revenue cover for H2 £77.2m £
Slide 4: Operational Highlights
Introduction Operational Highlights SEA Strong initial performance contribution from down on Chess to Group’s 2018/19 due to first half investment and performance bidding EID revenue MASS revenue improved due and trading to contract profit delivery in significantly Middle East increased on 2018/19 M
Slide 5: Acquisition of Wärtsilä ELAC Nautik GmbH
Acquisition of Wärtsilä ELAC Nautik GmbH Cohort plc Interim Results Presentation 12 December 2019
Slide 6: Acquisition of Wärtsilä ELAC Nautik GmbH (ELAC)
Acquisition update Acquisition of Wärtsilä ELAC Nautik GmbH (ELAC) • Cohort’s sixth standalone subsidiary • In line with Cohort’s stated strategy to accelerate growth by making targeted acquisitions of agile, innovative stand-alone businesses • A leader in sonar systems for naval surface ships and s
Slide 7: Reasons for and benefits of the acquisition
Acquisition update Reasons for and benefits of the acquisition • Enhancing Cohort’s maritime defence system offering with market leading technology in high-growth sector • Opportunity to take advantage of strong submarine new build market, with growth in Asia and Europe • Naval export market in APAC
Slide 8: Financial terms and highlights of acquisition
Acquisition update Financial terms and highlights of acquisition • Headline price is €11.25m for 100% shares, no earnout • Initial cash payment of €10.5m • Funded from existing cash resources and £30m credit facility agreed in 2018 • Subject to satisfaction of regulatory requirements of German gover
Slide 9: Financial and Divisional Review
Financial and Divisional Review Simon Walther, Finance Director Cohort plc Interim Results Presentation 12 December 2019
Slide 10: Revenue & adjusted operating profit bridge
Financial Review Revenue & adjusted operating profit bridge +£2.4m £60.2m Revenue bridge +£13.9m EID +£4.4m £39.5m Chess UK ex Chess 2018/19 H1 2019/20 H1 Adjusted operating profit bridge +£1.8m +£0.3m -£0.4m £4.0m EID Head office +£1.2m Chess £1.0m UK ex Chess 2018/19 H1 Cohort plc Interim Results
Slide 11: Cash bridge
Financial Review Cash bridge £4.0m £0.3m -£1.8m Working -£2.5m capital Capex movement -£0.4m £6.8m Dividend Other £6.4m Adjusted operating profit Opening Closing net net debt debt Cohort plc Interim Results Presentation 12 December 2019 11
Slide 12: CHESS Highlights
Divisional Highlights CHESS Highlights Revenue (£m) Adjusted Operating Profit (£m) Order Book (£m) 13.9 1.8 CHESS SEA 16.0 34.6 EID MCL 37.1 13.2 MASS 17 18 19 105.8 17 18 19 Financial • Strong initial H1 contribution following December 2018 acquisition • 2018/19 H1 trading profit of £1.0m on £10.3m
Slide 13: MASS Highlights
Divisional Highlights MASS Highlights Revenue (£m) Adjusted Operating Profit (£m) Order Book (£m) 3.7 19.9 CHESS 17.2 SEA 16.0 16.0 2.5 34.6 2.2 EID MCL 37.1 13.2 MASS 17 18 19 17 18 19 105.8 • Higher revenue driven by new electronic warfare operational support projects for Financial export customer
Slide 14: MCL Highlights
Divisional Highlights MCL Highlights Revenue (£m) Adjusted Operating Profit (£m) Order Book (£m) 7.0 0.5 CHESS 5.1 5.5 SEA 16.0 34.6 MCL EID 13.2 37.1 0.2 <0.1 MASS 17 18 19 17 18 19 105.8 Financial • Higher revenue and profit due to increased activity with UK MOD Operational • Increased activity wi
Slide 15: EID Highlights
Divisional Highlights EID Highlights Revenue (£m) Adjusted Operating Profit (£m) Order Book (£m) 6.0 6.0 CHESS 0.8 SEA 16.0 34.6 EID 3.6 MCL 37.1 13.2 0.1 -0.2 MASS 17 18 19 19 105.8 17 18 • Operating profit on back of increased revenue Financial • Lower net margin due to lower naval systems activit
Slide 16: SEA Highlights
Divisional Highlights SEA Highlights Revenue (£m) Adjusted Operating Profit (£m) Order Book (£m) 15.7 CHESS 1.0 SEA 16.0 34.6 EID 14.3 MCL 37.1 13.8 13.2 0.4 -0.3 MASS 17 18 19 105.8 17 18 19 • Adjusted operating loss of £0.3m on slightly lower revenue of £13.8m Financial • Weaker profit performance
Slide 17: Other financial items
Financial Review Other financial items Income • Headline tax credit of £0.1m (2018: credit of £0.4m) Statement Balance • No goodwill impairment Sheet • Estimated £5.5m payable on or before 31 October 2021 to acquire minority (including earn out) of Chess Banking • £18.4m cash at 31 October 2019 Faci
Slide 18: 2019/20 modelling guidance
Divisional Highlights 2019/20 modelling guidance Income • Underlying tax rate of 16% (excluding RDEC) but still hold tax provisions Statement • Operating cash inflow of £10m Cash flow • Tax/capex/dividends £8m • Closing net debt at 30 April 2020 expected to be £7m Balance • Anticipate amortisation o
Slide 19: Outlook and prospects
Outlook and prospects Andrew Thomis, Chief Executive Cohort plc Interim Results Presentation 12 December 2019
Slide 20: Market Prospects
Outlook Market Prospects Home markets • General election not expected to materially impact UK defence spending in short term • Cohort’s major programmes are stable, long term and operationally important • Developing new markets including civil counter-UAV and digital forensics • Portuguese market st
Slide 21: Investing for organic growth
Outlook Investing for organic growth • Well-established private venture and customer-funded R&D activities • Group priorities include: • Anti-Submarine Warfare (ASW) • Next generation vehicle intercom system • Upgrades to naval communications system • Counter-UAV for airports • High-definition surve
Slide 22: Order Book
Financial Review Order Book 206.7 220 MASS SEA EID Chess MCL 13.2 200 16.0 180 160 37.1 140 120 34.6 £m 100 61.5 60.0 80 49.5 35.7 0.7 5.9 60 6.3 5.8 5.3 0.0 10.6 6.3 3.9 105.8 0.3 6.6 40 14.3 6.9 5.5 12.6 9.9 20 42.1 22.5 18.8 22.4 0 At 30 Oct 2019 H2 2019/20 2020/21 2021/22 Later years Cohort plc
Slide 23: 2019/20 Outlook & Summary
Outlook 2019/20 Outlook & Summary • Second half weighting expected again this year • Order book stands at £206.7m, underpinning over £60m revenue in H2 • Cover of 83% of consensus forecast revenue for the full year • Prospects for more orders in second half to further underpin this year and next yea
Slide 24: Appendix
Appendix Cohort plc Interim Results Presentation 12 December 2019
Slide 25: Cohort Business Model
Financial Review 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 d
Slide 26: Quarterly profile of Group revenue
Financial Review Quarterly profile of Group revenue 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 Average % 50 45 40 35 30 % 25 20 15 10 5 0 Q1 Q2 Q3 Q4 Cohort plc Interim Results Presentation 12 December 2019 26
Slide 27: Income statement
Financial Review Income statement Half year ended 31 October 2019 2019 2018 to 31 to 31 October October £m £m Revenue 60.2 39.5 Gross profit 21.0 34.9% 13.1 33.2% Overhead (17.0) (12.1) 1 Adjusted operating profit 4.0 1.0 Exceptional items - (0.5) 1 Adjusted profit before interest and tax 4.0 0.5 Ne
Slide 28: Earnings per share
Financial Review Earnings per share • 350% increase in adjusted earnings per share from 300% growth in adjusted operating profit • Reconciled as follows: Adjusted Adjusted operating earnings per profit share £m pence 2019 1.0 1.99 Weighted share capital movement - 0.11 Tax (lower R&D in Portugal) -
Slide 29: Net Cash Flow
Financial Review Net Cash Flow Six months ended 31 October 2019 2019 2018 £m £m Adjusted operating profit 4.0 1.0 Working capital (0.4) (4.7) Depreciation and share based payments 0.7 0.6 Net funds inflow / (outflow) from operations 4.3 (3.1) Capital expenditure (1.8) (0.4) Net purchase of own share
Slide 30: Acquisition Strategy
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 susta
Slide 31: Acquisition Track Record
Acquisition Strategy 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 in
Slide 32: Cohort's Subsidiaries - An Overview
Cohort’s Subsidiaries - An Overview Trading History (Under Cohort – 5 months ended 30 April 2019) 25 4.0 20 2.8 Trading profit (£m) 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
Cohort’s Subsidiaries - An Overview Trading History 30 (Under Cohort since June 2016) 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
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 7.2 Trading profit (£m) 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
Cohort’s Subsidiaries - An Overview Trading History (Under Cohort since July 2014) 30 4.0 (September year end, April year 2017 onwards) Electronic Warfare Trading profit (£m) £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
Cohort’s Subsidiaries - An Overview Trading history under Cohort 60 6.0 Defence 5.4 5.3 5.5 (71%) 50 4.4 Trading profit (£m) Based in Beckington, Bristol and Barnstaple 40 4.0 4.0 3.8 delivering software, hardware and through life £m revenue 30 3.1 support to the UK MOD, prime contractors and overse
Slide 37: Cohort plc
Cohort plc One Waterside Drive Arlington Business Park Theale Reading RG7 4SW www.cohortplc.com Cohort plc Interim Results Presentation 12 December 2019 37