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Research: Industrials
Cohort’s MCL operation has announced the award of an additional £9.9m four-year contract for the provision of hearing protection systems to the UK MoD. With Cohort having completed the minority buyout on 1 February, the increased visibility from the hearing protection revenue stream now provides greater support for MCL’s medium-term forecasts, increasing earnings quality. Cohort has continued to outperform the market so far this year, continuing to trend towards our fair value of 485p.
Written by
Cohort |
Protection for hearing and earnings |
MCL contract award |
Aerospace and defence |
10 March 2017 |
Share price performance
Business description
Analysts
Cohort is a research client of Edison Investment Research Limited |
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Cohort’s MCL operation has announced the award of an additional £9.9m four-year contract for the provision of hearing protection systems to the UK MoD. With Cohort having completed the minority buyout on 1 February, the increased visibility from the hearing protection revenue stream now provides greater support for MCL’s medium-term forecasts, increasing earnings quality. Cohort has continued to outperform the market so far this year, continuing to trend towards our fair value of 485p.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
04/15 |
99.9 |
10.2 |
20.5 |
5.0 |
21.1 |
1.2 |
04/16 |
112.6 |
12.0 |
25.0 |
6.0 |
17.3 |
1.4 |
04/17e |
125.8 |
14.3 |
24.1 |
7.0 |
18.0 |
1.6 |
04/18e |
138.9 |
16.6 |
33.4 |
8.0 |
13.0 |
1.8 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and one-off tax credit of 2.20p in FY16.
In addition to being incremental to MCL’s initial success supplying the £11.2m THPS DCCU contract awarded in 2015, the terms allow for both a one-year extension and a potential mid-life update of the software to further enhance the performance of the product. The work will be undertaken with the Danish technology supplier Invisio. As a result of this contract, hearing protection has been confirmed as a major underpinning sustainable revenue stream for MCL, which has historically had relatively lower order cover than other Cohort activities.
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Disclaimer
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Disclaimer
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Bowleven’s (BLVN) farm-out with Victoria Oil and Gas (VOG) is probably the quickest route to market for Bomono gas. While BLVN has had to sacrifice 80% of its interest in the block, the deal allows gas to be sold to Victoria’s existing network of customers at a gas price significantly above that expected from other solutions with very little further capex required in the near future. On our estimates, 7mmscfd of production should bring in around $6-7m in direct revenues and royalties, corresponding to around c $4m in post-tax cash flows, a useful addition to Bowleven’s income. On the assumption that the deal completes, we increase our core NAV from 49p/share to 53p/share to reflect Bomono’s inclusion.