Cohort (CHRT) Investor Update summary

Financial performance and outlook

• Revenue reached a record £128.8m for the first half, with profit in line with expectations and a robust order intake of £122.3m, maintaining an order book over £600m covering 96% of forecast revenue for the year.

• Adjusted operating profit declined slightly to just under £10m, as anticipated after a record prior period, and adjusted EPS fell to 16.16p; effective tax rate was 15.5%.

• Operating cash outflow was £27.9m due to working capital build and capex, resulting in net debt of £32.5m at period end; net funds are expected to be in line with previous guidance by year-end.

• Interim dividend increased by 10% to 5.8p, reflecting board confidence in future prospects.

• Full-year expectations remain unchanged, with a strong second half anticipated and net margin guidance of around 12%.

Divisional performance and strategic initiatives

• Communications and intelligence division revenue rose 13% to £62.5m, with EM Solutions' acquisition contributing significantly; adjusted operating profit for the division was up 23% to £10.4m, with a margin of 16.8%.

• Sensors and effectors division saw higher revenue but lower trading performance due to mix; Chess returned to profitability and is expected to achieve mid-teen margins by 2027-28.

• ELAC completed its new facility in Kiel, Germany, and continues to support the Italian Navy program, with contingency provisions expected to be released as project milestones are met.

• SEA's net margin reduced due to lower margin work, but a stronger second half is expected; order cover for the division is 98%.

• MASS performed well in high-margin electronic warfare support, and EID is expected to return to profitability with significant orders anticipated.

Market environment and growth opportunities

• Global defense spending is rising, driven by geopolitical tensions, with Europe and Asia-Pacific increasing budgets and NATO countries targeting 5% of GDP by 2035.

• Demand is strong for autonomous systems, underwater infrastructure protection, secure communications, and electronic warfare, creating opportunities across all group businesses.

• EM Solutions' integration has expanded the group's satellite communications offering and contributed the largest profit among subsidiaries.

• Strategic investments include new facilities in Germany and Canada, and a memorandum of understanding with Hanwha Ocean to target the Royal Thai Navy program.

• Acquisition strategy remains active, focusing on businesses with strong order books and sustainable competitive advantages in growth markets such as autonomy, AI, and space.