Cohort — FY21 delivers growth despite pandemic

Cohort (AIM: CHRT)

Last close As at 01/03/2024

440.00

11.00 (2.56%)

Market capitalisation

GBP177m

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Research: Industrials

Cohort — FY21 delivers growth despite pandemic

Cohort has progressed once again in FY21 despite significant constraints placed on parts of the business due to the pandemic. The five-month initial consolidation of ELAC enabled a small advance in adjusted PBT and a full FY22 contribution should help to offset an anticipated sharp decline at EID in Portugal. As all of the other ongoing divisions are expected to improve in FY22 supported by the record group order backlog, a small increase in adjusted PBT is still forecast. We expect a resumption of growth in FY23 as EID improves. The FY23 P/E of 13.7x looks undemanding especially given valuations being established elsewhere in the UK defence sector.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Industrials

Cohort

FY21 delivers growth despite pandemic

FY21 results

Aerospace & defence

28 July 2021

Price

512p

Market cap

£210m

Adjusted net cash (£m) at 30 April 2021
(excludes £7.6m lease liabilities)

2.5

Shares in issue

41.0m

Free float

72%

Code

CHRT

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.9)

(19.2)

(14.7)

Rel (local)

(11.7)

(20.0)

(28.0)

52-week high/low

680p

503p

Business description

Cohort is an AIM-listed defence and security company operating across six divisions: MASS (28% of FY21 sales), SEA (20%), MCL (13%), the 80%-owned Portuguese business EID (15%), the 81%-owned Chess Technologies based in the UK (20%), and the newly acquired ELAC SONAR (6%).

Next events

AGM

20 September 2021

H122 results

December 2021

Analyst

Andy Chambers

+44 (0)20 3681 2525

Cohort is a research client of Edison Investment Research Limited

Cohort has progressed once again in FY21 despite significant constraints placed on parts of the business due to the pandemic. The five-month initial consolidation of ELAC enabled a small advance in adjusted PBT and a full FY22 contribution should help to offset an anticipated sharp decline at EID in Portugal. As all of the other ongoing divisions are expected to improve in FY22 supported by the record group order backlog, a small increase in adjusted PBT is still forecast. We expect a resumption of growth in FY23 as EID improves. The FY23 P/E of 13.7x looks undemanding especially given valuations being established elsewhere in the UK defence sector.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

04/20

131.1

17.5

37.1

10.1

13.8

2.0

04/21

143.3

17.9

33.6

11.1

15.2

2.2

04/22e

156.1

18.0

34.3

12.2

14.9

2.4

04/23e

168.0

19.5

37.4

13.4

13.7

2.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

A challenging year successfully negotiated

The challenges the pandemic presented in Q420 persisted throughout FY21. Some order processes were delayed or deferred as government priorities shifted to cope with the health crisis and the ability to deliver some services and execute training contracts was compromised, particularly for export customers. Despite the constraints, Cohort managed to deliver record sales, adjusted operating profit and adjusted PBT, and ended FY21 with a record order backlog. Net cash flow was again better than expected, leaving an adjusted net cash balance of £2.5m (excluding lease liabilities of £7.6m) at the year end. The dividend was increased by 10%.

Record order backlog should offset EID weakness

Although EID is expected to face a very challenging year, Cohort has a record £242m order backlog underpinning current year expectations elsewhere. The UK defence outlook appears to have moved favourably for Cohort as the recent Strategic Defence and Security Review not only focused on some of the group’s key areas of expertise such as submarines, special forces, cyber and secure communications, but was followed by increased spending commitments of 10% over the next four-year period. MCL appears to be an early beneficiary. In addition, ELAC, Chess and MASS all look set to grow supported by long-term contracts and a recovery in export activity. SEA also appears to be in better shape than for some time, with positive order wins, a reduced cost base and potential to grow in areas such as submarines, antisubmarine warfare and transport.

Valuation: Recent de-rating unwarranted

Given the expected resumption of growth in FY23, strong cash flows and a progressive dividend policy, the current rating does not seem to fully reflect Cohort’s medium-term prospects. Our capped DCF value stands at 656p, having been rolled forward for the new year, down only slightly from 674p previously.

Another record year

Cohort achieved another year of growth in FY21, despite the continued impact of the pandemic, which restricted its ability to deliver on certain contracts and services as well as causing the deferral of some anticipated contract activity. COVID-19 related factors including lockdowns delayed some customer acceptances and deferred new order processes. Aided by the initial consolidation of ELAC SONAR for five months, the group again achieved record sales, adjusted operating profit and order backlog in FY21, although adjusted EPS fell 9% due to a higher tax charge. The key highlights are summarised in Exhibit 1 below.

Exhibit 1: Cohort FY21 results summary

Year to April (£m)

FY20

FY21

% change

Revenue

MASS

41.1

39.5

-4.0%

SEA

31.7

28.0

-11.8%

MCL

15.1

18.0

19.4%

EID

18.0

21.0

16.3%

Chess

25.2

28.6

13.9%

ELAC

8.3

Total revenue

131.1

143.3

9.3%

Adjusted operating profit

MASS

8.9

8.7

-1.9%

SEA

3.5

2.4

-33.4%

MCL

1.7

2.1

24.8%

EID

3.1

4.8

55.5%

Chess

3.9

3.0

-23.1%

ELAC

1.2

HQ & Other

(2.9)

(3.6)

22.9%

Total adjusted operating profit

18.2

18.6

2.1%

Finance costs

(0.8)

(0.8)

-0.1%

Adjusted PBT

17.5

17.9

2.2%

Tax expense

(2.2)

(4.1)

82.5%

Minorities

(0.1)

(0.0)

-68.0%

Adjusted net income

15.1

13.7

-9.1%

Adjusted EPS (p)

37.1

33.6

-9.4%

DPS (p)

10.1

11.1

9.9%

Adjusted net cash/(debt) excluding lease liabilities

(4.7)

2.5

n.m.

Source: Cohort reports

The key features of the FY21 results are summarised below:

The company reported a record closing order book of £242.4m (FY20: £183.3m; including an initial contribution from newly acquired ELAC) that reflected strong order intake of £180.3m (FY20: £124.2m, ELAC: £7.2m), representing an FY21 book to bill of 1.26x (FY20: 0.95x). The new financial year has again started strongly with over £50m of new orders booked so far and taking order cover of anticipated FY22 sales to 70%.

Revenues were £143.3m (FY20: £131.1m), slightly ahead of our expectations and including a first contribution of £8.3m from ELAC, acquired in November 2020 for a net cash consideration of just £1.3m. The 3% growth for the ongoing activities was delivered despite continued constraints caused by the pandemic, especially on international trade.

Adjusted operating profit was £18.6m (FY20: £18.2m), a 2.1% increase and broadly in line with our estimate of £18.8m.

Adjusted EPS fell 9.4% to 33.6p (FY20: 37.1p), excluding research and development tax credits (RDEC), which we treat as exceptional.

The DPS was 11.1p (FY20: 10.1p), a 9.9% increase in line with the group’s progressive dividend policy and continuing the positive track record since flotation in 2006.

Year-end adjusted net cash (excluding £7.6m lease liabilities) was again better than expected at £2.5m (FY20: £4.7m net debt), partially reflecting the favourable timing of receipts, which should unwind in FY22.

Defence and security revenues accounted for 94% (FY20: 90%) of the group total in FY21, boosted by the addition of ELAC for five months and a 30% (£3.7m) contraction of non-defence sales. The defence and security sales can be split further by customer and market segment as shown in Exhibits 2 and Exhibit 3 respectively. Overall, group revenues were split 63:37 between products and the provision of services.

Exhibit 2: FY21 defence and security revenue (£134m) by market segment, % of group sales

Exhibit 3: FY20 defence and security revenue (£134m) by end customer, % of group sales

Source: Cohort reports

Source: Cohort reports

Exhibit 2: FY21 defence and security revenue (£134m) by market segment, % of group sales

Source: Cohort reports

Exhibit 3: FY20 defence and security revenue (£134m) by end customer, % of group sales

Source: Cohort reports

Divisional summaries

MASS

Exhibit 4: MASS FY21 revenue split by activity, £39.5m

Exhibit 5: MASS order book run off, FY21 backlog £77.2m

Source: Cohort

Source: Cohort

Exhibit 4: MASS FY21 revenue split by activity, £39.5m

Source: Cohort

Exhibit 5: MASS order book run off, FY21 backlog £77.2m

Source: Cohort

MASS’s sales fell 4% in FY21 from the record level of £41.1m achieved in FY20 and adjusted operating profit dropped by 2% to £8.7m (FY20: £8.9m), a margin of 22.1% (FY20: 21.7%). The margin improvement reflected a more favourable mix of business and flat overheads. Various segments of the business were affected by lockdowns and activity constraints as well as travel restrictions. Notably the export-oriented electronic warfare operational support (EWOS) business saw some revenue deferred into the current year and beyond as delivery to overseas customers proved difficult if not impossible due to the pandemic. The order backlog declined for the second year running as the operations continued to deliver against its long-term contracts and order intake declined 24% to £25.6m (FY20: £33.5m). With sales cover of £28m at the start of the year, management expects MASS to return to growth in FY22.

Chess

Exhibit 6: Chess FY21 revenue split by activity, £28.6m

Exhibit 7: Chess order book run off, FY21 backlog £42.3m

Source: Cohort

Source: Cohort

Exhibit 6: Chess FY21 revenue split by activity, £28.6m

Source: Cohort

Exhibit 7: Chess order book run off, FY21 backlog £42.3m

Source: Cohort

Chess delivered a mixed performance in FY21 with solid top-line growth but a drop in profitability. Revenues of £28.6m compared to £25.2m in FY20. The performance was driven by its export dominated customers including target identification for an important European army and optical fire control systems for the Belgian and Dutch navies for their new minesweepers. The proportion of counter-unmanned air vehicle revenues also increased significantly in FY21. Adjusted operating profit fell 29% to £3.0m, a margin of 10.5% compared to 15.6% in FY20, as a combination of poor project execution and competitive pricing took their toll. Management is acting to tighten project and financial controls to improve contract execution. On a more positive note, order intake more than trebled to £57.7m and included significant European land and sea orders. The order backlog also more than trebled to £42.3m and provides a much greater level of visibility for the coming years. Management expects Chess’s performance in the current year to strengthen.

SEA

Exhibit 8: SEA FY21 revenue split by activity, £28.0m

Exhibit 9: SEA order book run off, FY21 backlog £69.3m

Source: Cohort

Source: Cohort

Exhibit 8: SEA FY21 revenue split by activity, £28.0m

Source: Cohort

Exhibit 9: SEA order book run off, FY21 backlog £69.3m

Source: Cohort

SEA’s revenues fell by a further 12% in FY21 to £28.0m (FY20: £31.7m) as a result of weaker transport and research sales, with the subsea business contributing just £1m (FY20: £2.9m) up to its divestment in August 2020. While some significant naval export orders that had slipped from FY20 were ultimately received, these came too late to influence the performance deferrals, which slipped into FY21. Despite the completion of a restructuring programme to save £1.3m annually at a cost of £0.7m, which should be realised as activity levels improve from FY22, adjusted operating profit was 33% lower at £2.4m (FY20: £3.5m). Order intake was excellent for SEA at over £63m as several major and long-term contracts were secured, leaving the year-end backlog at almost £70m. With £20m due for delivery in FY22, it provides a significant increase in cover for the anticipated increased sales compared to a year ago.

Submarine system revenues started to recover in FY21 due to work for an export customer in advance of an expected increase in activity for the UK Dreadnought programme in the next couple of years. The unwinding of COVID-19 constraints should also benefit the group, especially in transport as well as export activity. Management expects SEA to grow in FY22 and return to double-digit margins aided by the cost reduction measures.

EID

Exhibit 10: EID FY21 revenue split by activity, £21.0m

Exhibit 11: EID order book run off, FY21 backlog £20.0m

Source: Cohort

Source: Cohort

Exhibit 10: EID FY21 revenue split by activity, £21.0m

Source: Cohort

Exhibit 11: EID order book run off, FY21 backlog £20.0m

Source: Cohort

Following an improved performance in FY20, EID delivered further strong growth in FY21. Sales rose 16% to £21.0m (FY20: £18.0m). There was decline in revenues for the Portuguese Ministry of National Defence, which had doubled in the prior year, but an improved level of exports of intercom systems to export customers. Adjusted operating profit was £4.8m (FY20: £3.1m), a margin of 23.1% (FY20: 17.2%), at the upper end of the historical range. However, order intake faltered with delays to anticipated programmes. Order intake was just £4.2m and the order book fell 45% to £20.0m (FY20: £36.5m). It provides order cover for just 44% of FY22 sales expectations. While there are some signs of order activity picking up, management expects revenues to drop by a third in FY22 with the operational gearing leading to even greater falls in operating profit.

MCL

Exhibit 12: MCL FY21 revenue split by activity, £18.0m

Exhibit 13: MCL order book run off, FY21 backlog £12.4m

Source: Cohort

Source: Cohort

Exhibit 12: MCL FY21 revenue split by activity, £18.0m

Source: Cohort

Exhibit 13: MCL order book run off, FY21 backlog £12.4m

Source: Cohort

Following a challenging FY20, MCL returned to growth in FY21 with revenues rising 19% to £18.0m (FY20: £15.1m). MCL faced a number of adverse effects from the pandemic, but responded to these well. Adjusted operating profit rose to £2.1m (FY20: £1.7m) with margins continuing to improve slightly to 11.5% (FY20: 11.0%). The recent UK defence review and spending plans have already provided some opportunities for the small and flexible MCL team to pursue, especially in support of the new Ranger regiment and it continues to pursue larger and longer-term support opportunities for the Royal Navy. The order book provides limited cover although it did improve to £12.4m (FY20: £8.6m) following strong order intake. We expect further progress in the coming year.

ELAC

Exhibit 14: ELAC FY21 revenue split by customer, £8.3m

Exhibit 15: ELAC order book* run off, FY21 backlog £21.2m*

Source: Cohort

Source: Edison Investment Research. Note: *Estimated to adjust for recent £43m Italian sonar contract.

Exhibit 14: ELAC FY21 revenue split by customer, £8.3m

Source: Cohort

Exhibit 15: ELAC order book* run off, FY21 backlog £21.2m*

Source: Edison Investment Research. Note: *Estimated to adjust for recent £43m Italian sonar contract.

ELAC made a stronger than expected initial contribution in FY21 following its acquisition in November 2021 for a net consideration of £1.3m. It does however bring with it some £8m of pension liabilities. It generated revenues of £8.3m and contributed £1.2m to adjusted operating profit at a margin of 14.1% before acquisition costs of £0.6m. Order intake of £7.2m left a year end order backlog of £21.1m. The wining of the Italian naval contract from Leonardo provides long-term underpinning of its sonar activity, with potential further extension through the take up of options for more boats. It leaves current year sales cover at over 90%.

Exhibit 16: Cohort divisional analysis and updated Edison estimates

Year to April (£m)

2019

2020

2021

2022e

2023e

MASS

38.9

41.1

39.5

41.9

43.5

Chess

10.7

25.2

28.6

31.2

32.8

SEA

38.3

31.7

28.0

30.8

33.8

MCL

21.7

15.1

18.0

19.4

20.4

EID

11.5

18.0

21.0

13.0

13.6

ELAC

8.3

19.9

23.9

Group revenues

121.2

131.1

143.3

156.1

168.0

MASS

8.2

8.9

8.7

9.6

10.0

Chess

1.7

3.9

3.0

3.7

3.9

SEA

5.5

3.5

2.4

3.9

4.3

MCL

2.3

1.7

2.1

2.2

2.3

EID

1.4

3.1

4.8

1.2

1.2

ELAC

1.2

2.2

2.6

HQ Other and intersegment

(2.8)

(2.9)

(3.6)

(4.0)

(4.0)

Adjusted operating profit

16.2

18.2

18.6

18.8

20.4

MASS

21.0%

21.7%

22.1%

23.0%

23.0%

Chess

15.8%

15.6%

10.5%

12.0%

12.0%

SEA

14.3%

11.1%

8.4%

12.6%

12.6%

MCL

10.5%

11.0%

11.5%

11.5%

11.5%

EID

11.8%

17.2%

23.1%

9.0%

9.0%

ELAC

14.1%

11.0%

11.0%

Adjusted operating profit margin

13.3%

13.9%

13.0%

12.1%

12.1%

Source: Company reports, Edison Investment Research estimates

Outlook for FY22

Exhibit 17: Cohort divisional order intake and backlog

Year to April (£m)

FY18

FY19

FY20

FY21

FY21/FY20
% change

Order intake

MASS

29.1

97.0

33.5

25.6

-23.6%

ELAC

7.2

SEA

27.0

36.7

34.7

63.7

83.6%

MCL

12.1

26.0

9.1

21.8

139.6%

EID

8.4

18.9

29.3

4.3

-85.3%

Chess

11.3

17.8

57.7

224.2%

Total order intake

76.6

189.9

124.4

180.3

44.9%

Order book

MASS

40.9

98.8

91.2

77.2

-15.4%

ELAC

21.2

SEA

33.6

31.1

33.6

69.3

106.3%

MCL

10.3

14.6

8.6

12.4

44.2%

EID

19.0

25.6

36.5

20.0

-45.2%

Chess

20.8

13.4

42.3

215.7%

Total order book

103.8

190.9

183.3

242.4

32.2%

Source: Cohort reports, Edison Investment Research estimates

The year-end order book of £242.4m (FY20: £183.3m) was at a new record level, although enhanced by the first-time inclusion of ELAC’s backlog of £21.2m. FY21 order intake of £180.3m was up 45%, or 39% adjusting for the initial £7.2m contributed by ELAC. There were notably substantial export orders won by Chess and SEA, the latter including torpedo launcher systems and external communications systems (ECS) worth around £17m. The book to bill ratio for the group was 1.26x (FY20: 0.95x).

Of the FY21 year-end backlog, £99.7m (FY20: £84.5m) is expected to be delivered in FY22, providing 64% cover for consensus sales expectation of c £156m, modestly up on the prior year level of 62%.

Exhibit 18: Cohort year end order backlog run off by division

MASS

EID

SEA

Chess

MCL

ELAC

Total

At 30 April 2021

77.2

20.0

69.3

42.3

12.4

21.2

242.4

H122

16.1

3.4

10.9

11.5

7.9

7.8

57.6

H222

11.1

4.8

9.7

8.3

3.6

4.6

42.1

FY22

27.2

8.2

20.6

19.8

11.5

12.4

99.7

FY23

18.8

4.1

11.8

11.9

0.8

4.6

52.0

FY24

10.7

6.9

6.3

1.6

0.0

1.3

26.8

Later years

20.5

0.8

30.6

9.0

0.1

2.9

63.9

Source: Cohort

In addition, order intake in Q122 has been strong, with over £50m of orders booked since the start of the financial year. This includes a major contract win for ELAC worth over €49m (£43m) from Italian defence company Leonardo for sonar systems for two U212 Near Future Submarines being built by Fincantieri for the Italian Navy. It includes the provision of special test and training tools as well as technical services and will run for several years with the submarines due for delivery by 2030, with options on a further two vessels. The order significantly increases the ELAC order backlog underpinning FY22 results together with longer-term prospects and provides a strong reference for its ability to deliver complete submarine sonar suites. The group intake since the year end has significantly extended the group order backlog, with order cover now standing at over 70%, still slightly behind 75% at the same point last year.

In line with its agile growth strategy management continues to invest in organic growth and targets value enhancing acquisition opportunities both in the UK and overseas. In FY21 £3.6m (FY20: £2.9m) was spent on self-funded R&D. The current divisional focus on projects is

SEA – Krait V2, KDS (Krait Defence System) software, transport

EID – handheld radio, soldier system, new features for ICCS and ICC

MASS – digital forensics evidence management, machine learning for missile defence

Chess – artificial intelligence for target identification

ELAC – smart digital transducers for Sphere

MCL – looking at long-term business expansion by new application of existing skills for Royal Navy

Debt and liquidity

Adjusted net cash of £2.5m (excluding leases liabilities) was again better than expected, largely due to the timing of receipts, which is expected to unwind in FY22. As a result, management expects net cash balances to be close to zero, after the expected £2.8m buy out of the Chess minority later this year (we have yet to adjust for that event in our estimates). Lease liabilities rose marginally to £7.6m (FY20: £7.5m). The robust balance sheet leaves some £42m of available liquidity, with £32m of gross cash and around £10m of the £40m four-year revolving credit facility (RCF) remaining undrawn. The RCF expires in November 2022, with an option to extend to November 2023.

Cohort’s strong financial position and the cash generative nature of the operations allows management to maintain a robust capital allocation policy. Organic investment and self-funded R&D spending remain key, while supporting the progressive dividend policy. The robust balance sheet also provides resources to pursue strategic value adding acquisitions.

Revisions to estimates and updated valuation

Overall, our estimates for FY22 change only slightly, although there are some divisional mix changes with EID where we had already reflected the anticipated weaker trading in FY22 as overhead under-recovery and the adverse sales mix have an impact on margins. Encouragingly, domestic order opportunities appear to be picking up and with an export focus we think FY22 should mark its low point. We expect all other divisions to progress in FY22, enhanced by a full year contribution from ELAC. We now expect overall group revenues of £156m in FY22. Our FY22 adjusted PBT estimate is increased 1.4% to £18.0m and our adjusted EPS estimate is 34.3p. We now forecast end April 2022 adjusted net cash of £0.7m, broadly in line with management indications.

Exhibit 19: Cohort earnings revisions

Year to April (£m)

FY21e

FY21

 

FY22e

FY22e

 

FY23e

 

Prior

Actual

% change

Prior

New

% change

New

Revenue

MASS

41.5

39.5

-4.9%

44.0

41.9

-4.9%

43.5

SEA

34.6

28.0

(19.1)%

36.6

30.8

(16.0)%

33.8

MCL

15.5

18.0

15.9%

16.8

19.4

15.9%

20.4

EID

18.6

21.0

12.9%

13.0

13.0

(0.0)%

13.6

Chess

26.9

28.6

6.4%

29.3

31.2

6.4%

32.8

ELAC SONAR

5.0

8.3

65.8%

19.0

19.9

4.7%

23.9

Intra group sales

0.0

0.0

 

0.0

0.0

 

0.0

Total Group

142.1

143.3

0.9%

158.7

156.1

(1.6)%

168.0

 

 

 

 

 

 

 

EBITDA

21.4

22.1

3.3%

21.6

22.0

1.6%

23.7

Adjusted operating profit

 

 

 

 

 

 

 

MASS

8.5

8.7

2.7%

9.0

9.6

6.7%

10.0

SEA

4.3

2.4

(45.8)%

4.6

3.9

(16.0)%

4.3

MCL

1.7

2.1

21.1%

1.8

2.2

21.1%

2.3

EID

3.2

4.8

51.0%

1.2

1.2

(0.0)%

1.2

Chess

3.8

3.0

(19.9)%

4.1

3.7

(8.8)%

3.9

ELAC SONAR

0.3

1.2

369.2%

2.1

2.2

4.7%

2.6

HQ Other and intersegment

(3.0)

(3.6)

19.4%

(4.0)

(4.0)

0.0%

(4.0)

Adjusted operating profit

18.8

18.6

(0.9)%

18.9

18.8

(0.1)%

20.4

 

 

 

 

 

 

 

Adjusted PBT

17.7

17.9

1.0%

17.7

18.0

1.4%

19.5

 

 

 

 

 

 

 

EPS - adjusted continuing (p)

33.6

33.6

(0.1)%

33.7

34.3

1.9%

37.4

DPS (p)

11.1

11.1

0.0%

12.2

12.2

0.0%

13.4

Adjusted net cash

2.0

2.5

+25.0%

0.2

0.7

265.2%

9.7

Source: Edison Investment Research estimates

Our rolled forward capped discounted cash flow (DCF) valuation now stands at a value of 656p compared to 674p per share previously. The drop is largely due to the inclusion of the £8m ELAC pension liability as well as a slower near-term recovery at EID.

Exhibit 20: Cohort capped DCF sensitivity to WACC and terminal growth (p per share)

WACC

6.0%

6.5%

7.0%

7.3%

7.5%

8.0%

8.5%

9.0%

Terminal growth rate

0%

825

751

687

656

632

585

543

505

1%

832

757

693

661

638

589

547

509

2%

839

763

699

667

643

594

551

513

3%

846

769

704

672

648

599

555

517

Source: Edison Investment Research estimates

Exhibit 21: Financial summary

Year end 31 April

£m

2020

2021

2022e

2023e

Revenue

 

 

131.1

143.3

156.1

168.0

Cost of Sales

(80.0)

(90.0)

(98.0)

(105.5)

Gross Profit

51.0

53.4

58.1

62.6

EBITDA

 

 

20.9

22.1

22.0

23.7

Operating Profit (before amort. and except.)

18.2

18.6

18.8

20.4

Intangible Amortisation

(7.4)

(10.1)

(6.8)

(3.1)

Exceptionals

(0.1)

(0.7)

0.0

0.0

Other

0.0

0.0

0.0

0.0

Operating Profit

10.7

7.8

12.0

17.3

Net Interest

(0.8)

(0.8)

(0.9)

(0.9)

Profit Before Tax (norm)

 

 

17.5

17.9

18.0

19.5

Profit Before Tax (FRS 3)

 

 

10.0

7.1

11.2

16.4

Tax

(0.3)

(1.6)

(2.4)

(2.7)

Profit After Tax (norm)

15.2

13.8

14.7

16.0

Profit After Tax (FRS 3)

9.7

5.5

8.7

13.7

Average Number of Shares Outstanding (m)

40.7

40.8

40.8

40.8

EPS - fully diluted (p)

 

 

36.7

33.3

34.0

37.0

EPS - normalised (p)

 

 

37.1

33.6

34.3

37.4

EPS - (IFRS) (p)

 

 

23.5

13.4

19.6

31.7

Dividend per share (p)

10.1

11.1

12.2

13.4

Gross Margin (%)

38.9

37.2

37.2

37.2

EBITDA Margin (%)

15.9

15.4

14.1

14.1

Operating Margin (before GW and except.) (%)

13.9

13.0

12.1

12.1

BALANCE SHEET

Fixed Assets

 

 

74.3

78.4

72.3

69.9

Intangible Assets

55.3

58.8

52.0

48.9

Tangible Assets

12.1

12.5

13.2

14.0

Right of Use assets

6.9

7.1

7.1

7.1

Investments

0.0

0.0

0.0

0.0

Current Assets

 

 

80.1

112.5

117.4

128.6

Stocks

11.5

12.9

15.6

16.5

Debtors

47.3

66.6

68.7

70.6

Cash

20.6

32.3

32.3

40.8

Other

0.7

0.8

0.8

0.8

Current Liabilities

 

 

(32.8)

(56.6)

(49.9)

(51.0)

Creditors

(32.8)

(56.6)

(49.9)

(51.0)

Short term borrowings

(0.1)

(0.1)

0.0

0.0

Long Term Liabilities

 

 

(39.8)

(49.2)

(51.0)

(50.5)

Long term borrowings

(25.2)

(29.8)

(31.5)

(31.1)

Lease liabilities

(7.5)

(7.6)

(7.6)

(7.6)

Other long term liabilities

(7.1)

(11.9)

(11.9)

(11.9)

Net Assets

 

 

81.8

85.1

88.8

97.1

CASH FLOW

Operating Cash Flow

 

 

13.0

21.1

9.9

21.5

Net Interest

(0.8)

(0.8)

(0.9)

(0.9)

Tax

(0.6)

(4.1)

(3.2)

(3.5)

Capex

(2.7)

(1.2)

(2.8)

(3.0)

Acquisitions/disposals

(1.2)

(3.3)

0.0

0.0

Financing

(2.2)

(0.3)

0.0

0.0

Dividends

(3.9)

(4.2)

(4.7)

(5.1)

Other

0.0

0.0

0.0

0.0

Net Cash Flow

1.7

7.2

(1.7)

9.0

Opening net debt/(cash)

 

 

6.4

4.7

(2.5)

(0.7)

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

(0.0)

(0.0)

0.0

0.0

Closing net debt/(cash) (excluding leases)

4.7

(2.5)

(0.7)

(9.7)

Total financial liabilities

 

 

12.2

5.1

6.8

(2.2)

Source: Company reports, Edison Investment Research


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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

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United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Cohort and prepared and issued by Edison, in consideration of a fee payable by Cohort. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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