Cohort PLC (CHRT)
UK MOD contract award to SEA for electronic warfare countermeasures
Cohort announces that its subsidiary SEA (Systems Engineering and Assessment Ltd.) has been awarded a major contract by the UK’s Ministry of Defence to provide Electronic Warfare Counter Measures (Increment 1a) (EWCM 1a) to the Royal Navy with a total value of at least £135m. This includes provision and support of SEA’s Trainable Decoy Launcher System, Ancilia
Ancilia delivers rapid protection against anti-ship threats such as incoming missiles, and incorporates technology from the Chess Dynamics subsidiary. Cohort notes that work will commence immediately and is expected to continue for more than ten years, in addition to which there are options available to the MOD which may increase both the contract’s value and delivery period. Overall, the Group estimates the addressable worldwide market for Ancilia systems at £250m.
Cohort notes that: “Together with other recent order wins the contract is expected to materially enhance the Group’s earnings”. Cohort CEO Andy Thomis commented on the significance of this “real vote of confidence in Ancilia”, adding that it will sustain employment for more than 150 skilled professionals.
EWCM forms part of the Royal Navy’s Maritime Electronic Warfare Programme (MEWP), to upgrade surface ship electronic surveillance, electronic warfare command and control (EWC2), and anti-ship missile defence (ASMD) capabilities. SEA’s bid under EWCM Increment 1a met the requirements for a trainable decoy launcher system which would be compatible with both current and future countermeasure rounds, e.g. the 130-mm calibre Mk 216 and Mk 217 radio frequency (RF) distraction decoys, and the 130-mm MK 245 submunition-based infrared seduction decoy.1
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 an overall “increased tempo” of order intake. The Group reported a closing order book of £354m: we note that this latest contract takes the closing order book above the £0.5bn mark at £513.6m.
Raised FY25 estimates. Fair Value raised to 725p.
We have raised our FY25 revenue outlook by 2.6% (£5.0m). Thereafter we estimate a contribution from the SEA EWCM contract of c.£15.0m annually. Our FY25 E (adj.) EBITDA estimate is raised by £2.0m, +7%, with an estimated subsequent incremental annual c.£5.0m contribution. Our FY25 EPS outlook is raised from 36.7p to 40.3p. Accordingly, and in the light of additional recent contract wins (e.g. the 19 March Chess Australian Navy contract) our Fair Value is raised to 725p.
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