Cohort : Preliminary Results

One Waterside Drive

Arlington Business Park

Reading

Berks

RG7 4SW

27 July 2021

COHORT PLC

PRELIMINARY RESULTS

FOR THE YEAR ENDED 30 APRIL 2021

Cohort plc today announces its audited results for the year ended 30 April 2021.

Highlights include:

• Revenue
• Adjusted operating profit1
• Adjusted earnings per share1
• Net funds/(debt)
• Order intake2
• Order book (closing)
• Proposed final dividend per share
• Total dividend per share

Statutory

• Statutory profit before tax
• Basic earnings per share

2021	2020	%
£143.3m	£131.1m	9
£18.6m	£18.2m	2
33.63p	37.10p	(9)
£2.5m	(£4.7m)
£180.3m	£124.4m	45
£242.4m	£183.3m	32
7.60p	6.90p	10
11.10p	10.10p	10
2021	2020	%
£7.1m	£10.0m	(29)
13.38p	23.47p	(43)

• Results in line with 26 May 2021 trading statement
• Record revenue and adjusted operating profit despite COVID impact estimated as £6m on Group revenue and £0.2m on adjusted operating profit
• Better than expected cash performance
• Lower adjusted EPS due to an expected higher tax charge
• Order intake increased to £180.3m (2020: £124.2m) with an additional £50m of orders won since the year end
• Dividend increased by 10%
• Divisional overview:

• 1. MASS was main profit contributor, although slightly down from record high last year o Strong performance improvement at EID
     o MCL returned to growth
     o Initial five-month contribution from ELAC ahead of expectations o Weaker results at Chess and SEA.
• Defence revenue from non-UK MOD exceeded UK MOD for the first time, reflecting both the higher sales at EID and Chess, where a much greater proportion of sales are to export markets, and the initial contribution of ELAC.
• Acquisition of ELAC completed in December 2020. Adds a profitable and growing sixth stand-alone business to the Cohort Group.

1. Excludes exceptional items, amortisation of other intangible assets, research and development expenditure credits and non-trading exchange differences, including marking forward exchange contracts to market.
2. Excludes acquired order book of £23.2m (2020: nil).

Looking forward:

• Strong order book and pipeline of prospects for the coming year
• £242.4m year end order book underpins nearly £100m of current year revenue, representing 64% (2020: 62%) of current consensus forecast for the year
• Coverage has risen to 70% in mid-July 2021 following recently announced contract wins
• Performance for 2021/22 expected to show good revenue growth but a lower rate of profit growth, with weaker trading at EID offset by stronger results elsewhere
• Expect zero net debt on 30 April 2022

Commenting on the results, Nick Prest CBE, Chairman of Cohort plc said:

Cohort continued to make progress in 2021, achieving a record adjusted operating profit and revenue. MCL and EID both posted an increase in profit and we benefited from an initial five-month contribution from ELAC. These positive movements were partly offset by weaker performances at SEA, Chess and, to a small extent, MASS.

As always, my thanks go to all employees within the Cohort businesses. Our employees have shown remarkable agility and resilience and have remained focused on the needs of our customers as well as the welfare of all our colleagues.

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The Group has entered the new financial year with a substantial long-term order book. The 30 April 2021 order book of £242.4m underpins nearly £100m of in-year revenue, representing 64% of the consensus forecast. Following further contract awards of over £50m since the start of the financial year, that cover now stands at 70%.

Looking forward we expect that strong performance across most of the Group in 2021/22 will be partly offset by a weaker year at EID. Overall, we expect to achieve continued growth in 2021/22, albeit at a modest level, and to have zero net debt at the year end.

Prospects for 2022/23 depend on order progress in the current year. We are optimistic that the Group will return to a higher rate of growth in 2023/24, based on current orders for long term delivery and our strong pipeline of opportunities.

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A presentation for analysts is being hosted today 27 July 2021 at 9.15am for 9.30am online as follows:

Please join the event 5-10 minutes prior to scheduled start time. When prompted, provide the confirmation code or event title.

WEBCAST: https://webcasting.brrmedia.co.uk/broadcast/60f80d0505da7a5c2646fc86

TELECONFERENCE CALL LINE: [phone]

Confirmation Code:	6712075
Event Conference Title:	Cohort plc - Preliminary results for the year ended 30 April 2021
Time Zone:	Dublin, Edinburgh, Lisbon, London
Start Time/Date:	09:30 Tuesday 27 July 2021

For further information please contact:
Cohort plc	0118 909 0390
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Investec Bank Plc (NOMAD and Broker)	020 7597 5970
Daniel Adams, Christopher Baird
MHP Communications	020 3128 8570
Reg Hoare, Pete Lambie	[e-mail]

NOTES TO EDITORS

Cohort plc (www.cohortplc.com) is the parent company of six innovative, agile and responsive businesses based in the UK, Germany and Portugal, providing a wide range of services and products for domestic and export customers in defence and related markets.

Chess Technologies, through its operating businesses Chess Dynamics and Vision4ce, offers surveillance, tracking and fire-control systems to the defence and security markets. A majority stake was acquired by Cohort plc in December 2018. www.chess- dynamics.com& www.vision4ce.com

EID designs and manufactures advanced communications systems for naval and military customers. Cohort acquired a majority stake in June 2016. www.eid.pt

ELAC SONAR supplies advanced sonar systems and underwater communications to global customers in the naval marketplace. Acquired by Cohort in December 2020. www.elac-sonar.de

MASS is a specialist data technology company serving the defence and security markets, focused on electronic warfare, digital services and training support. Acquired by Cohort in August 2006. www.mass.co.uk

MCL designs, sources and supports advanced electronic and surveillance technology for UK end users including the MOD and other government agencies. MCL has been part of the Group since July 2014. www.marlboroughcomms.com

SEA delivers and supports technology-based products for the defence and transport markets alongside specialist research and training services. Acquired by Cohort in October 2007. www.sea.co.uk

Cohort (AIM: CHRT) was admitted to London's Alternative Investment Market in March 2006. It has headquarters in Reading, Berkshire and employs in total around 1,000 core staff there and at its other operating company sites across the UK, Germany and Portugal.

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Chairman's statement

Performance

Cohort continued to make progress in 2021, achieving a record adjusted operating profit of £18.6m (2020: £18.2m) on revenue of

£143.3m (2020: £131.1m). MCL and EID both posted an increase in profit and we benefited from an initial five-month contribution from ELAC.

These positive movements were partially offset by weaker performances at Chess, SEA and, to a small extent, MASS. Despite increased revenue, Chess's profit performance was down, in part due to an operationally challenging project in support of a multinational military deployment. SEA, despite a restructuring exercise that completed in quarter two, had another disappointing year. Its revenue was down 13% and its trading profit down just over 30%. The fall in revenue was mainly in research and technical support areas for the UK MOD but there was also a drop in transport activity, due to the impact of COVID on local authorities' focus and spend, with lower levels of vehicle traffic in the UK throughout much of last year. SEA however completed the sale of its non-core subsea business to management in August 2020. MASS was slightly weaker after a record 2020 with a lull in activity on a long-term support project.

The need for the Group to manage the issues around COVID and the various restrictions on travel, work and social interaction continued throughout the financial year. At the start, we were still in the first wave of COVID, with restrictions in place and uncertainty about the duration and impact of the pandemic. Subsequently, we saw an easing of restrictions and some resumption of travel, but this was significantly curtailed again late in 2020. Lockdowns, in various guises, in the UK, Portugal and Germany, and our wider markets, extended into 2021 and past this financial year end. Despite this, the Group has continued to deliver to its customers and to grow its revenue. We also secured a good level of orders, the second highest annual total in our history, and improved our funding position from opening net debt of £4.7m to closing net funds of £2.5m.

As a result of COVID-19 we have experienced delay to certain aspects of our work. Some tasks requiring access to customer sites, such as the completion of integration and test activities, have been delayed. We have been unable to perform some training, service and support activities due to travel restrictions affecting either us or our customers. Offsetting this, we have made a significant saving in travel and marketing spend, the latter due to cancellation or postponement of many exhibitions.

We estimate the direct impact on the year ended 30 April 2021 as £6m lower revenue (2020: £3m lower) and £0.2m lower trading

profit (2020: £1m lower), with reduced margin partly offset by overhead savings.

We do not yet know the impact of the travel and marketing restrictions on future order flow. Although 2020/21 was strong for order intake, much of that was from opportunities that were already in the pipeline. We have certainly seen some delays, including to expected orders from the Portuguese Government, due to COVID. Looking forward, we hope to see a return to some pre-COVID normality in the second half of this financial year.

The Group's operating profit of £7.8m (2020: £10.7m) is stated after recognising amortisation of intangible assets of £10.1m (2020:

£7.3m), exceptional items of £1.3m (2020: £0.8m) and research and development expenditure credits of £1.0m (2020: £0.8m).

Profit before tax was £7.1m (2020: £10.0m) and profit after tax was £5.5m (2020: £9.7m).

The closing net funds of £2.5m (2020: net debt of £4.7m) was better than our expectation, due to an improved operating cash flow, particularly at EID, MCL and SEA.

Strategic initiatives

Cohort acquired Wärtsilä ELAC Nautik GmbH in early December 2020, following approval by the German Federal Government, a process that took longer than we had expected, in part due to COVID-19. This approval required certain undertakings from Cohort to safeguard German technical capability and military information. We completed the acquisition of the business, now renamed ELAC Sonar (ELAC), on 2 December 2020. The final price paid was €16.2m and the business included €14.4m of cash on completion. The net cash outflow was €1.8m (£1.3m). There are no further payments to be made.

ELAC joined the Group as Cohort's sixth standalone business and the transaction accorded with our strategy of acquiring businesses, primarily in the defence and security sector, with a strong niche capability and market position. ELAC, which is a market leader in sonar systems technology for naval surface ships and submarines, increases the Group's reach and potential internationally and adds Germany as a new home market. ELAC's potential was demonstrated by its win of an order for €49m from the Italian Navy in early July 2021.

When we acquired Chess in December 2018, we agreed to pay further consideration depending on the performance of the business over the three years ending 30 April 2021. Our current best estimate is that the additional consideration payable, including earn-out, to take control of the whole of Chess in 2021 will now be £2.8m (2020: £4.0m), and will be due on or before 31 October 2021.

Shareholder returns

Adjusted earnings per share (EPS) were 33.63 pence (2020: 37.10 pence). The adjusted EPS figure was based upon profit after tax, excluding amortisation of other intangible assets, net foreign exchange movements and exceptional items. Basic EPS were

13.38 pence (2020: 23.47 pence). The adjusted EPS were lower primarily due to the higher tax charge of 17.4% (2020: 6.6%), in part reflecting the change in mix of tax jurisdictions from which the Group's profits were derived.

The Board is recommending a final dividend of 7.60 pence per ordinary share (2020: 6.90 pence), making a total dividend of 11.10

pence per ordinary share (2020: 10.10 pence) for the year, a 10% increase. The dividend has been increased every year since the Group's IPO in 2006. It will be payable on 27 September 2021 to shareholders on the register at 20 August 2021, subject to approval at the Annual General Meeting on 20 September 2021.

Our people

As always, my thanks go to all employees within the Cohort businesses. Their hard work, skill and ability to satisfy our customers' needs are what continue to drive the performance of our Group. It is a pleasure to welcome our new employees in Kiel, Germany to the Group.

As already highlighted, COVID has continued to be a challenge throughout the year. Our employees have shown remarkable agility and resilience and have remained focused on the needs of our customers as well as the welfare of all our colleagues. Where possible, customer visits have taken place and, in some cases employees have undertaken essential travel to support

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overseas customers, enduring arduous testing and quarantine regimes in both directions. We have continued to enforce COVID safe practices at our places of work and operate shift patterns to ensure safety and delivery to key customers, including the British, Portuguese, and German armed forces as well as export customers and partners.

We continue to see a return of colleagues to work on site and now have around 50% of our employees back on site on a part-time or regular basis. We currently expect 75% of our workforce to be primarily site-based by October 2021and thereafter to see a mix of home and office-based working continue for at least some time.

Andy Thomis, Simon Walther and their senior executive colleagues have continued their dedicated and skilful work which has helped the Group to progress in the face of challenging conditions.

Governance and Board

As previously announced, Sir Robert Walmsley retired from our Board on 31 December 2020. Sir Robert has continued to provide consultancy services to the Group, deploying his skills and experience in project management and knowledge of the naval market.

As separately announced today, Beatrice Nicholas will join the Board as a non-executive director on 1 September 2021. Beatrice had a long and successful career in the defence industry with GEC, BAE Systems and Leonardo and brings a wealth of experience in engineering, project management and general management, much of it in products and technologies closely aligned to Cohort. We look forward to welcoming her to the Board and to her contribution.

I also take this opportunity to welcome new Managing Directors to the Group. Frederico Lemos joined EID in late November 2020, succeeding António Marcos Lopes who retired after 37 years of service. At SEA, Richard Flitton joined us in January 2021 replacing Steve Hill. I also welcome the joint Managing Directors of ELAC, Bernd Szukay and Ole Schneider, who joined the Group in December having both been with ELAC for over ten years.

Outlook

Prior to the COVID-19 pandemic governmental expenditure on defence and security was growing in many parts of the world, as a response to perceived increases in threats of various kinds. So far, we have not seen any notable examples of decreases as a result of public expenditure pressures following fiscal expansions in response to COVID-19, but we are conscious this is a risk.

Our business from the UK into EU countries and vice versa remains small (£4.7m in 2021; £3.0m in 2020), and consequently we do not expect any direct effects upon Cohort from Brexit. In the longer term there could be indirect effects, resulting from the broad economic and political consequences, and the future defence and security relationship that develops between the UK and the EU.

In the UK, we welcomed the recent strategic review and the four-year spending plan for the UK MOD. Both of these improve visibility and provide momentum, some of which we have already seen at MCL. The Cohort businesses have strong and relevant capabilities for both the current and evolving needs of our principal customer, established positions on some key long-term UK MOD programmes and a good pipeline of new opportunities. This was demonstrated by SEA's recent contract win to support the UK's in-service sonar equipment. Export prospects for the Group continue to develop, as exemplified by Chess's successes in the year and the recent large win at ELAC. For the first time in Cohort's history, revenue derived from the UK MOD is in a minority.

Our order intake for the year was £180.3m (2020: £124.4m). As we indicated last year, a number of key export orders were secured in the year, on most of which work has started. Renewals of important orders from the UK MOD were secured by SEA and MASS. These are for services and support we have successfully delivered for many years and winning these is an endorsement of our service focus to our major customers. One of these orders provides visibility of revenue out to 2031.

The Group has entered the new financial year with a substantial long-term order book. The 30 April 2021 order book of £242.4m underpins nearly £100m (2020: £84m) of current financial year revenue, representing 64% of expected consensus revenue for the year. Following order wins since the start of the financial year of over £50m, including recent announcements, that cover now stands at 70%.

As we indicated in our trading statement of 26 May 2021, EID's order intake in the year just finished was poor and as a result its expected performance for 2021/22 will be much weaker than its strong 2020/21 performance, revenue being down by around a third. The remainder of the Group continues to make progress and we expect revenue to grow in 2021/22 but the change in revenue and margin mix, especially the decline at EID, will see the Group's trading performance grow more slowly in 2021/22.

Overall, we continue to expect that our trading performance for 2021/22 will be slightly ahead of that achieved for the year ended 30 April 2021 and to have zero net debt at the year end.

Prospects for 2022/23 depend on order progress in the current year. We are optimistic that the Group will return to a higher rate of growth in 2023/24, based on current orders for long term delivery and on our pipeline of opportunities.

Nick Prest CBE

Chairman

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