6th Jul 2006 07:30
Cohort PLC06 July 2006 COHORT PLC MAIDEN PRELIMINARY RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 30 APRIL 2006 STRONG PLATFORM FOR GROWTH ESTABLISHED Cohort plc, owner of Systems Consultants Services Limited ("SCS"), a leadingindependent defence technical services business, today announces its maiden setof preliminary results since floating on AIM for the 12 months ended 30 April2006. Highlights include: • Turnover up 23% to £18.0m • Operating profit £1.8m* • Profit after tax £1.3m* • Year-end cash balance £5.6m • Basic earnings per share 5.47 pence • Proposed maiden dividend 0.4 pence per share * excluding share of joint ventures and exceptional items Commenting of the results, Nick Prest CBE, Chairman of Cohort plc said: "We havea strong business model and we will continue to push for organic growth whileseeking complementary acquisitions of businesses which can benefit from theCohort group concept. Overall the Board is positive about the outlook." For further information please contact: Cohort plc 01491 843150Nick Prest, Chairman Investec 020 7597 5970Michael Ansell, Martin Smith Gainsborough Communications 020 7190 1705Julian Walker Notes to Editors Cohort has been established to capitalise on opportunities to grow, bothorganically and through acquisition, in the defence technical services market.The directors of Cohort believe that the accessible UK market for such servicesis large and offers scope for expansion, whilst a portion of the supplier baseis fragmented and provides opportunities for consolidation. Cohort will seek tomake targeted acquisitions of complementary businesses. Cohort's sole initial trading subsidiary, Systems Consultants Services Limited("SCS"), is a leading independent defence technical services business based inHenley-on-Thames, Oxfordshire in the United Kingdom. SCS provides a range oftechnical services to clients in the defence and security sectors, its principalclient being the UK Ministry of Defence ("MOD") and its agencies. Its otherclients include other UK government departments, NATO, major defence contractorsand non-defence businesses. Cohort plc was listed on London's Alternative Investment Market (AIM) on 8 March2006. CHAIRMAN'S STATEMENT I am pleased to announce this maiden set of results for Cohort plc since listingon AIM in March 2006. Cohort has traded in accordance with our expectations atflotation. KEY FINANCIALS In the year ended 30 April 2006, Cohort achieved turnover of £18.0m (2005:£14.6m) representing a 23% increase on the level achieved by Systems ConsultantsServices Limited (SCS), Cohort's sole operating subsidiary, in 2005. Group operating profit before accounting for the share of joint ventures andexceptional items was £1.8m (2005: £2.0m). This reduction was due primarily toan increase in staff costs as new revenue generating personnel and support staffwere recruited to manage the increased scale of the business, provide a base forfurther expansion and meet the reporting and governance requirements of a publiccompany. Profit before interest and tax was £1.3m (2005: £1.6m) after accounting for theGroup's share of joint venture losses and exceptional items in relation toventure capital activities of £467k (2005: £401k). As a private company, SCS had invested in some venture capital activities. Atflotation, the decision was taken to provide fully for the maximum commitment tothese activities so that Cohort could go forward on a firm financial andstrategic basis. The profit after tax and before share of joint ventures and exceptional itemswas £1.3m (2005: £1.5m). Profit after interest and before tax was £1.4m (2005:£1.6m) and profit after tax was £0.9m (2005: £1.1m). Basic earnings per share were 5.47p (2005: 6.97p) The Cohort cash balance at year end was £5.6m, reflecting primarily the proceedsof the share placing net of costs. DIVIDENDS The Group plans to pay an initial dividend of 0.4p, being approximately onethird of the dividend which would have been paid had the Company's shares tradedpublicly for the whole of the financial year. This will be payable on 6September 2006 to shareholders on the register at 4 August 2006 subject toapproval at the annual general meeting on 31 August 2006. The Group plans tofollow a progressive dividend policy in future and to pay interim and finaldividends in respect of the current financial year in March and September 2007. BOARD AND PERSONNEL We were pleased to welcome Simon Walther, who joined as Finance Director in May2006. Simon has experience in the defence industry and in mergers andacquisitions as well as in the finance function in a quoted company environment.This has released Andy Thomis, who handled the finance function during thelisting, to concentrate on his intended roles in strategic and businessdevelopment. The new board of Cohort, brought together specifically to pursue the strategy offlotation followed by expansion, both organic and through acquisition in thedefence technical services market, has bedded in well. The operating team underStanley Carter is busy and productive and the transition from a private to aquoted company environment is being well handled. Whilst Stanley is in the dayto day charge of the business, I am spending significant time with the company,particularly in relation to acquisitions and business development. OUTLOOK Cohort's business is at present largely concentrated in the UK defence market.In overall terms the market is reasonably stable but growth is concentrated incertain areas. The view set out at the time of flotation, namely that theprovision of independent technical services to the UK Ministry of Defence (MOD)and industry is one such growth area, has been borne out by the many customercontact meetings which have been held since March. SCS has a strong businessmodel and we will continue to push for organic growth. At the same time we willseek complementary acquisitions of businesses which can benefit from the Cohortgroup concept. Overall the Board is positive about the outlook. Nick PrestChairman CHIEF EXECUTIVE'S REVIEW The formation of Cohort, whose sole trading subsidiary is currently SystemsConsultants Services (SCS), and its listing on AIM in March this year markedanother successful year for SCS. It led to changes in the composition of theSCS Board and other senior posts and placed increased demands on SCS seniormanagement. Despite the potentially unsettling effect common in thesecircumstances, SCS achieved a creditable growth of 23% in revenue and 17% ingross profit. Employee response to the change in status of SCS and to the staffchanges has been very positive and is reflected by the high take-up of shareoptions and the SAYE share scheme in June 2006. This augurs well for thecontinuing organic growth of SCS. Notable contract awards won in competition during the year include: a year'scontract as part of a five year support agreement to the Joint Warfare TrainingCentre with SCS heading a consortium of EDS Defence, Cubic and Titan; a two yearexclusive agreement to provide support to the NATO Consultation, Command andControl Agency in the Hague with SCS heading a consortium of six companies; SCSkey membership of a consortium of QinetiQ, Thales and others to provide humanfactors support in an exclusive pan-MOD agreement and SCS winning with RokeManor an urban warfighting research support contract with the MOD ResearchAcquisition Agency. SCS continues to play a central role in two major NetworkEnabled Capability programmes: the Land Environment Air Picture and the JointEffects Tactical Targeting System in consortiums headed by Lockheed Martin andRaytheon respectively. Another notable contract was won to support the NationalAudit Office study into a major defence communications programme. The Companyis alert to opportunities to apply its expertise in non-defence areas and wasawarded a contract to supply crisis management advice to a cruise lineroperator. The recent and continuing trends to integrate and consolidate in the widerdefence market, has included the absorption of some private technical advisorybusinesses by major international defence suppliers. This has led to asignificant reduction in the availability of impartial and independent technicaladvice available to the MOD and correspondingly increased opportunities tocompanies remaining in the field. Also the MOD has declared an intention tocompete in future much of the research work historically mandated to QinetiQ,which will result in opportunities both in the research programme itself and inrelated advisory work. At the same time the sustained high levels ofoperational commitment of HM Forces coupled with a natural "front-line first"policy is tending to leave gaps in military technical posts in the MOD, which isalready having to cope with reduced technical support arising from thesignificant reduction of the scientific civil service brought about byprivatisation. All of these factors have benefited the Group and will continueto do so in the future. I am confident that the comprehensive, first-hand defence market knowledge andexperience of the Cohort team make it well able to recognise and respond tothese and future trends and to meet the increasing need for independenttechnical advice and support. Stanley CarterChief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 30 April 2006 2006 2005 Notes £000 £000 Turnover of the Group including its share of joint ventures 1 18,008 14,595Less share of turnover of joint ventures 2 (185) (163) --------- ---------Group turnover 17,823 14,432Cost of sales (13,318) (10,576) --------- ---------Gross Profit 4,505 3,856Administrative expenses (2,708) (1,841) --------- ---------Group operating profit 1,797 2,015Share of operating result of joint ventures 2 (148) (120) --------- --------- Total operating profit 1,649 1,895 Exceptional items 3 (319) (281) --------- ---------Profit on ordinary activities beforeinterest 1,330 1,614Interest receivable 105 48Interest payable and similar charges (76) (85) --------- --------- 29 (37) --------- --------- Profit on ordinary activities before taxation 1,359 1,577Tax on profit on ordinary activities 4 (440) (473) --------- ---------Profit on ordinary activities after taxation 919 1,104 --------- --------- Basic earnings per share 5.47p 6.97pDiluted earnings per share 5.45p 6.97p The profit on ordinary activities before taxation arises from the continuingoperations of the Group which merged with Systems Consultants Services Limitedon 9 February 2006 There are no recognised gains or losses other than asstated in the profit and loss account. BALANCE SHEETAs at 30 April 2006 Notes 2006 2005 £000 £000 Fixed AssetsTangible Fixed Assets 6 99 1,036 --------- ---------Investments 2Share of gross assets of joint ventures 101 215Share of gross liabilities of joint ventures (192) (228) --------- --------- (91) (13)Provision against joint venture investments - (33) --------- ---------Net investments in joint ventures (91) (46) 8 990 --------- ---------Current AssetsDebtors 6,375 3,947Cash at bank 5,591 571 --------- --------- 11,966 4,518Creditors: amounts falling due within one year (2,830) (2,572) --------- ---------Net current assets 9,136 1,946 --------- ---------Total assets less current liabilities 9,144 2,936Creditors: amounts falling due after more than one year - (469)Provision for liability and charges 2 (220) (270) --------- ---------Net assets 8,924 2,197 --------- ---------Capital and ReservesCalled up share capital 2,212 1Share premium account 5,339 -Profit and loss account 1,373 2,196 --------- ---------Equity shareholders' funds 7 8,924 2,197 --------- --------- CONSOLIDATED CASH FLOW STATEMENTFor the year ended 30 April 2006 2006 2005 Notes £000 £000 Net cash inflow from operating activities 8 893 1,337Net interest received/(paid) 28 (24)Taxation paid (603) (335)Purchase of tangible fixed assets (66) (36)Sale of tangible fixed assets 868 -Investment in joint ventures 2 (50) (130)Investment in related parties 10 (339) (121)Equity dividend paid (159) (228) --------- ---------Cash inflow before financing 572 463Issue of ordinary shares (net of costs) 7 5,323 -Finance lease asset 85 -Repayment of secured loan (514) (43)(Repayment)/drawdown of Directors' loans 10 (446) 89 --------- ---------Increase in cash 5,020 509Finance lease asset 251 -Secured loan 514 43Directors' loans 446 (89) --------- ---------Increase in net funds 6,231 463Opening net funds (389) (852) --------- ---------Closing net funds 9 5,842 (389) --------- --------- ACCOUNTING POLICIES Basis of accounting The financial statements have been prepared under the historical cost conventionand in accordance with applicable accounting standards. Accounting period The Group has adopted merger accounting and presents the accounts for the yearended 30 April 2006 with comparatives restated accordingly for the year ended 30April 2005 Consolidation The Group has adopted merger accounting and presented Group results for the yearended 30 April 2006. In preparing the Group accounts, the Group's interest in joint ventures has beenaccounted for in accordance with the gross equity method and the comparativeshave been restated accordingly. The comparative figures for the Group are the audited accounts for SystemsConsultants Services Limited (SCS) for the year ended 30 April 2005 as restatedfor changes in accounting methods in preparing Group accounts. The impact ofthis accounting change and the restatement which arises from the change is therecognition of the Group's share of losses in joint ventures and is furtherexplained in note 11. Tangible Fixed Assets Depreciation is provided on cost in annual instalments over the estimated usefullife of assets which are reviewed annually. The rate of depreciation forequipment, fixtures and fittings is 25% per annum on cost on a straight linebasis. For the property sold in the year, the depreciation rate was 2% perannum on cost (excluding land) on a straight line basis. Finance Lease The Group has a finance lease asset with its 25% joint venture undertaking,Digital Millennium Map LLP. In this instance, where the Group acts as a lessorand substantially all the risks and rewards of ownership of the related assetsare transferred to the lessee, the net present of the future lease payments arerecognised as a debtor and the interest value is recognised over the periodwhich it is earned on an actuarial basis. Operating Lease Agreements Rentals applicable to operating leases where substantially all of the benefitsand risks of ownership remain with the lessor are charged against profits on astraight line basis over the period of the lease. Deferred Taxation Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future or a right topay less tax in the future have occurred at the balance sheet date. Timingdifferences are differences between the Group's taxable profits and its resultsas stated in the financial statements that arise from the inclusion of gains andlosses in tax assessments in periods different from those in which they arerecognised in the financial statements. Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which timing differences are expected to reverse, based on taxrates and laws that have been enacted or substantially enacted by the balancesheet date. Deferred tax is measured on a non-discounted basis. Pension Contributions Payments are made to the Group's stakeholder pension scheme, a definedcontribution scheme. Amounts are charged to the profit and loss account asincurred. Turnover Turnover represents amounts receivable for services provided, net of Value AddedTax. In accordance with Urgent Issues Task Force 40 (Revenue recognition andservice contracts), the Group recognises contract revenue as the activityprogresses to reflect the partial performance of contractual obligations. Financial Instruments Income and expenditure arising on financial instruments are recognised on anaccruals basis and credited or charged to the profit and loss account in thefinancial period to which they relate. 1. TURNOVER The Group's turnover was derived from its principal activity undertaken whollywithin the UK. 2. JOINT VENTURES The Group has two joint ventures Name Share of Equity Principal ActivitySCS Mothership Limited (SML) 50% 3D Mapping technologyDigital Millennium Map LLP (DMM) 25% 2D Mapping and photography SML DMM Total investment in joint ventures £000 £000 £000At 1 May 2005 (46) - (46)Additions - 83 83Profit and loss account:Share of joint ventures (15) (146) (161)Release of provision against joint venture investment - 33 33 ---------------------------------------------At 30 April 2006 (61) (30) (91) --------------------------------------------- The Group's share of joint ventures was as follows: 2006 2005Profit and loss account SML DMM Total SML DMM Total £000 £000 £000 £000 £000 £000 Turnover 144 41 185 157 6 163 --------------------------- ----------------------------Share of operating result (7) (141) (148) (18) (102) (120)Share of interest (8) (5) (13) (10) (3) (13) --------------------------- ----------------------------Share of profit before tax (15) (146) (161) (28) (105) (133) --------------------------- ---------------------------- Balance Sheet SML DMM Total SML DMM Total £000 £000 £000 £000 £000 £000Share of assets 15 86 101 67 148 215Share of liabilities (76) (116) (192) (113) (115) (228) --------------------------- ---------------------------- (61) (30) (91) (46) 33 (13)Provision against investment injoint ventures - - - - (33) (33) --------------------------- ---------------------------- (61) (30) (91) (46) - (46) --------------------------- ---------------------------- In addition to the above, the Group has provided £220,000 (2005: £270,000)against its investment commitment in DMM. During the year the Group invested£50,000 (2005: £130,000) in DMM. 3. EXCEPTIONAL ITEMS 2006 2005 £000 £000 Release of provision against joint venture investments and commitments (116) -Provision against joint venture investments and commitments 14 160 (102) 160Provision against costs incurred on behalf of related party 339 121undertakings (see note 10)Loss on sale of fixed assets (see note 6) 82 - ---------- --------- 319 281 ---------- --------- The Group current tax charge includes £101,700 credit (2005: £4,000 charge) inrespect of exceptional items. 4. TAX ON PROFIT ON ORDINARY ACTIVITIES 2006 2005 £000 £000 Corporation tax in current year 406 550Deferred tax 34 (77) ---------- --------- 440 473 ---------- --------- 5. EARNINGS PER SHARE The basic earnings per share is calculated on profit after tax of £919,000(2005: £1,104,000) and a weighted average number of shares of 16,791,727 (2005:15,840,000). The diluted earnings per share is calculated on profit after taxof £919,000 (2005: £1,104,000) and a weighted average number of shares, aftertaking into account share options, of 16,857,038 (2005: 15,840,000). 6. TANGIBLE FIXED ASSETS During the year ended 30 April 2006 the Group sold its freehold property for£880,000 realising an exceptional loss after selling costs of £82,000 7. EQUITY SHAREHOLDERS' FUNDS Share capital Share premium Profit and loss Total account account £000 £000 £000 £000 1 May 2005 (restated) 1 - 2,196 2,197Profit after tax - - 919 919Dividends paid - - (159) (159)Bonus issue of shares on merger of 1,583 - (1,583) -Cohort plc with Systems ConsultantsServices LimitedIssue of new shares 628 6,175 - 6,803Cost of new share issue - (836) - (836) --------- --------- --------- ---------At 30 April 2006 2,212 5,339 1,373 8,924 --------- --------- --------- --------- The reserves at 1 May 2005 have been restated to take account of the Group'sequity interest in joint ventures, a net reduction to reserves of £46,000 from£2,242,000 to £2,196,000. The issue of the new shares raised cash in the year ended 30 April 2006 asfollows: Shares Issue Net issued costs £000 £000 £000 New shares 6,803 (836) 5,967Shares issued for debt receivable from N M Prest (750) - (750) (see note 10)Costs to be paid in year ended 30 April 2007 - 106 106 --------- --------- ---------Net cash raised 6,053 (730) 5,323 --------- --------- --------- 8. NET CASH INFLOW FROM OPERATING ACTIVITIES 2006 2005 £000 £000 Operating profit 1,797 2,015Depreciation 54 47Increase in debtors (1,428) (692)Increase/(decrease) in creditors 470 (33) --------- ---------Net cash inflow from operating activities 893 1,337 --------- --------- 9. MOVEMENT IN NET FUNDS At 1 May 2005 Cash Flow At 30 April 2006 £000 £000 £000 Cash and bank 571 (258) 313Short term deposits - 5,278 5,278 --------- --------- --------- 571 5,020 5,591 --------- --------- ---------Finance lease - 251 251Directors loans (446) 446 -Secured loan (514) 514 - --------- --------- --------- (389) 6,231 5,842 --------- --------- --------- The short term deposits held by the Group are all less than one month induration. 10. RELATED PARTIES Costs incurred in respect of related party 2006 2005 £000 £000 Sentinel Programmes Limited (now SP Residual Limited) 172 92Centre for Defence and International Security Studies 87 29SCS South Africa 80 - --------- --------- 339 121 --------- --------- The above costs incurred have been fully provided against in the respective yearby the Group (see note 3). During the year ended 30 April 2006, Directors' loans have been fully repaid andinterest charged and paid in full as follows: Loan Interest £000 £000 A E S Carter 323 21J Lyde 122 7J Tydeman 1 - --------- --------- 446 28 --------- --------- At 30 April 2006, £750,000 (2005: £Nil) was payable by N M Prest in respect of979,790 10 pence ordinary shares. This debt is payable on or before 31 January2007. 11. PRIOR YEAR RESTATEMENT The figures presented for the year ended 30 April 2005 are based upon the SCSstatutory accounts. These have been adjusted to take account of the Group'sequity interest in joint ventures. The impact of the adjustments are to: i. Increase headline turnover by £163,000ii. Reduce net profit by £28,000, comprising a net share of the loss of joint ventures (including interest) of £133,000 offset by a reduction in the loss on exceptional items of £105,000 12. The financial information presented in this announcement does not constitute statutory accounts as defined by Section 240 of the Companies Act1985. The financial information for the year ended 30 April 2006 is derivedfrom the statutory accounts for that period, which have not yet been deliveredto the Registrar of Companies. The auditor has reported on those accounts;their report was unqualified and did not contain statements under section 237(2)or (3) of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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