Cohort ends year in line, still expects to pay dividend

Technology company Cohort updated the market on its financial year ended 30 April on Thursday, saying that with the benefit of a lower tax charge, it was expecting earnings per share to be in line with market expectations.

The AIM-traded firm said revenue was expected to be around £133m, up from £121.2m year-on-year, while adjusted operating profit would come in at £18m, rising from £16.2m.

Adjusted earnings per share were anticipated to be about 35p, compared to 33.6p in 2019, while net debt as at 30 April had narrowed to £5m, from £6.4m a year earlier.

The company’s closing order book stood at £186m, down slightly from £190.9m.

Cohort said trading performance for the 2021 financial year was difficult to predict, given the impact of the Covid-19 coronavirus pandemic, but it was currently expected to be in line with that of 2020.

In responding to the disruption caused by the pandemic, Cohort said the transition to having most of its employees work from home, and the adoption of social distancing measures for those unable to do so, was achieved “quickly and efficiently”.

Fewer than 30% of its workforce was now working on site, and many of those were working from home for part or most of the time.

Still, it said its manufacturing sites had remained operational, with “enhanced” health and safety measures in place.

A small minority of its employees were on furlough leave, most of whom were either described as vulnerable individuals, or having vulnerable dependents.

Cohort said cost containment and cash preservation measures had been implemented across the group, including board and senior management pay freezes for the coming financial year.

“Cohort's performance was tracking broadly in line with expectations prior to the imposition of Covid-19 restrictions in the last two months of our financial year - typically our busiest period,” the board said in its statement.

“We were assisted by the UK Ministry of Defence’s quick action to support its suppliers, including faster payments and simplification of some procedures.”

It said that the restrictions still affected its ability to carry out work on customer premises, and the ability of customers to witness acceptance tests and to place new orders.

That had some impact on the revenue and trading profit for the 2020 financial year, although those still showed positive growth compared to 2019.

“With the benefit of a lower tax charge we anticipate 2020 earnings per share to be in line with market expectations.”

Despite delays to orders caused by Covid-19 restrictions in the final quarter, Cohort siad order intake for the year was £125m, which it described as “a satisfactory outcome” compared to the record order intake of £189.9m in 2019, which included a number of large, long term awards.

It said its net debt comprised gross cash of £20m and gross debt of £25m, together with a £5m undrawn facility, giving it access to £25m of available facilities.

In addition, it had agreed with its banks to convert an existing £10m accordion into a committed facility, which would be used for the proposed acquisition of Germany-based naval surface ship and submarine sonar systems firm ELAC.

“We remain in positive discussions with the German federal authorities about approval of the transaction,” the board said.

“Both Cohort and Wärtsilä are working hard to complete the transaction in June 2020 as originally planned, but Covid-19 restrictions are likely to result in some delay.

“We will provide a further update when the conditions for completion have been met.”

Given the group's satisfactory performance last year and strong balance sheet, the board said it still expected to recommend the payment of a final dividend for the year ended 30 April in line with its progressive policy of recent years.

It said the decision would be announced as usual at the time of its final results, and wou;d be subject to shareholder approval at the annual general meeting.

Looking ahead, Cohort said it remained “well-placed”, having entered the new financial year with a “substantial” long-term order book.

The potential impact of Covid-19 made it “more difficult than usual” to provide guidance, with the directors saying that at this stage they expected restrictions on international travel could result in short-term constraints on export activity, which represented more than 30% of its revenues in the year just ended.

“Cohort had a satisfactory year despite the impact of Covid-19 on the business in the last two months of our financial year,” said chief executive officer Andrew Thomis.

“We successfully transitioned to most employees working from home, with the adoption of social distancing measures for those unable to do so.

“We have a robust financial position, a strong order book underpinning 60% of expected current year revenues, and an encouraging pipeline of order opportunities across the business.”

At 1624 BST, shares in Cohort were down 1.01% at 539.5p.