Cohort (CHRT)


Cohort contract wins offer hope

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Defence and technology consultancy Cohort has won contracts worth £6m. After a disappointing half-year, the news adds some credibility to management’s assertion the second half will be better.

Yesterday, Share Sleuth portfolio member Cohort announced new contracts worth £6m in total. SCS will provide training and exercise support services for the Joint Warfare Division of the Joint Forces Command, which ensures joint capabilities across the armed services are efficiently managed. The contract is worth £3m initially. The other two contracts, worth £3m combined, are for the supply of MASS' THURBON  Electronic Warfare Data Management System to a customer in the Middle East and a customer in the Far East. The company will also supply training, support and ICT infrastructures.

In the context of Cohort (CHRT)'s £70m revenue in 2013, the company's dependence on its home market where the defence budget remains under pressure, and the higher profitability of MASS in comparison to its two sister companies, the contracts for THURBON are perhaps more significant if they are harbingers of increased exports. THURBON has already been selected as the UK's next generation EW data management system.

The training contract is similar to previous contracts with Joint Forces Command and its predecessor organisation, which the company says it has held continuously since 1996. It runs until March 2015 and may be extended at the JFC's discretion. Undeniably good news, it may be best interpreted as a contract renewal rather than new businesses, although it was won in a competitive tendering process.

Though modest, the announcements add some credibility to management's claim that the second half of this will financial year will be a big improvement on the first.

Cohort is probably a stalwart, capable of good returns on capital averaged over the long-term and remaining comfortably profitable even when tested. It's probably undervalued and under-represented in the Share Sleuth portfolio.

A share price of 172p values the enterprise at just over £70m, or about ten times earnings. The earnings yield is 10%.


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