Cohort Plc (CHRT) 

 

FY24 momentum to continue into FY25 

In a Trading Update for the year to 30 April 2024 Cohort Group reports overall performance slightly ahead of market expectations. We note that the Group reports very strong order intake of c.£387m (compared to £218m in FY23) resulting in a closing order book which stood at c.£518m (FY23: £329.1m), inclusive of the March SEA Royal Navy £135m Ancilia contract. The order book now covers c.£180m, i.e. 90%, FY 25 revenue market expectations (FY24 was 84% covered at £145m). We see the momentum established in FY24 continuing into FY25. 

The Group notes strong H2 performance, with overall growth in the Sensors & Effectors division, notably Chess and SEA, outpacing the Communications & Intelligence division where, as expected, UK MOD orders decreased from the 2022/23 peak, and Portugal continued to experience some contract delays. 

Closing net funds were healthy, at c.£23m (FY23: £15.6m, H1 24, £13.3m), due to timing of working capital inflows combined with delays to capital projects caused by winter weather, principally the new ELAC submarine systems test tank facility in Germany, with cap-ex now scheduled for 2024/25 and completion, as planned, in early FY26. Cohort CEO, Andrew Thomis, highlighted the strength of the net funds position as a ‘robust platform’ for both investment in operations and, potentially, acquisitions. 

Order book above £0.5bn mark 

At the FY 24 interim results (Strong H1 24 results backed by a record order book) Cohort had commented on the overall “increased tempo” of order intake. The Group had then reported a closing order book of £354m. The SEA Ancilia order raised the closing order book above the £0.5bn mark (£513.6m); a figure now amended to approx.£518m, with on-order revenue visibility to 2037. 

Outlook combines firm demand with visibility

 The Group reports good demand from both domestic customers and for exports, noting increased attention to defence spending spurred by conflict in Ukraine and the Middle East, and ongoing tension in the Indo-Pacific region. We note the significance of the scale of the MOD Electronic Warfare Countermeasures Ancilia contract from the Royal Navy, and the upward inflection in share price performance from late CY23 in the context of both awareness of macro factors and, importantly, the consistency of Cohort’s order build. 

We had raised our FY25 revenue outlook +3% (£5.0m), inclusive of an estimated contribution from the SEA EWCM Ancilia contract of c.£15.0m annually, and (adj.) EBITDA estimate +7% (£2.0m), with an estimated subsequent annual c.£5.0m contribution. 

At this stage we maintain our outlook to FY25 and a Fair Value of 725p / share.

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