Cohort PLC (COHTF) Full Year 2026 Earnings Call Highlights: Record Revenue and Strategic Growth

Cohort PLC (COHTF) Full Year 2026 Earnings Call Highlights: Record Revenue and Strategic Growth

Stocks end lower as tech bleeds, Fed policymaker calls for ’modestly higher’ rates GuruFocus - - Revenue: Increased to over GBP306 million. - Adjusted Operating Profit: Grew by 32% to more than GBP36 million. - Order Intake: GBP314.2 million, exceeding revenue.

- Year-End Order Book: Nearly GBP620 million, with contracted work extending to 2037. - Operating Cash Flow and Net Funds: Lower than last year due to working capital movements and investments, but group remains in positive net funds. - Full-Year Dividend: Increased by 10% to 17.9p.

- Communications and Intelligence Division Revenue: Increased by 27% to GBP158.9 million. - Communications and Intelligence Division Operating Profit: Rose by more than 50% to GBP32.4 million. - Communications and Intelligence Division Operating Margin: Improved to 20.4%.

- Sensors and Effectors Division Revenue: Relatively flat at GBP147.5 million. - Net Funds Position: Returned to positive GBP2.2 million at year-end. - Cash from Operations (Last Five Years): GBP142 million.

- Investment in Business (Last Five Years): Approximately GBP60 million organically. - Acquisitions Investment (Last Five Years): Just over GBP40 million. - Order Book Revenue for Delivery This Year: Approximately GBP264 million.

- Communications and Intelligence Order Book Contribution: GBP128 million. - Sensors and Effectors Order Book Contribution: GBP136 million.

For the complete transcript of the earnings call, please refer to the full earnings call transcript. Positive Points - Cohort PLC (COHTF) reported record revenue and adjusted operating profit for the ’25/’26 financial year, with revenue exceeding GBP306 million and operating profit growing by 32% to over GBP36 million. - The company has a strong order book of nearly GBP620 million, providing excellent visibility of future revenues with contracted work extending out to 2037.

- Cohort PLC (COHTF) has consistently increased its dividend every year since 2006, reflecting the resilience of its business model and confidence in long-term prospects. - The Communications and Intelligence division saw a significant revenue increase of 27% and an operating profit rise of over 50%, driven by strong program execution and favorable contract awards. - The company maintains a strong balance sheet with positive net funds, demonstrating robust cash generation and financial health.

- The Sensors and Effectors division experienced flat revenue and decreased profitability due to the disposal of a high-margin non-core transport business. - Cohort PLC (COHTF) moved from a net funds position to net debt during the year, primarily due to significant working capital outflows associated with major program execution. - The company faces operational challenges at Chess, with the need to consolidate operations from 13 buildings into a single facility to improve efficiency.

- There is a risk associated with the Sensors and Effectors division’s margins, which were about 7% in the period, with Chess remaining a key risk factor. - The UK market, which accounts for a significant portion of revenue, is not expected to grow as rapidly as export markets, potentially impacting overall growth. A: The site for the new facility has been identified, and planning permission discussions are underway.

The current setup of 13 buildings at Chess involves logistical challenges, such as transporting equipment between buildings, which affects operational efficiency. The new facility aims to improve this by consolidating operations under one roof. Q: What accounts for the GBP60 million of organic investment, and what is the missing piece beyond the Chess facility and usual CapEx?

A: The GBP60 million includes private venture research and development (R&D) spending. Last year, GBP30 million was spent on R&D, with over 70% funded by customers.

Investments are focused on projects like ERAZOR and ENLITOR, targeting customer needs. Q: What are the key factors driving the expected margin improvement in the Sensors and Effectors division? A:

Chess remains the key factor in driving net margin improvement. The division aims to deliver the first Italian boat set and close out low-margin projects at SEA. Chess is expected to move from breakeven to a decent return, supported by strong demand and an improved facility by 2028.

Q: Is there a scenario where Cohort’s businesses might be brought together under single leadership instead of operating as standalone entities? A: Not in the foreseeable future. The current structure allows for agility and responsiveness, which is crucial for meeting defense needs.

Combining resources into an integrated business would reduce this agility and is not currently planned. Q: What is the outlook for EM Solutions in Australia, given the reduction in size flagged in the order book? A: EM Solutions has a strong set of opportunities, including providing satellite communications for the growing Australian naval fleet.

The company is expected to benefit from new naval programs and has a good future despite potential fluctuations in order timing. For the complete transcript of the earnings call, please refer to the full earnings call transcript.