Annual report

OUR PURPOSE

Cohort delivers trusted and valued technology that protects us all. Through innovation, organic business growth and acquisitions, we provide real value to our people, customers and shareholders.

We provide an entrepreneurial culture enabling our businesses to build solutions for the future of security and defence. We operate with deep-rooted knowledge and foster trusted relations with our customers and shareholders alike.

OUR STRATEGY

READ MORE ABOUT OUR STRATEGY ON PAGES 13 TO 16

OUR SUSTAINABILITY PILLARS

Strategic report

1. Who we are
2. Highlights
3. At a glance
4. Investment case
5. Chairman's statement

1. Chief Executive Officer's report

1. Our markets
2. Geographic analysis
3. Business model

1. Strategy

1. Strategy in action

1. Key performance indicators

1. Operating review

1. Financial review

1. Stakeholder engagement

1. Section 172(1) statement

1. Sustainability

1. Climate-relatedfinancial disclosures

1. Risk management and principal risks

Governance

1. Board of Directors and Company Secretary

1. Corporate governance report

1. Audit Committee report

1. Nomination Committee report
2. Remuneration Committee report

1. Directors' report

1. Statement of Directors' responsibilities

Financial statements

1. Independent auditor's report

1. Consolidated income statement

1. Consolidated statement of comprehensive income
2. Consolidated statement of changes in equity
3. Company statement of changes in equity
4. Consolidated and Company statement of financial position
5. Consolidated cash flow statement
6. Notes to the financial statements

117 Accounting policies

1. Notes to the accounting policies
2. Five-yearrecord
3. Glossary of terms
4. Shareholder information, financial calendar and advisers

HIGHLIGHTS

How we have performed

Operational highlights

Financial highlights

ADJUSTED OPERATING PROFIT (£M)1

£21.1m

24 21.1

23 19.1

22 15.5

21 18.6

20 18.2

1. See page 63.

ORDER INTAKE (£M)

£392.1m

24 392.1

23 220.9

22 186.4

Record revenue, adjusted operating profit, order intake, closing order book and net funds. Adjusted operating profit of £21.1m (2023: £19.1m) on revenue of £202.5m (2023: £182.7m).

Sensors and Effectors saw robust growth, with Chess and SEA delivering improved performances.

Communications and Intelligence reported a weaker year overall.

Order book exceeded half a billion pounds for the first time, with deliveries now extending out to 2037.

21 180.3

20 124.4

NET FUNDS/(DEBT) (£M)

£23.1m

1. 2.5

1. (4.7)

STATUTORY PROFIT BEFORE TAX (£M)1

£19.8m

24 19.8

23 13.9

22 10.2

21 7.1

20 10.0

Cohort is a group of like-minded technology companies providing services and products for domestic and export customers in the defence and security markets.

Cohort was founded on the principle that agile businesses can prosper by being part of a larger group, benefiting from greater financial strength, an enhanced market presence and the opportunity to share knowledge and best practice. Our businesses provide long-term value and future growth potential through innovative technology and agile decision making, within a framework

of light-touch but effective governance.

The Group reports its operating results in two divisions:

A FULL REVIEW FOR EACH DIVISION IS AVAILABLE

IN THE OPERATING REVIEW

REVENUE BY DIVISION

£202.5m

(2023: £182.7m)

Communications and Intelligence

REVENUE

£82.9m

(2023: £86.2m)

This division comprises the subsidiary businesses which provide electronic hardware and software solutions used for collecting, processing and communicating information securely. It also includes the provision of domain expertise, training and support services. The division supplies products, primarily through EID and MCL, and services through MASS.

READ MORE ON PAGE 20

Martin Bennett

Managing Director EID

Sensors and Effectors

REVENUE

£119.6m

(2023: £96.5m)

This division, comprising Chess Dynamics, SEA and ELAC SONAR, provides sensors, including sonar, radar and visual, for land and sea domains. It also provides effectors for surface ships and land-based users to protect against threats including submarine, missile and drone attacks. The focus for the division is on electronic, electromechanical and software solutions to detect, measure, identify, track and prosecute targets of interest.

READ MORE ON PAGE 21

David Tuddenham

Managing Director Chess

Strong business model

Experienced leadership teams with core capabilities in defence and security.

Subsidiaries operate with a significant degree of autonomy, enabling decision-making agility within a rigorous financial and strategic control regime.

Close working relationships between our operating businesses, so they can benefit from each other's technical capabilities, customer relationships and market knowledge.

Consistent dividend track record

Dividend increased by 10% in each of the last three years.

Dividend increased every year since IPO in 2006. Strong balance sheet in place with robust funding.

Active acquisition strategy

Aim to accelerate growth by making selective, targeted acquisitions in the UK and overseas.

Experienced acquisition team focused on careful selection and execution.

Strong track record of growing acquired businesses.

Financial strength

Strong financial position and record of success gives customers confidence to place major orders as exemplified by the £135m order from the Royal Navy in March 2024.

Net cash to fund product development and acquisitions (all acquisitions funded from cash flow and banking facilities since 2008).

Group banking facility extended to July 2027.

Visibility of future earnings provided by growing order book

£518.7m of revenue on order as at 30 April 2024 (30 April 2023: £329.1m).

92% of 2024/25 latest external forecast revenue on contract at 30 April 2024 (80%; equivalent for 2023/24 was 80%).

Order book extends out to 2037.

Social responsibility

Products and services that make a real contribution to the security of our home nations and allies at a time of increasing risk and challenge.

Initiatives to support local communities, encourage STEM education and help armed forces charities.

READ MORE AT COHORTPLC.COM/INVESTORS

Access to attractive growth markets

International defence spending increasing following the invasion of Ukraine in 2022 and persistent tensions in the Asia Pacific region and the Middle East.

Using our agility and innovation to build sustainable competitive advantage in niches with attractive prospects.

"Another record performance, slightly above market expectations, robust cash and a record closing order book."

Nick Prest CBE

Chairman

Nick Prest CBE

Chairman

"The record order book gives Cohort visibility out to the next decade. Along with our strong net funds and market position this provides a solid foundation for future organic growth as well as the ability to make further strategic additions

to the Group."

Performance

The Group achieved a record adjusted operating profit of £21.1m (2023: £19.1m) on record revenue of £202.5m (2023: £182.7m), exceeding market expectations, and representing an increase of 11% on the prior year in both cases.

As I said last December, the invasion of Ukraine in 2022 and persistent tensions in the Asia Pacific region have driven continuing impetus for defence spending across the globe. This is reflected in the Group delivering a record year of order intake, winning £392.1m of orders (2023: £220.9m), representing 1.9x full year revenue

(2023: 1.2x), and has resulted in a record closing order

book of £518.7m (2023: £329.1m).

As well as growing in size, our order book has extended in duration, now stretching out to 2037. This reflects the significant naval orders the Group has secured over the last few years, which are typically long-term in nature. A notable example of a naval order won in the period is the £135m order for SEA's Ancilia product secured in March 2024. As we said at the time, we expect this order with the Royal Navy to grow and we see a good pipeline of export opportunities for this and other product offerings for naval vessels, both surface ships and submarines.

In the land domain, we are seeing increased demand for drone and counter-drone systems, driven by the Ukraine conflict. The attacks on shipping in the Red Sea show that drone defence is not only needed in the land environment. Other areas of increased demand include secure communications and electronic warfare.

The Group's net funds also finished at a much higher level than we expected at the start of the year: £23.1m compared with £15.6m in 2023. As well as reflecting the Group's profit performance, this resulted from

favourable timing of working capital flows and delayed expenditure on our new facility in Germany due to adverse winter weather.

The Sensors and Effectors division saw a marked performance improvement. SEA made the largest contribution to revenue growth and also significantly grew profit on the back of its strong order book. Another major factor was a turnaround at Chess, which saw growth in revenue as well as a sharply improved margin performance. Both are set to grow further following the Ancilia win. ELAC SONAR's revenue grew, and it achieved an important milestone with the order for the third Italian submarine sonar system, though margin was affected by the cautious trading policy adopted on that large project, which is now beginning its production phase.

The Communications and Intelligence division reported a weaker year overall; we had previously indicated that we expected it to achieve a broadly level performance against last year as the record activity at MCL fell back to lower historical levels. Compared to the Sensors and Effectors division, Communications and Intelligence has so far seen less direct impact from global demand patterns. MASS's revenue is dominated by stable multi-year contracts from the UK, and EID's also presently by its domestic customer in Portugal. MCL did benefit from domestic and international demand for drones and counter-drone systems. The result was the second-best annual performance in its history, but still some way behind the exceptional result of 2022/23. MASS's revenue and profit grew to a record level, and EID showed a modest performance improvement, although still posting a small loss in the year. These did not offset the reduction in MCL's contribution and the division had a weaker year overall.

Strategic initiatives

On 31 May 2024, our business MCL (within our Communications and Intelligence division) acquired 100% of Interactive Technical Solutions Ltd (ITS) for a cash consideration of £3.0m paid from the Group's existing financial resources. ITS provides technical support, publications and services to the UK MOD and prime contractors, particularly in the area of military vehicles. This acquisition is expected to be immediately earnings enhancing (see note 29).

The Group continues to review acquisition opportunities as they arise, in line with our investment criteria.

Shareholder returns

Adjusted earnings per share (EPS) were 42.89 pence (2023: 36.48 pence). The adjusted EPS figure was based on profit after tax, excluding amortisation of other intangible assets and net foreign exchange movements. Basic EPS were 37.87 pence (2023: 27.92 pence).

The adjusted EPS were 18% higher primarily due to the stronger adjusted operating profit (up 11%) and a lower tax rate on adjusted earnings of 12.7% (2023: 14.8%).

The Board is recommending a final dividend of

10.10 pence per ordinary share (2023: 9.15 pence), making a total dividend of 14.80 pence per ordinary share (2023: 13.40 pence) for the year, a 10% increase. The dividend has been increased every year since the Group's IPO in 2006. It will be payable on 2 October 2024 to shareholders on the register at 23 August 2024, subject to approval at the Annual General Meeting on 24 September 2024.

Over the medium term, the Group plans to maintain a policy of growing its dividend each year at a rate reflecting growth in earnings per share and capital requirements.

Our people

As always, my thanks go to all employees within the Cohort businesses. Their hard work, skill and ability to satisfy our customers' needs are what continue to drive the performance of our Group.

The increasing order book and demand is driving a need for us to add to our work force, particularly for engineers and related technical skills. We have continued to invest in our graduate schemes and in work with local schools to support STEM activities. Recruitment challenges remain in some areas, especially high-level security cleared individuals, but overall we have increased our head count from 1,132 last April to 1,309 this April.

Andrew Thomis, Simon Walther and their senior executive colleagues have continued their dedicated and skilful work which has helped the Group to continue its progress. I would like to thank Shane Knight, who retired as Managing Director of MCL at the end of the financial year, for his dedication to MCL over 21 years and welcome Claire King as the new Managing Director.

Governance

Having served on the Board for nine years, Jeff Perrin has decided not to stand for re-election as a non-executive director at Cohort's forthcoming Annual General Meeting to be held in September 2024. Jeff has made an immense contribution to Cohort both as Chair of

the Audit Committee and as the Senior Independent Director. The Board and all Cohort staff are grateful to him for his sage advice and guidance. We formally welcomed Peter Lynas onto the Board as a non-executive director on 2 January 2024. Peter has had a long and successful career in the defence industry and brings a wealth of experience in finance and general management to Cohort. Peter will take over from Jeff as Chair of the Audit Committee and Senior Independent Director.

Throughout the last financial year we have continued to be guided by the 2018 edition of the QCA Corporate Governance Code (the QCA Code) and we have been applying the new 2023 edition from 1 May 2024.

The Board regularly evaluates and reviews the Group's environmental, social and governance (ESG) activity and is committed to maintaining appropriate standards. The Group has disclosed climate-related financial information for the second year and has established governance mechanisms to oversee climate-related risks and opportunities. This year we have undertaken a qualitative scenario analysis which has deepened our understanding of the potential risks and opportunities under the three scenarios reviewed. The Board agreed that a disclosure in line with the mandatory climate- related financial disclosures under the Companies Act 2006 (CFD) is appropriate for the Group given its size, industry sector and legal and regulatory requirements rather than a disclosure in line with TCFD.

The Group's values, stakeholder engagement principles and governance policies are all outlined on our website and in our Annual Report and Accounts.

Capital allocation

We have a proven strategy supported by an appropriate capital allocation policy. As a Board we use this to inform our decision making and it has been key to our progress. Our approach to capital allocation has three priorities: to deliver sustainable organic growth, through investment in our people, research and development and the capital requirements of the business; to find value generating complementary acquisitions; and to pay a progressive dividend. If all of the prior priorities are satisfied, then we will return excess capital to shareholders. At the current time we have a strong balance sheet with significant net cash which provides us with a range of options.

Outlook

Cohort continues to see good demand for our products and services from both our domestic customers, especially the UK, and from export customers.

The geopolitical tensions driving increased investment in defence have remained unrelenting during the year, with conflicts in Ukraine coupled with tensions in the Asia Pacific region leading to increased spending internationally.

Our order book underpins over £180m of current financial year revenue (2023: £140m), representing over 90% of current market expectations of revenue for the year. Following order wins since the start of the financial year of over £70m, that cover now stands at just over 95%.

Overall we continue to expect another year of good growth in trading performance in 2024/25, enhanced by the addition of ITS. Given planned capital expenditure and expansion in working capital to support our record order book, net funds are likely to decrease.

We are optimistic that the Group will make further progress in 2025/26 and beyond, based on current orders for long-term delivery and on our pipeline of opportunities.

Nick Prest CBE

Chairman

DIVIDEND (PENCE PER ORDINARY SHARE)

14.80p +10%

24 14.80

23 13.40

22 12.20

21 11.10

20 10.10

Andrew Thomis

Group Chief Executive Officer

"2023/24 was yet another strong year of growth for the Group with increases in order intake, revenue, adjusted operating profit and cash."

Overview

Following an encouraging performance in 2022/23 the Group's performance for the year improved again with strong growth in revenue, profit, order intake and cash. Overall, the results were ahead of market expectations. Sensors and Effectors performed strongly, offsetting the slightly weaker Communications and Intelligence division. In Sensors and Effectors, Chess continued its improvement whilst SEA also delivered a better result on higher volume. In Communications and Intelligence, the expected fall back at MCL was not fully compensated by EID, which made a smaller loss than last year. Cash performance was also better than expected, resulting in another strong positive net funds position at the year end. Order intake was a record high, and the resulting record order book of over half a billion pounds gives us a solid base for 2024/25 and beyond. We see good prospects for further significant new orders in the year ahead.

Financial performance

The Group's revenue of £202.5m (2023: £182.7m) was 11% higher than last year and delivered an adjusted operating profit of £21.1m (2023: £19.1m), 11% higher than last year. Work on naval systems has made a major contribution to performance, particularly within the Sensors and Effectors division.

The Group's statutory operating profit of £21.2m (2023: £15.3m) reflects the amortisation of other intangible assets, a £3.1m non-cash charge in

2024 (2023: £3.7m charge) and the Research and

Development credit (RDEC) of £2.9m (2023: £0.9m) which in turn is offset by a higher tax charge.

Adjusted earnings per share increased by 18% to

42.89 pence per share reflecting the improved performance as well as tax credits received in overseas territories.

Group net funds grew by 48% to £23.1m. As well as the improved adjusted operating performance, this benefited from delays to the planned capital expenditure on the new site in Germany, a result of bad winter weather. This delay in expenditure is expected to be caught up in 2024/25, and the Group net funds are expected to partially decline as a result.

Strategic progress

The Group has continued to make progress this year, achieving 11% organic growth in revenue and adjusted operating profit, in line with our target for double-digit growth. The record order intake, particularly in key areas of naval systems, has, as we have seen in recent years, increased and lengthened our order book. We continue to see a good pipeline of prospects, both in our domestic and export markets. Key developments have included:

1. The selection of Ancilia, the new decoy launcher system, to protect the Royal Navy's surface fleet against modern missile threats. As well as being a major revenue and profit opportunity in its own right (it is the Group's largest ever single contract win), it represents a strong endorsement of Ancilia from an internationally respected customer. That is a boost to the system's wider export opportunities.

1. Chess's various offerings into ground-based air defence systems, especially against drones, have seen a strong demand in 2024 and this continues.

1. SEA secured its first customer for its complete Anti-submarine Warfare systems based upon its thin-line towed sonar array, Krait. As with Ancilia, this opens up wider export markets, especially in the Asia Pacific region.

1. ELAC SONAR secured the order to provide its Sphere sonar technology for the third Italian Navy submarine, confirming the customer endorsement of this ground-breaking technology.

The closing order book and pipeline provide a firm base for us to continue to deliver on our strategy and to also push our overall net margin for the Group from its current 10-11% towards our target % of low to mid-teens within the next three to five years.

In addition, the Group's strong net funds and available banking facilities provide sufficient capital for us to continue to look for suitable businesses to add to the Group, either within an existing Group business or as a new standalone business, further accelerating the growth in revenue and adjusted operating profit.

Find out more

Our people

All the Group's capabilities and customer relationships ultimately derive from our people, and the success we have enjoyed is a result of their efforts. They have risen to the challenge of the stronger demand we have seen this year, and in doing so have made a material contribution to the national security and defence

of our nations and allies as well as to the performance of the Group. I would like to take this opportunity

to express my sincere thanks to all employees of Cohort and its businesses.

At the year end, Shane Knight retired as Managing Director of MCL. His successor is Claire King, who has been with MCL for 12 years and formerly held the role of Business Development Director.

Like many high-skill businesses, we are facing challenges in recruiting qualified and experienced people to meet our customer demands and our own investment strategies. As our order book has grown, so have our employee numbers and the Group now has just over 1,300 employees compared with nearly 1,130 this time last year, a 15% increase. We will continue to add more resources in the coming year, especially at Sensors and Effectors, although we expect at a slower rate.

Capital allocation

Our capital allocation policy is set out in the Chairman's statement. This is exemplified as follows:

1. Continuous investment in research and development, maintaining product offerings at the forefront of demanding environments and developing new technologies within the Group's core competencies. Increasing by 26% to £14.8m in year.
2. Complementary acquisitions driving growth in core areas where the Group can leverage industry knowledge. ITS was acquired in May 2024.
3. A progressive dividend policy. An increase of 10% for the sixth year running.

Revenue by domain

Defence and security

1. We supply electronics, software, electromechanical solutions and knowledge-based services to defence customers, across all domains, with a focus on maritime and land.

1. Direct customers include Ministries of Defence, platform providers, system integrators and infrastructure operators in national and international markets.

Other (non-defence and security) revenue

1. We provide high-integrity software and hardware solutions for transport systems. The Group also continues to support legacy products and services in non- defence areas with related technologies.

Operating domain

Maritime

Equipment, systems and services operated primarily by navies for use on or below the surface, the shore and the airspace linked to the maritime domain.

Land

Equipment, systems and services operated primarily by armies on or from the land. This includes certain airborne assets such as uncrewed air systems, where deployed in support of the land domain.

Air and Space

Equipment, systems and services for use in the air, in space, or in support of airborne or spaceborne assets.

Joint and Strategic

Equipment, systems and services supplied for use in a joint/multi-domain operating environment or in strategic-level headquarters and departments.

Cyber and Security

Equipment, systems and services operated by the armed forces, government and public and private sectors within the information and security environment.