Cohort : Preliminary Results

One Waterside Drive

Arlington Business Park

Reading

Berks

RG7 4SW

19 July 2023

COHORT PLC

UNAUDITED PRELIMINARY RESULTS

FOR THE YEAR ENDED 30 APRIL 2023

Record operating profit, revenue and order book. Further progress expected.

Cohort plc today announces its unaudited results for the year ended 30 April 2023.

	2023	2022	%
Revenue	£182.7m	£137.8m	33
Adjusted operating profit1	£19.1m	£15.5m	23
Adjusted earnings per share1	36.48p	31.08p	17
Net funds2	£15.6m	£11.0m	42
Order intake	£220.9m	£186.4m	19
Order book (closing)	£329.1m	£291.0m	13
Proposed final dividend per share	9.15p	8.35p	10
Total dividend per share	13.40p	12.20p	10
Statutory	2023	2022	%
Statutory profit before tax	£13.9m	£10.2m	36
Basic earnings per share	27.92p	22.55p	24

Highlights include:

• Record adjusted operating profit of £19.1m (2022: £15.5m) on record revenue of £182.7m (2022: £137.8m)
• Growth in both reporting divisions:

1. Especially strong performance from within the Communications and Intelligence division, driven by significant uplift in

UK MOD activity at MCL.

• 1. Improved performance within Sensors and Effectors, with Chess delivering better operational performance.
• Net funds higher than market expectations at £15.6m (2022: £11.0m) with continuing robust cash generation.
• Dividend increased by 10%; the dividend has been increased every year since the Group's IPO in 2006.

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.

2Excludes IFRS 16 lease liabilities.

Looking forward:

• Strong order intake of £220.9m (2022: £186.4m) leading to a record closing order book of £329.1m (2022: £291.0m)
• Underpins a record 80% of current market revenue expectations for 2023/24 (78% equivalent figure for 2022/23).
• Encouraging start to the 2023/24 financial year. Expectations for the full year unchanged.

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

"This was a record performance for Cohort, which came in slightly above market expectations, with robust cash generation and a record closing order book giving us strong revenue cover for the coming financial year.

Our order book is not only growing in value, but its longevity continues to increase and we now have orders across the Group stretching out to 2032. We have good prospects to secure further long-term orders for our naval systems and support work, including from the UK MOD, Portugal and in export markets, as recently exemplified by the £26m order announced 9 May 2023 and a first order for our KDS anti-submarine system of over £7m announced on 30 May 2023.

The order book underpins more than £140m (80%) of 2023/24 revenue expectations (2022: £128m). Following order wins since the start of the financial year of over £60m, that cover now stands at just over 90%.

We continue to expect that our trading performance for 2023/24 will be ahead of that achieved for the year ended 30 April 2023. As a result of planned capital expenditure and expansion in working capital we expect that our net cash balance will decrease, but that we will maintain positive net funds at the year end.

We are optimistic that the Group will make further progress in the medium to longer term, based on current orders for long-term delivery, our continued investment in the businesses and on our pipeline of opportunities."

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A meeting is being held today 19 July 2023 for analysts, hosted by Andy Thomis, Chief Executive, and Simon Walther, Finance Director, from 09.00am for a 09:30am start. Please contact MHP [e-mail] you wish to attend.

For those unable to attend in person, there will be a recording of the presentation available on Cohort's website after the meeting: https://www.cohortplc.com/investors/results-reports-presentations

Investor Presentation

Chief Executive, Andy Thomis, and Finance Director, Simon Walther, will present these results to investors by webinar on Friday, 21st July at 11am. Registration is free and questions can be submitted during the presentation which will, if possible, be addressed at the end of it. A recording will also be made available afterwards.

To attend the event, please register athttps://us06web.zoom.us/webinar/register/WN_giONcRAoQaavPuq0Q4HW9A

For further information please contact:
Cohort plc	0118 909 0390
Andy Thomis, Chief Executive
Simon Walther, Finance Director
Emily McBride, Head of Corporate Communications
Investec Bank Plc (NOMAD and Broker)	020 7597 5970
Carlton Nelson, Christopher Baird
MHP	020 3128 8276
Reg Hoare, Ollie Hoare, Hugo Harris	[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.

Cohort (AIM: CHRT) was admitted to London's Alternative Investment Market in March 2006. It has headquarters in Reading, Berkshire and employs in total over 1,100 core staff there and at its other operating company sites across the UK, Germany, and Portugal.

The Group is split into two divisions - Communications and Intelligence, and Sensors and Effectors:

Communications and Intelligence

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

Sensors and Effectors

• Chess Dynamics offers surveillance, tracking and fire-control systems to the defence and security markets. Chess has been part of the Group since December 2018. www.chess-dynamics.com
• 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
• 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. https://www.sea.co.uk/

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Chairman's statement

"Record performance, slightly above expectations, robust cash, and a record closing order book with strong revenue cover for the coming financial year."

Performance

The Group achieved a record adjusted operating profit of £19.1m (2022: £15.5m) on record revenue of £182.7m (2022: £137.8m), a result that slightly exceeded market expectations. Compared to 2021/22, significant improvements in performance were seen in both reporting divisions.

The Group had another strong year of order intake, winning £220.9m of orders (2022: £186.4m), resulting in a record closing order

book of £329.1m (2022: £291.0m). Our order book now stretches out to 2032 and we expect to extend that further in the coming year.

Our Communications and Intelligence division had a strong year, delivering a 21% increase in trading performance on 26% revenue growth and an operating margin of 17.3% (2022: 17.9%). Sales to UK MOD offset a weaker performance at our Portuguese business, EID, which made a marginal trading loss, a result of continuing weak performance in Portugal due to continuing delays to new programmes, particularly with the Portuguese Navy. We now expect these orders to be placed in 2023/24. Most of the improvement in this division arose at MCL from high demand for hearing protection, communication equipment and drones from the UK MOD. We also saw good order intake with MASS securing several order extensions with its UK MOD customers, continuing work it has been undertaking for many years.

The Sensors and Effectors division also saw an improved performance. Adjusted operating profit was up 25% on 39% higher revenue, producing an operating margin of 9.7% (2022: 10.8%). The strong order intake in the last financial year, especially for naval systems and support, was a significant factor in the improvement. This included an improved result at Chess where a much better financial performance was achieved alongside resolving the remaining project issues. ELAC continues to make progress on its project to provide a world-leading sonar solution to the Italian Navy's new submarines. At present we are trading this contract at a low margin whilst moving through the design phase. We expect to begin production in the coming financial year.

The impact of COVID-19 has now largely dissipated, although we continue to face higher prices in some of our supply chains. Face-to-face meetings, including exhibitions and engagement with customers, have largely returned to pre-pandemic levels.

The Group's statutory operating profit of £15.3m (2022: £11.1m) is stated after recognising amortisation of intangible assets of

£3.7m (2022: £6.9m), no exceptional items (2022: £0.7m income) and research and development expenditure credits of £0.9m

(2022: £1.0m). Profit before tax was £13.9m (2022: £10.2m) and profit after tax was £11.3m (2022: £8.7m).

The closing net funds of £15.6m (2022: £11.0m) was better than our expectation, due to an improved operating cash flow, particularly in the Communications and Intelligence division. Within Sensors and Effectors, Chess delivered a welcome improvement in cash performance, unwinding a significant proportion of its opening working capital.

International conflict

Russia's invasion of Ukraine has resulted in extraordinary hardship and suffering for the people of that country and has brought war to the plains of Europe for the first time in almost 80 years. One of the consequences of this situation is the impact on public and government perceptions worldwide of the importance of an effective defence capability. At the time of the invasion, last year, many governments across the world had to re-learn that the stability of democracy and maintenance of our freedoms and values requires strong defence to deter, and if necessary repel, an aggressive invader. It is also clearer than ever that strong defence depends on a strong defence industry as well as capable armed forces. That is something Cohort's leadership and employees understand well, and for many of us it is a large part of our motivation at work. By contributing to the security of the UK and its allies, Cohort generates social value as well as financial returns. Our customers' response to the situation in Ukraine had a positive business impact in 2021/22 and, as we expected, this increased in 2022/23. At this time, the duration and outcome of this conflict is difficult to predict but, as we stated last year, we believe that the long-term change in defence stance that has been catalysed by these events, especially among NATO countries, will be of benefit to the Group. Study work by McKinsey1 forecasts an increase in European defence spending of between 53% and 65% from 2021 to 2026. To set against this, we expect to see continuing economic fallout from the war in Ukraine, including higher inflation and rising interest rates as well as sustained higher energy costs.

Further afield, the increasingly assertive approach of China in the South China Sea, Taiwan and beyond, mostly through naval power, is driving a response among nations in that region. One example is Australia's AUKUS alliance between the UK, Australia and the US. Joint development of future nuclear submarines is a key component of this, and our strong involvement with the UK submarine programme positions us well to participate. But the scope of the alliance is much wider, and we are looking to engage in other areas including electronic warfare and artificial intelligence. Elsewhere Japan has announced an intention to increase annual defence spending by 65% by 2027, as well as move towards a wider international supply base. We already supply Japan through our Sensors and Effectors division and are looking to build relationships and demonstrate our other capabilities.

The prospects for the Group in this region, especially in naval systems supplied mostly through our Sensors and Effectors division, are good.

Strategic initiatives

When we acquired Chess Dynamics in December 2018, we agreed to pay further consideration depending on the performance of the business over the three years ended 30 April 2021. We took control of the whole of Chess on 30 November 2022 for a further consideration of £1.0m.

The Group continues to review acquisition opportunities as they arise, in line with our investment criteria.

1 McKinsey & Company: "Invasion of Ukraine: Implications for European defence spending", 19 December 2022 Page 3 of 20

Shareholder returns

Adjusted earnings per share (EPS) were 36.48 pence (2022: 31.08 pence). The adjusted EPS figure was based on profit after tax, excluding amortisation of other intangible assets, net foreign exchange movements and exceptional items. Basic EPS were 27.92 pence (2022: 22.55 pence). The adjusted EPS were 17% higher primarily due to the stronger adjusted operating profit (up 23%), partly offset by a higher interest charge and tax charge of 14.8% (2022: 13.5%).

The Board is recommending a final dividend of 9.15 pence per ordinary share (2022: 8.35 pence), making a total dividend of 13.40

pence per ordinary share (2022: 12.20 pence) for the year, representing a 10% increase. The dividend has been increased every year since the Group's IPO in 2006. It will be payable on 3 October 2023 to shareholders on the register at 25 August 2023, subject to approval at the Annual General Meeting on 26 September 2023.

Over the medium term, the Group plans to maintain a policy of growing its dividend each year broadly consistent with the growth in adjusted earnings per share growth.

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.

As already highlighted, the impact of COVID-19 has now largely dissipated, and we have in most instances returned to normal work and travel practices. Where appropriate we continue to offer flexibility to our employees as to their location of work, including hybrid working in some cases.

Andy Thomis, Simon Walther and their senior executive colleagues have continued their dedicated and skilful work which has helped the Group to continue its progress.

Governance and Board

We completed our first externally facilitated Board evaluation in March 2023, the process for and results of which can be found in the Corporate Governance report. I will work with the Board and Company Secretary to agree which of those recommendations we will prioritise for implementation in 2023/24. We continue to adhere to the QCA Corporate Governance Code (2018 edition) (the QCA Code).

The Board regularly evaluates and reviews the Group's environmental, social and governance (ESG) activity and is committed to maintaining appropriate standards. The Group has reported for the first time on the Taskforce on Climate-related Financial Disclosures (TCFD). As one of the first AIM companies to be required to do this under the legislative timetable, we have taken a pragmatic approach whilst also anticipating that the reporting on this matter will no doubt change and develop and require our future reporting to adjust accordingly.

The Group's values, stakeholder engagement principles and governance policies are all outlined on our website.

Encouraging outlook for Cohort

Our order intake for the year was strong and as a result of this success, the Group has entered the new financial year with a record order book of £329.1m. As we have indicated in the last few years, our order book is not only growing in value, but its longevity continues to increase. We now have orders across the Group stretching out to 2032. We have good prospects in the coming year to secure further long-term orders for our naval systems and support work, including from the UK MOD, Portugal and in export markets, as recently exemplified by the £26m order announced 9 May 2023 and a first order for our KDS anti-submarine system of over £7m announced on 30 May 2023.

The order book underpins over £140m (80%) of current financial year revenue expectations (2022: £128m). Following order wins since the start of the financial year of over £60m, that cover now stands at just over 90%.

Overall, we continue to expect that our trading performance for 2023/24 will be ahead of that achieved for the year ended 30 April 2023. We have had an encouraging start to the new financial year and our expectations for the full year are unchanged.

As a result of planned capital expenditure and expansion in working capital we expect that our net cash balance will decrease, but that we will maintain positive net funds at the year end.

We are optimistic that the Group will make further progress in 2024/25, based on current orders for long-term delivery and on our pipeline of opportunities.

Nick Prest CBE

Chairman

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Operations Review

"The Group's performance for the year showed a significant improvement on 2021/22 and was slightly ahead of market expectations. Both of our reporting divisions performed better than last year driven by higher UK MOD activity in Communications and Intelligence and a recovery in Chess's operating performance in Sensors and Effectors. Cash performance was also better than expected, resulting in another strong positive net cash position at the year end. Order intake was a record high, and the resulting record order book gives us a solid base for 2023/24 and beyond. We see good prospects for further significant new orders in the year ahead."

2022/23 highlights

• Record adjusted operating profit of £19.1m (2022: £15.5m) on record revenue of £182.7m (2022: £137.8m).
• Growth in both new reporting divisions:

1. Especially strong performance from the Communications and Intelligence division, driven by significant uplift in UK MOD activity at MCL.

• 1. Sensors and Effectors also performed well, with Chess delivering an improved performance.
• Strong order intake of £220.9m (2022: £186.4m) leading to a record closing order book of £329.1m (2022: £291.0m). That underpins a record 80% of current market revenue expectations for 2023/24 (78% equivalent figure for 2022/23).
• Strong cash conversion leading to higher net funds at £15.6m (2022: £11.0m).
• Dividend increased by 10%.

Operating review

The Group's revenue of £182.7m (2022: (£137.8m) was 33% higher than last year and delivered an adjusted operating profit of

£19.1m (2022: £15.5m), 23% higher than last year.

The Group's statutory operating profit of £15.3m (2022: £11.1m) reflects the amortisation of other intangible assets, a £3.7m non-

cash charge in 2023 (2022: £6.9m charge).

In this review the focus is on the adjusted operating profit of each division, which we consider to be a more appropriate measure of performance year on year. The adjusted operating profit is reconciled to the operating profit in the Consolidated income statement, and this is broken down by reporting segment in note 2.

The adjusted operating margin of the Group was 10.4%, a small drop compared to the 11.2% achieved in 2021/22. The net margin was slightly lower in Communications and Intelligence with stronger UK MOD sales offset by the weaker performance at EID, which made a small operating loss. In Sensors and Effectors, the net margin was also lower, primarily from the mix of work with the Italian Submarine programme being traded at a low margin whilst the programme makes its way through its design phase. As expected, Chess improved its performance, but its net margin remained below what we expect to see in the longer term as it resolved a number of project issues. Higher head office costs, mostly due to accruing for future bonus awards under the new Long Term Incentive Plan, also contributed to the weaker net margin.

We expect the Group net operating margin to improve going forward as some of the current inefficiencies, primarily at EID and Chess, are reversed.

2023 saw another strong year for order intake, with £220.9m of new work contracted compared with £186.4m in 2022. That resulted in a record closing order book of £329.1m, an historic high for the Group, underpinning 80% of the latest market consensus forecast revenue for 2024. Cash flow was robust, the Group closing the year with net funds of £15.6m (2022: £11.0m).

Adjusted operating profit by reporting segments:

	Adjusted operating
	profit			Adjusted operating margin
	2023	2022	2023	2022
	£m	£m	%	%
Communications and
Intelligence	14.9	12.2	17.3	17.7
Sensors and
Effectors	9.4	7.5	9.7	10.8
Central costs	(5.2)	(4.2)	-	-
	19.1	15.5	10.4	11.2

Communications and Intelligence

• Revenue - £86.2m (2022: £68.4m)
• Adjusted operating profit - £14.9m (2022: £12.3m)
• Operating cash flow - £8.3m (2022: £12.2m)
• Headcount - 432 (2022: 436)

Communications and Intelligence delivered improved revenue and adjusted operating profit. Much of this was driven by increased activity with the UK MOD, primarily through MCL where we saw significant orders for communication equipment, including hearing protection and vehicle intercoms. In addition, we supplied a range of tactical autonomous air vehicles. Elsewhere in this division,

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