£213m market cap

520p last close

Cohort is an AIM-listed defence and security company operating across five divisions: MASS (32% of FY19 sales), SEA (32%), MCL (18%), the 80%-owned Portuguese business EID (9%) and the recently acquired 81%-owned Chess Technologies based in the UK (c five months 9%).

Investment summary

Cohort’s AGM statement indicates the current year has progressed well, with order cover of sales for the year rising to 76% following recent September orders compared to 60% at the same point of FY19. The order backlog at 31 August 2019 increased by over 10% since the year end to a record £210.9m (FY19 £190.9m) and the pipeline of potential business remains healthy. We maintain our earnings estimates, which means the shares are trading on an FY21e P/E of 12.6x, a significant and unwarranted discount to UK defence peers.

Y/E Apr
Revenue (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 110.5 16.3 15.1 29.1 17.9 13.1
2019A 121.2 17.3 15.9 33.6 15.5 18.4
2020E 145.7 21.0 18.6 35.7 14.6 23.3
2021E 153.9 22.3 19.9 39.2 13.3 7.8
Last updated on 19/09/2019
Industry outlook

Cohort is heavily influenced by activities in defence and security (89% of FY18 sales). These markets require highly differentiated technologies and services with high barriers to entry based on customer relationships, regulation and high-level security clearances. The UK government’s commitment to spend at least 2% of GDP on defence provides greater confidence, as does the parliamentary approval for the replacement of Trident.

Last updated on 19/09/2019
Share price graph
Balance sheet
Forecast net debt (£m) 6.8
Forecast gearing ratio (%) 8
Price performance
Actual 16.2 16.2 28.4
Relative* 13.1 16.1 28.7
52-week high/low 520.0p/354.0p
*% relative to local index
Key management
Nick Prest Chairman
Andrew Thomis CEO
Simon Walther FD

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