Cohort plc Annual Report 2023

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FY2023 Annual Report · Cohort plc

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Strategic report

Governance

Financial statements

Cohort plc Annual Report and Accounts 2023
Cohort plc Annual Report and Accounts 2023

1
1

Our strategic roadmap

Supporting entrepreneurial businesses
to grow and innovate in defence,
technology products and services

Our purpose
We support the businesses within our Group to grow. With a focus on
entrepreneurialism, we foster agility and promote innovation. Our strong
balance sheet provides a stable financial foundation. We create an environment
of trust where our businesses share knowledge to widen market access and
through partnership open doors globally.

Our strategy

Organic growth

Acquisition

Maintaining confidence

READ MORE AT COHORTPLC.COM/INVESTORS

Strategic reportGovernanceFinancial statementsChairman’s statement

Cohort plc Annual Report and Accounts 2023

Record year and strong order cover for the coming year

Nick Prest CBE
Chairman

“ Record performance, slightly
above market 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). The Group’s net funds also finished
at a higher level than we expected at the start of the
year, £15.6m compared with £11.0m in 2022, as the
Group benefited from the earlier phasing of some
deliveries and therefore collection of receivables
than in previous years.

Our Communications and Intelligence division had a
strong year, delivering a 21% increase in trading
performance on 26% revenue growth, 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. This was a
result of 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 closing out 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. Our order
book now stretches out to 2032 and we expect to
extend that further in the coming year.

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) were
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 it has had
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 required 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 that 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
war are 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 the McKinsey organisation1 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.

McKinsey & Company: “Invasion of Ukraine: Implications
for European defence spending”, 19 December 2022.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

The order book underpins over £140m of current
financial year revenue (2022: £128m), representing
80% of current market expectations of revenue for
the year. 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. 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

Chairman’s statement continued

International conflict continued
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 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.

DIVIDEND (PENCE PER ORDINARY SHARE)

13.40p +10%

13.40

12.20

11.10

10.10

9.10

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, 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.

Andrew 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 Task
Force 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 of ensuring compliance 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
and in this Annual Report and Accounts.

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 export markets, as recently exemplified
by the £26m order announced on 9 May 2023 and a
first order for our KDS anti-submarine system of over
£7m announced on 30 May 2023.

Strategic reportGovernanceFinancial statementsOur markets

Applying advanced technology to protect
and secure, we nurture agile partnerships
across our markets

Cohort plc Annual Report and Accounts 2023

Defence and security
X We supply electronics, software, electromechanical
solutions and knowledge-based services to defence
customers, across all domains, with a focus on
maritime and land.

X Direct customers include Ministries of Defence,
platform providers, system integrators and
infrastructure operators in national and
international markets.

Other (non-defence and
security) revenue
X We provide high-integrity software and hardware
solutions for transport systems. The Group also
continues to support legacy products and services
in non-defence areas with related technologies.

Operating domain

Maritime
Equipment, systems and services operated primarily
by navies for use on or below the surface, the shore,
and the airspace linked to the maritime domain.

Land
Equipment, systems and services operated primarily
by armies on or from the land. This includes certain
airborne assets such as uncrewed air systems, where
deployed in support of the land domain.

Air and Space
Equipment, systems and services for use in the air, in
space, or in support of airborne, or spaceborne assets.

Joint and Strategic
Equipment, systems and services supplied for use in a
joint/multi-domain operating environment or in
strategic-level headquarters and departments.

Cyber and Security
Equipment, systems and services operated by the armed
forces, government and public and private sectors
within the information and security environment.

LAND

42%

Revenue by domain

25%

47%

2022

2023

MARITIME

36%

R25+
7%42+

JOINT AND STRATEGIC

OTHER

CYBER AND
INFORMATION

AIR AND SPACE

Strategic reportGovernanceFinancial statements3
+
4
+
8
+
7
+
36
+
R
5
+
6
+
9
+
8
+
47
+
+
U
Geographic analysis

Revenue by division and geography

Cohort plc Annual Report and Accounts 2023

Germany

Portugal

North and
South America

Asia Pacific and Africa

NORTH AND
SOUTH AMERICA

Total

£5.7m

(2022: £4.8m)

Communications
and Intelligence
£0.4m
(2022: £0.1m)

OTHER
EUROPEAN COUNTRIES

Total

£38.2m

(2022: £20.9m)

Communications
and Intelligence
£2.1m
(2022: £3.5m)

£109.6m

(2022: £80.1m)

Communications
and Intelligence
£73.1m
(2022: £53.9m)

Sensors and Effectors
£36.5m
(2022: £26.2m)

GERMANY

Total

£4.3m

(2022: £4.5m)

Communications
and Intelligence
£nil
(2022: £0.1m)

Sensors and Effectors
£4.3m
(2022: £4.4m)

PORTUGAL

Total

£5.0m

(2022: £3.9m)

Communications
and Intelligence
£4.9m
(2022: £3.9m)

Sensors and Effectors
£0.1m

ASIA PACIFIC AND AFRICA

Total

£19.9m

(2022: £23.6m)

Communications
and Intelligence
£5.7m
(2022: £6.9m)

Sensors and Effectors
£14.2m
(2022: £16.7m)

Sensors and Effectors
£5.3m
(2022: £4.7m)

Sensors and Effectors
£36.1m
(2022: £17.4m)

FULL DETAILS AVAILABLE IN THE FINANCIAL STATEMENTS

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Our mission is clear
To build and operate a group of companies applying
advanced technology in defence, security and
related markets and combining the innovation and
responsiveness of smaller, independent businesses
with the stability, shared knowledge, wider market
access and lower funding costs of a listed group to
provide enduring benefits to customers, employees
and shareholders.

Business model

Significant competitive advantage

Significant
competitive advantage
Being part of the Cohort Group brings significant advantages
to our businesses compared with operating independently

Market access

F
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h

gy from the G r o

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c
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t
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n
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Autonomous agile businesses combining
niche technology with highly skilled
people and an agile approach

alone acquisition

o lt-in acquisition

Clear acquisition approach
There are good businesses in the UK and overseas that
would thrive under Cohort ownership

Strategic reportGovernanceFinancial statements

Business model continued

How we create value

Cohort plc Annual Report and Accounts 2023

We create solutions to keep people
safe. Acting with agility to find a
better way, make smart decisions
and meet customers’ needs.

Where independent subsidiaries
are free to grow, nourished by the
strength and resilience of a supportive
parent. Bringing the power of the
Group to the ingenuity of our
businesses. To deliver purposeful
innovation that protects us all.

Our shareholders
We are committed to delivering value to our
shareholders and ensuring that they benefit from our
success. We are focused on delivering high standards
of corporate governance and providing clear,
consistent communication.

Our customers
Our global customers depend on us to deliver reliably.
We use innovation to stay at the forefront of defence
and security technology solutions for our customers,
aiming to be their trusted partner of choice. Our
culture of openness and support makes us easy to
do business with.

Our suppliers and partners
Our suppliers and partners are critical to the success
of our business. We work closely with them to build
long-term relationships. We ensure that they are
paid in line with our commitments for goods and
services received.

Our people
Our capabilities and customer relationships all
ultimately derive from our people. Guided by our
values, all employees across the Cohort Group can
fulfil their potential, develop their careers, make a
difference through the roles that they undertake,
and feel rewarded for what they do.

Our communities
We recognise the importance of engaging with our
local communities. We do this through education, work
experience, fundraising and sponsorship initiatives, and
engage with many military and veterans’ charities.
Across the Group we employ armed forces reservists
and are proud to be a signatory of the UK Armed Forces
Corporate Covenant.

Strategic reportGovernanceFinancial statementsStrategy

A clear strategy for growth

Three key objectives form our clear strategy for growth.

Cohort plc Annual Report and Accounts 2023

Consistently grow profits and cash generation
organically through our subsidiaries.

Increase the profitability of the Group and access new
markets through selective acquisitions.

Ensure good corporate governance, sound management of
subsidiaries and effective communications to shareholders.

Organic growth
Delivered through
X A focus on developing long-term customer partnerships.

Acquisition
Delivered through
X Proactive engagement with businesses that can add value to the Group.

X Encouraging innovation and responsiveness.

X Maintaining a strong acquisition team.

X Identifying and pursuing growth opportunities in new and existing markets.

X Demonstrating a structure and culture that are attractive to

X Developing high-quality leadership teams and a high-performance culture.

potential sellers.

X Creativity and flexibility in structuring transactions to bridge value gaps.

What we did in 2022/23
X Acquisition of non-controlling interest in Chess completed

November 2022.

X Reviewed numerous acquisition opportunities.

Our priorities for 2023/24
X Continue to seek value-adding acquisitions with strong market

positions in relevant sectors.

What we did in 2022/23
X Strong organic revenue growth in both divisions, 26% in Communications
and Intelligence and 39% in Sensors and Effectors. Result was a record
adjusted operating profit performance for the Group, up 23% on 2021/22.

X Record closing order book and improved visibility. On order cover for 2023/24 at
record high of 80% of latest external forecasts. Length of order book out to 2032.

X Improved operational performance at Chess within Sensors and Effectors

and closure of legacy issues.

X Group headcount increased from 1,050 to 1,132 over the year to meet the

demands to deliver the growing order book.

Our priorities for 2023/24
X Continue to improve long-term order book across the Group.

X Improve order intake at EID.

X Seek opportunities from increased focus on defence stance, especially in

NATO and Southeast Asia.

X Monitor and proactively manage supply chain and recruitment challenges.

X Improve efficiency of delivery to drive a better overall net margin.

Maintaining confidence
Delivered through
X Management of subsidiaries through a framework of financial control,
strategy review, performance management and leadership development.

X An effective operational strategy providing support and guidance when

circumstances change.

X Providing clear and consistent investor communications through all channels.

What we did in 2022/23
X New divisional reporting introduced for the year ended 30 April 2023.
Provides a clearer presentation of the Group’s subsidiaries through
aligned capabilities.

X Operational control improvements at Chess achieved. Improved

delivery and cash performance. Legacy issues closed out.

X During the year the Board engaged an external evaluator to review

the performance and effectiveness of the Board to drive
continuous improvement.

Our priorities for 2023/24
X Continue to embed risk management including environmental reporting.

X Implement actions arising from Board review.

Strategic reportGovernanceFinancial statementsStrategy in action

Innovation and technology

Our customers rely on us to deliver
innovative solutions and purposeful
technology that is driven by their
needs. Innovation is at the centre
of what we do. We dedicate the
equivalent of 50% of our profits
to innovation and employ the best
technology and domain experts
to stay at the forefront of defence
and security technology solutions.
We participate in UK MOD and
government research frameworks
and we develop products in house,
through inter-company collaboration
and working in partnership with
suppliers and customers. We
continuously develop and improve
key performance indicators and
processes to ensure customer
delivery and needs remain a priority.

Communications and Intelligence

Learning lessons from defence
to healthcare
By adapting proven and effective services provided
to defence customers, and through its strong data
management capability, MASS has supported an
NHS Trust to improve the way it learns, as an
organisation, from major and minor incidents.
The MASS Lessons Learned team has supported
UK Defence for several years, by enabling and
coordinating the observing, capturing and
analysing of lessons from all UK military
operations. Its work has helped foster the
development of a genuine learning culture within
MOD HQ and Strategic Command. The team has
been able to adapt this model for the healthcare
sector, recognising the common goal of continuous
improvement. The MASS team helped the NHS
Trust by providing a bespoke training course and
mentoring package for the Trust’s new Medical
Lessons Team on how to generate an effective
overall learning process from incident reporting by
individuals to Lessons Learned by the organisation.
This will enable the Trust’s Medical Lessons Team
to develop action plans to address issues raised
and then ensure their implementation. MASS is
also delivering a data management system to
provide the essential tool with which to manage
the lessons process. The combined training and
data management package will allow the Trust to
implement an effective safety learning culture
across its multiple sites for the first time.

Cohort plc Annual Report and Accounts 2023

Dismounted Soldier
System Integrator
EID has developed an integrator device that acts
as the centrepiece of its new dismounted soldier
communication system. The DSI-104 provides
seamless integration of legacy and/or third-party
products (radios, sensors, power supplies and data
terminals) enabling the transmission of voice and
data, as well as providing energy management and
distribution between the devices. The DSI-104 was
designed to be one of the most compact, lightweight
and robust integrators of its class. It does not require
additional ancillaries to provide the complete set
of functions typically found in dismounted soldier
integrators, thereby reducing the number of
connections and points of failure. A management
application runs on the Android platform to provide
remote control and monitoring of functions. The
challenge for EID engineers was to design, develop
and produce the first DSI-104 units within a
one-year timeframe to meet its domestic customer’s
demanding requirements. This required breaking
some of the typical development stereotypes and
a vibrant, agile, talented young development team
delivered the solution on time. The lack of electronic
components on the global market was overcome by
the team’s flexibility to quickly adjust the solution
whenever selected components became unavailable.
The DSI-104 is now in full scale production.

Strategic reportGovernanceFinancial statementsStrategy in action continued

Sensors and Effectors

Advanced video target tracking
Chess Dynamics has introduced a new AI augmented
video target tracking capability. The Deep Embedded
Feature Tracker (DEFT) uses feature embeddings from
Deep Neural Networks. This enables the DEFT
algorithm to cope well with dynamic, rapid moving
targets and rapid sensor changes. DEFT is able to follow
the target in cluttered scenes and provide a strong
reacquisition performance following occlusion of the
target. It can be used with both colour and
monochrome (such as infra-red) imagery and will track
land, air or maritime targets. The DEFT algorithm is
implemented in the Vision4ce CHARM range of
compact, rugged video processors which are integrated
into Chess Dynamics’ digital electro-optical fire control
and surveillance systems. The improved tracking
capability minimises the operator’s workload, removing
the need to switch between tracking algorithms and
greatly reducing the frequency of manual intervention.

Multi Environment Display
Working with Dstl, SEA has developed a prototype
Multi Environment Display (MED), aimed at improving the
situational awareness within a surface ship operations
room. The MED combines multiple datasets into one
comprehensive picture to provide a visual representation
of the undersea environment. Each data layer is assessed
for typical characteristics and threat analysis. The MED
layers data to produce a 2D or 3D image which can also
be used in augmented reality and virtual reality displays.
SEA demonstrated a working prototype MED and has since
been contracted to provide enhanced functionality and
support multi-national experiments and demonstrations.
Using such a display will reduce the workload on a ship’s
command team. SEA recently won a further contract
from Dstl to provide additional MED updates and
support a further UK demonstration later this year.

Cohort plc Annual Report and Accounts 2023

Underwater spread spectrum
acoustic communications
Intelligent autonomous underwater vehicles (AUVs) have the potential
to replace lengthy and labour-intensive naval missions in hazardous
areas. However, critical to their success is their seamless integration
into a wireless network of surface ships, submarines, ground and
mooring sensor nodes, and surface gateway buoys. This requires
scalable underwater communication networks that can connect to,
participate in and leave allied mobile (submarine and surface) platforms
on an ad-hoc basis, as well as the ability to autonomously adapt to
time-varying communication conditions without the need to recover
and redeploy. These flexible and self-configurable underwater acoustic
networks require an intelligent adaptive protocol stack. SALSA, a
European defence cooperation between Germany, the Netherlands,
Norway, Sweden and Finland, developed the stack for self-reconfigurable
underwater acoustic networks that autonomously adapt to changing
environmental conditions and operational needs. ELAC, in cooperation
with TNO, the Dutch Government’s defence research organisation,
implemented the new frequency repetition spread spectrum (FRSS)
transmission method which uses JANUS (STANAG 4748), also
implemented by ELAC, as the first contact communication method.
Although spread spectrum methods are well known in radio
communications, ELAC has pioneered their use in underwater acoustic
communications with the support of the Fraunhofer FKIE and WTD71,
the German military technical service agency. To support this
development, ELAC has also developed a new transducer for the
VLF (4–8 kHz) and HF (24–32 kHz) frequency bands.

Strategic reportGovernanceFinancial statementsKey performance indicators

Measuring our progress

Cohort plc Annual Report and Accounts 2023

Good progress in KPIs.
Cash conversion
consistently strong.

Change in revenue

Indicates the change in total Group revenue
compared with prior years.

Change in adjusted
operating profit
Change in Group operating profit before exceptional
items, amortisation of other intangible assets,
research and development expenditure credits and
non-trading exchange differences, including
marking forward exchange contracts to market.

Order book visibility

Orders for the next financial year expected to be
delivered as revenue, presented as a percentage
of latest market revenue forecasts for the year.

Why is it important?
Revenue growth gives a quantified indication
of the rate at which the Group’s business activity
is expanding over time.

Why is it important?
The adjusted operating profit trend provides an
indication of whether additional revenue is being
gained without profit margins being compromised
and whether any acquisitions are value enhancing.

Why is it important?
Order book visibility, based on expected revenue
during the year to come, provides a measure of
confidence in the likelihood of achievement of
future forecasts.

RESULTS

33%

22 (4)%

Comment on results
The Group revenue was markedly up on last year,
increasing from £137.8m to £182.7m with strong
contribution from both divisions. At Communications
and Intelligence this was driven by the strong
performance at MCL with higher UK MOD activity.
At Sensors and Effectors this was mostly a result
of increased deliveries by Chess.

RESULTS

23%

33%

23%

(17)%

21 2%

Comment on results
On the back of the much stronger revenue
performance, the trading result of the Group
improved significantly.

RESULTS

80%

78%

64%

Comment on results
This is a further improvement on the last two years,
reflecting the continuing progress in the size and
longevity of the order book, with orders now
stretching out to 2032. The order book cover
for 2023/24 had further increased to over 90%
by mid-July 2023.

Strategic reportGovernanceFinancial statementsKey performance indicators continued

Cohort plc Annual Report and Accounts 2023

Change in adjusted
earnings per share
Annual change in earnings per share, before
exceptional items, amortisation of other intangible
assets and non-trading exchange differences
including marking forward exchange contracts to
market, all net of tax.

Operating cash conversion

International revenue

Net cash generated from operations (net of interest
and net capital expenditure) before tax as compared
to the profit before tax and interest, excluding
amortisation of other intangible assets over a rolling
four-year period.

Total sales to markets outside the UK,
Germany and Portugal.

Why is it important?
Change in adjusted earnings per share is an absolute
measure of the Board’s management of the Group’s
return to shareholders (net of tax and interest).

Why is it important?
Operating cash conversion measures the ability of
the Group to convert profit into cash.

Why is it important?
International markets are important to the organic
growth of the business and reduce our dependence
on domestic markets.

RESULTS

17%

(8)%

(9)%

17%

RESULTS

87%

RESULTS

£63.9m

87%

81%

£48.8m

£63.9m

£60.9m

Comment on results
The 17% increase compares to a 23% increase in the
adjusted operating profit, partly offset by slightly
higher net interest charge and higher tax rate.

Comment on results
The conversion in the last year maintains a high
conversion ratio and was as a result of strong cash
control in Communications and Intelligence and
a marked turnaround at Chess within the Sensors
and Effectors division. Some of this improvement
was partly offset by inventory build in both of our
overseas subsidiaries, at EID due to the timing of
deliveries and at ELAC for its Italian sonar project.

Comment on results
The increase in 2023 export revenue is driven
by higher export sales in Sensors and Effectors,
especially for land environment customers of
Chess and naval customers of SEA.

Strategic reportGovernanceFinancial statementsOperating review

Strong growth in order intake, revenue,
adjusted operating profit and cash

Andrew Thomis
Chief Executive

2022/23 highlights
X Record adjusted operating profit of £19.1m

(2022: £15.5m) on record revenue of £182.7m
(2022: £137.8m).

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

X Sensors and Effectors also performed

well, with Chess delivering an improved
performance.

X 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).

X Dividend increased by 10%.

X Strong cash conversion leading to higher net

funds at £15.6m (2022: £11.0m).

“ 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.”

Cohort plc Annual Report and Accounts 2023

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 1.

The adjusted net 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.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Operating review continued

Operating review continued
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, a historic high for the Group,
underpinning 80% of the latest market consensus
forecast revenue for 2024. Cash flow was robust, with
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
£m

2022
£m

2023
%

2022
%

14.9

12.2

17.3

17.7

9.4
(5.2)

7.5
(4.2)

9.7
—

19.1

15.5

10.4

10.8
—

11.2

Communications
and Intelligence
Sensors and
Effectors
Central costs

Communications and Intelligence
X Revenue – £86.2m (2022: £68.4m)

X Adjusted operating profit – £14.9m (2022: £12.3m)

X Operating cash flow – £8.3m (2022: £12.2m)

X 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, MASS continued to be the
largest contributor to Group profit despite delays to
some of its activities, the most recent being caused
by the evacuation of UK citizens from Sudan, which
interfered with a major exercise that was planned
in that region.

In Portugal we continued to be affected by a protracted
procurement process for new ships, on which our
communications solution is the preferred solution.
Recent Parliamentary approval should enable this
project to now progress and we anticipate securing
orders in the coming financial year. As a result of
these delays and some slippage of work into 2023/24,
again due to procurement delays, EID had another
disappointing year and its small operating loss acted
as a drag on the net margin of this division. We expect
EID to deliver an improved 2023/24 performance, but
we expect this will be partly offset by the current high
level of UK MOD activity at MCL falling back nearer
to historical norms.

The Communications and Intelligence division enters
2023/24 with £59.1m (68%) of its revenue on order
at 30 April 2023. We expect to see improvements in
Portugal, in terms of both deliveries and orders as well
as a catch-up in delayed exercise support and other
service provisions in the UK. However we do not expect
the very strong year of product delivery to the UK
MOD in 2022/23 to be repeated and overall the
Communications and Intelligence division will perform
at a similar level in 2023/24 as it did in 2022/23.

Sensors and Effectors
X Revenue – £96.5m (2022: £69.4m)

X Adjusted operating profit – £9.4m (2022: £7.5m)

X Operating cash flow – £5.9m (2022: £6.5m)

X Headcount – 682 (2022: 592)

The Sensors and Effectors division delivered a much
improved operating performance on significantly higher
revenue. Much of the performance improvement arose
at Chess where management, operational and process
changes made during 2021/22 and further developed
during 2022/23 saw a significant turnaround in its
performance. This was exemplified by its operating
cash performance which was a net inflow of £10.1m.
Despite this, we had to make some further provisions
for legacy issues at the business which we now consider

closed. This should enable Chess in the short term to
move its net margin to a level of at least 10% and to
progress further in the medium term.

Elsewhere in Sensors and Effectors, we have continued
to trade the large Italian sonar project at ELAC at a low
margin whilst it proceeds through its development
stage. We anticipate beginning to enter production
towards the end of this financial year. ELAC’s existing
building in Kiel is being redeveloped by its owner and
ELAC has begun work on a new facility nearby that
will significantly enhance its efficiency and capacity.
On current plans this will be operational in 2025.

We saw growth in revenue to export customers,
including in South America and in Asia Pacific, as
well as initial deliveries on a large long-term support
contract for the UK MOD secured in the year. We won
some significant orders with the German and Italian
navies during the year as well as orders for customers
in South America, Southeast Asia and Japan. Orders for
the UK submarine programme were received late in the
year, restricting the amount of work we could deliver,
but we do expect this revenue stream to grow over the
coming years.

We had no changes to our senior management team
during the year. Shortly after the year end, Managing
Director of EID, Frederico Lemos, left the Group. Martin
Bennett, EID’s Sales and Marketing Director, has taken
over in the interim and we have commenced a process
to fill this role for the longer term.

Like many high-skill businesses, we are facing
challenges in recruiting qualified and experienced
people to meet our customer demands and our own
investment strategies. As our order book has grown,
so have our employee numbers and the Group now has
just over 1,130 employees compared with nearly 1,050
this time last year, an 8% increase. We will continue to
add more resources in the coming year, especially at
Sensors and Effectors.

Operating strategy
Organic growth
Cohort reports through two divisions, each containing
three of our six small and medium-sized businesses,
operating primarily in defence and security markets,
and with a strong emphasis on technology, innovation
and specialist expertise.

Looking forward, this division is well underpinned for
2023/24 with over £83m (91%) of revenue on order at
30 April 2023. Recent wins and some good prospects to
expand its order book in both the UK and export markets
lead us to expect this division to grow in 2023/24.

The two new reporting segments are:

X Communications and Intelligence, comprising EID,

MASS and MCL; and

X Sensors and Effectors, comprising Chess, ELAC

Our people
All the Group’s capabilities and customer relationships
ultimately derive from our people, and the success we
have enjoyed is a result of their efforts. They have risen
to the challenge of the stronger demand we have
seen this year, and in doing so have made a material
contribution to the national security and defence of
our nations and allies as well to the performance of
the Group. I would like to take this opportunity to
express my sincere thanks to all employees of
Cohort and its businesses.

and SEA.

These divisions represent the Group’s core specialisms
and the business units have been grouped accordingly to
reflect their complementary technologies and products.

Within our markets we have sought to identify niches
where prospects are attractive and where we have
some sustainable competitive advantage. Growth
strategies and opportunities vary around the Group.

Strategic reportGovernanceFinancial statementsOperating review continued

Operating strategy continued
Organic growth continued
The Communications and Intelligence division brings
together three of our businesses which have a focus on
communications systems, intelligence gathering and
analysis, including electronic warfare for mainly
defence and security customers. They provide this
through product system development and supply;
and services, including training.

X EID combines a low cost-base by international
standards with access to Portugal’s extremely
strong technical education system. This has allowed
it to develop high-performance, low-cost defence
communications products that can win business
in a highly competitive marketplace.

X MASS benefits from an extremely high customer
reputation, rare or unique technical capabilities
and experience at building long-lasting customer
relationships. Much of its revenue derives from
long-term service contracts, and it aims gradually
to add more of these building blocks to its
revenue stream.

X MCL has a unique business model, combining a

small but innovative engineering team with a wide
range of international partnerships to provide highly
specialised equipment and services to the UK’s
armed forces and security services.

The Sensors and Effectors division brings together three
of our businesses with a focus on technology products
and systems which enable our customers, primarily in
the naval and land domain, to detect, acquire, track
and respond to threats, whether land, air or sea based.

X Chess makes use of its innovative engineers,

customer-focused culture and freedom to source
sensors from the best international providers to
win business against more vertically integrated
larger competitors.

X ELAC, the newest member of the Group, has built
on almost a century of hydro-acoustic knowledge
to create a new architecture for sonar systems
on a scale that only a few international providers
can match. Its systems combine world-class
performance with an ability for customers to
tailor analysis techniques and data libraries
to their own specific needs.

X SEA has used its close long-term relationship with
the Royal Navy to build confidence with that
important customer, which in turn creates a strong
platform for export orders. It is also investing in
new technologies where there is an opportunity
to build a strong competitive position, for instance
in lightweight towed-array sonars and, alongside
Chess, decoy launchers.

Being part of the Cohort Group brings material
advantages to our operating businesses. The Group’s
strong balance sheet gives customers the confidence
to award large or long-term contracts that we are well
able to execute technically but which might otherwise
be perceived as risky. Examples in the recent past have
included the award of a €49m order for sonar systems
for the Italian Navy’s new class of submarine and a
follow-on order for the production and delivery of
systems for an export navy customer. We have started
to receive initial orders for developing and supplying
communication and related systems on the UK’s new
Dreadnought class of submarine, a very significant
and strategically important programme.

The Group’s Directors have long experience of
operating in the defence sector and have contacts and
working relationships with senior customers in the UK
and internationally that would be hard for independent
smaller businesses to establish. Our six operating
businesses, while remaining operationally independent,
have formed close working relationships with each
other and benefit from sharing technical capabilities,
customer relationships and market knowledge within
the bounds imposed by our various confidentiality
obligations. We will continue to work to promote the
Group’s services and products in wider markets,
including through business development visits.

These strategies have generated long-term customer
relationships and good opportunities that give us
confidence that we can continue to win substantial
new business in the year ahead. During the last year
we have extended a range of long-term support orders
for the UK MOD, both within the Communications and
Intelligence division (around £30m), and a similar value
in the Sensors and Effectors division. These include
extensions to work we have been carrying out for several
decades. The continued success of our businesses in
winning these orders is a good demonstration of our
capability and the level of trust our customers hold in us.

Looking forward, this year has begun well with some
key export wins for naval systems in Southeast Asia.
We expect, after some considerable delay due to a
protracted procurement process, to secure some
long-term naval development and delivery work from
the Portuguese Navy. We also continue to work, as a
Group, on some key UK programmes as well as seeking
further expansions of existing submarine programmes.
These opportunities, if secured, although not expected
to have much impact on 2023/24, will lay long-term
foundations for the Group, potentially as far out
as 2040.

Acquisitions
Alongside our organic growth strategy, we continue
to see opportunities to accelerate our growth by
making further targeted value enhancing acquisitions.
We believe that there are good businesses in the UK
and overseas that would thrive under Cohort ownership,
whether as standalone members of the Group or as
“bolt-in” acquisitions to our existing subsidiaries.

The most likely candidates for bolt-in acquisitions are
businesses with capabilities and/or customer relationships
that are closely linked to one of our existing subsidiaries.
We would expect to integrate an acquired business of
this nature fully within the relevant subsidiary. This
could lead to both cost savings and benefits from
shared access to markets and technologies.

Cohort plc Annual Report and Accounts 2023

For standalone acquisitions we are looking for agile,
innovative businesses that have reached a stage of
development where there will be mutual benefit in
joining Cohort. It is likely that candidates will be
operating in the defence and security markets either
in the UK or internationally, and broadly within the
capabilities of one of our divisions, as that is where
the Group can add most value. Growth prospects,
sustainable competitive advantage, and the ability
to operate as part of a publicly quoted UK group
will all be important.

We have reviewed a significant number of possible
acquisitions over the last year, in some cases leading
to active discussions. Our experienced executive team
is conscious of the various potential risks that arise
from acquisitions and takes a careful approach, with
only a small proportion of the opportunities we see
being brought to fruition. When we do identify an
opportunity that we believe to be value creating, the
close involvement of our senior team means we can
be very flexible in terms of transaction structure, and
quick in decision making. That gives us some advantage
compared to slower-moving competitors, even if they
have larger resources available.

As we indicated last year, we acquired all of the
minority shareholding of Chess for £1.0m (estimate
at 30 April 2022: £1.4m) on 30 November 2022.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Operating review continued

Operating strategy continued
Maintain confidence
Cohort’s management approach is to allow its
subsidiary businesses a significant degree of operational
autonomy to develop their potential fully. At the same
time, we provide rigorous financial and strategic controls
at Group level to manage and control risks and ensure
legislative and regulatory compliance. Our experience
is that our customers prefer to work with businesses
where decision making is streamlined and focused on
solving their immediate problems. This model provides
us with a degree of competitive advantage over some
larger rivals where the decision-making process can be
more extended. It is also cost effective as it avoids the
need for additional layers of management involved in
coordination activities and for a large headquarters
team. High-calibre employees find our business model
attractive and more rewarding as it allows them to be
involved in decisions affecting the business, even at a
relatively junior level, rather than being constrained to
a narrow or purely technical role. This positions us well
with customers where such attributes are highly valued.

We have invested in our head office function over the
last two years, introducing commercial support to the
subsidiaries, particularly for export business. We have
also invested in the financial, legal and company
secretarial functions, partly to support the subsidiaries
but also to deal with the ever-growing tide of
compliance requirements. This includes increasingly
wide and onerous external audit requirements,
which are reflected in rising audit fees, and the need
for external support for environmental reporting.
The latter only seem to ever grow.

The change this year to divisional reporting was made
following discussions with our shareholder community
and external analysts. The Board believes that the
revised divisional reporting, which amalgamates the
existing six business units into two reporting divisions,
will provide a clearer understanding of the underlying
performance of the Group, as well as a simplified
reporting structure. These new divisions will provide
sufficient scope for expansion as the Group continues
to grow, both organically and through acquisition,
whilst ensuring the business units can continue to
operate as standalone entities, retaining their agility
and flexibility.

The amount of activity between our businesses has
grown in the year and we expect that to continue.
We will ensure that the necessary coordination and
oversight to manage this is provided both within the
respective businesses and from our head office
to ensure that we are able to deliver these more
complex programmes while maintaining the
autonomy and agility that are so important for
our operating businesses.

Although the degree of autonomy our subsidiary
businesses enjoy is high, and we believe that this is an
effective operational strategy, we take a practical view
of the best way forward when circumstances change.
When the operational situation is such that a merger,
restructuring or even sale is necessitated, we will act
and have acted in the best interests of the wider Group
and its shareholders.

Andrew Thomis
Chief Executive

Strategic reportGovernanceFinancial statementsStrategic report

Financial review

Record operating performance

Simon Walther
Finance Director

“ Record revenue driven by growth
in UK defence. Strong order
intake in both divisions, with
order book dominated by
Sensors and Effectors.”

Revenue analysis
As announced 25 May 2023, the Group has changed
its reporting for the year ended 30 April 2023 with
comparative figures being restated accordingly.

The Group now reports its operating performance
through two divisions:

1. Communications and Intelligence

This division comprises EID, MASS and MCL, being
the subsidiary businesses which design, develop,
manufacture, integrate and support electronic
hardware and software solutions used for collecting,
storing, processing, protecting and transferring
information securely. It also includes the provision
of domain expertise, training and supporting services.
The division supplies products, primarily through EID
and MCL, and services through MASS.

2. Sensors and Effectors

This division comprises Chess, ELAC and SEA, being the
subsidiary businesses which provide a range of sensors,
including sonar, radar and visual for land and sea
domains. It also provides effectors for surface ships
and land-based users to protect against sea, air and
land-based threats, including submarine, missile and
drone attacks. The focus for the division is on the
design, development, manufacture, integration and
support of electronic, electromechanical and software
solutions to detect, measure, identify, track and
prosecute targets of interest.

For clarity, we have omitted the revenue analysis by
capability provided in previous years in favour of the
new divisional analysis.

The Group has also introduced an analysis of its
revenue by domain. This is described in the
“Our markets” section of this Annual Report.

Cohort plc Annual Report and Accounts 2023

The revenue for the Group has been analysed into
three separate breakdowns:

REVENUE

1. market (and geography) (see table below);

2. product or service (see table below); and

3. domain (see “Our markets” section).

The Group revenue continues to be dominated
by defence and security customers with £169.8m
(2022: £126.5m) delivered to these markets, 93% of
Group revenue (2022: 92%).

Overall, the Group increase in revenue has been driven
by an increase in UK MOD revenue of over 50%. At just
short of £100m, this represents 54% of total Group
revenue, a marked change in comparison to recent years
when this proportion has generally been in decline.

Export defence markets grew by 20%, but as a
proportion of the overall revenue dropped slightly
from 35% last year to 32% this year, as this healthy
growth was outpaced by growth in UK MOD revenue.
The increase was in deliveries to European customers,
for land and naval domains.

Although sales to Asia Pacific declined slightly,
reflecting the timing of deliveries from ELAC, we
anticipate this will increase in the coming year
following recent order wins.

In our other domestic markets, we saw growth in both
Portugal and Germany. The latter was backed up by
some significant order wins in 2022/23. In Portugal,
EID’s revenue reflects the current importance of its
domestic customer. Depending upon the timing of
orders we expect this revenue to grow and remain an
important element of EID’s revenue stream over the
next few years.

Non-defence revenue includes transport and legacy
hydroacoustic products, both of which are reported
within Sensors and Effectors and saw significant
increases. They were offset by a decline in our low
margin education support work, provided through
MASS, which is now coming to an end.

As expected, the Group continues to see the proportion
of its revenue from product (hardware and/or software)

£182.7m

2022: £137.8m

ADJUSTED OPERATING PROFIT

£19.1m

2022: £15.5m

OPERATING CASH FLOW

+£17.9m

2022: +£22.5m

continue to increase. This has been very marked this
year with the significant increases in delivery of
systems and products to the UK MOD
by Communications and Intelligence, mostly MCL,
and by Sensors and Effectors to both European and UK
customers. The service element of the Group is now
below 30%, having been steady for some years at
nearer 40%. This decline is in part due to the growth in
product, but also a fall in the actual support work the
Group is providing. This is mostly education at MASS
and service support in Portugal, where orders
have slipped.

The change in the Group’s revenue mix this year has
driven a drop in statutory gross margin percentage from
41% to 36%. The main cause of the drop in statutory
reported gross margin was the smaller contribution, as
a percentage of total Group trading, from the higher
margin elements within Communications and
Intelligence. In Sensors and Effectors, the lower traded
margin on the Italian sonar contract as it progresses
through its development stages and the impact of
marking foreign exchange contracts to market, mostly
in the same division, also had a downward impact on
reported gross margin.

Strategic reportGovernanceFinancial statementsFinancial review continued

Revenue analysis continued
The analysis of the Group’s revenue by domain is set
out in the Our markets section. This shows that the
Group’s revenue is dominated by Maritime and Land, a
combined 76% of Group revenue (2022: 72%). The next
significant area is Joint and Strategic at 8% (2022: 9%)
which is mostly Communications and Intelligence
support to the UK’s Joint Warfare capability. The
growth in Land is due to increases in UK MOD activity
in Communications and Intelligence, mostly through
MCL, and in Sensors and Effectors, through delivery of
systems by Chess to both the UK MOD and overseas
customers. In absolute terms, Maritime, and Joint and
Strategic have slightly increased but, as a proportion of
the Group’s overall revenue, they have fallen back
slightly due to the marked increase in Land which has
driven the overall Group revenue growth.

Cohort plc Annual Report and Accounts 2023

Revenue by market and geography

Communications and
Intelligence

Sensors and Effectors

Group

Direct to UK MOD
Indirect to UK MOD where the Group acts as a sub-contractor or partner

Total UK defence
UK security
UK other (non-defence and security)

Total UK

Portuguese defence and security
German defence and security

Total non-UK domestic defence and security

Export defence and security
– Other European countries
– Asia Pacific and Africa
– North and South America

Total export defence and security

Export other (non-defence and security)

Revenue by type of deliverable

Product

Communications and Intelligence
Sensors and Effectors

Services

Communications and Intelligence
Sensors and Effectors

Total revenue

2023
£m

62.1
7.3

69.4
3.7
—

73.1

4.9
—

4.9

2.1
5.7
0.4

8.2

—

86.2

2022
£m

40.3
5.8

46.1
4.7
3.1

53.9

3.9
0.1

4.0

3.5
6.9
0.1

10.5

—

68.4

2023
£m

0.2
28.9

29.1
—
7.4

36.5

—
4.3

4.3

33.7
12.3
4.2

50.2

5.5

96.5

2022
£m

6.0
12.8

18.8
0.3
7.1

26.2

—
4.0

4.0

17.0
16.5
4.6

38.1

1.1

69.4

2023
£m

62.3
36.2

98.5
3.7
7.4

109.6

4.9
4.3

9.2

35.8
18.0
4.6

58.4

5.5

34
20

54
2

3
2

2022
£m

46.3
18.6

64.9
5.0
10.2

80.1

3.9
4.1

8.0

20.5
23.4
4.7

48.6

1.1

34
13

47
4

3
3

182.7

100

137.8

100

Year ended
30 April 2023

Year ended
30 April 2022

£m

140.8

53.8
87.0

41.9

32.4
9.5

29
48

18
5

£m

88.6

26.7
61.9

49.2

41.7
7.5

19
45

30
6

182.7

100

137.8

100

Strategic reportGovernanceFinancial statements
Financial review continued

Operational outlook
Order intake and order book

Order intake

Order book

2023
£m

2022
£m

2023
£m

2022
£m

Communications and
Intelligence
Sensors and Effectors

77.3

118.3
94.5
126.4 109.1 202.4 172.7

126.7

220.9 186.4 329.1 291.0

The increase in the Group’s order book reflects stronger
order intake in both of our reporting divisions.

The 2022/23 order intake was 121% (2022: 135%) of
the Group’s revenue for the year.

The revenue on order (order cover) for the coming year
was 80% (2022: 78%) as at 30 April 2023, based on the
latest external revenue forecasts. This had risen to over
90% in July.

The Group’s order intake and order book are the
contracted values with customers and do not include
any value attributable to frameworks or other
arrangements where no enforceable contract exists.
The order intake and order book take account of
contractual changes to existing orders including
extensions, variations and cancellations.

Cohort plc Annual Report and Accounts 2023

Communications and Intelligence
Order intake at Communications and Intelligence was
22% higher than last year and represented 110% of its
annual revenue for 2022/23 (2022: 113%). The lower
order to revenue cover for this division is a result of its
work through MCL, which is typically short term, and
elements of the service provision at MASS, especially in
Digital Services and in short-term additional tasks on
its long-term service contracts.

This division is dominated by activity with the UK MOD
where £70.4m of its order intake (2022: £51.1m) was
ultimately intended for that customer. Important
orders secured in the year included renewals and
extensions of long-term contracts for our support to
the UK’s Joint Forces Command (£10.6m), electronic
warfare capability (£15.7m) and the UK’s strategic
deterrent. The Group has been providing services in
all these areas for several decades.

The division also saw a marked increase in product
demand from the UK MOD for communication
equipment including hearing protection and intercoms.
We saw higher levels of orders placed for specialist
electronic warfare equipment, drones and land-based
autonomous vehicles including “Spot”, the robot
canine. The division has also begun to see more interest
for a range of its products from UK police forces.

As touched on already, the order delays we saw from
the Portuguese armed forces impacted on EID’s
operating performance.

Sensors and Effectors
Order intake at Sensors and Effectors was 16% higher
than last year at £202.4m, representing 131% of its
2022/23 annual revenue (2022: 157%). Order cover in
this division tends to be greater as contracts frequently
cover long-term development and delivery, especially
for naval customers.

Although this division has important work in delivery
and support of the Royal Navy’s submarines and
surface vessels, its maritime activity is dominated by
export customers. In the land domain it secured
important orders for both the UK MOD and other
European customers (over £28m) and won initial
deliveries of an important system for ground-based
air defence.

Orders for the UK Royal Navy were nearly £40m
including the long-term support contract announced
last September and further work on communication
and related systems for the new Dreadnought class
of submarine. The latter work is expected to expand
in the coming years with work continuing, alongside
Astute, for rest of this decade. We are well placed
to secure similar work on the new AUKUS class of
submarine, which will eventually replace the
Royal Navy’s Astute class.

In Europe we continue to win work, including orders of
nearly £10m for the German Navy. In Italy we won
£8m of orders, comprising extensions to the existing
sonar project and some surface ship work. We also won
some key orders in Southeast Asia with the order book
in this region reinforced by further wins after the
year end.

Strategic reportGovernanceFinancial statementsFinancial review continued

Operational outlook continued
Delivery of the Group’s order book into revenue
The table below shows the expected delivery of future revenue from the current order book.

Order intake analysis

Cohort plc Annual Report and Accounts 2023

COMMUNICATIONS AND INTELLIGENCE

1,800

TOTAL ORDER VALUE

SENSORS AND EFFECTORS

73.6

NUMBER OF ORDERS

350

300

250

200

m
£

150

100

202.4

126.7

44.8

39.7

38.8

19.4

30 April 2023

H1 2023/24

H2 2023/24

83.6

59.1

Total
2023/24

39.4

31.8

31.3

18.8

48.1

17.0

2024/25

2025/26

Later years

“ The Group order book underpins 80% of the
2023/24 latest analyst forecasts for revenue.
This has increased to over 90% in July.”

1,566

1,600

s
r
e
d
r
o
f
o
r
e
b
m
u
N

1,400

1,200

1,000

800

600

400

200

55.1

14.1

30.4

143

20.6

23.6

<£100k

£100k to
<£500k

£500k to
<£1m

£1m to
<£5m

£5m to
<£10m

£10m and
above

)

m
£
(
e
u

l
a
v

r
e
d
r
O

Strategic reportGovernanceFinancial statements

Cohort plc Annual Report and Accounts 2023

Financial review continued

Operational outlook continued
Delivery of the Group’s order book into
revenue continued
As we saw last year, Cohort’s order book has again
increased in size and lengthened. We already have
on order for delivery in 2023/24 more revenue than
we delivered in 2021/22 and not far short of what
we delivered in 2020/21. The order book for Sensors
and Effectors is both larger and longer than for
Communications and Intelligence, which is what we
expect with the greater proportion of long-term
delivery projects for naval customers. In Communications
and Intelligence, the longevity of the order book is
dominated by the multi-year support contracts for the
UK MOD through MASS, the first of which is due for
renewal in 2026.

The short-term nature of some of the business in
Communications and Intelligence, especially the
product delivery of MCL and the shorter delivery
contracts in training and cyber by MASS, mean that this
division will typically enter a financial year with less
revenue on order. This work is often short in duration.
We do expect to see some increase in the longevity of
this division’s order book in the coming year when
anticipated orders for the Portuguese Navy arrive.

Sensors and Effectors has a number of large multi-year
programmes, both for delivery and support, with work
stretching out to 2032. The prospects for this division
in the coming year to increase the size and the
longevity of the order book are good, both in the UK
and export markets.

As for 2022/23, the Group’s businesses are not
dependent upon a single critical order to achieve their
respective revenue targets for 2023/24. The Group infill
for the coming year of around 20% is historically low
level and this had further reduced to below 10% in
July 2023.

We have introduced an analysis this year of the number
of orders secured by a range of order size. This is shown
in the “Order intake analysis” chart on page 23. This
shows that just over 95% of the Group’s orders (by
number) secured are of less than £0.5m in value,

accounting for nearly a quarter of the Group’s total
order intake value. Of the remaining 5% of orders,
which account for 75% of the Group’s total order value,
around one third of the order intake value arose from
orders in the value range of £1m to £5m. As a policy,
we usually only announce individual orders with a value
of over £5m.

Funding resource and policy
At 30 April 2023, the Group’s cash and readily available
credit was £50.6m (2022: £51.1m). A very high
proportion of our ultimate customers are governments
or government agencies, with a clear need to invest in
defence and security. The international and domestic
security environment still calls for greater resources
to be devoted to defence and counterterrorism in the
UK and many other countries, especially in light of
continuing events in Ukraine and rising tensions in the
South China Sea. As already mentioned, 80% of our
revenue (based on latest analyst forecasts) for 2023/24
was on contract at 30 April 2023, providing further
assurance, and this has since increased to over 90%.
The Board considers the Group to be a going concern.

The Group retains a robust financial position and
continues to be cash generative, enabling it to continue
to invest in internal R&D and other value-adding
projects on a carefully considered basis as well as
maintaining its progressive dividend policy. The Group’s
cash position and banking facility also provide it with
the resources to conduct its acquisition strategy.

The Group completed a renewal of its banking facility
on 18 July 2022. The facility was initially for three years
to July 2025, and this has been extended, following
exercise of an option, in June 2023, to July 2026 with
an option to extend it for a further year to July 2027.
The revolving credit facility (RCF) is for an initial £35m
with an option (accordion) to draw a further £15m.
The facility is provided by three banks: NatWest,
Lloyds and Commerzbank.

The Group’s bank borrowings have been reported
as due after one year as the facility in place as at
30 April 2023 was due to expire in July 2025.

NatWest is the Group’s primary bank in the UK,
especially for clearing purposes and day-to-day
transactions. Commerzbank undertakes a similar role
in Germany for ELAC.

The Group’s facility in place as at 30 April 2023 was
for £35m, of which £25.8m was drawn, leaving £9.2m
available to be drawn down. The facility itself provides
the Group with a flexible arrangement to draw down
for acquisitions and overdraft. The Group’s banking
covenants were all passed for the year ended 30 April
2023. Looking forward, we expect this to continue out
to 31 July 2024 and beyond.

The facility is available to the UK and German members
of the Group and is fully secured over the Group’s
assets. EID’s assets are excluded but the shares that the
Group owns in EID are included as part of the Group’s
security package with the banks.

In the UK, the Group has separate bilateral facilities
with each of NatWest and Lloyds for instruments such
as forward exchange rate contracts, bank guarantees
and letters of credit. In addition, the Group is free to
arrange such facilities with other banks where pricing
and operational efficiency warrant it. For example, we
have a forward exchange facility with Investec Bank.
The Group has a bilateral facility in place with
Commerzbank for provision of similar banking
instruments to ELAC in Germany.

The Group takes a prudent approach to treasury policy
with its overriding objective being protection of capital.
In implementing this policy, deposits are usually held
with institutions with credit ratings of at least Baa3.
Deposits are generally held on short (less than three
months) duration to maturity on commencement. This
matches the Group’s cash resources with its internal
monthly 13-week cash forecasts, retaining flexibility
whilst trying to ensure an acceptable return on its cash.

Most of the Group’s UK cash (that is not on short-term
deposit) is managed through a set-off arrangement,
enabling the most efficient use of the Group’s cash
from day to day, under the supervision of the Group’s
finance function.

EID’s bank facilities are managed locally in Portugal.
The cash is spread across a number of institutions to
minimise capital risk.

EID provides no security over its assets and its wide range
of banks enable it to be well supported in executing export
business, specifically in respect of foreign exchange
contracts, guarantees and letters of credit.

EID has a local overdraft facility of €2.5m with
Santander. This was undrawn as at 30 April 2023.

The Group regularly reviews the ratings of the
institutions with which it holds cash and always
considers this when placing a new deposit.

The Group’s net funds at 30 April 2023 were £15.6m
(30 April 2022: £11.0m), better than expected due to a
marked improvement in working capital management
at Chess and MCL. This has been partly offset by stock
build elsewhere in the Group, especially ELAC, and the
timing of receivables at EID. Looking forward, we
expect the Group’s net funds at 30 April 2024 to be
lower, as the timing advantage is expected, in part, to
unwind. The Group expects to see an increase in net
funds by 30 April 2025 from 2024, if there is no further
corporate activity. Looking forward into 2024 through
to 2025, the Group expects to continue to invest in a
new facility for its ELAC business in Kiel. As at 30 April
2023 the Group had invested £1.8m in this facility.

In addition to its cash resources, the Group has in issue
41.5m ordinary shares of 10 pence each. Of these
shares 0.7m (2022: 0.7m) are owned by the Cohort plc
Employee Benefit Trust (EBT), which waives its rights
to dividends. In addition, the Group has issued options
over ordinary shares through Key Employee Share
Option and SAYE schemes to the level of 1.7m at
30 April 2023 (2022: 1.8m).

The Group’s exposure to foreign exchange risk arises
from two sources:

the reporting of overseas subsidiaries’ earnings
(currently EID and ELAC) and net assets in sterling; and

transactions in currencies other than our Group
reporting currency (£) or subsidiary reporting currency
where different (currently € at EID and ELAC).

Strategic reportGovernanceFinancial statementsFinancial review continued

Funding resource and policy continued
The first risk is a reporting rather than cash risk and we
do not hedge the reporting of earnings.

In terms of reporting asset values, we have in place a
natural hedge of borrowing in euros to acquire a euro
asset (ELAC) but over time, as the asset grows and the
loan diminishes, this hedge will wane.

We take a prudent approach to transactional foreign
exchange risk requiring all significant sales and
purchases to be hedged at the point in time when
we consider the transaction to be certain, usually
on contract award. We mark these forward contracts
to market at each reporting date, recognising any gain
or loss in the income statement.

The Group has maintained its progressive dividend
policy, increasing its dividend this year by 10% to a
total dividend paid and payable of 13.40 pence per
share (2022: 12.20 pence).

The last five years’ annual dividends, growth rate,
earnings cover and cash cover are as follows:

Dividend
Pence

Growth over
previous year
%

Earnings cover
(based upon
adjusted
earnings
per share)

Cash cover
(based upon
net cash
inflow from
operations)

13.4
12.2
11.1
10.1
9.1
8.2

10
10
10
11
11
15

2.7
2.6
3.0
3.7
3.8
3.5

3.0
3.9
3.6
2.8
2.3
4.0

2023
2022
2021
2020
2019
2018

Looking forward the Group plans to maintain a policy
of growing its dividend each year and we expect the
rate of growth over time to align with the expected
growth in adjusted earnings per share.

Cohort plc Annual Report and Accounts 2023

In summary, the Group’s cash performance in 2022/23
was as follows:

Adjusted operating profit
Depreciation and other non-cash
operating movements
Working capital movement

Acquisition of JSK joint venture
Acquisition of the non-controlling
interest of Chess
Tax, dividends, capital expenditure,
interest, loans and other investments

Increase in funds

2023
£m

19.1

3.0
(4.2)

2022
£m

15.5

2.8
4.2

17.9

22.5

—

(0.4)

(1.0)

—

(12.3)

(13.6)

4.6

8.5

The lower cash outflow in tax and dividends, etc. was
due to lower net investment in own shares of £0.5m,
£2.1m lower than last year, and lower tax payments of
£0.1m, £2.0m lower than last year. These improvements
were partly offset by higher capital expenditure of
£5.2m, £3.2m higher than last year. The lower tax was
due to net receipts in Portugal and recovery of higher
tax payments made on account previously in the UK.
The higher capex was mostly initial investment in our
new German facility and key items of capital equipment
for the Italian sonar programme. Looking forward, we
retain the flexibility to use newly issued shares as well
as EBT shares to satisfy employee share options.

The Group’s customer base of governments, major
prime contractors and international agencies makes its
debtor risk low. The year-end debtor days in sales were
33 days (2022: 44 days). This calculation is based upon
dividing the revenue by month, working backwards
from April, into the trade debtors balance (excluding
revenue recognised not invoiced) at the year end. This is
a more appropriate measure than calculating based
upon the annual revenue as it takes into account the
heavy weighting of the Group’s revenue in the last
quarter of each year. The decrease has been mostly in
Sensors and Effectors due to the operating
improvement at Chess.

Tax
The Group’s tax charge for the year ended 30 April 2023
of £2.7m (2022: charge of £1.5m) was at a rate of 19.2%
(2022: 15.1%) of profit before tax. This includes a current
year corporation tax charge of £3.2m (2022: £2.6m), a
prior year corporation tax credit of £0.4m (2022: £0.3m)
and a deferred tax credit of £0.1m (2022: £0.7m).

Adjusted earnings per share
The adjusted earnings per share (EPS) of 36.48 pence
(2022: 31.08 pence) are reported in addition to the
basic earnings per share and exclude the effect of
exceptional items, amortisation of intangible assets
and exchange movement on marking forward exchange
contracts to market, all net of tax.

The Group’s overall tax rate was below the standard
UK corporation tax rate of 19.5% (2022: 19.0%). The
decrease is due to the loss in Portugal (at 31.0%) and
a further R&D credit recognised in Portugal, as there
was in 2022, partly offset by a higher contribution from
Germany (at 31.6%). The Group continues to take a
prudent approach to the potential outcomes of a tax
audit in Portugal and R&D credits recognised in the UK.

The Group has reported research and development
expenditure credits (RDEC) for the UK in accordance
with IAS 20 and shown the credit of £0.9m (2022:
£1.0m) in cost of sales and adjusted the tax charge
accordingly. The RDEC has been reversed in reporting
the adjusted operating profit for the Group to ensure
comparability of operating performance year on year.

Looking forward, the Group’s effective current tax rate
(excluding the impact of RDEC reporting) for 2023/24
is estimated at 23% compared with 15% of the pre-RDEC
adjusted operating profit less interest for 2022/23.
This rate going forward reflects a combination of lower
Portuguese derived profits and higher German profits
as well as rising UK rates (to 25%) in late 2022/23. The
Group maintains a cautious approach to previous R&D
tax credit claims for tax periods that are still open,
currently 2021/22 and 2022/23.

Exceptional items
The exceptional items this year are £nil
(2022: £0.7m net income).

The adjusted earnings per share exclude non-controlling
interest of EID (20%) and for Chess (18.16%), up until
30 November 2022. The reconciliation from last year
to this year is as follows:

Year ended 30 April 2022
100% owned businesses
throughout the year ended 30
April 2023
Impact of businesses with
minority holding
Change in tax rate (excluding
RDEC): 14.8% (2022: 13.5%)
Other movements including
dilution and interest

Year ended 30 April 2023

Increase from 2022 to 2023

Adjusted
operating
profit
£m

Adjusted
earnings
per share
Pence

15.5

31.08

4.6

9.10

(1.0)

(1.70)

—

19.1

23%

(0.61)

(1.39)

36.48

17%

The adjustments to the basic EPS in respect of
exceptional items, exchange movements and other
intangible asset amortisation of EID and Chess (up to
30 November 2022) only reflect that proportion of the
adjustment that is applicable to the equity holders of
the parent.

Accounting policies
There were no significant accounting policy changes
in 2022/23.

Simon Walther
Finance Director

Strategic reportGovernanceFinancial statementsStakeholder engagement

Our stakeholders

Stakeholders are those groups likely to be
affected by the actions of a company, or whose
actions can affect the operation or business
model of the company. The Board has identified
the Group’s key stakeholders and has taken the
following steps to engage with them in order to
inform the decisions that the Board takes about
the products or services provided by the Group,
its strategic direction, its relationship with its
workforce and other relevant matters.

Cohort plc Annual Report and Accounts 2023

Shareholders

Our people

Who engaged:
Non-executive Directors, Executive Directors and Company Secretary.

Key areas of interest:
Financial performance, dividends, share price, strategy, business model,
remuneration and behaviours towards other stakeholders.

How we engaged:
X We released communications such as trading updates and other important
announcements via a regulatory news service. We made our Annual Report
available to all shareholders and other interested parties together with
notices of general meetings.

Who engaged:
Non-executive Directors, Executive Directors, subsidiary Managing Directors
and Group Head of HR.

Key areas of interest:
Safe working environments, development and progression, diversity and
inclusion, competitive remuneration and workplace policies.

How we engaged:
X The Board visited all subsidiaries and the Directors were able to tour the

sites and engage with employees.

X The Board received monthly health and safety reports which included

X Live Q&As were hosted for shareholders after the preliminary results and

updates on safety incidents involving employees throughout the Group.

interim results webcast presentations.

X The Directors and subsidiary Managing Directors attended the Cohort

X The Board together with two of our subsidiary Managing Directors held a

Business Excellence Awards to commend individuals for their achievements.

Capital Markets Day after the 2022 AGM which was open to all shareholders
and provided the opportunity to gain a deeper understanding of two of our
subsidiary businesses as well as to engage with the Board and senior
management.

X The Remuneration Committee Chair consulted with a number of
shareholders regarding their views on our reporting on long-term
executive remuneration.

X Regular meetings were held with institutional shareholders and

prospective shareholders.

X We made regular updates to information in the Investor section of our

corporate website.

What we have done:
X We continued to explore strategic investment opportunities for the Group.

X We introduced amended divisional financial reporting following

consultation with our investors. We consider this will provide a simpler
reporting structure to the Group and reflect the underlying subsidiaries’
core activities.

X We developed our reporting on the long-term executive remuneration plan
in this year’s Remuneration Committee report to reflect the feedback
received from shareholders.

X We continued to comply with the Quoted Companies Alliance Corporate

Governance Code (the QCA Code).

FURTHER INFORMATION IS AVAILABLE IN: STRATEGY, CORPORATE
GOVERNANCE, BUSINESS MODEL AND SUSTAINABILITY

X Board members contributed to Q&A sessions held for the Leadership
Development Programme and the Business Development Conference.

X The Board worked closely with the Group Head of HR to gain a better

understanding of employee recruitment and retention across the Group.

What we have done:
X We have developed our understanding of our employees’ environments and
challenges, which has helped to influence our decision-making process.

X We have supported the development of the cross-Group Leadership
Development Programme to nurture leadership talent. The current
programme commenced in October 2022 and has 14 participants from
across the Cohort Group.

X Key milestones were celebrated at Chess (30 years), MASS (40 years) and
EID (40 years) with members of the Board and subsidiary Managing
Directors in attendance.

X We have supported an increase in the total number of employees to 1,132

(2022: 1,050).

X We have requested additional reporting on employee recruitment and

retention across the Group on a regular basis.

FURTHER INFORMATION IS AVAILABLE IN: SUSTAINABILITY

Strategic reportGovernanceFinancial statementsStakeholder engagement continued

Cohort plc Annual Report and Accounts 2023

Customers

Suppliers

Communities

Who engaged:
Non-executive Directors, Executive Directors and subsidiary
Managing Directors.

Who engaged:
Executive Directors and subsidiary Managing Directors.

Who engaged:
Non-executive Directors, Executive Directors and subsidiary
management teams.

Key areas of interest:
Innovative solutions, product development, long-term relationships,
value and product availability.

How we engaged:
X The Board received regular updates on key customers through the monthly
reporting mechanism, in the presentations to the Board meetings by the
subsidiary Managing Directors, and through input from the subsidiary
Managing Directors into the strategy planning.

X The Chief Executive was invited to meet with selected customers.

Key areas of interest:
Ethical and social impact, payment practices and long-term partnerships
to develop innovative products and solutions.

How we engaged:
X The Board received updates on relationships with key suppliers and strategic
partners through the monthly reporting mechanism and the year-end
compliance reports.

X Subsidiary management visited suppliers to develop the robustness of our

Key areas of interest:
Improving quality of life, environmental and social impact and diversity
and inclusion.

How we engaged:
X We are committed to supporting the communities in which we operate and
the Board received regular reporting on engagement by our businesses
throughout the year.

supply chain, and to ensure quality, and timeliness of delivery.

X Our businesses continued to engage with local schools and colleges

X We engaged with our key suppliers to understand their businesses and

supporting them in developing skills for industry, especially in STEM subjects.

X A number of the Non-executive Directors worked directly with the project

governance arrangements as part of our due diligence process.

X Through supporting community schemes and charitable events which allow

teams in our subsidiaries to support product development to satisfy
customer requirements.

X We appreciate that communication is a critical element of the product

delivery process and our subsidiary management teams actively engaged
with the customer, often over long-term programmes of work. This fostered
strong relationships with our key customers and enabled us to understand
our customers’ initiatives and priorities.

What we have done:
X Through regular engagement and open communication with our customers,
the Cohort Group has established a clear understanding and a responsive
service which we can align to our customers’ requirements; this is supported
by our Group engagement principles endorsed by the Board.

X The Executive Directors attended a number of each subsidiary’s

monthly management meetings and provided support on engagement
with customers.

X We continued to develop and improve key performance indicators and
processes to ensure customer delivery and needs remain a priority.

FURTHER INFORMATION IS AVAILABLE IN: STRATEGY,
BUSINESS MODEL AND SUSTAINABILITY

What we have done:
X To ensure that Cohort’s business is conducted ethically, all suppliers need to

comply with the principles of the Cohort policies on anti-bribery and
anti-slavery.

X The Executive Directors attended a number of each subsidiary’s monthly
management meetings and provided support on engagement with key
suppliers as required.

X Subsidiaries worked with our suppliers to ensure the supply chain is robust.
We have seen in some examples, post COVID-19 lockdown, that supply
chains have lengthened. We have worked with our supply chain to broaden
it and ensure suppliers understand our needs, including holding more stock
in the supply chain.

X Chess held a supplier day event during the year.
FURTHER INFORMATION IS AVAILABLE IN: SUSTAINABILITY

our businesses to leave a lasting positive impact.

X We engaged with our advisors and businesses to review our governance

arrangements regarding climate-related risks.

What we have done:
X We have supported communities and charities that have a link to our

activities (often supporting military veterans or service men and women)
with financial donations and a matching scheme for employee funds raised,
including SSAFA, the 10th Anniversary Military Wives Concert Series and
a 5–25k challenge for Help the Heroes as part of Armed Forces Week.

X The Group hosted school visits and work experience in STEM subjects at

some of our operations.

X We reviewed and assessed our climate-related risks across the Group and
produced our first report in alignment with the TCFD recommendations.

X We were proud to receive the Gold Award in the 2023 Ministry of Defence

Employer Recognition Scheme.

FURTHER INFORMATION IS AVAILABLE IN: SUSTAINABILITY AND
STRATEGIC REPORT

Strategic reportGovernanceFinancial statementsSection 172(1) statement

Cohort plc Annual Report and Accounts 2023

The Directors confirm that, throughout the year, in accordance with Section 172 of the Companies Act 2006, they have continued to act in such a way that they
considered, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole and, in doing so, have had
regard (amongst other matters) to the matters set out below:

Section 172 matters
X The likely consequences of any decision in

the long term

X The interests of the Company’s employees

X The need to foster the Company’s business
relationships with suppliers, customers
and others

How the Board has had regard to these matters

The Board oversees the Group’s strategy and closely monitors progress against strategic goals throughout the year both at Group and subsidiary level. The Board
believes that the strategy will result in long-term success and increased value for all stakeholders. The Board also carefully considers the Group’s commercial and
operational risks and how to protect shareholder value.
MORE DETAILS OF HOW THE GROUP MANAGES RISK CAN BE FOUND IN THE RISK MANAGEMENT REPORT

The Board recognises that our people are essential to our success and growth and the Board takes a keen interest in the development and retention of employees
across the Group. The Board actively supports the leadership development programme and effective employee engagement initiatives. The Board visited each of the
Group’s subsidiary businesses during the year to better understand the businesses, their employees and their culture and attended employee and management events.

While there are circumstances where the Board engages directly with certain stakeholder groups or on certain issues, the structure of the Group means that
engagement with suppliers and customers takes place most often at a subsidiary level. The Board supports the senior management teams at the subsidiaries to
foster good relationships with their customers and suppliers and, if appropriate, will engage directly, usually through the Executive Directors. The Board monitors
the relationship with key customers and suppliers through the Executive Directors and the monthly reports from each subsidiary Managing Director.
MORE DETAILS OF HOW THE BOARD ENGAGES WITH STAKEHOLDERS IS INCLUDED IN OUR STAKEHOLDER ENGAGEMENT REPORT

Page reference

26–27

X The impact of the Company’s operations
on the community and environment

The Board recognises the importance of the impact of its decisions on the community and the environment. In accordance with the Group Environmental Policy
endorsed by the Board, each subsidiary carefully manages its impact on the environment as further reported in our Sustainability report. Our subsidiaries engage
with their local communities through a variety of mechanisms including charity events, equipment sponsorship for local teams’ sporting activities, providing work
experience and university, school and college support.

26–27

X The desirability of the Company
maintaining a reputation for high
standards of business conduct

Through our Ethics Policy and our values, the Board sets out the values and standards of behaviour expected from all of its employees and representatives. This is
supported by our governance and compliance framework which requires compliance with the law in each jurisdiction where the Group operates and adherence to
a wide range of Group policies and standards including comprehensive anti-bribery procedures and our whistleblowing policy. We integrate our values into our
businesses and all of our interactions with our customers, partners and suppliers. Our Business Excellence Awards are based on the application of and
demonstration of our values by our employees.

26–27, 30–36

X The need to act fairly as between
shareholders of the Company

The Board recognises that it has to balance competing interests in reaching its decisions. Where there are conflicting interests, the Board will act as equitably and
fairly as it is able to take into account the implication for each stakeholder.

26–27

How this works for the Cohort Group
The structure of the Cohort Group means that day-to-day management decisions for our subsidiary businesses are undertaken by the senior management teams within the businesses within their levels of delegated authority.
The Board has put in place and oversees a detailed governance and delegation structure. In particular, the Cohort Board oversees the activities and decisions of its subsidiary businesses in the areas of strategy, finance, compliance,
human resources, and commercial and risk management.

Strategic reportGovernanceFinancial statementsSection 172(1) statement continued

Principal decisions made during the year
The principal decisions taken by the Board during the year, along with the stakeholder interests considered under S.172 of the Companies Act 2006, are set out below:

Principal decisions and stakeholders considered

Board’s decision-making process

Long-term considerations

Cohort plc Annual Report and Accounts 2023

Dividend
Shareholders, our people, customers
and suppliers

The Board considered its commitment to a progressive dividend policy which has seen
the dividend increase every year since 2006 and by 10% in each of the last three years.
It considered the financial resources required to execute our strategy, including organic
investment needs and acquisition opportunities, whilst ensuring a sufficient level of
dividend cover and equitable treatment of our stakeholders.

Acquisitions
Shareholders, operating companies, suppliers,
our people, future customers and employees
and professional advisers

Capital allocation
Shareholders, our people and customers

Divisional reporting model
All stakeholders

Board performance review
Shareholders and our people

Purchase of new site for
ELAC SONAR
Customers, suppliers, our people
and community

Renewal of banking facility
All stakeholders

Throughout the year the Board considered information relating to a number of potential
acquisitions, taking into account the Group strategy as well as the impact on the various
stakeholders of the Group. In 2022–2023 none of the potential targets reviewed by the
Board were considered to be appropriate investments taking into account the Group’s
long-term strategy. We did complete the acquisition of the minority interest of Chess
within our Sensors and Effectors division.

The Board approved the Group’s budget which sets out the capital allocation to deliver
the strategy through investment in R&D, capital expenditure, talent and acquisitions.
Our strategic objectives and priorities over the short to medium term will determine the
allocation weighting.

The Board considered that adopting a new simplified divisional reporting approach better
presented the performance of the Group to all stakeholders. These new divisions will
provide sufficient scope for expansion as the Group continues to grow, both organically
and through acquisition, whilst ensuring our subsidiaries can continue to operate as
standalone entities, retaining their agility and flexibility. The Chief Executive and Finance
Director engaged with major shareholders and institutions to obtain their views and
feedback on the proposal prior to implementation.

During the year the Board engaged an external evaluator to review the performance
of the Board as a whole, the Chair and the Board Committees. The Board felt that an
external evaluator would facilitate a robust and transparent process for the review and
would bring an element of objectivity.

The Directors considered this project over several Board meetings to assess not only the
financial implications but also environmental and energy considerations, the expected
timeframe and how this impacts upon employees, operational undertakings, customers
and suppliers. Risks and opportunities in respect of this investment were also fully
explored during this period.

The aim of the Board is to ensure that the dividends are consistent with the Company’s
financial performance without detriment to the strength of the balance sheet and future
sustainability. Specifically, we ensure that investment in research and development is
appropriate to ensure we remain competitive in the long term. In the last three years,
our total research and development spend was £32.6m compared with a total dividend
spend in the same period of £14.1m.

The long-term benefit of the investment against the short-term impact on different
stakeholders was considered by the Board.

The Board aims to balance investment for future growth whilst supporting our people
and customers in the short term as well as meeting shareholder expectations.

The Board believes that the simpler reporting model, amalgamating six existing
businesses into two reporting divisions, each reflecting the broad capabilities of its
component businesses, will help all stakeholders to have a clearer understanding of the
underlying performance of the Group going forward and provide a clear framework
within which new business additions to the Group can be reported.

The outputs of the review will inform the Board’s succession planning and will enable the
Board to continue to improve its performance and effectiveness.

The Board was keen that the new facility would be a flexible and energy efficient space
that would retain its value, ensure future sustainability and create growth potential for
ELAC SONAR.

The Board considered the financial stability of the Group for the next three to five years
and concluded that it was in the best interests of the Group to secure a three-year
refinancing deal to provide certainty. The Board considered the financing needs of ELAC
SONAR and decided to extend the facility from two UK banks to three banks with
Commerzbank (Germany) added to the existing two UK banks.

The revolving credit facility was put in place in May 2022, initially for three years to July
2025. An option was exercised in June 2023 to extend it for a further one year to July
2026 with a further option available to extend again to July 2027. The facility is for £35m
(drawn) with an option (accordion) to draw a further £15m providing both stability
and flexibility.

Strategic reportGovernanceFinancial statementsSustainability

Group commitment to sustainability

As a Group we are aware of the increasing importance of sustainability and are
focused on our environmental, social and governance priorities. We are committed to
monitoring how our business activities impact on our stakeholders and acting in
accordance with high levels of ethics and governance.

Ownership of our Environmental Policy rests with the
Cohort plc Board which is responsible for providing the
strategic vision and direction on all environmental
related matters. The Board is also committed to
supporting our subsidiaries and ensuring that this
policy is effectively implemented across the Group.

Each subsidiary’s Managing Director has responsibility
for implementing an Environmental Policy and
procedures appropriate for that business, and for
communicating that policy to their employees to
ensure that they are aware of their responsibilities.
They must also ensure that environmental issues are
given adequate consideration in the planning and
day-to-day undertaking of all business activities.

In addition, the Board expects all employees in the
Group to be ambassadors of good environmental
practices and to report any practices that do not meet
the required standards.

Environmental sustainability
The Group is committed to managing the environmental
impact of its activities, and to improving resource
efficiency and reducing waste. As part of the Group’s
commitment to sustainability, the Board has created and
endorsed a Group Environmental Policy. This outlines
how our businesses work together with our employees,
contractors, suppliers, customers and communities to
ensure high standards of environmental protection
through a variety of actions including:

X compliance with all relevant environmental

legislation;

X preparing and publishing environmental reports

for our stakeholders;

X reviewing the environmental impact of our

activities and following good business practices
to manage this;

X improving resource efficiency and reducing waste

wherever we can;

X having measures in place for effective and expedient

incident control, investigation and reporting;

X where relevant, having regard to environmental

factors in business decisions; and

X engaging and communicating with our employees
and other stakeholders on environmental matters.

Cohort plc Annual Report and Accounts 2023

Chess employees
volunteering
in Horsham.

Strategic reportGovernanceFinancial statementsSustainability continued

Environmental sustainability
continued

Performance – energy and greenhouse gas
(GHG) reporting
Cohort reports its environmental performance in
accordance with the UK Government’s Streamlined
Energy and Carbon Reporting Guidance (SECR) as
required under the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon
Report) Regulations 2018.

The GHG emissions have been assessed following the
GHG Protocol Corporate Accounting and Reporting
Standard and using the 2022 emissions conversion
factors published by the Department for Environment,
Food and Rural Affairs and the Department for Business,
Energy and Industrial Strategy. The assessment follows
the dual reporting approach for assessing scope 2
emissions from electricity usage. The financial control
approach has been used.

The table to the right summarises the GHG emissions
for reporting year 1 May 2022 to 30 April 2023 on both
a UK and a Group-wide basis. As a business we have
been assessing our UK carbon emissions since 2019 and
have provided both last year’s UK assessment results
and the baseline year for comparison. This year we have
included our European subsidiaries for the first time
and these are included in our total Group emissions.

Over the assessment period our UK scope 3 emissions
have increased due to an increase in travel as the
number of international trade shows and customer
meetings has continued to revert to pre-COVID-19
pandemic levels. We have continued to use virtual
meetings where appropriate. We also note that the
accuracy and quality of data collection has continued
to improve.

Cohort plc Annual Report and Accounts 2023

The table below summarises our GHG emissions for the reporting year 1 May 2022 to
30 April 2023:

Scope

Scope 1

Scope 1 subtotal

Scope 2

Scope 2 subtotal

Scope 3

Activity

Site gas
Van travel and distribution
Company car travel
Site gas oil
Refrigeration and A/C

Electricity generation
District heating

Flights
Employee-owned car travel (grey fleet)
Electricity transmission and distribution
Hire cars
District heating transmission
and distribution
Rail travel
Taxi travel
Bus travel

2022/23
Location
based
tCO2e
(incl. overseas
locations)

136.32
39.53
187.87
—
61.52

2022/23
Location
based
tCO2e

136.62
39.53
80.25
—
—

2020/21
Location
based
tCO2e

189.16
48.94
71.47
—
1.04

310.62

256.10

425.24

366.89
—

366.89

307.10
—

622.13
184.22

307.10

806.34

637.31 1
106.76
32.47
26.60

1,276.34
143.95
28.09
24.07

2,276.10
211.90
57.29
26.44

—
8.28
3.66
<0.01

—
9.03
2.80
0.10

9.70
9.05
7.75
0.67

2019/20
Location
based
tCO2e

167.32
67.19
70.63
38.74
0.84

344.71

536.47
—

536.47

1,725.18
138.24
45.55
39.60

—
23.08
4.88
<0.01

Scope 3 subtotal

1,976.52

815.08

1,484.37

2,598.90

Energy efficiency
Our subsidiaries continue to develop their energy
efficiency commitments and the majority have now
introduced or increased the existing provision of EV
charging points at their sites to encourage employees
to move away from petrol and diesel vehicles. SEA has
reduced energy consumption by insulating buildings
and installing energy efficient lighting and heating
systems and is improving energy monitoring. ELAC
conducted an energy audit and implemented several
measures to improve efficiency as a result including a
renewal of an air compressor, replacement of some roof
windows, and an upgrade of some fluorescent lighting
to LED lighting.

Energy initiatives
The subsidiaries of the Cohort Group have implemented
a range of energy efficiency and waste reduction
initiatives. All UK sites have continued to develop and
adopt Carbon Reduction Plans, in accordance with PPN
06/21. SEA has provided environmental awareness
training to all employees and MASS continues to offset
its carbon footprint.

All of the UK subsidiaries offer schemes for employees
to lease electric cars as part of their employee benefits
offering. This year ELAC SONAR implemented an
electric bicycle scheme as a benefit for all employees.

Total tonnes of CO2e
Total market-based tCO2e
Tonnes of CO2e per employee (all scopes)
Tonnes of CO2e per £m turnover (all scopes)
Total energy consumption (kWh)2

2,857.71
N/A
4.45
23.58
3,791,999

1,492.59
1,438.38
1.75
12.65

3,830.48
3,873.22
3.42
21.20
3,273,720 3,395,507 6,355,779

2,047.57
2,072.39
2.43
13.57

1. Flight emissions adjusted to account for improved data quality.
2. Total energy consumption includes electricity, gas, company vehicles, grey fleet and hire cars.
The table above includes two columns for 2022/23 reporting. The first is UK only and is thus comparable with the 2019/20
and 2021/22 reported figures. The second 2022/23 column includes our overseas subsidiaries and is not directly comparable.
Going forward we will report the entire Group, making the year on year figures comparable.

Strategic reportGovernanceFinancial statements

Sustainability continued

Environmental sustainability
continued

Waste and recycling
As part of its commitment to continuing to be a zero
to landfill business, SEA holds regular product lifecycle
reviews to consider reusability and recyclability of
components. During the year, Chess Dynamics identified
additional recycling opportunities for bubble wrap, nuts
and bolts, and plastic cable reels. MCL is implementing a
new Environmental Management System which includes
recycling of ink cartridges, with the recycling company
giving a donation to charity for each collection. The
employees at the Cohort head office identified a way
to recycle coffee pods. EID has implemented recycling
and waste reduction initiatives throughout its facility.

ISO 14001
SEA and EID are ISO 14001 accredited and Chess
Dynamics has now achieved ISO 14001 accreditation
at two of its three sites and is working towards
accreditation at the remaining site. MCL and MASS
continue to work towards accreditation.

Looking forward
MASS is planning to replace diesel pool cars with
electric or hybrid vehicles as leases expire and is
exploring a phased upgrade of lighting to LED in its
St Neots site.

SEA is investigating introducing energy generation
at all sites and will reinforce a UK sourcing policy for
direct materials.

Environmental incidents
There have been no internal or external environmental
incidents throughout this reporting period at any of
our locations. Relevant employees receive training
updates to enable them to effectively manage such
events if they occur.

SEA participated in
a big Beach Clean.

Cohort plc Annual Report and Accounts 2023

Our values

We believe in
PLAYING OUR PART

We dedicate our expertise to advancing defence
technology. It is our contribution to national
interest and security, protecting people and
keeping them safe. It is our way of making
a difference.

We work at the highest levels of strategic
capability and take great pride in our collective
expertise. We operate with uncompromising
ethics and offer up our talent and resources for
the greater good of nations.

We believe in
BEING RESULTS DRIVEN

We are an agile group of smart thinkers, with the
ability to create solutions and the tenacity to see
things through. If we say we’ll do something, then
we’ll do it.

We’re interested, committed and personally
invested in purposeful technology that delivers
and makes good commercial sense.

We believe in
INDEPENDENT THINKING

Small teams do big things when they have the
autonomy to think and to see the bigger picture.
When they’re given the space and encouragement
to explore, free of unnecessary process.

Independent thinking and an entrepreneurial spirit
help us inspire each other to find better ways of
working and create the conditions for new ideas to
unfold. It’s how we come to better understand the
challenges before us and adapt swiftly to reach
the most effective solution.

People
Our capabilities and customer relationships all derive
from our people. Across the Group, our people can make
a difference, fulfil their potential, develop their careers,
and are rewarded for what they do.

We recognise that our success hinges on the attitudes
and behaviours of our people. We create a climate and
culture that encourages them to deliver outstanding
performance for our customers while operating with
uncompromising ethics. We encourage our people to
role model our values that capture and articulate the
spirit of the Group.

NUMBER OF PERMANENT EMPLOYEES
AT 30 APRIL 2023

1,132

1,050

1,005

906

907

Strategic reportGovernanceFinancial statements

Sustainability continued

People continued

Employee engagement
It is critical to the success of our business that our
employees feel valued and engaged and are well
informed about events at Group level as well as within
their own businesses and their subsidiary peers.

Board visits to subsidiaries
The Board places great importance on visiting
subsidiary sites throughout the year to engage directly
with local management and employees. This enables
the Directors to understand the priorities for local
management so that they can have regard to their
interests in decision making.

This year the Board members visited each of the
subsidiaries’ sites in person. The Board undertook
a varied programme including a site tour at each
subsidiary, providing an opportunity to engage with
employees informally in the workplace.

Group communications
The Group cascades employee communications to
the subsidiary businesses through a Group intranet,
update presentations, and direct all-employee emails.
The Group intranet features regular updates from
the Chief Executive and updates at key times of the
reporting calendar, as well as sharing important
information about internal activities happening across
the subsidiaries. The Chief Executive has recently
completed in-person group strategy presentations
to all the subsidiary businesses. Employees have good
awareness of the financial and economic factors
affecting the Group’s performance. Where possible
communications are translated into the local language.

Internal communications
Each subsidiary has its own internal communications
programme, delivered across a variety of channels
appropriate to each business. Regular town hall
meetings and informal employee briefings, where
employees’ questions can be answered by local
leadership, and online communications continue
to support hybrid working.

Employee feedback
All of our subsidiaries conduct regular employee
engagement surveys and the key outcomes are put
into an action plan for the local management team
to implement. The results of these surveys are
reported to the Cohort plc Board.

Cohort plc Annual Report and Accounts 2023

Training and development
The success of our business depends on our ability
to deliver innovative solutions to our customers.
This drives us to attract the best talent and to
nurture this ability within our employees, providing
them with a stimulating workplace and career
development, and supporting the creation of
long-term value for our business. Many training
schemes operate at subsidiary level, including the
use of online solutions such as LinkedIn Learning
and Skillcast. In 2022/23 there have been a number
of management training courses in the subsidiary
businesses including cross-subsidiary HR training
for line managers.

At Group level, our leadership development
programme is designed to equip our current and
future leaders with the skills to effectively deliver
the strategic priorities of the business and respond
to the competitive and changing environment we
operate within. In October 2022 we commenced
a new round of our leadership development
programme with a group of 14 participants from
across the Cohort Group. The Executive Directors
and Managing Directors for the subsidiary businesses
were able to engage with the individuals who are
participating in the leadership development
programme to grow the Group in the future
through a Q&A session.

Reward and recognition
Each year we host the Cohort Business Excellence
Awards, where we acknowledge the key
achievements and dedication of those teams and
individuals who have shown true delivery of our
values, made a real difference to the success of our
business, or been commended for their excellence
in service to our customers. The awards event was
held as a luncheon celebration and was attended
by the Board.

The recipients of this year’s top award were the
leadership team from SEA’s Ship Fleet Protection
who won several export contracts.

The larger subsidiaries also run their own annual
employee recognition events and smaller thank
you awards.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Sustainability continued

People continued

Apprenticeship and graduate programmes
Across the Group we run a number of apprenticeship
and graduate programmes, incorporating both
technical and non-technical specialists. There are
currently 14 graduates, 12 apprentices and two
internships/student placements in our schemes
across the Group. The UK-based Cohort businesses
are utilising their apprenticeship levy funding for
new apprentices or to add to the skills of existing
employees. National apprenticeship week has been
supported with presentations on apprenticeships
and career paths at local schools.

Joseph Oldham was awarded “Apprentice of the
year” for his achievements in his final year of his
apprenticeship by the North Devon Manufacturers
Association Awards (NDMA).

Health and wellbeing
The subsidiaries took part in many activities during
the year to promote the health and wellbeing of their
people. Our employee assistance programmes are
available for employees to access and are regularly
promoted along with other employee benefits. In
response to the cost of living crisis and the current
economic situation we have been supporting
employees with various schemes including wellbeing
days, financial seminars and pension updates. More
mental health first aiders/ambassadors were trained
across the UK businesses.

Once again Mental Health Awareness Week was given
particular focus. Some of the activities included:

X Chess Dynamics highlighted the Time to Talk
campaign encouraging people to start a
conversation and open up about their mental
health. The aim was to reduce mental health stigma
and create a supportive community where people
can feel empowered to seek help when needed.
There were webinars on men’s mental health, stress
and resilience, healthy eating and combating
loneliness. There were also wellbeing lunchtime walks.

X MASS offered a Financial Wellness Programme

where topics covered included financial resilience,
debt support advice and mortgage advice for
employees looking to own their own home.

Top right: SEA and MASS
employees in the Run2Paris
fundraising event.
Right: SEA employees took
part in the Help for Heroes
Walk for Armed Forces Week.
Far right: Chess employees
volunteering for a local
charity in Wokingham.

Strategic reportGovernanceFinancial statementsSustainability continued

Horley Football U11s
MCL sponsored Horley Town U11s by providing the
boys with brand new football kit. Grassroots football
brings huge benefits to the children and provides a
positive contribution to our local community.

MCL STEM
MCL visited a total of six schools in England and Wales
over the past 12 months, supporting the national
curriculum that focuses heavily on science, technology,
engineering and mathematics.

During school visits, MCL talked about critical thinking,
problem-solving and innovation using the technology
within the business. The most popular feature at its
talks was the robot dog SPOT.

Working in an industry with the latest technology,
MCL believes it’s important to empower younger
generations by allowing children a space to learn,
question and think about how technology is being
used for the good of the world.

Social sustainability

STEM
At a Group level we maintain close links with academic
institutions, and we are Enterprise Partners of the
Institute of Engineering and Technology. MASS is a
signatory of the Tech Talent Charter which promotes
and supports the drive for diversity and inclusion in the
UK technology sector. MCL has become a member of
Business in the Community (BITC) – the King’s Responsible
Business network – and signed the BITC Race at Work
Charter which is a commitment to improving equality
of opportunity in the workplace.

We actively promote Science, Technology, Engineering
and Maths (STEM) locally by supporting schools and
colleges, providing opportunities for work experience
and graduate thesis sponsorship and promoting our
businesses at careers fairs, in order to motivate and
inspire the next generation of young scientists and
engineers. Students are sponsored at various levels
across the Group, including at Kiel University, the
University of Liverpool, and the University of the
West of England as part of the UKNEST scholarship
programme.

MCL was involved with 40 coders from across industry
and defence who met at MOD Abbey Wood in Bristol
for the Robot Dog Olympics. The coders programmed
“Spot” the quadruped robot to complete various
challenges including a 50 metre sprint, a gymnastics
routine and problem solving.

We have partnerships with local schools and colleges
including Longsands Academy in Cambridgeshire and
UTC Silverstone in Northamptonshire whose students
were provided with work experience opportunities.
We sponsor awards at several local schools and share
industry knowledge as part of the technical modules
on these programmes.

Cohort plc Annual Report and Accounts 2023

Chess Dynamics joined United Kingdom
Naval Engineering, Science and
Technology (UKNEST)
UKNEST is a not for profit organisation that promotes
the engineering, science and technology interests of
UK naval defence.

Dr Michael Green, Chess Dynamics’ Naval Systems
Director, said: “Chess is delighted to join UKNEST,
both to collaborate in the delivery of innovation and
technology, and to share in the development of future
engineers to support and grow the Royal Navy’s
capabilities for the future.”

SEA is also sponsoring an Engineering graduate from
UWE as part of the UKNEST scholarship programme.

One of our employees in Bristol has given support
to “Code First Girls”, which aims to get more women
into technology.

Communities and charities
We recognise the enormous contribution that our
Armed Forces make to protect our nation and the work
that we do helps them carry out their vital tasks more
effectively. Across the Group, we employ many military
veterans and current reservists, and celebrate their
achievements during Armed Forces Week. Chess Dynamics
sponsored the Armed Forces Day event in Scarborough.
SEA supported the 5–25k walking challenge for Help
for Heroes in Armed Forces Week and sponsored the
Tenth Anniversary Military Wives Concert Series.

We are proud to be a signatory to the Armed Forces
Covenant and under the Defence Employer Recognition
Scheme we hold one gold award at SEA, two Silver
Awards at MASS and Cohort plc, and a Bronze Award
for Chess Dynamics.

SEA was awarded the Gold Award in the 2023 Ministry
of Defence Employer Recognition Scheme (ERS), having
previously held the Silver ERS; this recognition demonstrates
our continued commitment to ex-service personnel.

The SEA Beckington office has supported primary
schools with visits to the environmental garden to
understand more about insects and their habitats.

Strategic reportGovernanceFinancial statementsSustainability continued

Social sustainability continued

Communities and charities continued
MASS also supported organisations as part of the
National Cyber Security Centre (NCSC) and the IASME
Consortium as a credited Assured Service Provider. These
NCSC funded Cyber Essentials and Cyber Essentials Plus
Programmes have enabled MASS to support charities
and legal aid organisations in becoming Cyber Essentials
certified. The cyber team at MASS also worked alongside
the Eastern Cyber Resilience Centre (ECRC) to provide
cyber resilience advice and support to local SMEs in the
eastern region of the UK.

MASS’s Electronic Warfare team hosted the Electronic
Warfare Subject Matter Expert working group meeting
as part of its commitment to promoting development
and progress in the industry. The Electronic Warfare
Subject Matter Expert working group is an opportunity
for small and medium-sized companies to come
together to learn more about each other’s capability
and business experience, to support future growth
and enhance the UK’s sovereign capability.

Across the Group we have sponsored local sports
teams’ training kits.

Our subsidiaries are active participants in their local
communities, engage in local initiatives and provide
charitable support. In a challenging year our teams
managed to provide valuable support for both local
and national charities. One of the events at the Chess
Dynamics’ Christmas party resulted in a donation of
more than £900 for a local charity in Plymouth.

Cohort plc Annual Report and Accounts 2023

CHARITY DONATIONS IN 2023 BY THE GROUP

£33,000

(2022: £29,000)

SSAFA
Cohort plc is proud to be an active sponsor of the
UK Armed Forces charity SSAFA Corporate Friends
Scheme. In 2022/23 the Group sponsored the SSAFA
Christmas Carol Concert, Run2Paris, annual dinner
and industry networking events.

Governance
Cohort is committed to the highest standards of
governance and ethics. The Group has a strong ethical
culture, supported by our Ethics Policy as published on
our website (cohortplc.com). We see a company as a
social unit with an economic output and the success of
our social unit depends on the values of honesty, trust,
loyalty and working together, with a healthy balance of
competition and cooperation, just as in any other unit
of society. We try to run our businesses this way.

Ethical business conduct
It is Cohort’s policy to conduct all of our business in an
honest and ethical manner. Our Ethics Policy sets out
the values and standards of behaviour expected from
all those working for or on our behalf. It requires all of
our representatives to comply with the laws and
regulations in the countries in which we operate and we
require anyone who becomes aware of behaviour which
may contravene our policy to report it and to seek
advice. We provide a confidential and anonymous
whistleblowing facility to support this.

Anti-bribery
Cohort has a culture of zero tolerance towards bribery
and corruption. The Group has an Anti-Bribery Policy
and each of its businesses has implemented that policy
and adequate procedures described by the Bribery Act
2010 (the Act) to prevent bribery. Each business within

Left: Teambuilding at EID.

the Group reports annually to the Board on its
compliance with the policy and procedures. The Cohort
Chief Executive is the Board member responsible for the
Group’s compliance. As part of its procedures, the Group
has implemented training in respect of compliance with
the Act for all of its employees on joining. Employees in
roles with a greater risk of exposure to bribery are
required to undertake annual refresher training.

The Group’s Anti-Bribery Policy is reviewed at least
every two years or more often if necessary. The policy
was last reviewed and updated in January 2022. Our
policy is supported by comprehensive procedures to be
followed when any member of the Group works with
third parties to ensure thorough due diligence is carried
out and repeated at regular intervals and that our
agents and other third parties have satisfactory
standards and procedures in place. This year the
anti-bribery procedures were reviewed and
strengthened and an exercise was carried out to
review all agents, distributors and representatives.

Cyber risk and data security
The Group introduced an Information Security Policy
(ISP) in January 2019, replacing its previous Security
Policy Framework.

The ISP covers the physical and cyber security of our
information, including that held on behalf of third
parties. It also addresses business continuity and
disaster recovery procedures and encompasses our
responsibilities in respect of data protection and other
non-personal information we handle.

Each business within the Group reports annually to the
Board on its compliance with the ISP and this compliance
is currently audited by an internal team of information
assurance and cyber experts from MASS. MASS’s own
compliance with the ISP is audited externally.

The Group’s ISP is frequently reviewed, taking account of
best practice and requirements in government and industry.

We continue to monitor phishing attempts and other
cyber threats and to raise awareness of these risks
across the Group.

Our data protection policies and processes are
embedded in our culture through mandatory training
for all employees which must be undertaken at least
every two years.

Modern slavery
The Group has an Anti-Slavery Policy to address the
aspects of modern slavery as set out in the Modern
Slavery Act 2015 (MSA). In accordance with the
requirements of the MSA, each UK member of the
Group has published a statement on their respective
websites setting out the steps the Group and they have
taken to ensure that slavery and human trafficking are
not taking place in their respective businesses and
supply chains. A copy of the statement can be found
on the Corporate Governance page of our website
(cohortplc.com). The Group’s Anti-Slavery Policy was
first adopted in April 2016 and was updated in
September 2020.

We require the same high standards from all of our
suppliers, contractors and other business partners.

Whistleblowing
Our whistleblowing line is hosted by SafeCall and
provides a channel for confidential and anonymous
reporting in more than 68 languages. Details of the
service are provided in the local language at our
European subsidiaries. The Chief Executive reviews all
whistleblowing reports and every report is investigated
with support from the General Counsel and Company
Secretary. The Senior Independent Director acts as the
escalation contact for whistleblowing reports. Our
Whistleblowing Policy provides protection and support
for whistleblowers raising a genuine concern. The
Group’s Whistleblowing Policy was reviewed and
updated in April 2023.

The Matters Reserved for the Board and the Audit
Committee Terms of Reference were refreshed in 2023.
FURTHER DETAILS OF OUR CORPORATE GOVERNANCE
STRUCTURE ARE SET OUT IN THE CORPORATE
GOVERNANCE REPORT

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Summary of Cohort’s climate risk register

Potential impact

Timeframe

Managing our risk exposure

Physical risk
1. Extreme weather events

Extreme weather such as heat, floods,
storms and drought are already impacting
the global supply of key materials. The
production of semiconductors, for example,
requires large quantities of clean water
and is currently impacted by a prolonged
drought in Taiwan. This may affect
Cohort’s product sourcing, leading
to delays.

Extreme heat can impact the performance
of some sensitive equipment and change
the operational requirements in locations,
where record-breaking temperatures have
been recorded. Extreme heat in Cohort’s
key geographies may also decrease
employee productivity and health and
wellbeing during heatwaves. Investment
may be required to mitigate these impacts.

Short, medium and
long-term risk

Cohort will continue to monitor the
exposure of its assets and geographies
to extreme weather events. Procurement
and finance teams are working to identify
materials that are sourced from areas
most at risk of extreme weather events
and using this to develop an alternative
source where possible. We conduct
research into temperature-resistant
materials that can be used in our
products. We are also taking steps to
protect the health and wellbeing of our
employees during prolonged periods of
extreme heat such as changing shift patterns.

Task Force on Climate-related Financial Disclosures (TCFD)

TCFD
This is our first year of reporting under Sections 414CA
and 414CB of the Companies Act 2006. With the
support of an external sustainability consultancy,
we completed this process with input from each of our
six subsidiaries to ensure the risks and opportunities
identified were representative of our entire business.
We recognise that there are steps yet to be taken across
the business to integrate climate-related risks and
opportunities into our strategic approach and we have
identified clear actions to work towards full compliance.

Governance

Board and management oversight of
climate change
The Board is ultimately responsible for the Group’s
risk management framework which includes both
climate-related risks and opportunities, as well as
ensuring the suitability of any climate-related controls
in place. The Audit Committee has assumed
responsibility for reviewing the TCFD disclosures.

Given heightened awareness of climate change and
the increased scrutiny from stakeholders, the Group
recognises that more formalised governance
mechanisms are needed to ensure that climate risks
and opportunities are given due focus by the Board
and senior management. These will be defined and
integrated across the business in the coming financial
year. In addition, we will develop a clearer long-term
definition of the role of the Board in overseeing the
management and monitoring of climate-related risks
and opportunities.

At a subsidiary level, the risks and opportunities
relating to climate change are identified, considered
and managed by the Finance Directors for each of the
six subsidiaries and reported in the ESG quarterly
updates to head office. In March 2023, the Finance
Directors attended a TCFD training course to develop
their knowledge in this area.

Actions for 2023/24

X Continue to train the Board and senior

management on climate and governance
related issues.

X Going forward, Beatrice Nicholas will be the

Non-executive Director responsible for oversight
of climate-related risks and opportunities.

Strategy

Our climate-related risks
Cohort undertook a formal climate heatmapping
exercise to identify and assess our climate-related
risks and opportunities. This was undertaken in the
first half of 2023 with the support of our sustainability
consultants. We considered our exposure to physical,
transition, liability and transboundary climate risk
drivers across short, medium and long-term horizons.

We have defined our timeframes below to align
with our business planning approach: short term:
one to three years, medium term: three to ten years
and long term: ten years+.

As a result of this risk identification process, we have
created our own climate risk and opportunities register
which identifies nine climate-related potential risks
and three opportunities that could impact the Group.

The potential impacts from climate change vary across
Cohort’s six subsidiaries. The table on pages 37 and 38
amalgamates the Group’s nine climate-related risks.

Strategic reportGovernanceFinancial statementsTask Force on Climate-related Financial Disclosures continued

Strategy continued

Summary of Cohort’s climate risk register continued

Potential impact

Transition risk

2. Energy prices
Rising energy prices and unstable energy
supply may lead to increased operational
costs if the government seeks to avert
energy poverty and fund the energy
transition through increased taxes.

Timeframe

Managing our risk exposure

Short and
medium-term risk

We will be evaluating our opportunities
to reduce energy consumption and
access cheaper and renewable sources
of energy.

3. Inflation fuelled by climate change
It is possible that climate change will have
long-term impacts on inflation globally.
This is fuelled by the physical impact
climate change will have on food
production, manufacturing and logistics.

Medium and
long-term risk

As a Group we are continually
monitoring and measuring the financial
impact inflation will have on the
business, including the influence climate
change has on the rising cost of
materials.

4. Cost of carbon
Government legislation designed to reduce
emissions could lead to increased
operational and material costs as the price
of carbon is passed on to the emitters.

Increased demand for carbon offset
credits due to the UK’s commitment to
become net zero by 2050 could result in
higher and/or volatile carbon credit prices.

Long-term risk

Whilst a risk, the immediate impacts are
unknown. We track emissions from our
subsidiaries. The Board will monitor
costs and raise concerns accordingly.

5. Increasing stakeholder expectations
Customers, investors and regulators are
requiring companies to be more climate
aware and introduce sustainable products
and services. Financial institutions and
insurers increasingly look to reduce the
risk of losses and/or link capital and loans
to ESG performance.

Medium-term risk

Our subsidiaries continually conduct
research to identify new and innovative
products, including assessing
sustainability and climate resilience.

Cohort plc Annual Report and Accounts 2023

Potential impact

Liability risk

6. Policy and regulation
There is increasing activity by regulators
to align Company activity to a low-carbon
economy. There is also reputational risk
that stakeholders might perceive our
response to climate change as insufficient
or inaccurate.

7. Litigation

Where the Company has been unable to
meet contractual requirements as a result
of climate change impacts, for example
due to climate-related supply
chain delays.

Trans-boundary

8. Supply chain disruption
Supply chains that rely on specialised
commodities and key infrastructure can
be disrupted by weather and extreme
weather events impacting supply facilities
and production.

9. Civil unrest/conflict
Emerging conflicts from transboundary
migration due to increasing climate risks
have the ability to disrupt supply chains
and redirect spending.

Timeframe

Managing our risk exposure

Medium and
long-term risk

The Group will continue to review
emerging policy and regulation that may
impact our subsidiaries and will take
appropriate action as and when required.

Medium and
long-term risk

Cohort monitors its regulatory and
contractual requirements closely to
ensure its exposure to litigation
remains minimal.

Short and
medium-term risk

Each of our subsidiaries will conduct a
review of key suppliers and identify
those that may be impacted by extreme
weather events.

Short and
medium-term risk

The Group will continue to monitor how
this emerging risk will impact our sector.

Strategic reportGovernanceFinancial statements
Task Force on Climate-related Financial Disclosures continued

Strategy continued

Climate-related opportunities
Many of the themes that arise from mapping our climate-related risks also manifest as strategic opportunities.
We believe Cohort is well positioned to take advantage of increasing investor and customer focus on the transition
to a low-carbon economy through the development of climate-resilient products and supporting our customers to
reach their own net zero commitments.

Opportunity

Description

1. Innovating in climate
resilient products

Investing in innovative equipment that helps customers
adapt their defence capability to extreme weather events
and climatic conditions.

2. Responding to climate-driven

security threats

3. Helping countries to manage

increased migration

Climate change will have an impact on natural resource
distribution and habitability in some parts of the world. This
could lead to aggressive conflicts either to gain control of natural
resources or to divert internal unrest. The UK and its allies will
need to ensure that they are ready to deal with such aggression,
and the Group offers products and services that will assist in this.

Increased migration flows from the regions most affected by
climate change will pose a political and security challenge for
destination countries including the UK and its allies. The Group
provides sea-based and land-based sensor systems that are an
essential element in responding to this.

Actions for 2023/24

X Review the impact climate change will have on the availability of key materials for Cohort’s subsidiaries.

X Explore how we can better quantify the potential financial impacts of Cohort plc’s priority climate risks

Below 1.5° (NZE informed)

and opportunities.

X Develop bespoke scenarios to deepen our understanding of the impact of climate change on our business.

Cohort plc Annual Report and Accounts 2023

Scenario analysis
This year, we employed a qualitative approach to scenario analysis to consider the potential implications of climate
change for our business. We have mapped our risks to two public scenarios which align with the two risk categories
to which our business is most exposed:

X transition risk, manifesting predominantly in energy costs and availability, supply chain disruption, and new

energy technologies; and

X physical risk, manifesting in extreme heat and floods and storms.

This exercise allowed us to consider key business dependencies and capabilities which may help us mitigate these
risks. Next year, work to develop bespoke climate scenarios will be carried out to support our financial planning.

Given our exposure to risks related to energy transition, we selected scenarios from the International Energy
Agency: Net Zero Emissions by 2050 Scenario (NZE) and Stated Policies Scenario (STEPS). In the table below,
we outline the impacts on our business in terms of risks and opportunities.

Above 2.5° (STEPS informed)

Risks

Physical risks:
X Physical risks are swifter to materialise

X Increased heat, floods and storms disrupt global supply

chains, from sourcing of materials to transport and logistics

Transition risks:
X Transition risks are slower to materialise, but may be

unpredictable, and are linked to physical risks

X Policy and regulation will intensify as it keeps up with demand

from global institutions to reach net zero faster

X Energy demand and costs may be unpredictable

Physical risks:
X Physical risks are low

Transition risks:
X Transition risks materialise rapidly

X New energy technologies are adopted rapidly, with the risk

of scarcity and competitor first-mover advantage

X Supply chain disruption likely to occur but could be influenced

by other geopolitical reasons

X Energy demand and costs may be unpredictable

Strategic reportGovernanceFinancial statements
Task Force on Climate-related Financial Disclosures continued

Cohort plc Annual Report and Accounts 2023 40

Risk management

Setting out of risk identification process
Climate change has not yet been fully integrated into the Group’s wider risk management review process, but this
has been identified as a key area to focus on and progress next year. The Group’s risk register is reviewed annually
and updated accordingly. At a subsidiary level, management teams are responsible for identifying and assessing
new risks, as well as managing existing risks, including the identification of new and emerging climate-related risks.

Risk mapping process
To identify our climate-related risks, we took a structured approach to ensure that the Group’s climate risk register
is representative of each of our subsidiaries. The Finance Directors from each subsidiary attended a full day
workshop in March 2023 and participated in a series of activities hosted by our sustainability consultants to
identify and begin to measure the impact of a wide range of climate-related risks.

The information obtained through this process allowed us to prioritise our top nine risks. We then assessed the
magnitude and likelihood of each issue to determine which topics present the greatest threat to Cohort as a group
and the potential impact on key resources and relationships such as our people, assets and other stakeholders.
The climate heatmap illustrates the results and our prioritised risks. Supply chain disruption risks have emerged
as the area where Cohort has the greatest exposure. Actions to mitigate these will be prioritised.

Metrics and targets
As Cohort takes steps to further understand its climate-related financial risks and opportunities, we will consider
adopting appropriate metrics and targets that would allow such risks and opportunities to be tracked.

Cohort has been reporting scope 1 and 2 and limited scope 3 emissions since the introduction of the Streamlined
Energy and Carbon Reporting (SECR) regulations in 2019. This has focused the Group’s awareness of carbon over
the past three years and our ability to substantiate our overall environmental impact.

We are also aware of the increasing stakeholder focus on scope 3 emissions and we will begin work to understand
our full scope 3 emissions and the associated carbon-related risks across our whole value chain.

Our full SECR report can be read on page 31.

Actions for 2023/24

X Consider adopting metrics and targets that would allow the Group to monitor and track its climate-related

financial risks and opportunities.

X Explore how to quantify the impact of scope 3 supply chain emissions.

(3)
Likely

X Energy costs

X Supply chain disruption

(2)
Possible

X Increased stakeholder

expectations

X Inflation

X Policies and compliance

X Extreme weather events

d
o
o
h
i
l
e
k

i
L

(1)
Unlikely

X Cost of carbon

X Civil unrest

X Liability

(1) Low

(2) Moderate

Magnitude

(3) High

Actions for 2023/24

X Embed our climate-related risks into our Group strategy and risk management process, to enable us to

integrate stronger consideration of sustainability issues, including climate change, into our risk management.

Strategic reportGovernanceFinancial statements
Cohort plc Annual Report and Accounts 2023

“ The Group reviews, analyses
and addresses the risks it faces
through the Audit Committee,
Board, Group Executive and
subsidiary management
meetings, and subsidiary
project and functional reviews.”

Risk management and principal risks

Risk management

Risk management
The key risks and the approach we take to their
management are set out below. Certain additional
risks are explained elsewhere in the Annual Report.
Specifically, the impact of the war in Ukraine, the
COVID-19 pandemic and resulting economic market
risks are discussed in the Chairman’s statement and
Operational review and the cyber risk to the Group
is discussed within the Corporate governance report,
alongside our ethical and behavioural risks. Our risk
in respect of our key resource, our employees, is
explained within this Risk management section but
also expanded upon in the Business model and
Stakeholder engagement sections of this report.
Our risks in respect of the environment, including
climate change, are addressed specifically in our TCFD
reporting. These should be considered alongside this
section to give a complete picture of our risks and their
management and control.

The Group reviews, analyses and addresses the risks
it faces through the Audit Committee, Board, Group
Executive and subsidiary management meetings,
and subsidiary project and functional reviews.

Depending upon the nature of the risk, review and
action may be on an annual basis. In most cases the
review is more frequent. Project risks are generally
reviewed monthly.

Risk management framework

Cohort plc Board

Audit Committee

Executive Management

Top-down review

Risk review

Group-wide business risk register

Bottom-up review

Group businesses

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Nature of risk

Business risk
Capacity to grow the Group

Mitigation and progress

Cohort plc Annual Report and Accounts 2023 42

Unchanged

Increased

Decreased

Change

As an AIM-listed group, Cohort’s strategy is to grow, both organically
and by acquisition. This gives rise to the risk of the Group not having the
capacity to grow in line with our strategic objectives. Specific elements
of this risk include our ability to win new business and design new
and competitive products and solutions, whilst ensuring that we meet
our obligations to our customers and identify and execute suitable
value-adding acquisitions. It also includes having sufficient people
of the right skill sets to deliver our existing commitments and develop
our future products and solutions (see “Employees” below).

The elements of this broad business risk are addressed below, especially the risks in respect of customers, operations, acquisitions and treasury.

At a higher level, our federated model of relatively small, independent businesses enables us to respond more quickly to changing market and
business conditions. Through this independence, each business is able to retain a good degree of innovation and responsiveness.

This model also allows our businesses to keep close to customer requirements and technical changes to enable them to identify the need for new
products and solutions and how best to achieve this, whether through our own development or utilising third-party technologies.

To ensure that the business growth opportunities are value adding, whether new business, products, services or acquisitions, appropriate
controls are in place in our subsidiaries’ businesses and at Group level to lessen the risks of such undertakings.

Market risk
Customers

The Group’s single most important customer remains the UK MOD.
£62.3m of revenue came directly from this source in 2023 (2022:
£46.3m), 34% (2022: 34%) of Group revenue.

In addition, £36.6m (2022: £18.5m) of Group revenue, 20% (2022:
13%), was sourced ultimately from the UK MOD but received via
other contractors.

Any event which affects the Group’s reputation with the UK MOD
could also put this revenue at risk.

The increase in the proportion of the Group’s revenue to its ultimate primary customer in 2023 compared with 2022 reflects the stronger
performance, within Communications and Intelligence, at MCL as well as the overall decline in revenue at EID where the UK MOD is a much
smaller customer. In the immediate future we expect the revenues, direct and indirect with the UK MOD, to remain at least at this absolute level,
but as we see a recovery in revenue at EID for the next two years, the proportion of the Group’s revenue with the UK MOD is expected to fall
back to historical levels.

Revenue from the Portuguese MOD, which is also a home market for the Group, was higher at £4.9m (3%) in 2023 (2022: £3.9m; 3%).
The increase in revenue from the Portuguese domestic customer was a result of increased sales of communications equipment. Germany is
also a home market for the Group following the acquisition of ELAC SONAR (ELAC). Sales of £4.3m (2%) in 2022/23 (2022: £4.0m; 3%) were
virtually in line with last year. Non-defence sales (which include security) decreased to £16.8m (9%) from £18.0m (13%). The decrease was
due largely to a decrease in security work performed for public sector entities.

£58.4m of revenue (32%) was delivered to defence and security export customers this year compared with £48.8m (35%) in 2022. The absolute
increase is largely due to the Sensors and Effectors division, specifically recovery at Chess. The relative proportion has declined as the increased
export sales were overtaken by the higher activity seen at the UK MOD.

£54.4m (2022: £33.6m), 30% (2022: 24%) of Group revenue, representing 55% (2022: 53%) of revenue derived from the UK MOD, was in
relation to the Astute and other submarine programmes, nuclear deterrent programme and operational support to the Royal Navy, Royal Air
Force and Joint Forces, all of which have been confirmed as high-priority areas following the UK Government’s latest Strategic Defence and
Security Review. This revenue stream is expected to be maintained in the coming financial year following some key order wins during 2022/23.

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Cohort plc Annual Report and Accounts 2023 43

Nature of risk

Operational risks
Employees

The Group’s main resource is our employees. We are not a capital
intensive business and as such our value, and our customers’ value,
derives from the ability of the Group to recruit, retain and train
employees with the right skills and flexibility. In some of our key areas,
resources are limited, and it is a risk if we cannot maintain sufficient
numbers and appropriate skills.

Mitigation and progress

Unchanged

Increased

Decreased

Change

As highlighted in the People section of our Sustainability report, we endeavour to provide an environment in which skilled employees are
attracted to our business through the nature and variety of work and the level of responsibility we can provide. We maintain close links with our
military and security customers, which provide a primary source of domain experts for our businesses. We, in return, are keen to support people
initiatives for and within those organisations, including the UK MOD’s Armed Forces Covenant.

We maintain close links with academic institutions in our neighbourhoods and further afield where appropriate skills exist.

We have apprenticeship and graduate recruitment schemes which ensure that the Group is able to develop its own people and that skills are
maintained into the future, especially in light of shrinking military establishments.

In the last year, as our order book has expanded and operating activity has returned to near pre-COVID-19 levels, we have been expanding our
workforce across the Group, especially at Chess, ELAC and SEA. In some cases, we have experienced a challenging environment to recruit the
right skills with challenges in both availability and cost. In some specific areas, especially software and cyber, we have seen even more marked
wage inflation.

In all cases we have continued to engage closely with our employees, ensuring we develop and compensate them appropriately and continue to
offer a working environment that they find both interesting and rewarding. We have already put in place an Employee Value Proposition programme
at MASS and are rolling this out across the Group to ensure we attract and retain the key skills the Group requires now and into the future.

Suppliers

As is typical in the defence sector, the Group is reliant on certain key
suppliers for specific elements of its technical and product offerings.
This reliance is long term, with product duration in this sector often
being tens of years.

This risk is managed through close liaison with suppliers, good project management and having contingency plans to contract with alternative
suppliers or bring the work in house.

The long-term life of many defence products requires a regular review of product life and capability, and the Group supports the customer in this
respect through funded ongoing product support and re-life tasks.

We have continued to see some suppliers struggling to meet delivery schedules because of the global supply chain disruptions caused by the
ongoing Ukrainian war and the tailwinds of COVID-19. This has been particularly noticeable where the level of a supplier’s output to the defence
sector is low, and the supplier is more dependent on the commercial aerospace and automotive markets. We have seen continued delayed
delivery times, particularly for semiconductors and certain other components. We have, where appropriate, ordered products and components
ahead of schedule to ensure we meet customer expectations. This has resulted in a higher working capital commitment. In the last year, lead
times have steadied, but remain longer than we had previously seen pre-COVID-19. We have seen the additional impact of inflation, especially
in supplies of products with high energy inputs, e.g. ceramics. As discussed below in operations, we continue to try and manage this inflation
by looking for alternatives or passing on costs where we can through higher pricing. Many longer-term contracts include an index-based price
adjustment which automatically compensates for some or all supply inflation. In most cases, bought-in parts and equipment are a small
proportion of total cost, so the inflationary impact can be managed. Nevertheless, this remains a higher risk for the Group in the coming year.

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Nature of risk

Mitigation and progress

Operational risks continued
Operations (project development)

Cohort plc Annual Report and Accounts 2023 44

Unchanged

Increased

Decreased

Change

The subsidiary trading and business risks are similar across divisions.

Bid risk – the businesses bid on contracts where the scope of work
may not be well or fully defined by the customer.

ii. Fixed-price contracts – these are often of a long-term nature (greater

This is typical in defence and is managed through bid/no bid reviews at the appropriate level using experienced personnel, including the Cohort
Executive and Board.

These projects are managed by dedicated project management teams, monthly reviews by the subsidiary board and regular interaction with the
customer and key suppliers. Revenue and costs are recognised taking account of risk and the estimated cost at completion (including any contingency).

than 12 months) and typically include delivery of hardware and
software, some of which may be developed as part of the contract.

This cost base is carefully monitored at budget time and by rolling quarterly forecasts to identify any potential risk of low utilisation and thus
under-recovery of cost, or over-utilisation leading to the inability to meet customer commitments.

iii. Due to the nature of their niche technical skills requirement, Chess,
EID, ELAC, MASS and SEA all have a fixed level of core software and
hardware engineering and technical expertise.

Operations (MCL)

MCL’s revenue visibility is short at typically three to six months.
This carries risk to employee utilisation and predictability of revenue
and profit.

Risks from higher inflation and lengthening delivery times have been seen across the Group. We have increased stock holdings of key
components to ensure delivery risk is mitigated as far as possible.

In the case of inflation, we have tried to fix prices with our supplier base and where this is not possible have used index-based pricing, particularly
in long-term contracts, to protect our margins. We have seen component prices rise, in some cases significantly, and have as far as possible
reflected these costs in bids and tenders.

The risk of employee shortages is mitigated, in the short term, by the use of sub-contractor employees. In the long term, a programme of skills
assessment and training is in place to ensure continued flexibility of the Group’s engineering and technical resources.

As highlighted previously, we saw operational, project and commercial weaknesses at Chess. Changes were made in 2020/21 and further work
completed during 2021/22. We saw the benefits from these changes in 2022/23 in Chess’s operating performance, even after recognising further
costs on some legacy issues which we now consider are closed.

The acquisition of ELAC in December 2020 added further manufacturing and testing capability to the Group. ELAC, having been owned by
various public listed companies over the last 20 years, has very good control processes in place. However, its win of the large Italian submarine
sonar contract is a significant development and delivery step for the business and the Group put in place a Project Advisory Committee (PAC)
to act as a review panel for the project and to be able to advise ELAC and the Cohort Board. This PAC comprises individuals with extensive
experience in the submarine and sonar domains.

MCL’s employee levels are low, 2023: 43 (2022: 39), and its people are flexible and possess multiple skills, enabling them to take on design,
integration and support tasks across the full range of MCL’s product offering. MCL has a long-term strategy to improve its visibility by securing
longer-term contracts, utilising the Group’s size and financial stability. Its year-end order cover for 2023/24 is lower than last year’s record high
at 60% (2022/23: 80%; 2021/22: 55%) however, this is expected to rise rapidly as a result of continued activity from the UK MOD, already
securing a further 5% order cover in the first month of trading. MCL has significant exposure to the UK MOD (over 90% of its revenue). As we
reported last year, the marked increase in the UK MOD budget and agreed four-year spending plan gave MCL some positive momentum and we
saw this translate into orders during 2022/23. MCL is very much the Group’s weathervane in respect of UK MOD spend.

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Cohort plc Annual Report and Accounts 2023 45

Nature of risk

Operational risks continued
Managed service contracts

The Group (through both its divisions) operates a number of off-site
managed service contracts. These contracts are long term in nature
(typically five years at commencement) and have dedicated project
managers. The contracts are fixed price in terms of revenue with
opportunities for additional tasks enhancing volume and return.

The long-term nature of these contracts does expose the Group to
the impact of high inflation.

Export contracts

The Group’s subsidiaries seek to win and deliver solutions and services
outside its geographical home markets, the UK, Germany and Portugal.

The risks that arise for the Group relate to the need to comply with
local and domestic legislation, and to ensure we receive payment in
circumstances where political and credit risk may be much higher than
in our domestic markets. There is also a risk that export licences may
not be granted or may be cancelled. The timing of some export
contracts can be more difficult to predict.

Partners

The Group, especially in the defence sector, often secures business through
teaming and partnering with other suppliers and this is often a requirement
of securing work with the UK MOD in order to ensure the end customer
receives the best solution. This creates a risk that the Group’s revenue or
profit will be affected by poor performance of partner business.

Mitigation and progress

Unchanged

Increased

Decreased

Change

The Group carefully manages the partnership with its customer and supplier base in all these cases to ensure the customer receives value for
money, with skilled Group employees providing a dedicated, flexible and responsive approach. The primary risk to these managed service
contracts is termination or loss through competition. We mitigate this risk through the partnering approach adopted by the Group and our close
engagement with customers to ensure their needs are met.

Both divisions secured long-term service contracts with the UK MOD to support various products and services, including Torpedo Launcher
Systems and Sea Gnat countermeasures systems at SEA and extensions and renewals to various UK MOD managed service contracts supplied
by MASS.

The Group manages the inflation risk in these contracts through index-based pricing. Elements of these long-term contracts are contracted by
the customer as required (e.g. purchases of spares) and are priced at that point in time, taking account of actual costs.

The Group’s long-term strategy is to grow its export business, both in terms of volume and markets. This provides mitigation against reliance
on any single customer, in particular the UK MOD. Total export activity in 2023 represented 32% (2022: 35%) of the Group’s revenue. Revenue
derived directly and indirectly from the UK, German and Portuguese defence ministries represents 54% (2022: 47%), 2% (2022: 3%) and 3%
(2022: 3%) of the Group total respectively.

Within Communications and Intelligence, stronger orders from the UK MOD accounts for the overall drop in the proportion of export sales for
the Group.

Our commercial employees are highly experienced at dealing with the various regulatory processes associated with the export of defence goods
and services, including export licence applications and information security requirements. In particular we have a strong Group-wide Anti-
Bribery Policy to ensure compliance with the UK’s 2010 Bribery Act.

We have seen delays to export licence approvals in Germany which has delayed revenue. This situation appears to be a result of increased levels
of administrative oversight and we expect some form of delay to persist into 2023/24.

The Group has experienced a very low level of bad debts, including from export contracts. We take a case-by-case approach to payment risk,
making use of various treasury and commercial arrangements where necessary to ensure payment. We regularly monitor any potential political
risk to any of our export markets, and we do not commit resources to markets where export licences might be difficult to obtain.

Cost pressures driven by the Ukraine war and COVID-19 tailwinds, which are still impacting a small percentage of our export markets, have
placed individual customer defence budgets under pressure. We may see more positive demand drivers from export markets arising from
changes in regional security stances and disputes, notably Ukraine and Southeast Asia.

The unpredictability of some export contracts, especially in terms of timing, remains a risk. Any increase in defence spending by NATO members
may have both a positive impact on the volume and predictability of the Group’s revenue.

The Group takes an active part in these arrangements and, through regular (usually monthly) project review meetings and other communication,
ensures that the team (including our partners) delivers to the customer and meets the needs of the individual team members.

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Cohort plc Annual Report and Accounts 2023 46

Nature of risk

Strategic risk
Acquisitions

Mitigation and progress

Unchanged

Increased

Decreased

Change

The buying (and selling) of businesses is a risk in respect of value,
distraction, integration and ongoing obligations and undertakings.

The Group’s acquisition risk is mitigated as far as practicable by the acquisition process being led at the Cohort Board level, making use of a
skilled and experienced internal team augmented by external expertise and resources as and when required. Our approach to acquisitions is set
out more fully in our Business model. During the year ended 30 April 2023, the Group continued to review potential businesses with a view to
them joining the Cohort Group.

Financial risks
Treasury

A key risk is that the Group deposits monies with banks that are a credit
risk, putting our cash resources at risk.

The Group prepares a monthly cash forecast to ensure that cash in the UK, Germany and Portugal is sufficient for local needs over the following
three-month period. The shareholder agreement in respect of EID enables dividends to be paid from EID to the UK.

A risk for the Group is that its pools of cash and facilities, in the UK,
Germany and Portugal, are insufficient for local needs.

In addition to our own cash, the Group has facilities with banks to
provide debt (structured and overdraft) and other financial products
(bonds, foreign exchange instruments, etc.) to enable us to carry out
our operations efficiently and to execute our strategy of growth by
acquisition and organically.

Under the facility agreement with its banks, the Group is required to
meet certain covenants every quarter. There is a risk that the Group
does not meet some or all the covenants and that the facility is
amended or cancelled as a consequence.

In July 2022, the Group completed a new banking facility with Commerzbank, Lloyds and NatWest. NatWest remains the Group’s primary
bank in the UK, especially for clearing purposes and day-to-day transactions. Commerzbank performs a similar role in Germany. The facility is
a revolving credit facility for three years out to July 2025 with options to extend for a further two years to July 2027. In June 2023 the facility
was extended by one year to July 2026. The facility is for £35.0m with an accordion in place to extend it by a further £15.0m to £50.0m in total.
Of the Group’s existing facility at 30 April 2023 (£35.0m), £25.8m was drawn at 30 April 2023. The existing and new facilities provide the Group
with a flexible arrangement to draw down for acquisitions and overdrafts. The Group’s banking facility for three years (with an option to extend
for a further year to July 2027) and our strong net funds position as at 30 April 2023 provide the Group with a robust financial strength for at
least the next 12 months.

The Group’s new facility is available to all the Group’s entities (excluding EID) through an offset arrangement.

The existing and new facilities are secured against all the Group’s UK and German businesses (and assets) including the Group’s shares in EID.
EID has facilities with local banks in Portugal, none of which have security over its assets. These facilities are for clearing bank purposes,
overdraft, foreign exchange contracts, guarantees and letters of credit.

The Group regularly monitors its covenant position and considers the impact of proposed transactions upon our banking covenants to ensure
that they are not breached. It also has regular (no less than twice yearly) meetings with its banking providers to ensure that any potential issues
or risks are identified and communicated early and that any implications for covenants can be addressed.

The Group has remained in compliance with its banking covenants in 2023 and expects to continue to do so. The impact of IFRS 16 ‘Leases’
is ignored for the purpose of our banking covenants.

Strategic reportGovernanceFinancial statementsRisk management and principal risks continued

Nature of risk

Financial risks continued
Currency risk

Mitigation and progress

Cohort plc Annual Report and Accounts 2023

Unchanged

Increased

Decreased

Change

The Group has contracts with overseas customers and suppliers
requiring payment or receipt in currencies other than sterling (in the UK)
and euros (in Germany and Portugal).

The Group’s exposure to credit risk at 30 April 2023 in respect of
financial derivatives (forward foreign exchange contracts) was £13.3m
of payable and £18.6m of receivable (2022: £10.7m of payable and
£23.8m of receivable).

The financial derivatives at 30 April 2023 were held with NatWest and
Investec Bank (30 April 2022: NatWest and Investec Bank). These are
disclosed in detail.

The Group manages its exposure to currency risk by using forward foreign currency exchange contracts. The level of forward cover is determined
on an individual contract basis, taking into account the net currency exposure to receipts and purchases. Forward contracts are only put in place
when the award of customer contracts has taken place or is considered highly probable. There is a risk of weaker margin or bid loss if exchange
rates materially deteriorate from the Group’s perspective between bid and contract. There is also an opportunity of margin improvement
from favourable exchange rate movements in the same period. The Group does not enter into speculative forward exchange contracts.
At 30 April 2023, the Group’s primary foreign exchange contracts were to cover exposures to the US dollar at SEA, which has a number
of sales in US dollar, and increased euro buys for supplies, mainly at MCL.

The Group does not hedge the exposure to euro/sterling fluctuations that arise from its ownership of either EID or ELAC.

The currency risks the Group faces have increased, especially in respect of the US dollar requiring the Group to review more regularly its supplies
to be paid in foreign currency.

Revenue

The Group has risk in respect of:

i. milestone and acceptance failure on projects; and

ii. unrecoverable trade debts.

The Group takes a prudent approach to revenue and credit risk, and any work done at risk is minimal, authorised at the appropriate level and
reviewed on a monthly basis. The Group uses project control processes and regularly reviews project progress to ensure recognition of revenue
and takes account of external milestones and customer acceptance as well as the internal costs incurred. The calibre of the Group’s customers
and the control processes in respect of revenue capture and invoicing ensure minimal bad debts.

The recognition of revenue is discussed at length in the accounting
policies and critical accounting judgements of the notes to the accounts
and, as such, may from time to time have a degree of risk.

The Group also uses letters of credit and other methods of payment guarantee, including customer advances, especially in respect of
overseas customers, to ensure any export debt risk is minimised. Significant debt receivable in foreign currency is hedged using forward
exchange contracts.

The 2023 net bad debt charge was £0.7m (2022: £0.2m) on Group
revenue of £182.7m (2022: £137.8m).

Financial assets exposed to credit risk at 30 April:

Trade receivables
Other receivables including contract assets
Cash and bank deposits

2023
£m

22.9
32.7
41.5

2022
£m

24.4
31.8
40.4

The credit risk of the major debtor of the Group, the UK MOD, is considered very low.

The Group’s risk to trade receivables is higher in some of our non-defence markets where our customers are not all government bodies.

The Group also has a risk, even for government business, where we contract via a prime contractor. This risk has been low historically,
especially in the defence sector, but collapses such as Carillion in the past highlight that prime contractor risk needs to be monitored.

The cash and bank deposit risk is discussed under the Treasury section above.

Strategic reportGovernanceFinancial statementsGovernance

Board of Directors and Company Secretary

Board of Directors

Cohort plc Annual Report and Accounts 2023 48

Member of the Board of Directors

Member of the Remuneration Committee

Member of the Audit Committee

Member of the Nomination Committee

Chair

Nick Prest CBE
Chairman
Nick became Chairman of Cohort on flotation
in March 2006.

Andrew Thomis
Chief Executive
Andrew took over as Chief Executive of Cohort
in May 2009.

After graduating from Oxford in 1974 Nick joined the
UK MOD. In 1982 Nick moved to Alvis, the defence
contractor, undertaking a variety of roles before
becoming Chief Executive in 1989 and Chairman and
Chief Executive in 1996. Nick left Alvis following its
acquisition by BAE Systems in 2004, by which time the
company had become a leading international business
in military land systems. Nick was also Chairman of
Aveva Group plc from 2006 until 2012 and Chairman
of Shephard Media until 2020.

Andrew graduated with an MEng degree in Electrical
and Electronic Engineering from Imperial College
London in 1987. He spent nine years in science,
technology and policy roles in the UK MOD. He left
in 1996 and, after a period working with public and
private sector clients at Capita plc’s management
consultancy arm, he joined Alvis in a role covering
strategy, M&A and business development. Following
the acquisition of Alvis by BAE Systems in 2004,
Andrew worked with Nick Prest and Stanley Carter on
the creation of Cohort plc, acting as Finance Director
during the flotation and subsequently Corporate
Development Director. From 2007 to 2009 he was
Managing Director of MASS. Andrew is a Fellow of
the Institution of Engineering and Technology.

Simon Walther
Finance Director
Simon joined Cohort as Finance Director in May 2006.

After graduating with a BSc in Toxicology and
Pharmacology from University College London,
Simon went on to qualify as a Chartered Accountant
with Touche Ross in 1992. Simon moved to the Peninsular
and Oriental Steam Navigation Company (P&O) in
1993 where he was appointed as Chief Accountant for
P&O European Ferries in 1995. He has over 25 years’
industry-relevant experience, with previous senior
finance roles at Alvis and BAE Systems.

Edward Lowe
Independent Non-executive Director
Edward was appointed to the Board on 1 July 2019
and became Chair of the Remuneration Committee
on 23 July 2019.

Edward joined Racal Electronics in 1980 and, over a
20-year period, undertook a variety of commercial,
sales and managerial roles. In 2000, he was appointed
Vice President within Thales UK with responsibility for
the commercial, sales and strategy functions. In 2005
he was appointed Managing Director of the Thales UK
naval activities and led the international business line
for naval platforms and services. In 2010 he was
appointed Chief Operating Officer for Thales UK with
operational responsibility for all Thales UK activities.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 49

Member of the Board of Directors

Member of the Remuneration Committee

Member of the Audit Committee

Member of the Nomination Committee

Chair

Stanley Carter retired as a Non-executive Director
on 27 September 2022.

Board of Directors and Company Secretary continued

Jeff Perrin
Independent Non-executive Director
and Senior Independent Director
Jeff joined Cohort in July 2015. He is Chair of the Audit
Committee and was appointed Senior Independent
Director on 23 July 2019.

A Chartered Certified Accountant, Jeff has held a
number of senior financial positions including roles
within Unilever, Oriflame and the defence businesses
of GEC and Radstone Technology Plc. In the latter
company, he was also Chief Executive for four years
until his departure a year after its acquisition by the
General Electric Company in 2006. He was Chairman
of the private equity-backed defence company Chess
Technologies Limited from 2008 until the acquisition
of a majority share by Cohort on 12 December 2018.

Beatrice Nicholas
Independent Non-executive Director
Dr Beatrice Nicholas joined Cohort on 1 September 2021.

Beatrice started her career at the GEC Hirst Research
Centre in 1984, moving to GEC Marconi Avionics in 1995,
where she held several senior management positions.
As part of the wider consolidation in the sector,
GEC Marconi Avionics became part of BAE Systems
in 1999 and then Selex Galileo Limited in 2012,
subsequently part of the Leonardo Group.

In 2010 she was appointed Senior Vice President with
responsibility for leading the electronic warfare business.
In 2013, she was appointed Director of Engineering for
the Airborne and Space division of Leonardo UK Limited,
with responsibility for the execution of all engineering
projects within the division.

Between 2017 and early 2022, she established and
operated an independent consultancy, Beatrice Nicholas
Consulting Limited, advising on diversity and inclusion.

Raquel McGrath
Company Secretary and General Counsel
Raquel was appointed as Company Secretary and
General Counsel from 1 October 2020.

Raquel graduated from the University of Bristol in 1991
with a Bachelor of Laws LLB (Hons) followed by Law
Society Finals at the College of Law, Chester, in 1993.
She started her career as a Solicitor and Articled Clerk
with Slaughter and May in London before moving to
Melbourne to work with Allens as a Senior Associate.
Raquel has held the role of General Counsel and
Company Secretary at a number of UK AIM-listed
and large private companies. Raquel joined Cohort plc
in November 2019 before taking over the role of
Company Secretary from Simon Walther in October
2020, in addition to being appointed General Counsel
for the Cohort Group.

Strategic reportGovernanceFinancial statementsCorporate governance report

Corporate governance report

Cohort plc Annual Report and Accounts 2023

Nick Prest CBE
Chairman

Introduction
Cohort has placed a great importance on corporate
governance since its flotation in 2006 and has, as far as
practicable, modelled its corporate governance structure
on a recommended corporate governance code.

Since 2018 Cohort has applied the QCA Corporate
Governance Code (the QCA Code), being appropriate
for a company with the size and structure of Cohort,
and our Corporate governance report for the year
ended 30 April 2023 is based upon the QCA Code.

The QCA Code sets out ten principles in three broad
categories and I have set out below the Group’s
application of each principle to the extent that the
Board considers these to be appropriate to Cohort.
Where our practices depart from the expectations of
the QCA Code, I have clearly highlighted these and given
an explanation as to why, at this time, it is appropriate
for the Group to depart from the QCA Code.

As Chairman of the Board, I take primary responsibility
for corporate governance. An important part of my role
is to build strong relationships with shareholders and
other stakeholders and to ensure that the views
expressed by shareholders are communicated to and
considered by the Board.

In September 2022, Stanley Carter retired from the Board.
Stanley remains a major shareholder in the Company.

The voting pattern at our 2022 AGM indicated a broad
measure of shareholder support in relation to corporate
governance matters. We nevertheless continue to keep
these matters under close review and to pay careful
attention to shareholder views.

The principal means of communicating our application
of the QCA Code are this Annual Report and our
website (cohortplc.com).

Governance structure
Corporate governance framework

The Board of Directors1
Nick Prest CBE (Chair), Jeff Perrin (Senior Independent Director),
Edward Lowe, Beatrice Nicholas, Andrew Thomis (Chief Executive), Simon Walther (Finance Director)

Audit
Committee

Jeff Perrin (Chair)

Edward Lowe

Beatrice Nicholas

Remuneration
Committee

Nomination
Committee

Edward Lowe (Chair)

Nick Prest CBE (Chair)

Jeff Perrin

Nick Prest CBE

Beatrice Nicholas

Jeff Perrin

Edward Lowe

1. Stanley Carter retired from the Board with effect from the end of the 2022 AGM on 27 September 2022.

Board composition

(1)

Executive

Chairman

1717+

Non-executive

(3)

(2)

Strategic reportGovernanceFinancial statements33
33
+
50
50
+
M
M
Corporate governance report continued

Deliver growth
Principle 1. Establish a strategy and business
model which promote long-term value for
our shareholders
The Board, led by the Chairman, sets the Group’s
strategic direction and is responsible to Cohort’s
stakeholders for the leadership, oversight and long-term
success of the Group.

The Group’s Business model is set out in our Strategic
report. We believe this promotes long-term value for
our shareholders as demonstrated by our five years’
financial performance (see page 116) and our key
performance indicators, as set out in our Strategic
report, are shown for the last three years.

Our progressive dividend policy and share performance
over the last five years are also indicators of long-term
value for our shareholders with total shareholder return
shown below.

In addition to our scheduled Board meetings, the Board
meets for an annual strategy day at which it conducts
an in-depth annual review of strategy and the business
plans of Cohort and its subsidiaries. This provides the
Executive Directors and the Non-executive Directors,
in particular, with an opportunity to discuss execution
and delivery of strategy in depth and to challenge the
Group’s corporate strategy. The Board also visits the
subsidiary Managing Directors for an in-depth review
of the execution of strategy at each business throughout
the year. In between our formal annual strategy
reviews, strategic issues and emerging risks are
frequently discussed by the Board.

Remaining on AIM is of long-term value to our
shareholders as it offers a combination of access to
capital markets, flexibility to make acquisitions,
incentives and rewards to management through share
schemes, and a regulatory environment appropriate
to the size of the Company.

Some of the key activities which we have undertaken
to promote long-term value are set out in our Section
172 statement.

Principle 2. Seek to understand and meet our
shareholders’ needs and expectations
Cohort places a great deal of importance on
communication with all shareholders and details of how
we achieve this are set out in Stakeholder engagement.
The Company also meets with its institutional
shareholders and analysts and receives regular feedback
from its institutional shareholders, either directly or via
its NOMAD, Investec. The Board is keen to ensure that
shareholders are provided with the opportunity to
engage with the Board and has continued to host live
Q&A sessions following the 2021/22 financial year
announcement in July 2022 and the interim results
announcement in December 2022. Recordings of these
sessions can be accessed on our website (cohortplc.com).

We also carefully consider any voting guidance reports
received from organisations such as Institutional
Shareholder Services.

The primary points of contact with the shareholders
are the Chief Executive, the Finance Director and me.
Jeff Perrin, the Senior Independent Director, is available
to all shareholders should they have any concerns
which communication through the normal channels
of Chairman, Chief Executive and Finance Director
has failed to resolve, or for which contact through
the normal channels would be inappropriate.

Principle 3. Take into account wider
stakeholder and social responsibilities and
their implications for our long-term success
Consideration of all of the Group’s stakeholders is an
integral part of the Board’s discussions and decision
making. Stakeholders include shareholders, our
employees, customers, partners, suppliers and local
communities. Further details are set out in our
Stakeholder engagement report.

In particular, we believe that our employees are the key
to our success. We are not a capital-intensive business
but depend upon the skills, capabilities and flexibility of
our employees, and our business model (see Strategic
report) depends upon us being agile and responsive (see
People in our Sustainability report). The Board receives
a monthly report on health and safety across the Group.

Cohort plc Annual Report and Accounts 2023

We facilitate named or anonymous feedback by
employees through our whistleblowing arrangements.
These are managed by an independent third-party
service provider. If any call is made to this third party,
either the Chief Executive or the Senior Independent
Director is notified promptly of the fact and the content
of the call, so that appropriate action can be taken.

Our customers and suppliers are in many instances
long-term partners and an important part of our
culture is to establish and maintain relationships of
trust (see Stakeholder engagement).

Principle 4. Embed effective risk management,
considering both opportunities and threats,
throughout the Group
The Board and Group approach to risk is set out in the
Audit Committee report and the Risk management section.

The Board has overall responsibility for the system of
internal control and for reviewing its effectiveness in
managing the risks we face. Such systems are designed
to manage rather than eliminate risks and can provide
only reasonable and not absolute assurance against
material misstatement or loss. Each year, on behalf of the
Board, the Audit Committee reviews the effectiveness of
these systems. This is achieved primarily by considering
the risks potentially affecting the Group and from
discussions with the external auditor. The key risks of the
Group are presented in the Risk management section.

On the recommendation of the Audit Committee, the
Board has determined that an internal audit function is
not required due to the relatively small size of Cohort
and the high level of Director review and authorisation
of transactions. The Board will keep this matter under
review as the Group develops.

Total shareholder return five-year performance
Total shareholder return ﬁve-year performance

250

)
0
0
1
o
t
d
e
s
a
b
e
r

e
c
n
e
p
(
R
S
T

200

150

100

Cohort

Peer group (weighted)

FTSE AIM All Share

50
Jan 2018

Jan 2019

Jan 2020

Jan 2021

Jan 2022

Jan 2023

The weighted peer group companies comprise Avon, Babcock, Chemring, QinetiQ and Ultra Electronics.

Strategic reportGovernanceFinancial statements

Corporate governance report continued

Cohort plc Annual Report and Accounts 2023

Deliver growth continued
Principle 4. Embed effective risk management,
considering both opportunities and threats,
throughout the Group continued
A comprehensive budgeting process is completed once
a year and is reviewed and approved by the Board. In
addition, the Group conducts quarterly re-forecasts.
The Group’s results, as compared against budget and
the latest quarterly forecast, are reported to the Board
on a monthly basis and discussed in detail at each
meeting of the Board.

The subsidiary balance sheets are reviewed in detail on
a quarterly basis by the Cohort finance team.

Maintain a dynamic management framework
The Board of Cohort plc is highly experienced in the
defence market. Through the operation of the Board and
the Group Executive, which comprises the subsidiary
Managing Directors and the Cohort plc Executive
Directors and function heads, the Board is able to
monitor the business and respond in a timely manner
to issues and opportunities as and when they arise.

Principle 5. Maintain the Board as a well-
functioning, balanced team led by the Chair
The Board
As at 30 April 2023, the Board of Directors comprised
two Executive Directors, Andrew Thomis and Simon
Walther, three Non-executive Directors, Jeff Perrin,
Beatrice Nicholas and Edward Lowe, and me.

The Board considers that Jeff Perrin, Beatrice Nicholas and
Edward Lowe are independent Non-executive Directors.

All Directors retire by rotation and are subject to election
by shareholders at least once every three years. Any
Non-executive Directors who are considered by the Board
to be independent but who have served on the Board for
at least nine years, will be subject to annual re-election.

Board Committees
The Board has established three Committees: Audit,
Nomination and Remuneration, each having written
terms of reference, which can be viewed on the
Company’s website (cohortplc.com).

The reports of the three Committees are reported separately.

Audit Committee
The Audit Committee comprises three independent
Non-executive Directors in accordance with the QCA
Code, being Jeff Perrin (Chair), Beatrice Nicholas and
Edward Lowe. The Audit Committee’s role is set out
in the Audit Committee report.

Nomination Committee
The Board established a Nomination Committee in
April 2021. The Nomination Committee comprises two
independent Non-executive Directors, Jeff Perrin and
Edward Lowe, and me as Chair. The Nomination
Committee’s role is set out in the Nomination
Committee report. The Committee meets as required.

Remuneration Committee
The Committee comprises Edward Lowe (Chair), Beatrice
Nicholas, Jeff Perrin and me. The Board is of the opinion
that the composition of the Committee is compliant
with the UK Corporate Governance Code (the UK Code)
as it is composed of three independent Non-executive
Directors (one serving as Chair) and a Chairman who
was independent on appointment. All four members
of the Committee have considerable experience of
managing remuneration schemes for senior executives
in public and private companies, both large and small.

The Remuneration Committee’s role is set out in its report.

Company Secretary
Raquel McGrath acts as secretary to the Board and its
Committees. The Company Secretarial department
supports the Board, ensuring good information flows
and advising on all corporate governance matters.

Attendance at Board and Committee meetings
Board and Committee meetings are scheduled in
advance for each calendar year. Additional meetings
are arranged as necessary including meetings with
the subsidiary Managing Directors to review strategic
and financial plans and, as mentioned above, the
Board also holds a strategy day in addition to the
scheduled meetings.

The scheduled Board and Committee meetings and attendance of the members during the year ended 30 April 2023
were as follows:

N Prest CBE (Chairman)
S Carter (Non-executive Director)1
B Nicholas (Independent Non-executive Director)
J Perrin (Independent Non-executive Director and
Senior Independent Director)
E Lowe (Independent Non-executive Director)
A Thomis (Chief Executive)
S Walther (Finance Director)

Board
(9 scheduled
meetings)

Audit
Committee
(3 meetings)

Remuneration
Committee
(2 meetings)

Nomination
Committee
(no meetings)

9/9
1/3
9/9

9/9
9/9
9/9
9/9

—
—
3/3

3/3
3/3
—
—

2/2
—
2/2

2/2
2/2
—
—

—
—
—

—
—
—
—

1. Stanley Carter resigned from the Board on 27 September 2022.

The Executive Directors and subsidiary Managing Directors all work full time for the Group.

All the Non-executive Directors give adequate time to fulfil thoroughly their responsibilities to Cohort and, as
Chairman, I monitor this.

Principle 6. Ensure that between them the Directors have the necessary up-to-date experience,
skills and capabilities
The Board has a broad range of skills, with particularly deep experience in the defence sector. The balance of skills
and experience of the Board is summarised as follows:

N Prest
A Thomis
S Walther
E Lowe
S Carter1
J Perrin
B Nicholas

Defence
sector

Financial

General
management

Other public
company
(board level)





















Public
sector






1. Stanley Carter resigned from the Board on 27 September 2022.

The Board biographies give an indication of the breadth of skills and experience.

Cohort is predominantly a defence company and collectively the Board has experience of engineering, financial,
commercial, sales and marketing and general management functions in a range of defence companies, large and
small, operating in and supplying to a large number of countries throughout the world. We consider this collective
experience to be an important contributor to Cohort.

Each member of the Board takes responsibility for maintaining their skill set, which includes formal training and
seminars. We also commission tailored executive coaching for our senior executives from time to time.

Strategic reportGovernanceFinancial statementsCorporate governance report continued

Cohort plc Annual Report and Accounts 2023

Maintain a dynamic management
framework continued
Principle 6. Ensure that between them the
Directors have the necessary up-to-date
experience, skills and capabilities continued
The Company Secretary, a qualified solicitor, is
responsible within the Company for advising the Board
on its legal and regulatory responsibilities and on
corporate governance matters. The Company Secretary
and the Cohort Group Head of Human Resources also
advise the Non-executive Directors independently of
the Executive Directors on any matter in which the
Executive Directors are personally interested, for
example their own remuneration.

When necessary, external advice is sought, on legal,
personnel, financial and governance matters. The
primary sources are the Company’s NOMAD and the
Company’s lawyers.

Principle 7. Evaluate Board performance based
on clear and relevant objectives, seeking
continuous improvement
Our approach to evaluation of the Board’s effectiveness
is that it should be a continuous process rather than
just a periodic event. It is my responsibility as Chairman
to stimulate and orchestrate this process, consulting
colleagues both individually and collectively. As part of
the process, I must obtain the views of colleagues on
my own performance. Evaluation should embrace at
the individual level skills, personality and commitment
and, at the collective level, processes and teamwork.

It is important that this largely informal process is
supplemented periodically with a formal review of Board
performance. This year, the Board completed its first
external evaluation facilitated by Independent Audit
Limited (IAL), an independent third-party organisation.
The review was led by Jonathan Hayward. The scope
included an evaluation of the performance of the Board,
the Board Committees, individual Directors, and the Chair.
IAL was selected via a competitive procurement process
led by me together with the Company Secretary which
included interviews with three shortlisted candidates.
IAL has no connection with the Company or any Director.

The evaluation was focused on completing an
independent assessment of the Board’s effectiveness,
performance and compliance with the Quoted
Companies Alliance Corporate Governance Code, the
UK Financial Reporting Council Guidance on Board
effectiveness, internationally recognised board best
practices and IAL’s own experience of best practice.

Together with the Company Secretary, I agreed the
objectives, process and scope with IAL. In the first
instance, an online questionnaire was designed and sent
to all Board members and the Company Secretary to
complete. A separate questionnaire was sent to each of
the Managing Directors of our subsidiaries. Jonathan
Hayward then attended and observed a Board meeting,
having reviewed the Board pack and associated materials
in advance. IAL was also provided with access to an
annual cycle of Board and Committee papers, which
included strategy documentation. Confidential interviews
were then conducted between IAL and each of the
Directors, the Group Head of Strategy and the Company
Secretary. A full written report was presented to the
Board and was discussed in depth with Jonathan Hayward
at an additional Board meeting convened for this purpose.

The findings concluded that Cohort’s Board comprises
highly committed and engaged Directors who bring a
wealth of industry-specific experience and offer
meaningful support to the Executive Directors. The Board
was found to be transparent and collegial with a strong
focus on financial oversight. The Audit Committee is
considered thorough and effective and the depth of
experience of the Chair was greatly valued by the finance
team. The Board will give early consideration to the
appointment of a replacement for the current Chair of
the Audit Committee, whose term will end in July 2024.
The Remuneration Committee is well led by its Chair and
has successfully implemented a new executive Long Term
Incentive Plan. Improvements to the remuneration
disclosures in the Remuneration report have been
implemented this year and the Remuneration Committee
will continue to work closely with the Audit Committee
to review the Group’s outcomes against the performance
targets set under the executive remuneration scheme.
Actions will be taken to address certain areas for
improvement arising from the evaluation, including an

increased focus on reviewing progress against strategic
goals throughout the year, an increased focus on
succession planning and enhanced reporting to the Board
on people and employee engagement. IAL has reviewed
this summary of the findings of the Board evaluation.

The Board will continue to evaluate Board effectiveness
in 2024 and will report any relevant findings together
with our progress on the actions arising from this year’s
external Board evaluation in the 2024 Annual Report.

Principle 8. Promote a corporate culture that
is based on ethical values and behaviours
The Group has a strong ethical culture, supported by
our policies and processes as further described in the
Governance section of our Sustainability report.

Principle 9. Maintain governance structures
and processes that are fit for purpose and
support good decision making by the Board
The Board has ultimate responsibility for corporate
governance, which it discharges either directly, or
through its Committees and through the management
structure outlined below.

Group management
The Cohort Board holds nine scheduled meetings per
calendar year; in addition the Board meets to conduct
business and strategic reviews which are not recorded
as formal Board meetings. The Board also holds regular
ad-hoc discussions as required to consider particular
issues. As a Board, we visit each of the subsidiaries
at least once a year and individual Non-executive
Directors will visit subsidiaries as required to assist
with matters within their area of expertise. The
Non-executive Directors and I meet at least once
a year without the Executive Directors present.

The Board receives a detailed monthly Board report
comprising individual reports from each of the
Executive Directors and the subsidiary Managing
Directors, together with any other material necessary
for the Board to hold fully informed discussions to
discharge its duties, including the review of Company
strategy to ensure this aligns with creating shareholder
value. It is the Board’s responsibility to formulate,
review and approve the Group’s strategy, budgets,

major items of expenditure and commitment, major
contract bids, acquisitions and disposals. A full schedule
of the matters reserved for the Board can be viewed
on the Cohort website (cohortplc.com). The Group
Executive Committee meets at least four times per
calendar year, comprising Cohort Executive Directors,
subsidiary Managing Directors, and Group Heads of
Strategy, Communications, Commercial, Legal and
Human Resources.

Subsidiary management
There are monthly Executive Management meetings
involving the senior management of each subsidiary.
Cohort Executive Directors attend subsidiary Executive
Management meetings on a regular basis and sit on
the Board of each subsidiary. The Non-executive
Directors and I occasionally attend subsidiary Executive
Management meetings. In addition to the matters
reserved for the Board, there is a formal Delegation
of Authority Policy which is approved by the Board
and provides a framework for effective decision
making at the subsidiary level together with
appropriate Board oversight.

Build trust
Principle 10. Communicate how Cohort plc
is governed and is performing by maintaining
a dialogue with our shareholders and other
relevant stakeholders
The Board communicates how the Company is
governed and how it is performing by maintaining
a dialogue with shareholders and other stakeholders
through the mechanisms described in this report and
in Stakeholder engagement.

Board Committees
The reports to shareholders of the Audit, Nomination
and Remuneration Committees are shown separately.

The Board welcomes considered enquiries from
shareholders and other stakeholders at any time.

Nick Prest CBE
Chairman

Strategic reportGovernanceFinancial statementsAudit Committee report

Jeff Perrin
Independent Non-executive Director
and Senior Independent Director

Consideration of the financial statements
In making its recommendation that the financial
statements be approved by the Board, the Audit
Committee has taken account of the following
significant issues and judgement areas:

Areas of judgement
Revenue and profit recognition on
fixed-price contracts
The judgement applied in recognising revenue on a
contract over time as performance obligations are
completed is in respect of the input costs incurred
and the attributable margin. The latter is particularly
a judgement in respect of estimating the cost to
complete on a particular contract and the remaining
risk and associated contingency. This cost contingency
takes account of the stage that the contract has
reached and any judgement and uncertainty remaining
to deliver the remainder of the contract. It is usual for
these cost contingencies to reduce as the contract
progresses and risk and uncertainty reduce.

Auditor’s remuneration

Fees payable to the Company’s
auditor for the audit of the Company
and consolidated accounts
Fees payable to the Company’s
auditor for the audit of the
Company’s subsidiaries

Total audit fees

Other accounting services
Interim review fee

Total non-audit fees

Total fees paid to the auditor and its
associates

Charged to profit for the year

2023
£’000

2022 1
£’000

104

369

473

—
57

530

320

398

—
48

446

1. The 2022 figures include cost overruns of £31,000.

Introduction
The Audit Committee comprises three independent
Non-executive Directors and is scheduled to meet at
least three times a year. It is the Audit Committee’s role
to provide formal and transparent arrangements for
considering how to apply financial reporting under IFRS
and the Companies Act 2006. The Audit Committee
also considers risk and the internal control requirements
of the QCA Corporate Governance Code and how to
maintain an appropriate relationship with the
independent auditor of the Group.

The Audit Committee is responsible for ensuring that
the Group’s risks are understood, managed and
mitigated as far as practicable.

Jeff Perrin is Chair of the Audit Committee, being a
qualified Chartered Certified Accountant and having
experience of the defence industry in this and previous
roles. Jeff Perrin has offered himself for re-election at
the 2023 AGM as discussed in the Nomination
Committee report.

The current terms of reference of the Audit Committee
were reviewed and updated in March 2023.

Cohort plc Annual Report and Accounts 2023

Goodwill
The Group has recognised goodwill and other intangible
assets in respect of the acquisitions of businesses
within its two reporting divisions, Communications
and Intelligence (EID, MASS and MCL) and Sensors and
Effectors (Chess, ELAC and SEA). The other intangible
assets are in respect of contracts acquired, intellectual
property rights and specific opportunities and, in each
case, are amortised over the expected life of the earnings
associated with the other intangible assets acquired.
The goodwill, which is not subject to amortisation but
to at least annual impairment testing, arises from the
intangible elements of the acquired businesses for
which either the value or life is not readily derived. This
includes, but is not limited to, reputation, customer
relations, contacts and market synergies with existing
Group members. The goodwill relating to acquisitions
made by the Group has been tested for impairment as
at 30 April 2023; this is an area of judgement. In each
case there was no impairment. The Group’s 2023
post-tax WACC of 12.8% is higher than the 2022
equivalent of 10.8%, which reflects higher interest
rates and higher volatility in respect of Cohort plc’s
shares. These post-tax WACC amounts are equivalent
to a pre-tax WACC of 18.1% (2022: 16.2%).

Sensitivity was applied to the impairment tests to
deliver a material impairment of goodwill as reported
in note 9.

Provisions
The Group makes estimates of provisions for existing
commitments arising from past events. In estimating
these provisions, the Group makes judgements as to
the quantity and likelihood of the liability arising.
Certain provisions require more judgement than others.
In particular, warranty provisions and contract loss
provisions have to take account of future outcomes
arising from past deliveries of products and services.
In estimating these provisions, the Group makes use
of management experience, precedents and specific
contract and customer issues.

Strategic reportGovernanceFinancial statementsAudit Committee report continued

Cohort plc Annual Report and Accounts 2023

Consideration of the financial statements continued
Alternative performance measures (APMs)
The Group reports a number of APMs which are not in accordance with the reporting requirements of IFRS.
The Audit Committee has reviewed these during the year ended 30 April 2023 to ensure they are appropriate
and that in each case:

Adjusted earnings per share
This is based upon the adjusted operating profit after taking account of tax applying to adjusted operating profit
and interest, to enable the Group to report an earnings per share figure based upon what the Board considers is a
more appropriate and comparable earnings basis.

This is reconciled to the headline (IFRS) earnings per share in note 8 to the accounts.

X the reason for their use is clearly explained;

X they are reconciled to the equivalent IFRS figure; and

X they are not given prominence over the equivalent IFRS figure.

The most important APMs reported by the Group are as follows:

Adjusted operating profit
This is used by the Group to report what the Board considers is its trading profit in a consistent manner, year on
year, to provide the readers of the accounts with a consistent comparative. This is derived from the operating profit
as reported under IFRS by excluding amortisation of other intangible assets, all of which arises on the acquisition of
subsidiaries; research and development expenditure credits; exceptional items, including costs of acquisitions and
reorganisations; and foreign exchange movements from non-trading activities, including marking forward
exchange contracts to market.

The reconciliation of operating profit (IFRS) to adjusted operating profit is shown in the Consolidated income
statement for the Group and in note 1 to the accounts for the Group’s reporting divisions. The following table
shows the Group’s adjusted operating profit compared with operating profit for the last five years:

Adjusted operating profit
Operating profit (IFRS)

2023
£m

19.1
15.3

2022
£m

15.5
11.1

2021
£m

18.6
7.8

2020
£m

18.2
10.7

2019
£m

16.2
5.9

Independent auditor
Although not applicable to Cohort plc, the Audit Committee has considered the Financial Reporting Council’s
recently published standard on Audit Committees and External Audit: Minimum Standard. This is considered good
practice and where appropriate the Cohort plc Audit Committee has followed the responsibilities outlined in this
standard, specifically:

The independent auditor liaises with the Audit Committee regarding work to be undertaken and complies with
the Ethical Standards for Auditors issued by the Auditing Practices Board. Prior to commencing its audit work,
the independent auditor confirmed in writing the nature of any non-audit work carried out on behalf of the Group
and the safeguards in place to ensure its independence and objectivity. Any in-year proposals for non-audit work
are subject to prior approval by the Audit Committee.

The independent auditor presented its audit plan to the Audit Committee prior to the Audit Committee meeting
held in March 2023. The plan was reviewed and approved at that meeting with specific areas of focus by the
independent auditor discussed in detail for the ensuing audit.

The independent auditor (RSM UK Audit LLP) was appointed in November 2019.

The analysis of RSM UK Audit LLP (2022: RSM UK Audit LLP) remuneration is shown in the table above.
The payments made to RSM UK Audit LLP in 2022 include additional fees incurred as part of that audit.

Fees payable to RSM UK Audit LLP and its associates for non-audit services to the Company are not required to
be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated
basis only.

The main difference between the two figures is the amortisation of other intangible assets value which arises on
the acquisition of subsidiaries.

It is the Board’s opinion that the trading performance of the Group is better reflected by the adjusted operating profit.

Jeff Perrin
Chair of the Audit Committee

Strategic reportGovernanceFinancial statementsNomination Committee report

Cohort plc Annual Report and Accounts 2023

Nick Prest CBE
Chairman

Re-appointment of Directors
The Company’s Articles of Association require any
Director who has not been appointed or re-appointed
at either of the two previous Annual General Meetings
of the Company to retire, and for one third of the
Directors to retire by rotation each year. This year,
Simon Walther and Jeff Perrin, being eligible, each
offers himself for re-election at the 2023 AGM. For Jeff
Perrin this will be for a term of one year because Jeff
Perrin will have served on the Board for nine years from
July 2024 and will be subject to annual re-election
thereafter. The Board has considered the performance
and commitment to the role of each of Simon Walther
and Jeff Perrin and has recommended their re-election
to the Board on the basis that their contribution is, and
continues to be, important to the Company’s long-term
sustainable success.

Nick Prest CBE
Chair of the Nomination Committee

The Nomination Committee is chaired by me and the
other members are two independent Non-executive
Directors, Jeff Perrin and Edward Lowe.

Key responsibilities
The Committee is appointed by the Board and its terms
of reference are available on the Company’s website
(cohortplc.com). The Committee meets as required and
no formal meeting was needed in the reporting year.
The members of the Nomination Committee did,
however, discuss the various matters for which the
Committee is responsible in the course of other
meetings and undertook work to support the Executive
Directors in relation to appointments below Board level
and were engaged in reviewing the relevant outputs
from the Board evaluation process (refer to the
Corporate governance report for further details).

The key responsibilities of the Committee are:

X to regularly review the structure, size and

composition of the Board (including the skills,
knowledge, experience and diversity of the Board)
and to make recommendations to the Board with
regard to any changes;

X to keep the leadership needs of the organisation under
review, including succession planning, in relation to
both Executives and Non-executives, with a view
to ensuring the continued ability of the organisation
to compete effectively in the marketplace;

X to be responsible for identifying and nominating
for the approval of the Board candidates to fill
Board vacancies as and when they arise; and

X to undertake any work requested by the Board or

Chief Executive to select or approve appointments
below Board level.

Strategic reportGovernanceFinancial statementsRemuneration Committee report

Cohort plc Annual Report and Accounts 2023

Edward Lowe
Independent Non-executive Director

Performance related pay
The current year (2022/23) has seen a slightly stronger
than expected trading performance and another very
strong year of order intake, laying a good foundation
for 2023/24 and beyond. The Group cash performance
was also very strong and provides the Group with the
firepower to deliver its record order book and continue
its strategy.

The Group’s financial performance for the year resulted
in in-year bonus for the Executive Directors at 87% of
maximum (maximum pay out being 15% of salary) and
long-term performance awards (under the old LTIP) at
50% of the maximum level (maximum level being 50%
of salary). Full details are shown below.

The Committee must be satisfied with the level of
performance during the performance period taking
account of a range of factors and has the ability to
adjust awards if it considers that the calculated
numbers are out of line with the underlying business
performance of the Group.

Outlook for 2023/2024
The Committee also considered it appropriate to award
basic salary increases of 6.5% to the Executive Directors
with effect from 1 May 2023.

For 2023/2024 we will be continuing with the in-year
performance bonus (as set out in the table below)
and the new Long Term Incentive Plan (LTIP) which
commenced 1 May 2021. Such awards will be in line with
the Cohort Executive Incentive plan December 2021.

The Committee remains committed to ensuring that
executive remuneration is in line with best practice
and appropriately incentivises the Executive Directors
over the long term to deliver the Cohort strategy. The
committee will review the policy in 2023 to ensure
that it is fulfilling its objectives and that it remains
competitive with industry peers.

Should you have any queries in relation to this report
please do not hesitate to contact me through the
Company Secretary.

The Committee considered that the calculated level of
award was an appropriate and merited outcome in the
light of the strong recovery of the Group’s performance.

Edward Lowe
Chair of the Remuneration Committee

I am pleased to present the Remuneration Committee
(the Committee) report for the year ended 30 April 2023.

This report is split into three sections:

X this annual letter summarising the work of the

Committee in 2022/23;

X a statement of the current Directors’ Remuneration

Policy (the Policy), including the LTIP; and

X the Annual report on remuneration, which provides
details of the remuneration earned by Executive
Directors and the Non-executive Directors in the
year ended 30 April 2023.

Remuneration policy
The view of the Committee is that the Directors’
Remuneration Policy (the Policy) has, as intended,
supported delivery of the strategy, and focused the
management team on delivering strong financial and
operational performance.

The new policy for Long Term Incentive Plans (LTIP) was
implemented in 2021/22 and the first year when new
long-term incentives will vest, partly in cash and partly
in shares, under the new policy will be in 2024/25
based on performance over the three-year period
ended 30 April 2024.

It is to be noted that the remuneration of the Group’s
subsidiary Managing Directors is structured very similarly
to that of the Executive Directors. The Committee has
also been keen to promote the involvement of all
Cohort employees in the long-term success of the
Group and to this end has been pleased to see
continuing interest by employees in the Share Incentive
Plan (SIP) and the Save as You Earn (SAYE) schemes.

Strategic reportGovernanceFinancial statementsRemuneration Committee report continued

Cohort plc Annual Report and Accounts 2023

Cohort plc Executive Directors’ Remuneration Policy

Element of remuneration

Purpose and link to strategy

Operation

Maximum potential value

Performance measure and target

Base salary

To provide competitive fixed remuneration
to attract, motivate and retain Executive
Directors of a calibre required to deliver
growth for the business.

Benefits

As above.

Retirement
allowance

To reward sustained contribution by
providing retirement benefits.

In-year performance
bonus

Rewards the achievement of annual
financial business performance targets
which support the strategic direction of
the business.

Normally reviewed annually by the Committee considering remuneration
levels for comparable companies of a similar size and complexity, industry
sector or location.

Individual salary adjustments take into account each Executive Director’s
performance and the Group’s financial circumstances, with significant
adjustments infrequent and normally reserved for material changes in role,
a significant increase in the size or complexity of the Group, or where an
individual has been appointed on a low salary with an intention to bring
them to market levels over time and subject to performance.

Executive Directors are entitled to benefits such as family private health
insurance, income protection during periods of long-term illness absence
and life assurance.

Executive Directors are eligible to participate in any all-employee share plan
operated by the Company, on the same terms as other eligible employees.

Executives will be eligible for any other benefits which are introduced for
the wider workforce on broadly similar terms and additional benefits might
be provided from time to time if the Committee decides payment of such
benefits is appropriate and in line with emerging market practice.

The Company pays a retirement allowance in lieu of pension contributions.
Where this is operated via salary sacrifice the Company passes on the
National Insurance saving of 10% of the sacrificed salary back to the
Executive as additional retirement allowance, in line with its general
workforce practices.

No prescribed maximum salary or
maximum increase in salary. Increases are
awarded having given consideration to
those awarded across the wider workforce.

Not applicable.

A maximum is not pre-determined.

Not applicable.

Benefit values can vary year on year
depending on premiums and the
maximum is the cost of providing the
relevant benefits.

The maximum level of participation in
all-employee share plans is subject to the
limits imposed by the Inland Revenue.

For Cohort Executive Directors the
retirement allowance is set at 4% of basic
salary in line with the current general
workforce contribution level. National
Insurance saving on allowance delivered
via salary sacrifice is set at 10% of the
salary sacrificed.

Not applicable.

Paid annually in cash.

15% of salary.

0% to 10% of salary payable based on full year adjusted operating profit
performance against budget calculated as follows:

X Zero if performance below 95% of budget.

X Linear increase from 0% to 10% as performance goes from 95% to

105% of budget.

Plus 0% or 5% of salary payable based on full year operating cash flow
performance against budget calculated as follows:

X Zero if performance is below budget.

X 5% if performance is at or exceeds budget.

Recovery provisions apply in cases of restatement of financial results
for the relevant financial year.

Actual performance compared to budget for the
financial year for adjusted operating profit and
operating cash flow (both excluding the impact of
any in-year acquisitions and disposals).

Both adjusted operating profit and operating cash flow
shall be calculated after deducting the costs of all bonus
payments, including the cost of Restricted Shares.

Financial measures determine 100% of the
bonus calculation.

The Committee has discretion to adjust the awards if
it considers that the calculated numbers are out of line
with the underlying performance of the Company or
the Executive, or in other exceptional circumstances.

Strategic reportGovernanceFinancial statementsRemuneration Committee report continued

Cohort plc Annual Report and Accounts 2023

Cohort plc Executive Directors’ Remuneration Policy continued

Element of remuneration

Purpose and link to strategy

Operation

Maximum potential value

Performance measure and target

Long-term
performance awards
– scheme ceased
30 April 2023

Designed to align Executive Directors’
interests with both the strategic objectives
of delivering sustainable growth and the
interests of shareholders. Encourages
long-term shareholding and discourages
excessive risk taking.

This scheme came to an end with the
completion of the year ended 30 April
2023 and this report includes the final
rewards to the Executive Directors under
this scheme.

Long-term
performance awards
– scheme to operate
from 2021/22
onwards with first
awards under this
scheme, if earned,
vesting in the year
ending 30 April 2025

First award approved
in the Remuneration
Committee meeting
of 2 November 2021

Annual award based on the historical annualised profit growth of the
Group over a (up to1) four-year performance period prior to award
comprised of:

1. Up to 50% of basic salary split:

X two fifths as a cash bonus;

X two fifths as Restricted Shares; and

X one fifth in either cash or Restricted Shares at the Executive’s discretion.

The award increases from 0% to 50% of salary on a linear basis as
achievement against the performance measure increases from 0% to 10%.

An award of share options with market value exercise price at the
discretion of the Remuneration Committee.

Restricted Shares vest in four equal tranches, 25% on award and 25% on
each of the following three anniversaries of award, subject to continued
employment. No dividends are paid on Restricted Shares before vesting.
Tax and National Insurance (employee and employer) are borne on awards
of Restricted Shares by the Company on behalf of the Executive.

Recovery provisions for both cash and Restricted Shares apply in cases
of restatement of financial results for the relevant financial year.

Annual award based on the future annualised profit growth of the Group
over a three-year performance. An additional two-year holding period
applies after the end of the three-year vesting period.

Up to 125% of basic salary split:

X one third as a cash bonus; and

X two thirds as performance shares.

No award of share options.

Awards will vest subject to the performance criteria set out above and
following audit clearance of the Group accounts in the relevant third year.
Executive Directors are required to hold any shares arising from the vesting
of their award, net of any shares sold to meet personal tax and social
security obligations, for a period of two years from the vesting date.
An overall reward period of five years. Employers’ National Insurance
is borne by the Company.

Recovery provisions for both cash and performance shares apply in cases
of restatement of financial results for the relevant financial year.

Cash and Restricted Shares valued at up to
50% of basic salary. In addition, the
income tax and National Insurance
(employee and employer) arising from the
award of Restricted Shares is settled by
the Company on the Executive’s behalf.

An option award over a maximum number
of shares calculated as 20% of basic salary
divided by exercise price. These option
awards have not been made since 1 May
2022, this part of the current award
scheme having ceased on 30 April 2022.

Cash and performance shares valued at up
to 125% of basic salary for the base year.
The income tax and employee National
Insurance on all awards are settled by the
Executive. Employers’ National insurance
is settled by the Company on all awards.

The shares element is awarded as number
of shares based on the two thirds of salary
figure divided by the average mid-market
share price of Cohort plc shares for the
five business days prior to the award under
this scheme.

Compound annualised growth rate per share2 in
adjusted profit before interest and tax (after excluding
non-controlling interests) between the year ended
30 April 2019 and the year ended 30 April 2023.

For the avoidance of doubt, amortisation of other
intangible items, marking forward exchange contracts
to market at the period end and such exceptional
items as the Committee, in its absolute discretion,
decides shall be excluded from the calculation.

The level of award of share options is discretionary
and is based on the Remuneration Committee’s
overall assessment of both the individual
performance of each Executive Director and the
financial performance of the Group.

Compound annualised growth rate per share2
in adjusted profit before interest and tax (after
excluding non-controlling interests) between the
base year and the vesting year three years later.

The calculation of awards under this scheme will be
disclosed in Remuneration Committee reports as
awards vest. Thus, for the year ended 30 April 2024,
the calculation of first awards under the LTIP scheme
(which commenced on 1 May 2021) will be reported in
the Annual Report for the year ended 30 April 2024.

1. On appointment and until the participant has been in position for a period of four financial years, the long-term performance period will increase in line with increasing tenure up to the maximum performance period of four years.
2. Being the weighted average number of Cohort plc shares in issue.

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Remuneration Committee report continued

Cohort plc Executive Directors’ Remuneration Policy continued

Element of remuneration

Purpose and link to strategy

Operation

Share ownership
levels

To increase alignment between Executives
and shareholders.

Chairman and
Non-executive
Directors’ fees

To provide compensation in line with the
demands of the roles at a level that
attracts high-calibre individuals and
reflects their experience and knowledge.

Service contracts

Executive Directors are encouraged to build a holding of shares in the
Company during their tenure with the Company. The Committee keeps
the level of the Executive Directors’ shareholding under review.

Sale of shares in the Company by an Executive Director is only allowed
with the approval of the Chairman.

Base fee for Chairman and Non-executive Directors. Normally
reviewed annually.

The Company reimburses any reasonable expenses that a Non-executive
Director incurs in carrying out their duties as a Director, including travel,
hospitality related and other modest benefits, if appropriate.

If there is a temporary material increase in the time commitments for
Non-executive Directors, the Board may pay extra fees to recognise the
additional workload.

The Non-executive Directors are entitled to participate in the Company private
health insurance scheme at their own expense should they wish to do so.

The Executive Directors have service agreements with the Company which
can be cancelled by either party giving six months’ notice at any time or
12 months’ notice in the event of losing office following a change of control
arising as a result of any person or persons acquiring more than 50% of the
voting rights at a general meeting of the Company.

Maximum potential value

Performance measure and target

Levels were set for 2021 onwards.

CEO at 200% of salary.

FD at 150% of salary.

Subsidiary MDs at 100% of salary.

Not applicable.

No maximum. Fees are set taking into
account internal benchmarks such as
the salary increase for the general
workforce and external benchmarks
of fees paid by companies of a similar
size and complexity.

Not applicable.

Strategic reportGovernanceFinancial statementsRemuneration Committee report continued

Illustration of the application of the Remuneration Policy
The charts below illustrate how the Policy would function for minimum, 50% of maximum and maximum
performance for each Executive Director for the year beginning 1 May 2023. These charts address the new
LTIP policy with the current Policy, which ceased on 30 April 2023, addressed as part of actual remuneration
received in the Remuneration summary. Actual LTIP options vested will be disclosed in the year of vesting
once awards crystallise and compared to the maximum potential award.

Chief Executive – Andrew Thomis

Finance Director – Simon Walther

800

600

0
0
0
£

’

400

200

£686,551

£501,043

22%

11%
4%

63%

32%

16%

45%

£315,536

100%

£549,946

£399,907

21%
11%
6%

62%

31%

15%
8%

46%

£249,869

100%

0% of variable
pay vests

50% of
variable
pay vests

100% of
variable
pay vests

0% of variable
pay vests

50% of variable
pay vests

100% of
variable
pay vests

Salary, benefits and retirement allowance

Short-term bonus

Long-term cash bonus

Long-term share bonus

Assumptions for charts above:

Salary levels are based on those applying from 1 May 2023. The retirement allowance is 4% of annual
basic salary. Other benefits relate to private health insurance and executive medical.

2) Amounts relating to all-employee share schemes have, for simplicity, been excluded from the charts.

Cohort plc Annual Report and Accounts 2023

An illustration of proposed and existing LTIPs, under the new scheme, is provided below:

Chief Executive – Andrew Thomis

Finance Director – Simon Walther

400

300

0
0
0
£

’

200

100

£325,938

£354,375

£377,406

100%

£255,000

£276,938

£294,938

100%

£162,969
50%

£177,188
50%

£188,703
50%

£127,500
50%

£138,469
50%

£147,469
50%

2021/22
LTIP award
(vesting
2024/25)

2022/23
LTIP award
(vesting
2025/26)

2023/24
LTIP award
(vesting
2026/27)

2021/22
LTIP award
(vesting
2024/25)

2022/23
LTIP award
(vesting
2025/26)

2023/24
LTIP award
(vesting
2026/27)

Remuneration summary
The actual application of the Remuneration Policy for the Executive Directors for the year ended 30 April 2023 was
as follows:

Salary *
£

In-year
bonus
£

Long-term
bonus
£

Share
awards
£

A Thomis
S Walther

283,500
221,550

37,015
28,927

28,571
22,328

80,862
63,192

Benefits
in kind
£

4,629
2,185

Retirement

allowance**

11,340
8,862

Emoluments
£

445,917
347,044

Pension
contributions
£

Total
£

364
364

446,281
347,408

* This will rise by 6.5% for the CEO to £301,925 and the FD to £235,950 from 1 May 2023.
** Retirement allowance.

From 1 April 2019, the Company has paid (and will continue to pay) to the Executive Directors 4% of annual salary as a
retirement allowance. This payment does not count towards the Executive Directors’ determination of bonus. This is in line
with pension contribution rates to the wider workforce.

Strategic reportGovernanceFinancial statements
Remuneration Committee report continued

Cohort plc Annual Report and Accounts 2023

Annual Report on Remuneration
The role of the Remuneration Committee (the Committee) is to:

X establish a formal and transparent policy on Executive remuneration and to set remuneration packages for
individual Executive Directors (the Group Chief Executive and Finance Director) and the Group Executive
Management (the Managing Directors of the subsidiary businesses);

X assess the performance of the individual Executive Directors and Group Executive Management against these

packages and determine the related remuneration;

X undertake the role, in conjunction with the Chief Executive, of proposing remuneration packages for individuals

to the Board for new appointments; and

X undertake any other tasks appropriate to the Committee requested by the Board.

Directors’ interests in the equity of Cohort plc

The Directors in office during the year under review and their interests in the equity of the Company are shown in
the table above. The changes in the Executive Directors’ equity interests in the Company between 30 April 2023
and 30 April 2022 are analysed as follows:

At 30 April 2022
Shares awarded under Restricted Share Scheme
Shares acquired under Cohort plc Share Incentive Plan
Cohort plc shares purchased through Cohort plc SAYE scheme
Additional PCA falling into scope
Automatic dividend reinvestment in shares (within an ISA and/or a SIPP)
Shares sold on transfer to ISA

At 30 April 2023

A Thomis

S Walther

234,623
2,790
355
933
495
5,962
(17)

221,553
2,180
355
1,021
—
2,485
(13)

245,141

227,581

N Prest CBE
A Thomis
S Walther
J Perrin

At
30 April 2023
Number of
10p ordinary
shares

At
30 April 2022
Number of
10p ordinary
shares

1,791,738
245,141
227,581
4,000

1,791,738
234,623
221,553
4,000

S Carter retired from office on 27 September 2022; at 30 April 2022 he held an interest of 9,094,202 shares.

The Executives’ shareholdings at 30 April 2023 represent 376% of Andrew Thomis’ and 447% of Simon Walther’s
annual salaries respectively (at 30 April 2022 the respective levels were 473% and 571%) and are based upon the
market price of Cohort plc shares at those respective dates: £4.35 at 30 April 2023 and £5.44 at 30 April 2022.
These levels exceed shareholding targets set by the Remuneration Committee.

Of the above shareholdings at 30 April 2023, 11,296 (2022: 20,470) of Andrew Thomis’ and 8,836 (2022: 16,015) of
Simon Walther’s are held on trust by the EBT as part of the Restricted Share Scheme and do not receive a dividend.

None of the Chairman’s or the Non-executive Directors’ shareholdings are held as part of the Restricted Share
Scheme (2022: £nil).

Strategic reportGovernanceFinancial statements

Remuneration Committee report continued

Annual Report on Remuneration continued
Performance incentives
The Cohort Executive Directors’ bonus scheme was agreed by the Board on 19 June 2013 following a
recommendation from the Committee. This scheme has applied for the year ended 30 April 2023. This is the final
year for which this scheme will apply.

At the Committee meeting held on 11 July 2023, the following awards were made to the Executive Directors:

in-year and long-term cash bonuses totalling £116,828 for the year ended 30 April 2023 (2022: £42,373).
See the split in table 2; and

ii. Restricted Share awards were approved as follows:

A Thomis
S Walther

In respect of the
year ended
30 April 2023

Actual
number of
shares

8,736
6,827

Estimated
value of
shares
£

42,857
33,492

15,563

76,349

In respect of the
year ended
30 April 2022

Actual
number of
shares

2,790
2,180

4,970

Actual
value of
shares
£

15,429
12,055

27,484

The in-year performance achieved resulted in 13% of salary being awarded as an in-year bonus for the year ended
30 April 2023 (5% for the year ended 30 April 2022). The long-term performance achieved was below the
maximum over the performance period resulting in cash bonus payments of 10.08% (2022: 3.81%) of salary and
Restricted Share awards with a value of 15.12% (2022: 5.71%) of salary, together 25.20% of salary, for the year
ended 30 April 2023 (9.52% for the year ended 30 April 2022).

Cohort plc Annual Report and Accounts 2023

The total estimated value received by the Executive Directors in respect of the Share awards, including income
tax and employee National Insurance, was £144,054 in respect of the year ended 30 April 2023 (2022: £59,660).
The Restricted Share awards in respect of the year ended 30 April 2022 were approved at the Committee meeting
of 12 July 2022 and were awarded on 11 August 2022. The Restricted Share awards in respect of the year ended
30 April 2023 are expected to be awarded in August 2023. The actual number of shares awarded was calculated
using the average mid-market share price for the year ended 30 April 2023 of 490.6 pence (2022: 553.0 pence).
The total estimated Restricted Share award value is based on the Executive’s marginal tax and National Insurance
rates prevailing at time of award.

Ordinary shares under option outstanding at 30 April 2023 were as shown in Table 1 on the next page. No share
options were awarded in 2023 or 2022 as stated in last year’s update to the Remuneration Policy.

The mid-market price of Cohort plc 10 pence ordinary shares at 30 April 2023 was 491.0 pence (2022: 544.0
pence); the lowest and highest market prices in the year were 391.0 pence and 560.0 pence respectively.

No bonuses are payable or share options awardable to the Non-executive Directors. Cash and share bonus
schemes for the Group Executive Management have been established for the year ended 30 April 2023, with a
similar framework to that of the Cohort Executive Directors, with varying levels of percentage of salary. Three
Managing Directors received awards at higher percentage levels than the Executive Directors, the highest being
55% of salary (of a maximum of 65% of salary).

The Group has the right to recover from the Cohort Executive Directors and the Group Executive Management any
cash bonus paid or shares awarded in respect of a reporting period where a material adverse restatement is made.

Chairman and Non-executive Directors
Nick Prest CBE was appointed in February 2006. Jeff Perrin was appointed Non-executive Director on 1 July 2015.
Edward Lowe was appointed Non-executive Director on 1 July 2019. Beatrice Nicholas was appointed Non-
executive Director on 1 September 2021. These appointments can be terminated upon three months’ notice being
given by either party.

Directors’ remuneration
Details of Directors’ remuneration are set out in Table 2.

Beatrice Nicholas’ salary was increased from £51,500 with effect from 1 May 2023 to reflect her increased role in
respect of the Group’s TCFD compliance.

Strategic reportGovernanceFinancial statements
Remuneration Committee report continued

Annual Report on Remuneration continued
Directors’ remuneration continued
Table 1: Directors’ share options

A Thomis

Cohort plc 2016 share option scheme (approved)
– Option price of £3.760 per share
Cohort plc 2016 share option scheme (unapproved)
– Option price of £3.760 per share
– Option price of £3.900 per share
– Option price of £4.875 per share
– Option price of £6.200 per share
– Option price of £5.390 per share
Save As You Earn (SAYE) scheme
– Option price of £4.475 per share
– Option price of £6.700 per share
– Option price of £5.830 per share
– Option price of £5.32 per share

S Walther
Cohort plc 2016 share option scheme (approved)
– Option price of £3.900 per share
– Option price of £6.200 per share
Cohort plc 2016 share option scheme (unapproved)
– Option price of £3.900 per share
– Option price of £4.875 per share
– Option price of £6.200 per share
– Option price of £5.390 per share
Save As You Earn (SAYE) scheme
– Option price of £4.475 per share
– Option price of £6.700 per share
– Option price of £5.830 per share
– Option price of £5.32 per share

At 1 May 2022
Number

Granted
Number

Exercised
Number

Lapsed/
forfeited
Number

At 30 April
2023
Number

Date from
which option
can be
exercised

Exercise
period
Years

Date of
grant

7,978

1,809
9,846
7,569
8,411
9,675

933
902
1,333
—

48,456

—

—
—
—
—
—

—
—
—
1,921

1,921

—

—
—
—
—
—

(933)
—
—
—

(933)

—

—
—
—
—
—

—
(902)
—
—

(902)

7,978

25 Aug 2017

26 Aug 2020

1,809
9,846
7,569
8,411
9,675

—
—
1,333
1,921

48,542

25 Aug 2017
10 Aug 2018
28 Aug 2019
28 Aug 2020
16 Aug 2021

26 Aug 2020
11 Aug 2021
29 Aug 2022
29 Aug 2023
16 Aug 2024

6 Sep 2019
4 Sep 2020
3 Sep 2021
5 Sep 2022

7 Sep 2022
5 Sep 2023
1 Oct 2024
1 Oct 2025

7
7
7
7
7

Cohort plc Annual Report and Accounts 2023 64

There are no future performance conditions applying
to any of the share option schemes opposite. The price
paid for all share options in the opposite schemes was
nil pence.

Both Andrew Thomis and Simon Walther have
participated in the Cohort plc Share Incentive Plan
(SIP) which was launched on 1 September 2018. As at
30 April 2023, contributions were made by each of
£1,200. This would convert to 275 Cohort plc ordinary
shares as at 30 April 2023 based on the closing share
price of 435.0 pence per share. On 23 September 2022,
contributions of £1,800 each were converted to 355
ordinary shares each at 506.0 pence per share.

The terms of the Cohort plc SIP are set out in note 20.

Andrew Thomis exercised 933 share options held under
the Cohort plc SAYE scheme on 21 February 2023 when
the mid-market price of Cohort plc ordinary shares
was 538.0 pence per share. All shares were retained.

Simon Walther exercised 1,021 share options held
under the Cohort plc SAYE scheme on 11 October 2022
when the mid-market price of Cohort plc ordinary shares
was 447.5 pence per share. All shares were retained.

At 1 May 2022
Number

Granted
Number

Exercised
Number

Lapsed/
forfeited
Number

At 30 April
2023
Number

Date from
which option
can be
exercised

Exercise
period
Years

Date of
grant

The aggregate amount of gains made by the Directors
as a result of exercising share options during the year
was £816 (2022: £4,033).

307
4,645

7,397
5,922
1,936
7,569

1,021
376
926
—

30,099

—
—

—
—
—
—

—
—
—
1,015

1,015

—
—

—
—
—
—

(1,021)
—
—
—

(1,021)

—
—

—
—
—
—

—

307
4,645

7,397
5,922
1,936
7,569

—
376
926
1,015

30,093

10 Aug 2018
28 Aug 2020

11 Aug 2021
29 Aug 2023

10 Aug 2018
28 Aug 2019
28 Aug 2020
16 Aug 2021

11 Aug 2021
29 Aug 2022
29 Aug 2023
16 Aug 2024

6 Sep 2019
4 Sep 2020
3 Sep 2021
5 Sep 2022

7 Sep 2022
5 Sep 2023
1 Oct 2024
1 Oct 2025

7
7

7
7
7
7

Strategic reportGovernanceFinancial statements

Remuneration Committee report continued

Annual Report on Remuneration continued
Directors’ remuneration continued
Table 2: Directors’ remuneration

Salary
2023
£

In-year
cash bonus
2023
£

Long-term
cash bonus
2023
£

Restricted
Share awards
2023
£

Benefits
in kind
2023
£

Retirement
allowance
2023
£

Emoluments
2023
£

Pension
contributions
2023
£

Total
2023
£

Executive Directors
A Thomis
S Walther
Non-executive Directors
N Prest
S Carter*
E Lowe
J Perrin
B Nicholas

283,500
221,550

37,015
28,927

28,571
22,328

80,862
63,192

4,629
2,185

11,340
8,862

445,917
347,044

364
364

446,281
347,408

115,000
19,304
58,750
55,000
47,500

—
—
—
—
—

115,000
19,304
58,750
55,000
47,500

—
—
—
—
—

115,000
19,304
58,750
55,000
47,500

Total

800,604

65,942

50,899

144,054

6,814

20,202 1,088,515

728 1,089,243

* S Carter retired from the Board on 27 September 2022.

Salary
2022
£

In-year
cash bonus
2022
£

Long-term
cash bonus
2022
£

Restricted
Share awards
2022
£

Executive Directors
A Thomis
S Walther
Non-executive Directors
N Prest
S Carter
E Lowe
J Perrin
B Nicholas

270,000
211,000

13,500
10,550

10,285
8,038

33,492
26,168

102,500
46,250
50,000
50,000
31,250

—
—
—
—

Benefits
in kind
2022
£

2,700
2,064

—
—
—
—

Retirement
allowance
2022
£

Emoluments
2022
£

Pension
contributions
2022
£

Total
2022
£

10,800
8,440

340,777
266,260

364
364

341,141
266,624

—
—
—
—

102,500
46,250
50,000
50,000
31,250

—
—
—
—

102,500
46,250
50,000
50,000
31,250

Total

761,000

24,050

18,323

59,660

4,764

19,240

887,037

728

887,765

The Restricted Share awards include tax and employee National Insurance.

Cohort plc Annual Report and Accounts 2023

CEO remuneration as a multiple of the average remuneration of
all employees

Salary
Total remuneration

2020

5.76
10.27

2021

5.58
9.31

2022

5.59
7.89

2023

5.63
8.38

Salary includes benefits in kind and retirement allowance. Total remuneration
includes all bonuses.

Relative spend on pay
The following table shows actual expenditure of the Group on remuneration of all
employees compared with distributions to shareholders and profit retained:

Total
remuneration
expenditure
£’000

65,682
59,764
51,881
47,815

Other expenditure as a percentage of total remuneration

Dividends paid
to shareholders

Profit retained

£’000

5,124
4,684
4,247
3,853

8
8
8
8

£’000

9,374
5,308
1,652
5,074

14
9
3
11

2023
2022
2021
2020

The total shareholder return performance graph is shown in the Corporate
governance report.

Strategic reportGovernanceFinancial statements

Directors’ report

Cohort plc Annual Report and Accounts 2023

Introduction
The Directors present their report and the audited financial statements of Cohort plc for the year ended 30 April
2023. Cohort plc is a company incorporated in and operating from England. Its registered address is One Waterside
Drive, Arlington Business Park, Theale, Reading RG7 4SW.

The Group maintains appropriate insurance cover in respect of legal actions against the Directors, as well as
against material loss or claims against the Group, and reviews the adequacy of the cover regularly.

The Company has made qualifying third-party indemnity provisions for the benefit of its Directors during the
reporting period and these remain in force at the date of this report.

Certain information required for disclosure in this report is provided in other appropriate sections of the Annual
Report and Accounts, accordingly, the following sections of the Annual Report and Accounts are incorporated into
this Directors’ report by reference:

X Strategic report

X Corporate governance report

X Audit Committee report

X Remuneration Committee report

X The financial statements together with the notes to those financial statements

Principal activities
The principal activity of the Company is that of a holding company. The principal activities of the Group are
described in our Operating review. The Company’s subsidiary undertakings, including those located outside the
UK, are listed in note 11 of the financial statements within their respective reporting segments.

Business review
The Strategic report provides a review of the Group’s business performance during the year, its strategy and likely
future developments, its key performance indicators, and a description of the principal risks and uncertainties
facing the business. The Chairman’s statement is included in the Strategic report section.

Since 30 April 2023, the Group has extended its banking facility for a further year to 18 July 2026 with an option
to extend it for a further year to July 2027. The facility terms have not changed with this extension and are
explained in detail in the Strategic report.

Dividends
The Directors recommend a final dividend of 9.15 pence (2022: 8.35 pence) per 10 pence ordinary share which,
subject to shareholder approval, is due to be paid on 3 October 2023 to ordinary shareholders on the register
on 25 August 2023. Together with the interim dividend of 4.25 pence paid on 14 February 2023, the full dividend
for the year will be 13.40 pence (2022: 12.20 pence), an increase of 10% over last year.

Directors and their interests
Brief biographies of the current Directors are set out on pages 48 and 49 (Board of Directors). All current members
of the Board were in office throughout the year and up to the date of signing these accounts. Stanley Carter served
on the Board as a Non-executive Director in the year, retiring on 27 September 2022. Details of the Directors’
interests in the equity of the Company are disclosed in the Remuneration Committee report.

The Company’s rules about the appointment and replacement of Directors, together with the powers of Directors,
are contained in the Articles of Association (the Articles) (available on the Company’s website, cohortplc.com).
Changes to the Articles must be approved by special resolution of the shareholders. A summary of the matters
reserved for the Board is included in the Corporate governance report and a copy is available on the Company’s
website (www.cohortplc.com).

Table 1: Information in respect of the Directors of the Company

Disclosure

Report

Directors who served throughout the year
Directors retiring by rotation
Directors’ biographies
Directors’ interests
Directors’ share options

Remuneration Committee report
Nomination Committee report
Board of Directors
Remuneration Committee report
Remuneration Committee report

Table 2: Significant shareholdings and voting rights
As at 10 July 2023, the following interests of shareholders in excess of 3% have been notified to the Company:

S Carter
Schroders Investment Management
Liontrust Asset Management
Canaccord Genuity Wealth Management
N Prest
Unicorn Asset Management
Herald Investment Management

Percentage of
voting rights
and issued
share capital
%

21.91
11.43
11.41
9.66
4.32
3.31
3.26

Number of
ordinary
shares

9,085,884
4,738,327
4,730,266
4,003,898
1,791,738
1,373,000
1,352,500

Nature of
holding

Direct
Direct
Direct
Direct
Direct
Direct
Direct

Research and development
During the year ended 30 April 2023 the Group expenditure on research and development, both on behalf of
customers and the Group’s own private venture expenditure, was £11.8m (2022: £11.3m).

Strategic reportGovernanceFinancial statements
Directors’ report continued

Going concern
The Group’s financial statements have been prepared
on the going concern basis.

As highlighted in note 15 to the financial statements,
the Company meets its day-to-day working capital
requirements through a facility which was renewed in
July 2022 and extended in June 2023, out to July 2026.
Both the current domestic economic conditions and
continuing UK Government budget pressures, including
defence, create uncertainty, particularly over the level
of demand for the Group’s products.

The Company’s forecasts and projections, taking
account of reasonably possible changes in trading
performance, and its order book extending out to 2032,
show that the Company should be able to operate
within the level of its current facility.

The Directors have a reasonable expectation that the
Company has adequate resources to continue in
operational existence for the foreseeable future. Thus,
they continue to adopt the going concern basis in
preparing the annual financial statements.

Capital structure
Details of the issued share capital, together with details
of the movements in the Company’s issued share capital
during the year, are shown in note 19. The Company has
one class of ordinary shares, each of which carries no
right to fixed income. Each share carries the right to one
vote at general meetings of the Company.

There are no specific restrictions on the size of a
holding nor on the transfer of shares, which are both
governed by the general provisions of the Articles and
prevailing legislation. The Directors are not aware of
any agreements between holders of the Company’s
shares that may result in restrictions on the transfer
of securities or on voting rights.

Subject to the provisions of the Company’s Articles and
the Companies Act 2006, at a general meeting of the
Company the Directors may request authority to allot
shares and the power to disapply pre-emption rights

and the authority for the Company to purchase its own
ordinary shares in the market. The Board requests such
authority at each Annual General Meeting. Details of
the authorities to be sought at the Annual General
Meeting on 26 September 2023 are set out in the
Notice of Annual General Meeting.

Details of employee share schemes are set out in
note 20. The Trustee of the Cohort Employee Benefit
Trust (EBT) (see note 21) abstains from voting on the
Company’s shares held on trust and these shares do
not receive any dividend.

At 30 April 2023, the EBT held 718,157 Cohort plc
ordinary shares, 1.73% of the issued share capital
(2022: 663,845; 1.61%). The maximum number of
shares held at any time in the year ended 30 April 2023
was 718,157 (1.73%) of the issued share capital at that
time. Shares in Cohort plc are acquired and disposed
of by the EBT for the purposes of satisfying employee
share options, Share Incentive and Restricted Share
Schemes, and the Long Term Incentive Plan, details of
which are shown in note 20.

No person has any special rights of control over the
Company’s share capital and all issued shares are
fully paid.

Under its Articles, the Company has authority to issue
up to half of its issued shares as new ordinary shares.
This approximates to 20.7m shares at 30 April 2023.

Change of control
There are a number of agreements that take effect,
alter or terminate upon a change of control of the
Company, such as: commercial contracts; banking
facility agreements; property lease arrangements; and
employee share plans. None of these are considered
to be significant in terms of their likely impact on the
business of the Group as a whole. Furthermore, the
Directors are not aware of any agreements between the
Company and its Directors or employees that provide
for compensation for loss of office or employment
that occurs because of a takeover bid, other than those
disclosed in the Remuneration Committee report.

Cohort plc Annual Report and Accounts 2023

International Financial Reporting
Standards (IFRS)
The Group and parent company’s reported results
for the year ended 30 April 2023 are prepared in
accordance with UK adopted International Accounting
Standards (IFRS). Information about the use of financial
instruments by the Company and its subsidiaries is
given in note 18 to the financial statements.

Fixed assets
There is no material difference between the book value
and current open market value of the Group’s interests
in land and buildings.

Employee consultation
Details of our engagement with employees and how
the Directors have considered their interests
throughout the year are set out in our Stakeholder
engagement summary.

Disabled employees
The policy of the Group is to offer the same
opportunities to disabled people as to all others in
respect of recruitment and career advancement,
provided their disability does not prevent them from
carrying out their required duties. Employees who
become disabled will, wherever possible, be retained,
rehabilitated and, where necessary, retrained.

Donations
During the year ended 30 April 2023 the Group made
charitable donations of £33,000 (2022: £29,000),
mainly in respect of military and local charities. The
Group made no political donations during the year
(2022: £nil).

Environment
The Company is required to disclose its UK energy use
and associated greenhouse gas emissions (GHG) under
the Streamlined Energy and Carbon Reporting (SECR)
Regulations, which came into force on 1 April 2019.
Details of our report are set out in our Sustainability
report. This is the fourth year that the Company has
undertaken a GHG emissions assessment to comply
with SECR. This year, Cohort is making its first
disclosure in accordance with the Task Force on
Climate-related Financial Disclosures (TCFD).
This is included in our Strategic report.

Provision of information to the auditor
The Directors who were in office on the date of
approval of these financial statements have confirmed,
as far as they are aware, that there is no relevant audit
information of which the auditor is unaware. Each of
the Directors has confirmed that they have taken all
the steps they ought to have taken as Directors in order
to make themselves aware of any relevant audit
information and to establish that it has been
communicated to the auditor.

RSM UK Audit LLP has expressed its willingness to
continue in office as auditor and a resolution to re-appoint
them will be proposed at the forthcoming AGM.

Approved by the Board of Directors on 31 July 2023
and signed on its behalf by:

Raquel McGrath
Company Secretary

Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Statement of Directors’ responsibilities
in respect of the Annual Report and financial statements

The Directors are responsible for preparing the Strategic
report, the Directors’ report and the financial statements
in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. The Directors have elected under company law and
the AIM Rules of the London Stock Exchange to prepare
Group financial statements in accordance with UK
adopted International Accounting Standards (IFRS) and
have elected under company law to prepare the
Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable
law), including FRS 101 ‘Reduced Disclosure Framework’.

The Group financial statements are required by law and
accounting standards in conformity with the
requirements of the Companies Act 2006 to present fairly
the financial position and performance of the Group. The
Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of the Act
to financial statements giving a true and fair view are
references to their achieving a fair presentation.

Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and the Company and of the profit or loss
of the Group for that period. In preparing each of
the Group and Company financial statements, the
Directors are required to:

X select suitable accounting policies and then apply

them consistently;

X make judgements and accounting estimates that

are reasonable and prudent;

X for the Group financial statements, state whether
they have been prepared in accordance with UK
adopted International Accounting Standards (IFRS);

X for the Company financial statements, state

whether applicable UK accounting standards have
been followed, subject to any material departures
disclosed and explained in the Company financial
statements; and

X prepare the financial statements on the going

concern basis unless it is inappropriate to presume
that the Group and the Company will continue
in business.

The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s and the Company’s transactions
and disclose with reasonable accuracy at any time the
financial position of the Group and the Company and
enable them to ensure that the financial statements
comply with the requirements of the Companies Act
2006. They are also responsible for safeguarding the
assets of the Group and the Company and hence for
taking reasonable steps for the prevention and
detection of fraud and other irregularities.

The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Cohort plc website.

Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.

By order of the Board on 31 July 2023

Andrew Thomis
Chief Executive

Simon Walther
Finance Director

Strategic reportGovernanceFinancial statementsFinancial statements

Independent auditor’s report
to the members of Cohort plc

Cohort plc Annual Report and Accounts 2023

Opinion
We have audited the financial statements of Cohort Plc (the parent company) and its subsidiaries (the Group)
for the year ended 30 April 2023 which comprise the Consolidated income statement, Consolidated statement
of comprehensive income, Consolidated statement of changes in equity, Company statement of changes in equity,
Consolidated and Company statement of financial position, Consolidated and Company cash flow statements
and notes to the financial statements, including significant accounting policies. The financial reporting framework
that has been applied in the preparation of the Group financial statements is applicable law and UK adopted
International Accounting Standards. The financial reporting framework that has been applied in the preparation
of the parent company financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted
Accounting Practice).

In our opinion:

X the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs

as at 30 April 2023 and of the Group’s profit for the year then ended;

X the Group financial statements have been properly prepared in accordance with UK adopted International

Accounting Standards;

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are independent of the Group and the parent company in
accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

Summary of our audit approach

Group

Parent company

Key audit matters

Revenue recognition – policies and
assessment of project accounting

Investment in Subsidiaries impairment

Goodwill impairment

Recoverability of trade receivables and
contract assets

X the parent company financial statements have been properly prepared in accordance with United Kingdom

Materiality

Generally Accepted Accounting Practice; and

X the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Overall materiality: £950,000
(2022: £750,000)

Performance materiality: £712,000
(2022: £562,500)

Scope

Our audit procedures covered 99% of revenue, 94% of adjusted operating profit
(Absolute Value*) and 72% of total assets (post consolidation adjustments**).

We have calculated the absolute value of each component subject to a full scope audit and compared this to the aggregate
of the absolute value of the adjusted operating profit for all components in the Group.

** We have calculated this % based on each component’s total assets 30 April 2023 position post consolidation adjustments.

Strategic reportGovernanceFinancial statementsIndependent auditor’s report continued
to the members of Cohort plc

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the Group and parent company financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had
the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the Group and parent
company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.

Revenue recognition – policies and assessment and project accounting (Group)

Key audit matter
description

The Group has set out the critical accounting judgements in relation to revenue recognition on
page 115. Contract assets and liabilities arising under IFRS 15 are set out in notes 13 and 14.

The application of the appropriate revenue recognition criteria is key to the recognition of
revenue within the financial statements and has been deemed a key audit matter due to the
judgement and estimation involved within the input model of accounting for complex projects.

The Group derives revenue from a range of contract types including those where control
passes at a point in time, support and licence contracts as well as complex contracts that are
operated on an input model over time.

For projects that are operated on an input model over time the degree of completion is
measured by reference to costs incurred at the reporting date as a percentage of the total
estimated costs to complete the project.

The assumptions underlying the cost to complete estimates involve significant judgement, and
any changes in estimation could have a material impact on the revenue recognised in relation
to those contracts.

The effect of these matters is that, as part of our risk assessment, we determined that the cost
to complete estimates have a high degree of estimation uncertainty, with a potential range of
reasonable outcomes greater than our materiality for the financial statements as a whole, and
revenue recognition.

Note that we have also identified fraud risks with regard to point in time revenue (occurrence
completeness and cut off) and over time revenue limited to ongoing contracts at year end
(existence, valuation, completeness and cut off).

How the matter
was addressed
in the audit

1. Audit of revenue recognition policies and review of the accounting policies with
management to check that they remain consistent and appropriate based on the
performance obligations, contractual terms and relevant accounting standards.

2. Challenged management’s assessment of the performance obligations and allocated price
in the contracts sampled to check this has been performed in accordance with IFRS 15.

3. Performed tests of detail on a sample of accrued revenue and deferred revenue items to

check the items are accounted for in accordance with the revenue recognition policy as well
as specific cut off testing for revenue recorded either side of the year end.

4. Recalculated the revenue recognised on a sample of contracts corroborating the details to
the underlying contracts and anticipated margin to project managers’ assessment of costs
to complete.

5. Challenged project managers’ estimates of costs to complete through assessment of

historical accuracy of budgets for contracts closed in the period.

Cohort plc Annual Report and Accounts 2023

Revenue recognition – policies and assessment and project accounting (Group) continued

6. Held discussions with project managers on the projects tested in detail to challenge

forecasts and discuss the risks within the contract risk register and the calculation and
inclusion of project contingencies.

7. Reviewed the post year end trading of projects to ascertain whether there had been any

change in the estimated costs to complete that should have been considered at the period
end date.

8. Reviewed correspondence with customers where delays or risks were identified to

corroborate the current contract position.

9. Audited the disclosures in the financial statements and considered their completeness,

accuracy and appropriateness.

10. Performed detailed data analytics procedures over the transaction cycle for revenue to
identify potential high risk journals that we then traced to source documentation to
confirm appropriateness.

Impairment of goodwill (for the Group) and investment in subsidiaries (Cohort plc Company only)

Key audit matter
description

The Group has a goodwill balance of £50.1m (2022: £50.1m) relating to historic acquisitions as
described in note 9 in the consolidated financial statements. In addition, the parent company
holds significant investments in subsidiaries at cost of £88.5m (2022: £91.1m).

Management assesses goodwill and investments in subsidiaries for impairment using
discounted cash flow (DCF) models to estimate the value in use of the Group’s cash-generating
units (CGUs) and compare this to the carrying values of the CGU.

The use of a DCF model requires management to make estimates involving judgement,
including forecasts of revenue and profitability and application of appropriate discount rates
and as a result the matter was considered to be one of the most significant in the Group and
parent company audits and therefore determined to be a key audit matter.

How the matter
was addressed
in the audit

1. Corroborated inputs to the DCF models to relevant external and internal financial

information and challenged management assumptions.

2. Comparison of historical forecasted performance to current year actual financial

performance to assess reliability of forecasting.

3. Comparison of forecast financial performance to post-year-end trading to assess reliability

of forecasting.

4. Verification of management’s discount rate to externally available sources.

5. Engagement with RSM valuation specialist in regard to consideration of discount rate

applied in management’s DCF models.

6. Challenged forecasts focused on the three CGUs for which the DCF models showed

lowest headroom.

7. Challenged management on the allocation of central cost to cash generating units.

8. Audit of management’s sensitivity analysis and check of arithmetic accuracy.

9. Audit of the disclosures in the financial statements and consideration of their

completeness, accuracy and appropriateness.

Strategic reportGovernanceFinancial statementsIndependent auditor’s report continued
to the members of Cohort plc

Key audit matters continued

Recoverability of trade receivables and contract assets

Key audit matter
description

The Group recognises trade receivables of £22.9m (2022: £24.4m) and contract assets of
£25.9m (2022: £24.1m) in the balance sheet. There is a risk that trade receivables and contract
assets recognised at the reporting date are not recoverable or will not be recovered in full.

How the matter
was addressed
in the audit

Management provides for specific trade receivable and contract asset balances where there is
an indication of risk of recovery. This is assessed on a contract-by-contract basis and takes into
account the parties involved within the contract and the status of the end user.

Due to the element of judgement in the need for and level of provision we have assessed this
to be a key audit matter.

1. Reviewed the ageing of receivables and obtained explanations for aged debt that has not

been provided for or recovered.

2. Discussed with management how they have identified customers and balances that would
likely be severely adversely impacted by current macroeconomic factors either due to
location or industry.

3. Reviewed the contract asset balances from the prior year to trace to invoicing and receipt.

4. Challenged the recoverability of receivables or contract assets that have been outstanding

for extended periods where no provision has been made.

5. Challenged management on the recovery of assets relating to contracts deemed as of high

risk from our work on revenue recognition.

6. Audit of the disclosures in the financial statements and consideration of their

completeness, accuracy and appropriateness.

Cohort plc Annual Report and Accounts 2023

Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature,
timing and extent of our audit procedures. When evaluating whether the effects of misstatements, both
individually and on the financial statements as a whole, could reasonably influence the economic decisions of the
users we take into account the qualitative nature and the size of the misstatements. Based on our professional
judgement, we determined materiality as follows:

Group

Parent company

Overall materiality

£950,000 (2022: £750,000)

Basis for determining overall
materiality

Rationale for benchmark
applied

5% of adjusted operating profit

Adjusted operating profit is the key
benchmark against which the business is
assessed by management and investors.

4% of net assets – capped at Group
materiality

The holding company is primarily
focused on the investments that it holds.

Performance materiality

£712,000 (2022: £562,500)

Basis for determining
performance materiality

Reporting of misstatements
to the Audit Committee

75% of overall materiality

Misstatements in excess of £48,000
and misstatements below that threshold
that, in our view, warranted reporting
on qualitative grounds.

An overview of the scope of our audit
The Group consists of 20 components, 13 of which are based in the UK, two in Canada, one in USA, two in
Germany and two in Portugal.

Full scope audits were performed for 6 components, specified procedures for 1 component to respond to identified
fraud risks at the Group level, and identified risk of litigation and claims at Group level and specified procedures over
completeness and cut off revenue assertions*** and analytical procedures at the Group level for 13 components.

Full scope audit
Specified procedures***
Analytical procedures

Total

Number of
components

6
1
13

Revenue

95%
4%
1%

100%

Adjusted
Operating Profit
(Absolute Value)

Total Assets **

94%
—
6%

72%
—
28%

100%

Further specific audit procedures over the Group consolidation and areas of significant judgement including
impairment of goodwill, business combinations, share-based payments, defined benefit pension liability, leases
and taxation were performed.

Of the above, a full scope audit for one component was undertaken by component auditors.

Strategic reportGovernanceFinancial statementsIndependent auditor’s report continued
to the members of Cohort plc

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment
of the Group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:

X obtaining an understanding of relevant controls over the going concern models prepared by management,

including the review of the inputs and assumptions used in those models;

X testing the accuracy of management’s models, including agreement to the most recent Board approved

budgets and forecasts;

X auditing the forecasts prepared by management from year end 30 April 2023 to 30 April 2026 by challenging

the key assumptions of these forecasts by:

X comparing forecast revenue with the Group’s order book and historical performance;

X evaluating the historical accuracy of forecasts prepared by management;

X assessing the sensitivity of the available headroom on facilities, cash position of the Group;

X assessing the headroom available on covenants; and

X review of post-year-end trading of the Group and comparison to the forecasts supplied by management; and

X auditing the sufficiency of going concern disclosures in the financial statements, including whether

commentary regarding the new facility entered into by the Group is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group’s or the parent company’s
ability to continue as a going concern for a period of at least 12 months from when the financial statements are
authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.

Other information
The other information comprises the information included in the Annual Report, other than the financial statements
and our auditor’s report thereon. The Directors are responsible for the other information contained within the
Annual Report. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Cohort plc Annual Report and Accounts 2023

Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:

X the information given in the Strategic report and the Directors’ report for the financial year for which the

financial statements are prepared is consistent with the financial statements; and

X the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the parent company and their environment
obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the
Directors’ report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:

X adequate accounting records have not been kept by the parent company, or returns adequate for our audit have

not been received from branches not visited by us; or

X the parent company financial statements are not in agreement with the accounting records and returns; or

X certain disclosures of Directors’ remuneration specified by law are not made; or

X we have not received all the information and explanations we require for our audit.

Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement (set out on page 68), the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the parent
company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.

Strategic reportGovernanceFinancial statementsIndependent auditor’s report continued
to the members of Cohort plc

The extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient
appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination
of material amounts and disclosures in the financial statements, to perform audit procedures to help identify instances
of non-compliance with other laws and regulations that may have a material effect on the financial statements, and to
respond appropriately to identified or suspected non-compliance with laws and regulations identified during the audit.

In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the
financial statements due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud through designing and implementing appropriate responses and to respond
appropriately to fraud or suspected fraud identified during the audit.

However, it is the primary responsibility of management, with the oversight of those charged with governance, to
ensure that the entity’s operations are conducted in accordance with the provisions of laws and regulations and for
the prevention and detection of fraud.

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the Group
audit engagement team and component auditors:

X obtained an understanding of the nature of the industry and sector, including the legal and regulatory

frameworks that the Group and parent company operate in and how the Group and parent company are
complying with the legal and regulatory frameworks;

X enquired of management, and those charged with governance, about their own identification and assessment

of the risks of irregularities, including any known actual, suspected or alleged instances of fraud; and

X discussed matters about non-compliance with laws and regulations and how fraud might occur including

assessment of how and where the financial statements may be susceptible to fraud.

The most significant laws and regulations were determined as follows:

Legislation/regulation

UK Companies Act, UK adopted
International Accounting Standards
/ Financial Reporting Standard 101
‘Reduced Disclosure Framework’

Additional audit procedures performed by the Group audit engagement team and component
auditors included:

Review of the financial statement disclosures and testing to supporting
documentation.

Completion of disclosure checklists to identify areas of non-compliance.

Tax compliance regulations

Inspection of advice received from internal/external tax advisers.

Inspection of correspondence with local tax authorities.

Consideration of whether any matter identified during the audit required
reporting to an appropriate authority outside the entity.

AIM listing rules

Review of announcements made during the year via RNS to identify
potential instances of non-compliance.

Other indirect laws and regulations We have held discussions with those charged with governance and inquired

of management as to whether there have been any non-compliance with
other laws and regulations that may materially impact the Group.

The key indirect laws we identified as material to the business were export
controls, defence contracting and anti-bribery and corruption legislation.

Cohort plc Annual Report and Accounts 2023

The areas that we identified as being susceptible to material misstatement due to fraud were:

Risk

Audit procedures performed by the audit engagement team:

Revenue recognition – policies and
assessment and project accounting

Please refer to the Key audit matters section above regarding how the
matter was addressed in the audit.

Management override of controls

Testing the appropriateness of journal entries and other adjustments.

Assessing whether the judgements made in making accounting estimates
are indicative of a potential bias.

Evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.

Recoverability of receivables and
contract assets

Please refer to the Key Audit Matters section above regarding how the
matter was addressed in the audit.

Assignment of cost to projects

Obtained understanding on the controls in place around the application
of costs to each project.

Discussed with management the processes in place to monitor and
challenge the application of cost on each project.

Performed test of details tracing the underlying cost to project either
through use of purchase order reference or time sheet posting.

A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.

Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Richard Bartlett-Rawlings (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
The Pinnacle
Midsummer Boulevard
Milton Keynes
MK9 1BP

31 July 2023

Strategic reportGovernanceFinancial statementsConsolidated income statement
for the year ended 30 April 2023

Revenue
Cost of sales

Gross profit
Administrative expenses

Operating profit

Comprising:
Adjusted operating profit
Amortisation of other intangible assets (included in administrative expenses)
Research and development expenditure credits (RDEC) (included in cost of sales)
(Charge)/credit on marking forward exchange contracts to market value at the year end (included in cost of sales)
Exceptional items (included in administrative expenses)
Gain on acquisition of JSK
Cost of acquisition of JSK
Adjustment to earn-out on acquisition of Chess

Finance income
Finance costs

Profit before tax
Income tax charge

Profit for the year

Attributable to:
Equity shareholders of the parent
Non-controlling interests

Earnings per share

Basic
Diluted

All profit for the year is derived from continuing operations.

The accompanying notes form part of the financial statements.

Cohort plc Annual Report and Accounts 2023

2023
£’000

2022
£’000

182,713
(117,852)

64,861
(49,610)

137,765
(81,160)

56,605
(45,515)

15,251

11,090

19,064
(3,672)
941
(1,082)

15,525
(6,865)
1,004
716

—
—
—

342
(70)
438

15,251

11,090

134
(1,458)

13,927
(2,675)

6
(868)

10,228
(1,541)

11,252

8,687

11,356
(104)

9,202
(515)

11,252

8,687

Pence

27.92
27.86

Pence

22.55
22.42

Notes

1
9

4
5

8
8

Strategic reportGovernanceFinancial statementsConsolidated statement of comprehensive income
for the year ended 30 April 2023

Profit for the year

Items which may be subsequently reclassified to profit or loss:
Foreign currency translation differences on net assets of oversea subsidiaries
Items that will not be subsequently reclassified to profit and loss:
Changes in retirement benefit obligations

Other comprehensive income for the period, net of tax

Total comprehensive income for the year

Attributable to:
Equity shareholders of the parent
Non-controlling interests

Cohort plc Annual Report and Accounts 2023

2023
£’000

2022
£’000

11,252

8,687

(1,070)

(422)

1,919

1,002

849

580

12,101

9,267

12,205
(104)

9,785
(518)

12,101

9,267

Strategic reportGovernanceFinancial statementsConsolidated statement of changes in equity
for the year ended 30 April 2023

Group

At 1 May 2021

Profit for the year
Other comprehensive income for the year

Total comprehensive income for the year

Transactions with owners of Group and non-controlling interests, recognised directly in equity
Issue of new shares
Equity dividends
Vesting of Restricted Shares
Own shares purchased
Own shares sold
Net loss on selling own shares
Share-based payments
Deferred tax adjustment in respect of share-based payments
Transfer of share option reserve on vesting of options
Change in option for acquiring non-controlling interest in Chess

At 30 April 2022

Profit for the year
Other comprehensive income for the year

Total comprehensive income for the year

Transactions with owners of Group and non-controlling interests, recognised directly in equity
Issue of new shares
Equity dividends
Vesting of Restricted Shares
Own shares purchased
Own shares sold
Net loss on selling own shares
Purchase of non-controlling interest
Share-based payments
Deferred tax adjustment in respect of share-based payments
Transfer of share option reserve on vesting of options
Change in option for acquiring non-controlling interest in Chess

Cohort plc Annual Report and Accounts 2023

Attributable to the equity shareholders of the parent

Share
capital
£’000

4,104

Share
premium
account
£’000

29,956

—
—

—

17
—
—
—
—
—
—
—
—
—

—
—

—

571
—
—
—
—
—
—
—
—
—

Own
shares
£’000

(1,068)

—
—

—

—
—
—
(2,923)
282
363
—
—
—
—

Share
option
reserve
£’000

923

—
—

—

—
—
—
—
—
—
572
(204)
(291)
—

Other
reserves
£’000

(2,362)

—
—

—

—
—
—
—
—
—
—
—
—
962

Retained
earnings
£’000

47,760

9,202
583

9,785

—
(4,684)
279
—
—
(363)
—
—
291
—

4,121

30,527

(3,346)

1,000

(1,400)

53,068

—
—

—

25
—
—
—
—
—
—
—
—
—
—

—
—

—

957
—
—
—
—
—
—
—
—
—
—

—
—

—

—
—
—
(586)
111
220
—
—
—
—
—

—
—

—

—
—
—
—
—
—
—
1,522
(36)
(370)
—

—
—

—

—
—
—
—
—
—
—
—
—
—
1,400

11,356
849

12,205

—
(5,124)
218
—
—
(220)
2,359
—
—
370
—

982
(5,124)
218
(586)
111
—
2,359
1,522
(36)
—
1,400

Total
£’000

79,313

9,202
583

9,785

588
(4,684)
279
(2,923)
282
—
572
(204)
—
962

83,970

11,356
849

Non-
controlling
interests
£’000

Total
equity
£’000

5,738

85,051

(515)
(3)

(518)

—
—
—
—
—
—
—
—
—
—

5,220

(104)
—

(104)

—
—
—
—
—
—
(2,359)
—
—
—
—

8,687
580

9,267

588
(4,684)
279
(2,923)
282
—
572
(204)
—
962

89,190

11,252
849

12,101

982
(5,124)
218
(586)
111
—
—
1,522
(36)
—
1,400

At 30 April 2023

4,146

31,484

(3,601)

2,116

—

62,876

97,021

2,757

99,778

Strategic reportGovernanceFinancial statementsCompany statement of changes in equity
for the year ended 30 April 2023

Company

At 1 May 2021

Profit for the year
Transactions with owners of the Company, recognised directly in equity
Issue of new shares
Equity dividends
Vesting of Restricted Shares
Own shares purchased
Own shares sold
Net loss on selling own shares
Share-based payments
Deferred tax adjustment in respect of share-based payments
Transfer of share option reserve on vesting of options
Change in option for acquiring non-controlling interest in Chess

Total contributions by and distributions to owners of the Company

At 30 April 2022

Total contributions by and distributions to owners of the Company

At 30 April 2023

The reserves of the Group and the Company are described in note 22.

Cohort plc Annual Report and Accounts 2023

Share
capital
£’000

4,104

Share
premium
account
£’000

29,956

—

17
—
—
—
—
—
—
—
—
—

—

571
—
—
—
—
—
—
—
—
—

571

Own
shares
£’000

(1,068)

—

—
—
—
(2,923)
282
363
—
—
—
—

(2,278)

Share
option
reserve
£’000

923

—

—
—
—
—
—
—
572
(204)
(291)
—

Other
reserves
£’000

(2,362)

—

—
—
—
—
—
—
—
—
—
962

962

Retained
earnings
£’000

21,672

14,513

—
(4,684)
279
—
—
(363)
—
—
31
—

9,776

Total
£’000

53,225

14,513

588
(4,684)
279
(2,923)
282
—
572
(204)
(260)
962

9,125

4,121

30,527

(3,346)

1,000

(1,400)

31,448

62,350

—

5,199

—

25
—
—
—
—
—
—
—
—
—

—

957
—
—
—
—
—
—
—
—
—

957

4,146

31,484

(3,601)

—
—
—
(586)
111
220
—
—
—
—

(255)

—
—
—
—
—
—
1,522
(36)
(370)
—

1,116

2,116

—
—
—
—
—
—
—
—
—
1,400

1,400

—
(5,124)
218
—
—
(220)
—
—
32
—

105

982
(5,124)
218
(586)
111
—
1,522
(36)
(338)
1,400

3,348

—

31,553

65,698

Strategic reportGovernanceFinancial statementsConsolidated and Company statement of financial position
as at 30 April 2023

Group

2023
£’000

2022
£’000

Company

2023
£’000

2022
£’000

Notes

Cohort plc Annual Report and Accounts 2023

Equity
Share capital
Share premium account
Own shares
Share option reserve
Other reserves
Retained earnings

Total equity attributable to the equity
shareholders of the parent
Non-controlling interests

Total equity

Notes

Group

2023
£’000

4,146
31,484
(3,601)
2,116
—
62,876

97,021
2,757

99,778

2022
£’000

4,121
30,527
(3,346)
1,000
(1,400)
53,068

83,970
5,220

89,190

Company

2023
£’000

2022
£’000

4,146
31,484
(3,601)
2,116
—
31,553

65,698
—

65,698

4,121
30,527
(3,346)
1,000
(1,400)
31,448

62,350
—

62,350

The accompanying notes form part of the financial statements.

As permitted by Section 408 of the Companies Act 2006, the parent company’s profit and loss account has
not been included in these financial statements. The parent company’s profit after tax was £5,199,000
(2022: £14,513,000).

The financial statements on pages 74 to 116 were approved by the Board of Directors and authorised for issue on
31 July 2023 and are signed on its behalf by:

50,145
5,969
8,521
15,304
—
1,600

50,145
9,641
9,615
12,310
—
1,361

—
—
431
62
88,493
178

—
—
172
140
91,110
85

81,539

83,072

89,164

91,507

32,041
55,612
42
41,454

22,777
56,161
793
40,367

—
18,522
—
—

129,149

120,098

18,522

—
18,438
—
—

18,438

210,688

203,170

107,686

109,945

Assets
Non-current assets
Goodwill
Other intangible assets
Right of use asset
Property, plant and equipment
Investment in subsidiaries
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents

Total assets

Liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Lease liability
Bank borrowings
Provisions
Other payables

Non-current liabilities
Deferred tax liabilities
Lease liability
Bank borrowings
Provisions
Retirement benefit obligations

Total liabilities

Net assets

9
9
10a
10b
11
17

12
13
18
15

14
18
10a
15
16
29

17
10a
15
16
26

(58,040)
(1,041)
(1,660)
(9)
(8,687)
—

(53,985)
(861)
(1,515)
(29,362)
(8,878)
(1,400)

(8,981)
—
(60)
(6,734)
—
—

(10,498)
—
(117)
(35,510)
—
(1,400)

(69,437)

(96,001)

(15,775)

(47,525)

Andy Thomis
Chief Executive

Company number
05684823

Simon Walther
Finance Director

(1,467)
(7,473)
(25,837)
(1,404)
(5,292)

(1,353)
(8,631)
(8)
(1,139)
(6,848)

—
(376)
(25,837)
—
—

(41,473)

(17,979)

(26,213)

—
(70)
—
—
—

(70)

(110,910)

(113,980)

(41,988)

(47,595)

99,778

89,190

65,698

62,350

Strategic reportGovernanceFinancial statements

Consolidated and Company cash flow statements
for the year ended 30 April 2023

Notes

10b

7
21
21
15
10a

Group

2023
£’000

2022
£’000

16,522

19,525

134
(5,231)

(1,016)
—
—

6
(2,005)

—
—
(372)

Company

2023
£’000

4,523

352
(10)

(1,016)
3,834
—

2022
£’000

13,880

269
(31)

—
—
—

Net funds reconciliation
Group
Cash and bank
Short-term deposits

Cash and cash equivalents

Loan
Finance lease

(6,113)

(2,371)

3,160

238

Debt

Net funds

982
(5,124)
(586)
111
(4,000)
(1,954)

(10,571)

588
(4,684)
(2,923)
282
(50)
(1,916)

(8,703)

982
(5,124)
(586)
111
(4,000)
(122)

(8,739)

588
(4,684)
(2,923)
282
—
(112)

(6,849)

Company
Cash and bank
Short-term deposits

Cash and cash equivalents

Loan
Overdraft

(162)

8,451

(1,056)

7,269

Debt

Net cash inflow from operating activities

Cash flows from investing activities
Interest received
Purchases of property, plant and equipment
Purchase of non-controlling interest
in Chess
Capital repayment
Acquisition of JSK (net of cash acquired)

Net cash (used in)/generated from investing
activities

Cash flows from financing activities
Issue of new shares
Dividends paid
Purchase of own shares
Sale of own shares
Repayment of borrowings
Repayment of lease liabilities

Net cash used in financing activities

Net (decrease)/increase in cash and
cash equivalents

Represented by:
Cash and cash equivalents and short-term
borrowings brought forward
Cash flow
Exchange

Cash and cash equivalents and short-term
borrowings carried forward

40,367
(162)
1,249

32,294
8,451
(378)

(6,178)
(1,056)
500

(13,447)
7,269
—

41,454

40,367

(6,734)

(6,178)

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with a maturity at
commencement of three months or less. The carrying amounts of these assets approximate to their fair value.

Net funds exclude IFRS 16 lease liabilities.

Cohort plc Annual Report and Accounts 2023

Effect of
foreign
exchange rate
changes
£’000

At 1 May
2022
£’000

Cash flow
£’000

At 30 April
2023
£’000

40,367
—

40,367

(29,332)
(38)

(29,370)

10,997

—
—

—

(29,332)
(6,178)

(35,510)

1,249
—

1,249

(505)
—

(505)

744

—
—

—

(505)
500

(5)

(162)
—

(162)

4,000
29

4,029

3,867

—
—

—

4,000
(1,056)

2,944

41,454
—

41,454

(25,837)
(9)

(25,846)

15,608

—
—

—

(25,837)
(6,734)

(32,571)

Strategic reportGovernanceFinancial statementsStrategic report

Governance

Financial statements

Cohort plc Annual Report and Accounts 2023 80

Notes to the financial statements
for the year ended 30 April 2023

1. Segmental analysis
For management and reporting purposes, the Group, during the year ended 30 April 2023, operated through its two trading divisions: Communications and Intelligence, and Sensors and Effectors. During the year the Group changed
its reporting basis from individual subsidiaries to these reporting divisions as more fully disclosed in “Who we are” (page 3) These divisions are the basis on which the Company reports its primary business segment information in
accordance with IFRS 8. Whilst each division internally reports by reference to the sectors it sells to, these are considered by the Board to have similar economic characteristics in terms of the nature of the services and their customer
base and therefore disaggregated information is not regularly reported to the Board. On this basis, the Board, which is deemed to be the chief operating decision maker, considers each trading division a separate operating segment.

The principal activities of the trading subsidiaries are described in the Strategic report.

All are UK operations with the exception of EID, which is based in Portugal, and ELAC, which is based in Germany. All operations are continuing. Inter-segment sales are charged at arm’s length rates.

Unallocated corporate expenses are the costs of the Cohort plc head office including the remuneration of the Cohort plc Board.

Business segment information about these subsidiaries is presented below:

2023

Revenue
External revenue
Inter-segment revenue

Segment adjusted operating profit
Unallocated corporate expenses

Adjusted operating profit
Charge on marking forward exchange contracts to market value at the year end
Amortisation of other intangible assets
Research and development expenditure credits (RDEC)

Operating profit
Finance cost (net of income)

Profit before tax
Income tax charge

Profit after tax

2023
Other information

Capital additions
Depreciation of property, plant and equipment
Depreciation of right of use assets

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

Eliminations
£’000

Group
£’000

86,195
184

96,518
513

—
(697)

182,713
—

86,379

97,031

(697)

182,713

14,911
—

14,911
(280)
(86)
270

14,815
(89)

9,320
—

9,320
(641)
(3,585)
671

5,765
(560)

14,726

5,205

—
—

—
—
—
—

—
—

—

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

972
534
414

4,248
1,754
1,255

Central
£’000

11
88
107

24,231
(5,167)

19,064
(1,082)
(3,672)
941

15,251
(1,324)

13,927
(2,675)

11,252

Group
£’000

5,231
2,376
1,776

1. Segmental analysis continued

2023
Balance sheet

Assets
Segment tangible assets
Goodwill and other intangible assets
Current tax asset
Deferred tax asset
Cash

Consolidated total assets

Liabilities
Segment liabilities
Current tax liability
Deferred tax liability
Bank borrowings

Consolidated total liabilities

Cohort plc Annual Report and Accounts 2023

Portuguese
assets
£’000

German
assets
£’000

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

Eliminations
£’000

Group
£’000

12,969
2,364

30,045
11,453

31,135
17,262

87,286
38,852

(6,901)
—

15,333

41,498

48,397

126,138

(7,924)

(14,805)

(27,732)

(47,398)

(6,334)

(7,924)

(14,805)

(27,732)

(47,398)

111,520
56,114
—
1,600
41,454

210,688

(81,464)
(2,143)
(1,467)
(25,837)

(110,911)

The above figures include 100% of Chess and EID. The non-controlling interest, 18.16% for Chess to 30 November 2022 and 20.00% for EID, is reported separately in the income statement and Group reserves.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements1. Segmental analysis continued

2022

Revenue
External revenue
Inter-segment revenue

Segment adjusted operating profit
Unallocated corporate expenses

Adjusted operating profit
(Charge)/credit on marking forward exchange contracts to market value at the year end
Costs of acquisition of JSK (50%)
Gain on acquisition of JSK (50%)
Adjustment to earn-out on acquisition of Chess
Amortisation of other intangible assets
Research and development expenditure credits (RDEC)

Operating profit
Finance cost (net of income)

Profit before tax
Income tax charge

Profit after tax

2022
Other information

Capital additions
Depreciation of property, plant and equipment
Depreciation of right of use assets

Cohort plc Annual Report and Accounts 2023

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

Eliminations
£’000

Group
£’000

68,369
114

68,483

12,253
—

12,253
(15)
—
—
—
(216)
288

12,310
(86)

12,224

69,396
—

69,396

7,469
—

7,469
587
(70)
342
—
(6,649)
716

2,395
(550)

1,845

—
(114)

(114)

—
—

—
—
—
—
—
—
—

—
—

—

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

930
411
380

1,043
1,698
1,206

Central
£’000

32
100
98

137,765
—

137,765

19,722
(4,197)

15,525
716
(70)
342
438
(6,865)
1,004

11,090
(862)

10,228
(1,541)

8,687

Group
£’000

2,005
2,209
1,684

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements1. Segmental analysis continued

2022
Balance sheet

Assets
Segment tangible assets
Goodwill and other intangible assets
Deferred tax asset
Cash

Consolidated total assets

Liabilities
Segment liabilities
Current tax liability
Deferred tax liability
Bank borrowings

Consolidated total liabilities

Cohort plc Annual Report and Accounts 2023 83

Portuguese
assets
£’000

German
assets
£’000

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

Eliminations
£’000

Group
£’000

19,455
12,883

11,692
2,450

35,457
27,781

76,506
41,192

(8,747)
—

32,338

14,142

63,238

117,698

(15,713)

(10,926)

(32,888)

(42,554)

(5,503)

(15,713)

(10,926)

(32,888)

(42,554)

101,656
59,786
1,361
40,367

203,170

(82,561)
(696)
(1,353)
(29,370)

(113,980)

For the purposes of monitoring segment performance and allocating resource between segments, the Group’s Chief Executive monitors the tangible, intangible and financial assets attributable to each segment.

All assets and liabilities are allocated to reportable segments with the exception of central cash and bank borrowings, current tax and deferred tax assets and liabilities.

Goodwill and other intangible assets are allocated to reportable segments as analysed in note 9.

Geographical segments
The Group’s subsidiaries are all located in the UK with the exception of EID, which is located in Portugal, and ELAC, which is based in Germany. For an analysis of the Group’s revenue by geographical location of the customer, please
refer to the “Revenue by market and geography” table in the finance review (page 21).

All Group assets, tangible and intangible, are located in the UK with the exceptions of EID, which is located in Portugal, and ELAC, which is based in Germany.

Market segments
For an analysis of the Group’s revenue by market sector please refer to the “Revenue by domain” table in the Business review (page 7).

For an analysis of the Group’s total revenue, broken down by type of deliverable, please refer to the “Revenue by type of deliverable” table in the Finance review (page 21).

Product includes bespoke product, customised systems and sub-systems and is hardware and/or software. Services include operational support and training.

Further information on revenue by market segment and capability can be found in the Strategic report.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements1. Segmental analysis continued
Major customers
Revenue from major customers included in the Group’s business segments for the year ended 30 April 2023 is as follows:

Cohort plc Annual Report and Accounts 2023 84

Communications and Intelligence
Sensors and Effectors

Customer C in 2023 is not the same as customer C in 2022.

2. Employee benefit expense (including Directors)

Wages and salaries
Social security costs
Retirement benefit obligations (see note 26):
Defined contribution schemes
Defined benefit scheme
Share-based payments

Average number of employees (including Directors)

Engineering and production
Managed services

Total operational
Administration and support

2023

2022

UK MOD
£’000

62,078
185

62,263

Portuguese
MOD
£’000

4,891
—

4,891

Customer A
£’000

Customer B
£’000

Customer C
£’000

460
5,622

6,082

—
10,598

10,598

—
9,011

9,011

UK MOD
£’000

40,280
6,041

46,321

Portuguese
MOD
£’000

3,924
—

3,924

Customer A
£’000

Customer B
£’000

Customer C
£’000

5,749
2,609

8,358

—
8,945

8,945

1,554
7,259

8,813

3. Profit for the year
The profit for the year has been arrived at after charging/(crediting):

Net foreign exchange losses/(gains)
Research and development costs
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of other intangible assets
Cost of inventories recognised as expenses
Staff costs (excluding share-based payments)
Share-based payments

Notes

10b
10a
9

2
20

2023
£’000

1,082
11,781
2,376
1,776
3,672
64,348
64,340
1,522

2022
£’000

(716)
11,298
2,209
1,684
6,865
42,997
59,192
572

All of the above charges are in respect of continuing operations.

The fees payable to the auditor for audit and non-audit services are disclosed in the Audit Committee report,
where the relevant disclosures have been highlighted as audited.

4. Finance income

2023
£’000

54,437
7,075

2,540
288
1,522

2022
£’000

50,177
6,275

2,421
319
572

65,862

59,764

2023
Number

2022
Number

598
105

703
385

614
116

730
303

1,088

1,033

2023
£’000

134

2022
£’000

The above disclosures include Directors. Directors’ emoluments and share option details are disclosed separately in
the Remuneration Committee report, where the relevant disclosures have been highlighted as audited.

Interest on bank deposits

All finance income is in respect of continuing operations.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements5. Finance costs

Loans
Finance leases
Interest paid on lease liabilities (see note 10a)
Retirement benefit obligations (see note 26)

All finance costs are in respect of continuing operations.

6. Income tax charge

Current tax charge/(credit):
UK corporation tax: in respect of this year
UK corporation tax: in respect of prior years
German corporation tax: in respect of this year
German corporation tax: in respect of prior years
Portugal corporation tax: in respect of this year
Portugal corporation tax: in respect of prior years
Other foreign corporation tax: in respect of this year

Deferred tax credit:
In respect of this year
In respect of prior years

Cohort plc Annual Report and Accounts 2023

2023
£’000

1,047
37
234
140

1,458

2022
£’000

542
6
251
69

868

2023
£’000

2022
£’000

3,314
(756)
—
—
(249)
397
133

3,112
(373)
(40)
82
(491)
(9)
(4)

The tax charge for the year is reconciled to profit per the Consolidated income statement for the year ended
30 April 2023 as follows:

Profit before tax on continuing operations

Tax at the UK corporation tax rate of 19.5% (2022: 19.0%)
Tax effect of expenses and reserve movements that are not deductible in determining
taxable profit
Tax effect of R&D tax credits in Portugal
Tax effect of exceptional items that are not recognised in determining taxable profit
Tax effect of other timing differences not reflected in deferred tax
Tax effect of statutory deduction for share options exercised
Tax effect of foreign tax rates
Tax effect of deferred tax movement on share options to be exercised
Tax effect of other prior year adjustments

Tax charge for the year

2023
£’000

2022
£’000

13,927

10,228

2,716

1,943

294
(319)
—
(112)
(49)
455
117
(427)

94
(631)
(135)
583
(72)
94
(32)
(303)

2,675

1,541

The UK corporation tax for the year ended 30 April 2023 is calculated at 19.5%, based upon eleven months
at 19.0% and one month at 25.0%. The UK corporation tax rate for the year ended 30 April 2022 is calculated
at 19.0%, based upon 12 months at 19.0%. The Portuguese corporation tax rate calculated for the year ended
30 April 2023 is 31.0% (2022: 22.2%) and the German corporation tax rate calculated for the year ended 30 April
2023 is 31.6% (2022: 31.7%).

2,839

2,277

In addition, a deferred tax charge of £39,000 (2022: charge of £204,000) was recognised directly in equity in
respect of share options.

(96)
(68)

(164)

(733)
(3)

(736)

2,675

1,541

As announced in the Budget on 3 March 2021, the UK tax rate increased to 25% from 1 April 2023. This will have a
consequential effect on the Group’s future UK tax charge.

7. Dividends

The corporation tax is calculated at 19.5% (2022: 19.0%) of the estimated taxable profit for the year, as disclosed
below.

The deferred tax includes a credit of £987,000 in respect of amortisation of other intangible assets (2022:
£1,541,000), and a credit of £271,000 (2022: charge of £136,000) in respect of marking forward exchange
contracts to market at the year end. The deferred tax is further explained in note 17.

Amounts recognised as distributions to equity holders in the period:
Final dividend in respect of the year ended 30 April 2022 at 8.35 pence per ordinary share
(2021: 7.60 pence)
Interim dividend in respect of the year ended 30 April 2023 at 4.25 pence per ordinary share
(2022: 3.85 pence)

Proposed final dividend for the year ended 30 April 2023 at 9.15 pence per ordinary share
(2022: 8.35 pence per ordinary share)

2023
£’000

2022
£’000

3,393

3,106

1,731

5,124

1,578

4,684

3,650

3,423

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 86

7. Dividends continued
The cost of the proposed final dividend, which is an estimate, is subject to approval by shareholders at the AGM to be held on 26 September 2023 and has not been included as a liability in these financial statements. If approved, this
dividend will be paid on 3 October 2023 to shareholders on the register as at 25 August 2023.

The Cohort Employee Benefit Trust, which holds ordinary shares in Cohort plc representing 1.73% (2022: 1.61%) of the Company’s called up share capital, has agreed to waive all dividends due to it in accordance with an arrangement
dated 20 November 2009.

8. Earnings per share
The earnings per share are calculated as follows:

Basic earnings (net profit attributable to equity holders of Cohort plc)
Share options

Diluted earnings

2023

2022

Weighted
average
number
of shares
Number

40,673,953
88,038

Earnings
£’000

11,356

Earnings
per share
Pence

27.92

Weighted
average
number
of shares
Number

40,813,569
230,101

Earnings
£’000

9,202

Earnings
per share
Pence

22.55

40,761,991

11,356

27.86

41,043,670

9,202

22.42

The basic earnings per share are calculated by dividing the profit attributable to equity holders of the parent company (Cohort plc) by the weighted average number of ordinary shares in issue during the year. The diluted earnings per
share are calculated by dividing the profit attributable to equity holders of the parent company by the weighted average number of shares in issue during the year as adjusted for the effects of potentially dilutive share options.

The weighted average number of shares for the years ended 30 April 2023 and 30 April 2022 is after deducting the own shares, which are held by the Cohort Employee Benefit Trust.

In addition, the adjusted earnings per share of the Group are calculated in a similar manner to the basic earnings per share with the adjustments to the basic earnings as shown below:

Basic earnings
Charge/(credit) on marking forward exchange contracts at the year end (net of tax credit of £271,000 (2022: charge of £136,000))
Costs on acquisition of JSK
Gain on acquisition of JSK
Adjustment to earn-out on acquisition of Chess
Amortisation of other intangible assets (see below)

Adjusted earnings

Share options

Diluted adjusted earnings

2023

2022

Notes

Weighted
average
number
of shares
Number

40,673,953
—
—
—
—
—

Earnings
£’000

11,356
811
—
—
—
2,672

Weighted
average
number
of shares
Number

40,813,569
—
—
—
—
—

Earnings
per share
Pence

27.92
—
—
—
—
—

Earnings
£’000

9,202
(580)
70
(342)
(438)
4,772

40,673,953

14,839

36.48

40,813,569

12,684

88,038

—

230,101

—

Earnings
per share
Pence

22.55
—
—
—
—
—

31.08

—

40,761,991

14,839

36.40

41,043,670

12,684

30.90

The adjusted earnings are in respect of continuing operations. The research and development expenditure credit (RDEC) has no effect on adjusted earnings per share as it is nil after tax.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

8. Earnings per share continued
The following table shows the adjustment to earnings in respect of amortisation of other intangible assets for calculating the adjusted earnings per share.

Chess
EID
ELAC
JSK (SEA)

2023

2022

Amortisation
of other
intangible
assets
(note 9)
£’000

1,564
86
1,430
592

3,672

Deferred
tax credit
thereon
£’000

(339)
(19)
(451)
(178)

(987)

Net
£’000

1,225
67
979
414

2,685

Attributable
to equity
shareholders
of the
Group
£’000

Amortisation
of other
intangible
assets
(note 9)
£’000

Non-
controlling
interest
£’000

—
(13)
—
—

(13)

1,225
54
979
414

2,672

3,288
216
3,274
87

6,865

Deferred
tax credit
thereon
£’000

(433)
(48)
(1,034)
(26)

(1,541)

Attributable
to equity
shareholders
of the
Group
£’000

2,337
134
2,240
61

4,772

Non-
controlling
interest
£’000

(518)
(34)
—
—

(552)

Net
£’000

2,855
168
2,240
61

5,324

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements9. Goodwill and other intangible assets

Goodwill

Cost
At 1 May 2021
Acquisition of ELAC SONAR
Acquisition of JSK

At 1 May 2022

At 30 April 2023

Amortisation
At 1 May 2021
Charge for the year ended 30 April 2022

At 1 May 2022
Charge for the year ended 30 April 2023

At 30 April 2023

Net book value
At 30 April 2023

At 30 April 2022

Other intangible assets

Cost
At 1 May 2021
Acquisition of JSK

At 1 May 2022

At 30 April 2023

Amortisation
At 1 May 2021
Charge for the year ended 30 April 2022

At 1 May 2022
Charge for the year ended 30 April 2023

At 30 April 2023

Net book value
At 30 April 2023

At 30 April 2022

Cohort plc Annual Report and Accounts 2023 88

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

17,093
—
—

17,093

28,570
6,170
312

35,052

Group
£’000

45,663
6,170
312

52,145

17,093

35,052

52,145

—
—

—

2,000
—

2,000

2,000
—

2,000

17,093

33,052

50,145

17,093

33,052

50,145

30,265
—

30,265

43,851
1,413

45,264

74,116
1,413

75,529

30,265

45,264

75,529

29,794
216

30,010
86

29,229
6,649

35,878
3,586

59,023
6,865

65,888
3,672

30,096

39,464

69,560

169

255

5,800

5,969

9,386

9,641

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements9. Goodwill and other intangible assets continued
Goodwill arises on the acquisition of subsidiaries. These subsidiaries are the cash-generating units to which
goodwill has been allocated. The goodwill relating to the individual subsidiaries has been included in the division
against which each subsidiary reports.

The acquisition of JSK completed 20 August 2021.

The amortisation charge is disclosed as “Amortisation of other intangible assets” in the income statement.

The Group tests goodwill biannually for impairment, or more frequently if there are indications that goodwill
might be impaired.

Beta factor

The recoverable amounts of the subsidiaries (cash-generating units) are determined from value-in-use calculations.

The value-in-use calculations take the cash flows of each cash-generating unit and apply the Group’s weighted
average cost of capital (WACC) to this to determine if there is any impairment of the cash-generating units’ goodwill.

Equity risk premium

In assessing any impairment of goodwill, each value-in-use calculation makes a number of estimates, which use
the same basis as used in previous years, as follows:

Cost of debt

Cohort plc Annual Report and Accounts 2023 89

WACC comprises a number of elements as follows:

Basis of estimate

Value of equity

Calculated as the issued share capital of the Group (Cohort plc) multiplied by the
closing share price at 30 April 2023 of £4.35 (2022: £5.44).

Risk free interest rate

Based upon ten-year UK Government gilt rate of 3.64% (2022: 1.99%). The ten-year
gilt rate has been used given current uncertainty over longer-term projections.
Previously the 30-year gilt rate was used.

Derived from analyst estimates provided by the Group’s Nomad (Investec) and reflects
a range of outcomes from 0.20 to 0.60 (2022: 0.20 to 0.60).

The equity risk premium of the Group of 10.78% (2022: 9.96%) to which is added a
further range of risk premium of 4% to 8% to reflect customer market risk and the low
liquidity and risk of AIM stocks.

The Group is in a net funds position. The Group loans at 30 April 2023 have an average
interest cost of 6.31% per annum as at that date (2022: 1.84% per annum).

Cash flow

Growth rate

Basis of estimate

As in previous years, the cash flows for the years ending 30 April 2024, 2025 and 2026 are based
upon the cash-generating units’ budgets and forecasts for those years. These cash flows are based
upon the revenue, margin and overhead cost forecasts for each business taking account of the
run-off of order book, renewal of existing business and winning of new business. Historically, these
cash flow forecasts have been a reasonable forecast of actual performance over the period of
measurement. Costs reflect inflation rates, currently assumed at 5% (2022: 5%). With regard to
the revenue, margin and overhead cost forecasts, the key assumptions underlying these inputs are
that current projects contracted will continue as per agreement, that government defence spending
will remain largely consistent in the future and that each cash-generating unit will continue to be
as successful in competing for new contracts as it has been historically. At 30 April 2023, just over
£142m (80% of latest consensus forecasts) of revenue for 2024 was already under contract and,
as such, the main assumptions related to revenue volumes are in periods for 2025 and after where
there is greater uncertainty and risk.

The cash flows for each UK-based cash-generating unit from years four to twenty inclusive are
based upon the forecast cash flow for the year ending 30 April 2026 to which a growth rate of
1.5% is applied each year (2022: 1.5%). This rate reflects a prudent view of recent UK growth rates
and is below the historically higher UK growth rate of 2.25%. The growth rate is similar for all of
the UK-based cash-generating units as a significant proportion of their business is with the same
customer, the UK MOD. As a significant proportion of the business is with the UK Government, a
more prudent growth rate has been used to reflect lower expected growth rates of UK Government
expenditure. In the case of EID, its main customer is the Portuguese MOD. As such, the growth rate
assumed for EID’s future cash flows is 1.0% (2022: 1.0%), reflecting the expected growth rate for
Portuguese Government expenditure. In the case of ELAC, its domestic customer, the German
Bundeswehr, does not form a significant proportion of its revenue with much of its business from
export customers. A growth rate of 1.5% has been assumed for ELAC in 2023 (2022: 1.5%). The
longevity of the cash flows used reflects the length of our order books and the long duration of the
customer platforms and applications we supply and support. Our order book currently includes
deliveries out to 2032.

The Group’s pre-tax WACC applied to each cash-generating unit’s cash flows was in a range from 20.4% to 35.6%
(2022: 16.2% to 20.5%). The Group WACC has been deemed appropriate to use for each cash-generating unit as
all funding is cross-guaranteed and therefore the same cost of funding is incurred by each cash-generating unit.
The increase in the Group’s pre-tax WACC is due to higher interest rates and volatility (Beta factor) in respect of
Cohort plc shares.

On the basis of these tests, no impairment of goodwill has arisen in the year ended 30 April 2023 within either of
the divisions. Sensitivity was applied to the impairment tests to deliver a material impairment of goodwill. If the
post-tax WACC is increased to over 13.8% (pre-tax WACC of over 28.4%), goodwill within Sensors and Effectors
relating to SEA (£22.4m) and ELAC (£7.7m) equals recoverable value. A similar impairment would occur should the
growth rate drop by 0.7%; however, this is considered unlikely as this falls significantly behind the historical UK
growth rate and current expectations of growth in the defence sector. This goodwill is the most sensitive to
impairment due to a current high level of divisional current assets. This impairment would arise if the higher equity
risk was applied to the post-tax WACC calculation.

The other intangible assets arose on the acquisition of subsidiaries and are mainly in respect of contracts and
prospects acquired. The Communications and Intelligence other intangible asset will be fully amortised by 30 April
2024. The Sensors and Effectors other intangible asset will be fully amortised by 30 April 2029.

The split of the net book value of other intangibles, where it comprises both contracts/opportunities to be secured
and contracts acquired, is as follows:

Contracts acquired
Customer relationships

2023

2022

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

169
—

169

1,041
4,759

5,800

255
—

255

3,559
5,827

9,386

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements10. Fixed assets
a) Right of use assets

Cost

At 1 May 2021
Additions
Disposals
Foreign exchange movements

At 1 May 2022
Additions
Disposals
Foreign exchange movements

At 30 April 2023

Depreciation

At 1 May 2021
Charge for the year
Disposals
Foreign exchange movement

At 1 May 2022
Charge for the year
Disposals
Foreign exchange movement

At 30 April 2023

Net book value at 30 April 2023

Net book value at 30 April 2022

Group

Fixtures and
equipment
£’000

1,067
482
(130)
(14)

1,405
257
(216)
22

Property
£’000

8,632
3,906
(62)
(46)

12,430
387
—
79

Total
£’000

9,699
4,388
(192)
(60)

13,835
644
(216)
101

12,896

1,468

14,364

Group

Fixtures and
equipment
£’000

476
290
(51)
(7)

708
342
(192)
12

870

598

697

Property
£’000

2,147
1,394
(19)
(10)

3,512
1,434
—
27

4,973

7,923

8,918

Total
£’000

2,623
1,684
(70)
(17)

4,220
1,776
(192)
39

5,843

8,521

9,615

Company
£’000

351
69
—
—

420
366
—
—

786

Company
£’000

151
97
—
—

248
107
—
—

355

431

172

Cohort plc Annual Report and Accounts 2023

Property
£’000

7,045
3,838
232
(1,602)
(39)

9,474
366
217
(1,626)
52

8,483

1,410
7,073

8,483

1,243
8,231

9,474

Group

Other
£’000

510
463
19
(314)
(6)

672
279
17
(328)
10

650

250
400

650

272
400

672

Total
£’000

7,555
4,301
251
(1,916)
(45)

10,146
645
234
(1,954)
62

9,133

1,660
7,473

9,133

1,515
8,631

10,146

2023
£’000

234
1,776

2,010

Company
£’000

221
69
9
(112)
—

187
366
5
(122)
—

436

60
376

436

117
70

187

2022
£’000

251
1,684

1,935

Lease liabilities

At 1 May 2021
New lease liabilities
Interest charge
Payments
Foreign exchange movement

At 1 May 2022
New lease liabilities
Interest charge
Payments
Foreign exchange movement

At 30 April 2023

Current
Non-current

At 30 April 2023

Current
Non-current

At 30 April 2022

Amounts recognised in Consolidated income statement

Interest expense on lease liabilities (note 5)
Depreciation expense

The Company’s right of use asset is in respect of its property lease at Theale (net book value £391,000; 2022:
£100,000) and vehicles (net book value £40,000; 2022: £72,000).

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

The net book value of the Company’s property, plant and equipment was £62,000 at 30 April 2023 (2022:
£140,000). This was after additions of £10,000, net disposals of £nil and a depreciation charge of £89,000 for the
year ended 30 April 2023.

The net book value of fixed assets held under finance leases at 30 April 2023 was £nil (2022: £35,000).

The depreciation charge is disclosed within “Administrative expenses” in the Consolidated income statement.

The Group’s land and buildings as disclosed above are the cost of purchase plus refurbishment and the fair value
on acquisition. As such the Group has no revaluation reserve at this time.

10. Fixed assets continued
b) Property, plant and equipment

Group

Cost
At 1 May 2021
Additions
Disposals
Acquired
Foreign exchange movement

At 1 May 2022
Additions
Disposals
Foreign exchange movement

At 30 April 2023

Depreciation
At 1 May 2021
Charge in the year
Eliminated on disposal
Foreign exchange movement

At 1 May 2022
Charge in the year
Eliminated on disposal
Foreign exchange movement

At 30 April 2023

Net book value
At 30 April 2023

At 30 April 2022

Land and
buildings
£’000

10,159
276
—
—
—

10,435
2,125
—
(9)

Fixtures
and
equipment
£’000

13,006
1,729
(130)
49
(94)

14,560
3,106
(546)
219

Total
£’000

23,165
2,005
(130)
49
(94)

24,995
5,231
(546)
210

12,551

17,339

29,890

2,760
349
—
—

3,109
332
—
—

7,869
1,860
(130)
(23)

9,576
2,044
(533)
58

10,629
2,209
(130)
(23)

12,685
2,376
(533)
58

3,441

11,145

14,586

9,110

7,326

6,194

15,304

4,984

12,310

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements11. Investment in subsidiaries

Investment in subsidiaries

A list of all the investments in subsidiaries is as follows:

Cohort plc Annual Report and Accounts 2023

Company

2023
£’000

88,493

2022
£’000

91,110

Registered office

Country of
registration

Type of
shares

Proportion of
shareholding
and voting
rights held

Nature of business

Name of company

Directly owned

Systems Consultants Services
Limited (SCS)

One Waterside Drive, Arlington Business Park, Theale, Reading RG7 4SW England

Ordinary

100%

MASS Limited

One Waterside Drive, Arlington Business Park, Theale, Reading RG7 4SW England

Ordinary

100%

Formerly a provider of technical consultancy
In the process of being struck off

Holding company of
MASS Consultants Limited

SEA (Group) Ltd. (SEA)

Beckington Castle, 17 Castle Corner, Beckington, Frome BA11 6TA

England

Ordinary

100%

Holding company of Systems Engineering & Assessment Ltd and Beckington
Castle Ltd

Marlborough Communications
(Holdings) Limited

1 Perrywood Business Park, Honeycrock Lane, Redhill, Surrey RH1 5DZ

England

Ordinary

100%

Holding company of Marlborough Communications Limited

Thunderwaves, S.A.

6. Rua do Alecrim 26E 1200-018, Lisbon

Portugal

Ordinary

100%

Holding company of EID

Cohort Deutschland GmbH

Neufeldtstraße 10, 24118 Kiel, Germany

Germany Ordinary

100%

Holding company for ELAC SONAR GmbH

Chess Technologies Limited (Chess)

One Waterside Drive, Arlington Business Park, Theale, Reading RG7 4SW England

Ordinary

100%
(2022:
81.84%)

Holding company of Chess Dynamics Limited, Chess Dynamics Inc and
Vision4ce Limited

Held through a subsidiary

MASS Consultants Limited (MASS)

Systems Engineering
& Assessment Ltd

Enterprise House, Great North Road, Little Paxton, St. Neots,
Cambridgeshire PE19 6BN

England

Ordinary

100%

Electronic warfare, managed services, secure communications and
digital services

Beckington Castle, 17 Castle Corner, Beckington, Frome BA11 6TA

England

Ordinary

100%

JS Residual Ltd

Riverside Road, Pottington Business Park, Barnstaple, Devon EX31 1LY

England

Ordinary

100%

Marlborough Communications
Limited (MCL)

1 Perrywood Business Park, Honeycrock Lane, Redhill, Surrey RH1 5DZ

England

Ordinary

100%

Deliverer of systems engineering, software and electronic engineering services
and solutions to the defence and transport markets and is also the holding
company of JS Residual Ltd

Subsidiary of Systems Engineering & Assessment Ltd and holds investment
in SEA’s Canadian operations
Dormant

Designs, sources and supports advanced electronic
and surveillance technology

Beckington Castle Ltd

Beckington Castle, 17 Castle Corner, Beckington, Frome BA11 6TA

England

Ordinary

100%

Property company holding freehold of Beckington Castle and SEA’s Bristol office

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

11. Investment in subsidiaries continued

Name of company

Registered office

Country of
registration

Type of
shares

Proportion of
shareholding
and voting
rights held

Nature of business

Held through a subsidiary continued

Chess Dynamics Limited

Empresa de Investigação
e Desenvolvimento de
Electrónica, S.A. (EID)

8963665 Canada Inc.

Quadrant House, North Heath Business Park, North Heath Lane
Horsham, West Sussex RH12 5QE

England

Ordinary

100%

Design and production of detection and tracking systems, as well
as counter-UAV solutions for the defence and security markets

Quinta dos Medronheiros-Lazarim,
2820-486 Charneca da Caparica, Lisbon

Portugal

Ordinary

80%

Designs and manufactures advanced communications systems for the defence
and security markets

1100, Boul Rene-Levesque O, Porte 2500, Montreal (Quebec),
Canada H3B 5C9

Canada

Ordinary

100%

The holding company of the Group’s investment in JSK Naval Support Inc.

JSK Naval Support Inc.

193 Brunswick Blvd, Quebec, Canada H9R 5N2

Canada

Ordinary

100%

Delivers and supports SEA products and services into the Canadian Navy

Vision4ce Limited

Chess Dynamics Inc

ELAC SONAR GmbH

ELAC SONAR
Unterstützungskasse GmbH

Unit 4, Wokingham Commercial Centre, Molly Millars Lane,
Wokingham RG41 2RF

England

Ordinary

100%

Software solutions for detection, tracking and C-UAV systems

7060 S Tucson Way A, Centennial, CO 80112 USA

USA

Ordinary

100%

US representative of Chess’s UK business

Neufeldtstraße 10, 24118 Kiel, Germany

Germany Ordinary

100%

Neufeldtstraße 10, 24118 Kiel, Germany

Germany Ordinary

100%

Supplies advanced sonar systems and underwater communications to global
customers in the naval market

Social institution of ELAC SONAR GmbH which provides pension related
support benefits to ELAC SONAR GmbH employees

All shares held in subsidiaries are the same class and carry equal weighting to any shares held by other shareholders.

Company
The Company’s investments in subsidiaries are as follows:

At 1 May 2021
Additions
Share-based payments
Vested in year
Deferred tax on share-based payments charged directly to equity

At 1 May 2022
Additions
Share-based payments
Vested in year
Deferred tax on share-based payments charged directly to equity
Capital repayments

At 30 April 2023

Chess
£’000

18,797
—
104
—
(10)

18,891
1,016
117
(88)
—
—

Cohort
Deutschland
£’000

24
—
60
—
—

84
—
85
—
—
—

MASS
£’000

14,650
—
178
(104)
(79)

14,645
—
203
(123)
—
—

MCL
£’000

16,521
—
47
(25)
(16)

16,527
—
56
(25)
—
—

SCS
£’000

1,584
—
—
—
—

1,584
—
—
—
—
—

SEA
£’000

Thunderwaves
£’000

26,560
—
101
(76)
(73)

26,512
—
116
(71)
(39)
—

12,902
—
15
(50)
—

12,867
—
3
(33)
—
(3,834)

Total
£’000

91,038
—
505
(255)
(178)

91,110
1,016
580
(340)
(39)
(3,834)

19,936

169

14,725

16,558

1,584

26,518

9,003

88,493

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements12. Inventories

Raw materials
Work in progress
Finished goods

Total

2023
£’000

13,669
11,273
7,099

2022
£’000

16,094
3,055
3,628

32,041

22,777

The inventory at 30 April 2023 is stated after stock provision of £4,348,000 (2022: £4,991,000).

13. Trade and other receivables

Cohort plc Annual Report and Accounts 2023

The majority of the Group’s customers are UK or overseas government organisations and larger prime contractors
in the defence and transport sectors.

The Group assesses all new customers for creditworthiness before extending credit. In the case of overseas
customers, the Group utilises various payment protection mechanisms including but not limited to export credit
guarantees, letters of credit and advance payments.

Trade receivables disclosed above include amounts which are past due at the reporting date but against which
the Group has not recognised an allowance for doubtful debts because the credit quality of the customer is not
considered to have changed and the amount due is considered fully recoverable. The Group recognises provisions
for doubtful debts on a credit loss basis taking into account the future anticipated losses based upon the
creditworthiness of the end customer.

2023
£’000

5,167
1,563
271
4,477

2022
£’000

2,510
961
106
4,655

11,478

8,232

Group

Company

Ageing of past due but not impaired receivables

Trade receivables (net of provision for doubtful debts)
Contract receivables
Prepayments and accrued income
Amounts due from subsidiary undertakings

2023
£’000

22,917
25,862
6,833
—

2022
£’000

24,410
24,121
7,630
—

2023
£’000

—
—
853
17,669

2022
£’000

—
—
345
18,093

55,612

56,161

18,522

18,438

<30 days
30–60 days
60–90 days
>90 days

Of the amount in >90 days, £2,825,000 trade and other receivables were overdue for greater than one year.

No trade and other receivables were due in greater than one year.

Movement in the allowance for doubtful debts (reported within trade receivables)

The average credit period taken on sales of goods is 33 days (2022: 44 days). Of the trade receivables balance,
£11.5m was considered overdue at 30 April 2023 (30 April 2022: £8.2m). Overdue is defined as trade receivables
still outstanding beyond invoice terms (typically 30 days). The allowance for doubtful debt is determined by
management’s best estimates, by reference to the particular receivables over which doubt may exist. None of the
other receivables were past due.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair values.
One of the largest trade receivables, to which the Group is exposed at 30 April 2023, is the UK MOD (customer B
below) with a balance outstanding of £1.7m (2022: £2.3m). Customers who represent more than 5% of trade
receivables include:

Customer A
Customer B
Customer C
Customer D

2023
£m

2.1
1.7
1.9
1.4

2022
£m

3.2
2.3
1.9
2.5

Balance at 1 May
Expected credit losses recognised
Released on recovery of debt previously provided
Foreign exchange movement

Balance at 30 April

Contract receivables

Opening balance
Acquired
Contract amendment
Contract receivable recognised in revenue
Contract receivable invoiced
Foreign exchange movement

Closing balance

2023
£’000

657
703
(174)
16

1,202

2023
£’000

24,121
—
—
40,090
(38,515)
166

2022
£’000

943
228
(503)
(11)

657

2022
£’000

26,112
571
(4,405)
15,960
(13,993)
(124)

25,862

24,121

Customers A and D in 2023 are not the same as customers A and D in 2022.

Trade receivables include £1.4m (2022: £7.3m) denominated in foreign currency. The predominant currency of the
trade receivables is pounds sterling.

The Group order book at 30 April 2023 and its expected recognition as revenue in future periods is shown in the
Financial review. The order book at 30 April 2022 is shown in the Five-year record.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

Group

Company

2023
£’000

—
25,837
9

2022
£’000

—
29,332
38

2023
£’000

6,734
25,837
—

2022
£’000

6,178
29,332
—

25,846

29,370

32,571

35,510

Group

Company

2023
£’000

9
—
25,837

2022
£’000

29,362
8
—

2023
£’000

6,734
—
25,837

2022
£’000

35,510
—
—

25,846

29,370

32,571

35,510

14. Trade and other payables

15. Bank borrowings

Advance receipts
Trade payables and accruals
Current tax liabilities
Social security and other taxes
Accruals and deferred income
Amounts due to subsidiary undertakings

Group

Company

2023
£’000

13,824
15,323
2,143
3,136
23,614
—

2022
£’000

20,593
9,648
696
3,290
19,758
—

2023
£’000

—
132
—
334
1,392
7,123

2022
£’000

—
172
—
299
1,640
8,388

58,040

53,985

8,981

10,499

Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing contract
costs. Advance receipts reflect invoicing ahead of work done in accordance with contracted terms. The average
credit period taken for trade purchases is 38 days (2022: 37 days), based upon each Group business’s standard
payment terms. The Group has financial risk management policies in place to ensure that all payables are paid
within the pre-agreed credit terms (see Risk management).

Trade payables and accruals, other payables and taxes are all due for settlement within 12 months of the year end,
the majority within three months.

Social security and other taxes include employment taxes and VAT.

The Directors consider that the carrying amount of trade payables approximates to their fair values.

Bank overdrafts
Bank loans
Finance leases

These borrowings are repayable as follows:

On demand or within one year
In the second year
In the third to fifth years inclusive

Less: amounts due for settlement within 12 months (shown under
current liabilities)

(9)

(29,362)

(6,734)

(35,510)

Amount due for settlement after 12 months

25,837

—

Total payable includes £7.7m (2022: £3.0m) denominated in foreign currency.

The weighted average interest rates paid were as follows:

Contract liabilities

Opening balance
New advances
Advances consumed in delivery of contract
Acquired
Foreign exchange movement

Closing balance

2023
£’000

2022
£’000

20,593
37,747
(44,621)
—
105

14,658
23,647
(18,488)
797
(21)

13,824

20,593

Bank loans (variable)
Finance leases (fixed)

2023
%

3.31
4.34

2022
%

1.84
5.10

The variable rates are based upon the Bank of England or European Central Bank interest rates. The year end interest
rate applying to the bank loans drawn in sterling was 5.65% (2022: 1.97%) and in euros was 4.49% (2022: 1.62%).

On 18 July 2022, the Group agreed a new facility for £35m with an extended banking syndicate comprising Lloyds,
NatWest and Commerzbank. The facility has an option to draw down a further £15m. The facility is provided for
three years with options to extend for a further two years to July 2027. On 14 June 2023 the Group exercised its
option to extend the facility to July 2026. The facility is secured over all of the Group’s assets excluding EID, which
is not part of the facility arrangement and maintains its own facilities locally in Portugal. The new facility is
available to the Group (excluding EID) in respect of acquisition financing and overdraft.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements15. Bank borrowings continued
The movement in the facility drawn in the year by currency was as follows:

16. Provisions

At 1 May 2021
Borrowing drawn down
Borrowing repaid
Foreign exchange movement

At 1 May 2022
Borrowing drawn down
Borrowing repaid
Foreign exchange movement

At 30 April 2023

Sterling
£’000

18,000
—
—
—

18,000
—
(4,000)
—

Euro
£’000

11,742
—
—
(410)

11,332
—
—
505

Total
£’000

29,742
—
—
(410)

29,332
—
(4,000)
505

14,000

11,837

25,837

At 30 April 2023, the Group had available £9.2m (2022: £10.7m) of undrawn banking facility. The Directors
consider the carrying amount of bank borrowings approximates their fair values.

The Group, including ELAC as from 18 July 2022, has entered into separate bilateral arrangements with each of its
banks, Lloyds and NatWest, for ancillary facilities including bonding, letters of credit and foreign exchange
contracts.

Group

At 1 May 2021
On acquisition and review of provisional fair values
Charged/(released) to the income statement
Utilised
Foreign exchange movement

At 1 May 2022
Charged/(released) to the income statement
Utilised
Foreign exchange movement

At 30 April 2023

Provisions due in less than one year
Provisions due in greater than one year

At 30 April 2023

Similar bilateral arrangements exist for EID with its bank in Portugal. In addition, EID has an overdraft facility of
€2.5m with Santander which is renewable on a six-month rolling basis. This facility was undrawn at 30 April 2023.

Provisions due in less than one year
Provisions due in greater than one year

Cohort plc Annual Report and Accounts 2023

Other
contract
related
provisions
£’000

3,179
6,554
(771)
—
16

8,978
(467)
—
—

Total
£’000

3,926
6,554
(394)
(71)
3

10,018
60
(8)
21

8,511

10,091

7,641
870

8,687
1,404

8,511

10,091

7,963
1,015

8,879
1,139

Warranty
£’000

747
—
377
(71)
(13)

1,040
527
(8)
21

1,580

1,046
534

1,580

916
124

The Group’s cash at 30 April 2023 of £41.5m is held with the following banks:

At 30 April 2022

1,040

8,978

10,018

National Westminster Bank plc
Barclays Bank PLC
Lloyds Bank plc
Novo Banco
Santander Bank
Banco Comercial Português
Caixa Geral de Depósitos Bank
Commerzbank
Other banks and cash

2023
£’000

33,581
—
1
11
267
2,962
1,220
3,125
287

2022
£’000

19,754
265
26
11
506
7,185
1,175
10,894
551

41,454

40,367

Moody’s
long-term
credit rating
of bank
as at
2023

The warranty provisions are management’s best estimates of the Group’s liability under warranties granted on
software and other products supplied and are based upon past experiences. The timing of such expenditure is
uncertain, although warranties generally have a time limit of no more than 12 months, unless a longer warranty
period is purchased by the customer. Warranty provisions are reviewed at the half year and year end in respect of
actual spend and the remaining obligations to be fulfilled.

A1*/A2
A1
A1
B2
A2
Baa3
Baa2
A1

Other contract related provisions are management’s best estimate of the Group’s exposure to contract related costs
and undertakings which are in addition to contract accruals and include contract loss provisions. The timing of these
is uncertain but is expected to be resolved within 12 months of the balance sheet date apart from dilapidation
provisions for the Group’s leased properties. These arise where a service or product has been previously delivered
to the customer and the Group receives a claim or an adverse indication in respect of the work done. Where the
amount required is uncertain or the Group disputes the amount of the claim, provision is made for the best
estimate of the amount that will be required to settle the issue.

Other contract related provisions also include contract loss provisions in respect of contracts where the estimated
cost at completion exceeds the total expected revenue of the contract. A contract loss provision is recognised as a
provision in full immediately as it arises. The contract loss provisions are held in respect of contracts which are
expected to complete in the next 12 months.

Other contract related provisions also include property dilapidation provisions and other trade related issues which
may not be related to a trading contract.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements17. Deferred tax

Accelerated
tax
depreciation
£’000

Other
intangible
assets
£’000

Revaluation
of building
£’000

At 1 May 2021

(376)

(3,692)

(320)

On acquisition
(Charge)/credit to the income
statement in respect of the current
tax year
(Charge)/credit to the income
statement in respect of prior tax
years
Effect of change in tax rate
Foreign exchange movement

Recognised in the income
statement
Recognised in equity

—

(424)

(80)

1,541

(35)
—
—

(115)
—

—
—
—

1,541
—

—

—
—
—

7
—

At 1 May 2022

(491)

(2,575)

(313)

3,049

Cohort plc Annual Report and Accounts 2023

Other
short-term
timing
differences
£’000

1,759

2,035

Share options
£’000

Derivatives
£’000

372

—

122

—

Group
£’000

(2,135)

1,611

(733)

(16)

(13)

706

A deferred tax liability in respect of the revaluation of a freehold building arose on the acquisition of SEA and is the
potential tax liability payable on the revaluation gain in respect of the building with reference to its historical cost.

The Company’s deferred tax balance at 30 April 2023 was an asset of £178,000 (2022: £85,000), being £146,000
(2022: £50,000) in respect of other short-term timing differences, accelerated tax depreciation of £24,000 (2022:
£16,000) and share options of £8,000 (2022: £19,000).

The corporation tax rate in the UK for the year ended 30 April 2023 was 19.50% (2022: 19.00%) which has been
applied by Cohort in calculating its income tax (see note 6).

For deferred tax balances in respect of EID (Portugal), the rate used was 22.45% (2022: 22.20%). For ELAC
(Germany) the rate used was 31.58% (2022: 31.70%).

The equity movement in deferred tax on share options is to reflect the future tax associated with the total future
share options exercisable and is not capped at the share-based payment level.

(24)
11
1

(745)
—

62
14
1

61
(204)

229

—
—
—

(13)
—

109

3
25
2

736
(204)

18. Derivative financial instruments
The Group has derivative financial instruments as follows:

Assets
Foreign currency forward contracts

Liabilities
Foreign currency forward contracts

2023
£’000

2022
£’000

793

(1,041)

(861)

(Charge)/credit to the income
statement in respect of the current
tax year
(Charge)/credit to the income
statement in respect of prior tax
years
Effect of change in tax rate
Foreign exchange movement

Recognised in the income
statement
Recognised in equity

(155)

987

(8)

(204)

(86)

(109)

425

(16)
(89)
—

(260)
—

—
(148)
—

839
—

—
(90)
—

(98)
—

107
26
(20)

(91)
—

(23)
(7)
(1)

(117)
(39)

—
—
—

(109)
—

—

68
(308)
(21)

164
(39)

133

The changes in marking the outstanding foreign currency forward contracts to fair value (which are based upon
quoted market valuations) are credited or charged to the Consolidated income statement as “credit/(charge) on
marking forward exchange contracts to market at the year end”. They are in respect of trading contracts undertaken
by the Group and in respect of Communications and Intelligence and Sensors and Effectors and are disclosed within
their respective operating profits in the segmental analysis (see note 1; 2022: Communications and Intelligence and
Sensors and Effectors). They are considered to be level 2 classification. The loss (2022: gain) to the Consolidated
income statement for the year ended 30 April 2023 was as follows:

Foreign currency forward contracts

2023
£’000

(1,082)

2022
£’000

716

At 30 April 2023

(751)

(1,736)

(411)

2,958

Certain deferred tax assets and liabilities have been offset where the Group has a legally enforceable right to do so.
The following is the analysis of the total deferred tax balances (after offset) for financial reporting purposes:

Deferred tax assets
Deferred tax liabilities

2023
£’000

1,600
(1,467)

133

2022
£’000

1,361
(1,353)

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023

18. Derivative financial instruments continued
Currency derivatives
The Group utilises forward currency contracts to hedge significant future transactions and cash flows. The Group is party to a number of foreign currency forward contracts in the management of its foreign exchange rate exposure.

The changes in total outstanding committed foreign currency forward contracts of the Group were as follows:

2023

At forward exchange rates
At 1 May 2022
Contracts matured in period
New contracts in period

At 30 April 2023
Fair value adjustment

At 30 April 2023 at spot rate

Buy
£’000

Sell
€’000

Sell
£’000

Buy
€’000

Buy
£’000

Sell
US$’000

Sell
£’000

Buy
US$’000

13,313
(10,491)
1,981

4,803
(72)

4,731

14,834
(11,738)
2,221

5,317
—

(8,962)
8,962
(8,652)

(8,652)
146

(10,507)
10,507
(9,678)

(9,678)
—

10,515
(379)
45

10,181
778

—

(8,506)

—

10,959

14,220
(509)
56

13,767
—

—

(1,736)
1,736
(4,628)

(4,628)
147

(4,481)

(2,361)
2,361
(5,628)

(5,628)
—

—

The total fair value adjustment is £999,000 (2022: £67,000) and the change in the forward exchange fair values for the year ended 30 April 2023 is £1,082,000 (30 April 2022: £716,00), which is included in the operating profit of the
Group as a loss (2022: gain).

2022

At forward exchange rates
At 1 May 2021
Contracts matured in period
New contracts in period

At 30 April 2022
Fair value adjustment

At 30 April 2022 at spot rate

Liquidity risk
The maturity of the outstanding contracts was as follows:

At 30 April 2023

Within one year
Within two years
Greater than two years

At 30 April 2023 at forward rate

Buy
£’000

Sell
€’000

Sell
£’000

Buy
€’000

Buy
£’000

Sell
US$’000

Sell
£’000

Buy
US$’000

17,480
(6,685)
2,518

13,313
(861)

12,452

Buy
£’000

2,740
1,305
758

4,803

19,314
(7,434)
2,954

14,834
—

—

Sell
€’000

3,054
1,429
834

5,317

(971)
942
(8,933)

(8,962)
142

(8,820)

Sell
£’000

(8,652)
—
—

(1,075)
1,044
(10,476)

(10,507)
—

—

4
(4)
10,515

10,515
794

11,309

5
(5)
14,220

14,220
—

—

(4,913)
4,913
(1,736)

(1,736)
(142)

(1,878)

(6,813)
6,813
(2,361)

(2,361)
—

—

Buy
€’000

(9,678)
—
—

Buy
£’000

4,152
—
6,029

Sell
US$’000

5,621
—
8,146

Sell
£’000

(4,628)
—
—

Buy
US$’000

(5,628)
—
—

(8,652)

(9,678)

10,181

13,767

(4,628)

(5,628)

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements18. Derivative financial instruments continued
Liquidity risk continued

At 30 April 2022

Within one year
Within two years
Greater than two years

At 30 April 2022 at forward rate

The following significant exchange rates applied at 30 April:

Exchange rates at 30 April

Cohort plc Annual Report and Accounts 2023

Buy
£’000

4,739
759
7,815

Sell
€’000

5,428
834
8,572

Sell
£’000

(8,016)
(946)
—

Buy
€’000

(9,414)
(1,093)
—

Buy
£’000

379
4,107
6,029

Sell
US$’000

509
5,565
8,146

13,313

14,834

(8,962)

(10,507)

10,515

14,220

Sell
£’000

(1,736)
—
—

(1,736)

Buy
US$’000

(2,361)
—
—

(2,361)

2023

US$

Euro

2022

US$

Euro

0.7961

0.8827

0.7953

0.8394

Sensitivity analysis
A 10% strengthening of sterling against the above currencies at 30 April 2023 would increase the reported operating profit by £3,193,000 (2022: decrease the reported operating profit by £1,186,000) in respect of marking these
forward contracts to market value.

19. Share capital

Allotted, called up and fully paid 10 pence ordinary shares

Movement in allotted, called up and fully paid 10 pence ordinary shares:

At 1 May 2021
Share options exercised

At 1 May 2022
Share options exercised

At 30 April 2023

The Company has one class of ordinary shares, none of which carry a right to fixed income.

During the year ended 30 April 2023, 245,576 ordinary shares (2022: 171,235) in Cohort plc were issued to satisfy share options.

2023
Number

2022
Number

41,458,477

41,212,901

Number

41,041,666
171,235

41,212,901
245,576

41,458,477

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements19. Share capital continued
New shares were issued as follows:

Price per share (£)

1.675
1.975
3.400
3.725
3.760
3.900
4.085
4.425
4.475

£24,558 was added to the share capital with the balance (£957,109) added to the share premium account.

Cohort plc Annual Report and Accounts 2023 100

Proceeds
from new
shares issued
£

17,923
20,343
32,990
29,800
69,451
121,208
101,185
390,020
198,748

Number of
shares

10,700
10,300
9,703
8,000
18,471
31,079
24,770
88,140
44,413

245,576

981,668

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statements20. Share options
The Group grants new share options under the Cohort plc 2016 share option scheme to senior management and key employees. Previous options have been granted under the Cohort plc 2006 and 2016 share option schemes.
Additionally the Group operates a Restricted Share Scheme (RSS), which closed at the end of April 2023, and a Long Term Incentive Plan (LTIP) for senior management. The Group also operates a Save As You Earn (SAYE) scheme and a
Share Incentive Plan (SIP), both of which are available to all employees.

The following options were outstanding at 30 April 2023:

Cohort plc Annual Report and Accounts 2023 101

Scheme and
grant date

Cohort plc 2006 share option scheme
9 Aug 2013
11 Aug 2014
20 Aug 2015
Cohort plc 2016 share option scheme
15 Aug 2016
25 Aug 2017
10 Aug 2018
28 Aug 2019
18 Sep 2019
7 Nov 2019
28 Aug 2020
1 Oct 2020
28 Apr 2021
16 Aug 2021
18 Aug 2022

Save As You Earn (SAYE) scheme
25 Aug 2017
1 Sep 2018
6 Sep 2019
4 Sep 2020
3 Sep 2021
5 Sep 2022

Exercise
price
£

1.675
1.975
3.725

3.400
3.760
3.900
4.425
4.875
5.500
6.200
6.150
6.340
5.390
5.410

4.085
3.900
4.475
6.700
5.830
5.320

Vesting
date

Expiry
date

10 Aug 2016
12 Aug 2017
21 Aug 2018

9 Aug 2023
11 Aug 2024
20 Aug 2025

16 Aug 2019
26 Aug 2020
11 Aug 2021
29 Aug 2022
19 Sep 2022
8 Nov 2022
29 Aug 2023
2 Oct 2023
29 Apr 2024
16 Aug 2024
18 Aug 2025

15 Aug 2026
25 Aug 2027
10 Aug 2028
28 Aug 2029
18 Sep 2029
7 Nov 2029
28 Aug 2030
1 Oct 2030
28 Apr 2031
15 Aug 2031
18 Aug 2032

Vested

—
2,300
22,609

26,308
107,787
125,363
183,816
13,491
5,454
—
—
—
—
—

30 April 2023

30 April 2022

Not
vested

Total

Vested

Not
vested

Total

—
—
—

—
2,300
22,609

—
—
—
—
—
—
230,718
6,000
80,000
354,931
390,500

26,308
107,787
125,363
183,816
13,491
5,454
230,718
6,000
80,000
354,931
390,500

10,700
12,600
34,609

36,666
132,258
158,163
—
—
—
—
—
—
—
—

—
—
—

—
—
—
315,016
13,491
5,454
301,718
6,000
80,000
427,931
—

10,700
12,600
34,609

36,666
132,258
158,163
315,016
13,491
5,454
301,718
6,000
80,000
427,931
—

487,128

1,062,149

1,549,277

384,996

1,149,610

1,534,606

—
—
—
—
—
—

—

—
12,305
17,760
38,479
50,962
69,620

—
—
—
—
—
—

25,651
13,843
74,259
53,895
76,070
—

189,126

—

243,718

487,128

1,251,275

1,738,403

384,996

1,393,328

1,778,324

The SAYE options have maturity periods of three or five years from the date of grant. The Group plan provides for a grant price equal to the closing market price of the Group shares on the trading day prior to the date of grant. In the case
of the SAYE schemes, the price is determined on the date before the invitation to participate, which was on 8 August 2022 for the 2022 scheme. The vesting period is generally three years, five years in the case of some SAYE options.

If options under the Cohort plc 2006 or 2016 share option schemes remain unexercised after a period of ten years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Group before
the options vest.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 102

20. Share options continued
The Group launched an all-employee Share Incentive Plan (SIP) on 1 September 2018. The scheme provides for
participating employees to save up to £150 per month throughout each annual accumulation period. At the end of
each accumulation period (30 August each year), the amount saved will be used to purchase Cohort plc ordinary
shares at the lower of the mid-market share price on the first and last day of accumulation period.

The shares to be issued under the Group’s SIP scheme are provided by the Cohort Employee Benefit Trust (see note 21).

Expected volatility was determined by calculating the historical volatility of the Group’s share price over the
previous two years. The leaver rate used in the model is based on management’s best estimate.

The RSS scheme is valued at fair value based on the achievement in year at the date at with the RSS is awarded.

The Group recognised a cost of £1,522,000 (2022: £572,000) relating to share-based payment transactions which
are all equity settled, an equivalent amount being transferred to the share option reserve.

The cost of share-based payments is included in “Administrative expenses” within the Consolidated income statement.

The movement in share options during the year is as follows:

2023

2022

21. Own shares

Outstanding at 1 May
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year

Outstanding at 30 April

Exercisable at 30 April

Weighted
average
exercise
price
£

5.01
5.40
5.49
3.99
4.58

5.20

4.07

Options

1,679,742
521,704
(198,042)
(220,080)
(5,000)

1,778,324

384,996

Weighted
average
exercise
price
£

4.66
5.31
4.96
3.56
0.92

5.01

3.66

Options

1,778,324
488,199
(268,203)
(245,992)
(13,925)

1,738,403

487,128

The weighted average remaining contractual life is six years, eleven months (2022: six years, eleven months).

The exercised options in the year were satisfied by transferring shares from the Cohort Employee Benefit Trust
(see note 21) and the issue of new shares (see note 19).

In the year ended 30 April 2023, options were granted as follows: 75,199 on 5 September 2022 under the SAYE
scheme, and 413,000 on 18 August 2022 under the Cohort plc 2016 share option scheme. The option price for the
SAYE scheme was £5.320 per share which was the mid-market price on the day before the scheme invitation was
made on 9 August 2022. The option price for the options issued under the Cohort plc 2016 share option scheme
was £5.410, the mid-market price the day before the grant.

Share options granted during the current and previous years were valued using the Black Scholes model provided
by the Quoted Companies Alliance. The inputs to this model for the current and previous years were as follows:

2023

2022

Average share price
Weighted average exercise price
Expected volatility
Risk free rate
Leaver rate (per annum)
Dividend yield

£4.91
£5.20
34.0%

£5.53
£5.01
38.0%
3.37%–3.63% 0.47%–0.82%
10.0%
0.96%

10.0%
1.04%

Balance at 1 May 2021
Acquired in the year
Sold in the year
Loss on shares sold in the year

Balance at 30 April 2022
Acquired in the year
Sold in the year
Loss on shares sold in the year

Balance at 30 April 2023

£’000

1,068
2,923
(282)
(363)

3,346
586
(111)
(220)

3,601

The own shares reserve represents the cost of shares in Cohort plc purchased in the market and held by the Cohort
Employee Benefit Trust to satisfy options under the Group’s share options (see note 20), the Restricted Share
Scheme (see the Remuneration Committee report) and the Group’s SIP scheme.

The number of ordinary shares in Cohort plc held by the Employee Benefit Trust at 30 April 2023 was 718,157
(2022: 663,845).

Tranches of Cohort plc ordinary shares were acquired by the Employee Benefit Trust as follows:

Date

19 December 2022
29 December 2022
4 January 2023
30 January 2023
28 April 2023

Number
acquired

25,000
23,000
4,500
47,500
20,000

120,000

Price
per share
£

4.42
4.96
5.02
5.31
4.36

Investment
£’000

110
114
23
252
87

586

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 103

21. Own shares continued
Ordinary shares in Cohort plc were transferred by the Employee Benefit Trust for the purposes of satisfying the
exercise of share options and SIP as follows:

The non-controlling interests are analysed as follows:

Exercise price per share
Pence

506.0

Number of
shares sold

Proceeds
£’000

21,877

111

Loss
on sale
of shares
£’000

—

In addition, 43,811 (2022: 42,947) ordinary shares in Cohort plc were transferred at nil value realising a loss on sale
of shares of £220,760 for the purpose of satisfying shares awarded to the Executive Directors (see the Remuneration
Committee report) and senior management under the Group’s Restricted Share Scheme. The total loss on satisfying
share options and Restricted Shares by the Employee Benefit Trust was £220,313 (2022: £363,543). All of the shares
sold at £5.060 per share were in respect of satisfying the Group’s SIP.

41,166 (2022: 67,576) of the shares held by the Employee Benefit Trust at 30 April 2023 remain to be issued under
the Restricted Share Scheme, on which an estimated loss of £207,180 (2022: £341,000) will be recognised as they
are issued.

As at 30 April 2023, an estimated 15,000 shares (2022: 13,000) held by the Employee Benefit Trust expect to be
issued under the SIP on which a loss of £10,000 (2022: gain of £5,000) would be recognised as they are issued.

The market valuation of the ordinary shares in Cohort plc held by the Employee Benefit Trust at 30 April 2023
was £3,123,983 (2022: £3,611,316).

The cost of operating the Employee Benefit Trust during the year ended 30 April 2023 was £21,716 (2022:
£23,796) and this cost is included within “Administrative expenses” in the Consolidated income statement.

22. Reserves and non-controlling interests
The Group (consolidated) and Company statements of changes in equity are disclosed as primary statements.
Below is a description of the nature and purpose of the individual reserves:

X Share capital represents the nominal value of shares issued, including those issued to the Cohort Employee

Benefit Trust (see note 19).

X Share premium includes the amounts over the nominal value in respect of share issues. In addition, costs in

respect of share issues are debited to this account.

X Own shares held by the Group represent shares in Cohort plc. All the shares are held by the Cohort Employee

Benefit Trust (see note 21).

X Share option reserve represents the cumulative share-based payment charged to reserves less the transfer to

retained earnings on vesting of options.

X Retained earnings include the realised gains and losses made by the Group and the Company.

Group

At 1 May 2021
Profit/(loss)
Other comprehensive loss

At 1 May 2022
(Loss)/profit
Reallocation of non-controlling interest on purchase of remaining interest in Chess

At 30 April 2023

Communications
and Intelligence
£’000

Sensors and
Effectors
£’000

2,938
158
(100)

2,996
(239)
—

2,757

2,800
(576)
—

2,224
135
(2,359)

—

Total
£’000

5,738
(418)
(100)

5,220
(104)
(2,359)

2,757

Non-controlling interest within Communications and Intelligence comprises EID (20%), and within Sensors and Effectors
comprises Chess at 18.16% to 30 November 2022.

23. Net cash from operating activities

Profit for the year
Adjustments for:
Income tax charge/(credit)
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of other intangible assets and goodwill
Net finance expense
Derivative financial instruments and other non-trading
exchange movements
Share-based payment
Increase in provisions

Group

Company

2023
£’000

2022
£’000

2023
£’000

2022
£’000

11,252

8,687

5,199

14,513

2,675
2,376
1,776
3,672
1,324

1,082
1,522
720

1,541
2,209
1,684
6,865
862

(716)
572
102

(54)
89
107
—
679

—
948
—

(83)
101
97
—
233

—
69
—

Operating cash flows before movements in working capital

26,399

21,806

6,968

14,930

Increase in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables

Cash generated by operations

Income taxes paid
Interest paid

(8,565)
2,999
(2,976)

(8,542)

(9,885)
10,530
22

—
(84)
(1,367)

667

(1,451)

—
(40)
(508)

(548)

17,857

22,473

5,517

14,382

(111)
(1,224)

(2,081)
(867)

31
(1,025)

—
(502)

Net cash inflow from operating activities

16,522

19,525

4,523

13,880

Interest paid includes the interest element of lease liabilities under IFRS 16 (see note 10a) of £234,000 (2022: £251,000).

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 104

24. Leases
Prior to 1 May 2019 the Group recognised only finance leases and operating leases. Since 1 May 2019 the Group has recognised three types of lease arrangements for reporting purposes.

Type

How determined

Reporting

Finance leases

Lease agreement is a finance lease.

Asset is reported in property, plant and equipment (see note 10b) and depreciated over term of
lease. Liability is shown as part of debt (see note 15).

Operating leases as right of use assets

Lease agreement is an operating lease but does not meet the criteria
for type 3 below.

Asset is reported as right of use asset (see note 10a) and depreciated over term of lease and liability
is shown as lease liability (see note 10a).

Operating leases

Operating leases where:
X length of lease is less than 12 months in duration; and/or

X the value of the lease is low (below £5,000) at inception.

No asset or liability is recognised and cost of lease is expensed over the lease term as part of
operating profit in the income statement. The cost of these operating leases is recognised in the
Consolidated income statement in the year ended 30 April 2023 was £519,000 (30 April 2022:
£446,000).

25. Commitments
There was £561,000 of capital commitments at 30 April 2023 (2022: £572,000).

26. Retirement benefit obligations
The Group operates a variety of retirement benefit arrangements. These are all defined contribution schemes with the exception in Germany of ELAC SONAR (ELAC) where a defined benefit scheme operates.

i. Defined contribution schemes
The Group makes contributions to defined contribution stakeholder pension schemes. The contributions for the year of £2,540,000 (2022: £2,421,000) were charged to the Consolidated income statement. Contributions outstanding
at 30 April 2023 were £1,069,548 (2022: £358,433).

ii. Defined benefit schemes
The Group operates a single defined benefit scheme in Germany on behalf of employees in ELAC. The scheme has been closed to new members since 1 January 2019. The scheme provides annuities to the entitled participants and is
funded by an external support fund. At each balance sheet date, the obligations are calculated by an external actuary.

Retirement benefit risks
Defined benefit schemes expose the Group to a number of risks, the most significant of which are detailed below:

Asset risk

As the scheme assets are in the form of purchased annuities held with an independent insurance provider, this risk is low.

Longevity risk

The plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plan’s liabilities.

Charges to the income statement in respect of the Group’s defined benefit scheme are as follows:

Service cost
Net interest expense

2023
£’000

284
140

424

2022
£’000

324
69

393

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 105

26. Retirement benefit obligations continued
Retirement benefit risks continued
Amounts recognised in the statement of comprehensive income are set out below:

Net gains from changes in assumptions
(Losses)/gains from plan assets

2023
£’000

1,967
(67)

2022
£’000

931
95

1,900

1,026

Amounts included in the Group’s Consolidated balance sheet arising from the Group’s defined benefit scheme
obligations are:

The present value of defined benefit obligations comprised:

Opening defined benefit obligations
Current service cost
Interest expense

Amounts recognised in income in respect of defined benefit scheme

Remeasurement gains/(losses) from:
Change in financial assumptions
Experience adjustments

Amounts recognised in the statement of comprehensive income

Present value of defined benefit obligations
Fair value of scheme’s assets

Net liability arising from defined benefit obligations

Fair value of the scheme’s assets are as follows:

Opening scheme assets
Interest income

Amounts recognised in income in respect of defined benefit scheme

Return on plan assets excluding amounts included in interest income

Amounts recognised in the statement of comprehensive income

Contributions:
Employer
Payment from plan:
Benefits paid

Effect of movements in exchange rates

Closing scheme assets

2023
£’000

2022
£’000

(11,952)
6,660

(13,108)
6,260

(5,292)

(6,848)

Benefits paid
Benefit payments from employer

Payments from plan

Effects of movements in exchange rates

Closing defined benefit obligations

2023
£’000

6,260
146

146

(67)

2022
£’000

6,296
60

306

254

(264)

279

(223)

(222)

6,660

6,260

The net defined retirement obligation acquired on 2 December 2020 as part of the ELAC acquisition was
£7,595,000 to which a fair value adjustment was added of £925,000 to arrive at a fair value on acquisition of
£8,520,000 comprising asset of £6,351,000 and obligation of £14,871,000.

Actuarial assumptions
The assumptions used for the purpose of the actuarial valuations were as follows:

Discount rate
Salary increase rate
Pensions-in-payment increase rate
Mortality assumption

At year end
30 April 2023

At year end
30 April 2022

3.75%
3.50%
2.50%
Richttafeln
2018 G

2.30%
2.50%
2.20%
Richttafeln
2018 G

The assumptions regarding future mortality are based on actuarial advice in accordance with published statistics,
which are country specific.

The plan assets at acquisition and at 30 April 2023 comprised insurance annuities held with a third-party insurer.

2023
£’000

2022
£’000

(13,108)
(284)
(286)

(14,278)
(324)
(129)

(570)

(453)

2,231
(264)

1,967

264
7

271

(512)

875
56

931

224
23

247

445

(11,952)

(13,108)

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 106

26. Retirement benefit obligations continued
Actuarial assumptions continued
The current and future beneficiaries of the scheme are as follows:

Active
Deferred
Retired

Number Average age

79
81
153

52
55
76

Average
annual
pension
£

6,372
1,258
1,778

The weighted average duration of the benefit obligation as at 30 April 2023 is 18 years (2022: 21 years).

Using the mortality tables adopted, the expected lifetime of average members currently at age 65 and average
members at age 65 in 20 years’ time is as follows:

30 April 2023
30 April 2043

Male
Years

85.8
88.5

Female
Years

89.2
91.4

The expected contributions for the year ending 30 April 2024 are £351,000 for scheme assets and a further
£46,000 benefit payments not from the plan assets.

The expected total benefit payments for the next ten years are £4.5m ranging from around £351,000 per annum
to £520,000 per annum.

Sensitivity analysis
Several significant actuarial assumptions are made for the determination of the defined benefit obligation. These
are set out below along with the impact on the net liability of the scheme as at 30 April 2023 by the prescribed
sensitivity change:

Mortality rate – increase in life expectancy
Discount rate – increase in rate
Salary increase assumption – increase in rate
Pension payment increase assumption – increase in rate

Increase/
(decrease) in
net liability
of scheme
£m

0.4
(1.7)
0.6
1.5

Change in
assumption

+1 year
+1%
+1%
+1%

The above sensitivities are based on a change of assumption while holding all other assumptions constant. In
practice this is unlikely to occur and changes in some of the assumptions may have some correlation. When
calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method
(present value of the defined benefit obligation calculated with the projected unit credit method at the end of the
reporting period) has been applied as when calculating the pension liability recognised within the balance sheet.

27. Contingent liabilities
At 30 April 2023 the Group had in place bank guarantees of £25,765,000 (2022: £24,624,000) in respect of
trading contracts. The Group is not aware of any conditions which would realise these contingent liabilities. The
significant increase in the Group’s contingent liabilities is in respect of contract increases due to increased export
orders including attached bank guarantee requirements.

28. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been
eliminated on consolidation. However, the key transactions with the Company are disclosed as follows:

2023

2022

Interest paid
to subsidiaries
£’000

Interested
received from
subsidiaries
£’000

Management
fees received
from
subsidiaries
£’000

Dividends
received from
subsidiaries
£’000

Group relief
received from
subsidiaries
£’000

156

411

345

5,157

3,807

6,000

14,560

During the year ended 30 April 2023, the Directors of Cohort plc received dividends from the Company as follows:

N Prest CBE
A Thomis
S Walther
J Perrin

2023
£

2022
£

225,759
28,675
27,207
504

205,154
23,851
23,304
458

282,145

252,767

S Carter retired as a Director of the Company on 27 September 2022. In 2022 S Carter received £1,041,286 in
dividends from Cohort.

Further details of the remuneration of the Directors are set out in the Remuneration Committee report.

The aggregate remuneration (excluding share option costs) of the key management (2023: 12; 2022: 14) of the
Group was as follows:

Salary (including any allowances, benefits and employer’s NIC)
Employer’s pension contribution

2023
£

2022
£

2,346,256
43,513

2,778,302
36,449

2,389,769

2,814,751

The key management of the Group is the Board of Cohort plc plus each subsidiary’s Managing Director. For the
year ended 30 April 2022, ELAC had joint Managing Directors. This reverted to one as from 1 May 2023.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsCohort plc Annual Report and Accounts 2023 107

29. Acquisition of Chess Technologies Limited (Chess)
As announced on 12 December 2018, Cohort plc acquired 81.84% of Chess for an initial cash consideration of just
over £20.0m. The Group has recognised 100% of Chess’s results and net assets from that date as it has effective control.

The acquisition accounting for Chess was reviewed prior to the first anniversary of its acquisition (12 December
2019) and further provisions were recognised of £900,000 in respect of contract liabilities.

Under the sale and purchase agreement, up to a further £12.7m is payable to the shareholders of Chess as an
earn-out based upon its trading performance over the three years ended 30 April 2021. Based upon the actual
performance to 30 April 2021 this earn-out was determined to be £nil as at 30 April 2023 (2022: £nil).

The sale and purchase agreement for the acquisition of Chess included a put and call option for the purchase of the
remaining shares (18.16%) in Chess, the non-controlling interest.

The option was capped at £9.1m with the amount payable dependent upon the performance of the Chess business
for the three years ended 30 April 2021.

The non-controlling interest was entitled to participate in any dividends payable by Chess in the period to 30 April 2021.

On 30 November 2022 the Group acquired the remaining shares of Chess (18.16%) for an amount of £1,016,000.

Notes to the financial statements continuedfor the year ended 30 April 2023Strategic reportGovernanceFinancial statementsAccounting policies

Basis of accounting
The Group financial statements have been prepared and approved by the Directors in accordance with UK adopted
International Accounting Standards.

The Company financial statements presented on pages 74 to 116 are prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law),
including FRS 101 ‘Reduced Disclosure Framework’.

On publishing the parent company financial statements here, together with the Group financial statements,
the Company is taking advantage of the exemption in Section 408 of the Companies Act 2006 not to present
its individual income statement and related notes that form part of these approved financial statements.
The Company is a public company limited by shares.

The financial statements are prepared on the historical cost basis except for derivative financial instruments that
are stated at their fair value.

Exemption from audit
For the year ended 30 April 2023 Cohort plc has provided a guarantee in respect of all liabilities due by its
following subsidiaries: MASS Limited (registration number 05863964), SEA (Group) Ltd. (registration number
02430846), Marlborough Communications (Holdings) Limited (registration number 07739219), and Chess
Technologies Limited (registration number 06539922). This entitles them to exemption from audit under Section
479A of the Companies Act 2006 relating to subsidiary companies.

Going concern
As highlighted in note 15 to the financial statements, the Company meets its day-to-day working capital requirements
through a facility which was renewed on 18 July 2022. The current heightened international security situation,
especially following the invasion of Ukraine, has increased the focus of governments, particularly in NATO, on defence
capability and driven increasing levels of demand for the Group’s products. Specifically in respect of UK defence
spending (UK MOD represents 54% of the Group’s 2022/23 revenue), the four-year budget settlement in 2021, and
subsequent confirmation of the commitments, does give the Group some improved visibility from this key customer.

The Group’s banking facility was extended in June 2023 for a further year to July 2026, with an option to extend
this for a further year out to July 2027.

The Company’s forecasts and projections, taking account of reasonably possible changes in trading performance,
show that the Company should be able to operate within the level of its current facility.

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the annual
financial statements.

Further information regarding the Company’s business activities, together with the factors likely to affect its future
development, performance and position, is set out in the Strategic report and included in the Risk management
section. The financial position of the Company, its cash flows, its liquidity position and its borrowing facilities are
also described in the Strategic report.

In addition, the Strategic report includes the Company’s objectives, policies and processes for managing its capital;
its financial risk management objectives; details of its financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk.

Cohort plc Annual Report and Accounts 2023 108

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary
undertakings made up to 30 April 2023. Subsidiaries acquired during the year are consolidated from the date of
acquisition, using the purchase method (see “Business combinations” below).

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies
used into line with those used by the Group. The Group’s subsidiaries have prepared their statutory financial
statements in accordance with Adopted IFRS, as from 1 May 2019.

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity. In assessing control, the Group takes into consideration potential voting rights. The acquisition
date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included
in the consolidated financial statements from the date that control commences until the date that control ceases.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even
if doing so causes the non-controlling interests to have a deficit balance.

Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are
eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Adoption of new and revised standards
The Group has applied the following standards and amendments for the first time for their annual reporting period
commencing 1 May 2022, none of which had a material impact on the entity:

X Amendments to IFRS 3 ‘Business Combinations’; IAS 16 ‘Property, Plant and Equipment’; IAS 37 ‘Provisions,
Contingent Liabilities and Contingent Assets’; and Annual Improvements 2018–2020 (all issued on 14 May
2020 and effective for years commencing on or after 1 January 2022).

Standards and interpretations issued as at 18 July 2023 not applied to these financial statements
Certain new accounting standards and interpretations have been published that are not mandatory for 30 April
2023 reporting periods and have not been early adopted by the Group. These standards, outlined below, are not
expected to have a material impact on the entity in the current or future reporting periods or on foreseeable
future transactions:

X Amendments to IFRS 4 ‘Insurance Contracts’ and IFRS 17 ‘Insurance Contracts’ (issued on 25 June 2020 and

effective for years commencing 1 January 2023).

X Amendments to IAS 1, IAS 8, IFRS Practice Statement 2 (issued on 12 February 2021 and effective for years

commencing 1 January 2023).

X Amendments to IAS 12 (issued on 7 May 2021 and effective for years commencing 1 January 2023).

Strategic reportGovernanceFinancial statementsAccounting policies continued

Cohort plc Annual Report and Accounts 2023 109

Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. Finance
charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an
accruals basis in the income statement using the effective interest rate method and are disclosed within accruals
to the extent they are not settled in the period, unless the loan terms provide for the interest to be added to the
principal, in which case the interest is added to the carrying amount of the instrument to which it pertains.

Borrowing costs
All borrowing costs are recognised in the income statement in the period in which they are incurred unless, where
appropriate, interest costs are capitalised into assets, fixed and current. The costs of arranging the Group facility
are expensed over the term of the facility except for those costs arising as a result of an acquisition or disposal of a
business which are then included as part of those transaction costs.

Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured
as the aggregate of the fair values, at the completion date, of assets acquired, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of the acquired subsidiary. The costs of acquisition
are charged to the Consolidated income statement as an exceptional item in accordance with IFRS 3 (Revised).

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable intangible assets,
assets, liabilities and contingent liabilities recognised. If, after reassessment, which is a point in time greater than
12 months after the completion date, the Group’s interest in the net fair value of the acquiree’s identifiable assets,
liabilities and contingent liabilities exceeds or is below the cost of the business combination, the excess or shortfall
is recognised immediately in the income statement as an exceptional item.

Adjustments to the provisional value of assets and liabilities acquired in a business combination when the final
values have become known within 12 months are adjusted for and reported as a movement in the current period.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent consideration are recognised in profit or loss as an
exceptional item.

The Group measures the non-controlling interests, which have both present ownership interests and are entitled to
a proportionate share of net assets of the acquired business in the event of liquidation, at its proportionate interest
in the recognised amount of the identifiable net assets of the acquired business at the acquisition date.

Where less than 100% of a subsidiary is acquired but the Group has effective control, that subsidiary is accounted
for as if 100% were acquired with the non-controlling interest recognised appropriately.

Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for
as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such
transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets
of the subsidiary. Any difference between the price paid or received and the amount by which non-controlling
interests are adjusted is recognised directly in equity and attributed to the owners of the parent.

Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and on-demand deposits, and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of
changes in value. Deposits are included within cash and cash equivalents where the maturity from commencement
of the deposit is three months or less.

Derivative financial instruments
The Group’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest
rates. The Group uses foreign exchange forward contracts and interest rate swap contracts to hedge these
exposures. The Group does not use derivative financial instruments for speculative purposes.

Changes in the fair value of derivative financial instruments are recognised in the income statement as they arise
and are disclosed separately in deriving the Group’s adjusted operating profit.

Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Exceptional items
The separate reporting of exceptional items helps provide a better indication of the Group’s underlying business
performance, reported as the adjusted operating profit. Events which may give rise to the classification of items
as exceptional, if of a significantly material value, include gains or losses on the disposal of a business or the
restructuring of a business, transaction costs, litigation and similar settlements, asset impairments and onerous
contracts.

Financial instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when the Group becomes party
to the contractual provisions of the instrument.

Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets
of the Group after deducting all of its liabilities.

Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic
environment in which it operates (its functional currency), which is generally sterling for the Group. Cohort’s direct
subsidiaries, Thunderwaves and Cohort Deutschland, and indirect subsidiaries, EID and ELAC, all have the euro as
their functional currency. For the purpose of the consolidated financial statements, the results and financial
position of each Group company are expressed in pounds sterling, which is the functional currency of the Company
and the presentational currency for the consolidated financial statements, with any exchange difference included
in the Consolidated comprehensive statement of income.

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Cohort plc Annual Report and Accounts 2023 110

Foreign currencies continued
In preparing the financial statements of the individual companies, transactions in currencies other than the
entity’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates
of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign
currencies are re-translated at the rates prevailing on the balance sheet date.

Exchange differences arising on the settlement of monetary items, and on the re-translation of monetary items,
are included in the income statement for the year.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts.
The Group’s accounting policies in respect of such derivative financial instruments are described above.

These forward foreign exchange contracts are revalued to fair value at each balance sheet date with any movement
included in the Consolidated income statement as part of the cost of sales and disclosed separately in deriving the
Group’s adjusted operating profit.

Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the
fair value of the identifiable intangible assets, assets and liabilities of a subsidiary, associate or jointly controlled
entity at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at
cost less any accumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment
biannually. Any impairment is recognised immediately in the income statement as an exceptional item and is not
subsequently reversed.

For the purpose of impairment testing, goodwill is allocated to each of the Group’s subsidiaries as appropriate.
Subsidiaries (cash-generating units) to which goodwill has been allocated are tested for impairment biannually,
or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the
subsidiary is less than the carrying amount of the subsidiary, the impairment loss is allocated first to reduce the
carrying amount of any goodwill allocated to the subsidiary and then to the other assets of the subsidiary pro rata
on the basis of the carrying amount of each asset in the subsidiary. An impairment loss recognised for goodwill is
not reversed in a subsequent period. The impairment of goodwill is a critical judgement and estimate and is
discussed in detail below.

On disposal of a subsidiary, or part of a subsidiary, associate or jointly controlled entity, the attributable amount
of goodwill is included in the determination of the profit or loss on disposal.

Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment (if any).

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future
cash flows have not been adjusted.

If the recoverable amount of an asset (or subsidiary) is estimated to be less than its carrying amount, the carrying
amount of the asset (subsidiary) is reduced to its recoverable amount. An impairment loss is recognised as an
expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss
is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (subsidiary) is increased to
the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset
(subsidiary) in prior years. A reversal of an impairment loss is recognised as income immediately.

Intangible assets
Intangible assets are recognised in respect of contracts, intellectual property rights and other measurable
intangibles, including customer relations, arising on business combinations. The value of these intangible assets
is determined by the estimated value to the Group going forward. The intangible assets are written off over the
estimated useful life of those particular assets. As discussed, the valuation of intangible assets is an area of critical
judgement and estimate for the Directors.

Inventories
Inventories are stated at the lower of cost and net realisable value. Cost of finished goods and work in progress
includes overheads appropriate to the stage of manufacture. Net realisable value is based upon estimated selling
price less the further cost expected to be incurred to completion and disposal. Provision is made for obsolete and
slow-moving items. Stock is accounted for on a first in, first out basis.

Joint ventures
The Group accounts for joint ventures where it has a participating interest using the equity method of accounting
and discloses the net investment in non-current assets.

Where the investment in a joint venture is negative, the negative investment, to the extent it is a liability of the
Group, is offset against any trade and other receivables held by the Group in respect of that joint venture.

The Group accounts for joint ventures in which it no longer has a participating interest by recognising any
investment and assets or liabilities due to or from the Group.

Leases
At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration.

As a lessee
At commencement or on modification of a contract that contains a lease component, along with one or more
other lease or non-lease components, the Group accounts for each lease component separately from the
non-lease components. The Group allocates the consideration in the contract to each lease component on the
basis of its relative standalone price and the aggregate standalone price of the non-lease components.

Strategic reportGovernanceFinancial statementsAccounting policies continued

Cohort plc Annual Report and Accounts 2023

111

Leases continued
As a lessee continued
The Group recognises a right of use asset and a lease liability at the lease commencement date. The right of use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.

The right of use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right of use asset reflects that the Group will exercise a purchase option. In that
case the right of use asset will be depreciated over the useful life of the underlying asset, which is determined on
the same basis as those of property and equipment. In addition, the right of use asset is periodically reduced by
impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

X fixed payments, including in-substance fixed payments;

Pension contributions
Payments are made to the Company’s stakeholder pension schemes, all of which are defined contribution schemes
with the exception of a defined benefit scheme in Germany. In respect of defined contribution schemes, amounts
are charged to the income statement as incurred.

In respect of the defined benefit scheme, the schemes’ assets and liabilities are valued annually by an external
actuary. The service cost and net interest movements are recognised in the Consolidated income statement.
Movements in valuation from changes in assumptions, including discount rate and mortality rate, are recognised in
the Consolidated statement of other comprehensive income. The gross assets and obligations of the scheme, as
independently valued, are shown net as retirement benefit obligations in the Consolidated statement of financial
position at each balance sheet date.

Property, plant and equipment
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes,
are stated in the balance sheet at their fair value at the date of acquisition, plus any subsequent cost, less any
subsequent accumulated depreciation and subsequent accumulated impairment losses.

Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

Depreciation is charged so as to write off the cost or valuation of assets, other than land and properties under
construction, over their estimated useful lives, using the straight-line method, on the following bases:

X variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the

commencement date;

Buildings

2%–4%

Fixtures, fittings and equipment

20%–50%

X amounts expected to be payable under a residual value guarantee;

X the exercise price under a purchase option that the Group is reasonably certain to exercise;

X lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option;

and

X penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an index or rate, there is a change in the Group’s estimate of
the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether
it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of
the right of use asset, to the extent that the right of use asset is reduced to nil, with any further adjustment
required from the remeasurement being recorded in profit or loss.

The Group has elected not to recognise right of use assets and lease liabilities for leases of low-value assets and
of short-term (less than 12 months) leases. The Group recognises the lease payments associated with these leases
as an expense on a straight-line basis over the lease term.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, over the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in the income statement.

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) which arises as a result of a
past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the
Directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted
to present value where the effect is material. In respect of specific types of provisions, the policy is as follows:

Warranty
Provisions for the expected cost of warranty obligations under local sale of goods legislation and specifically
contracted warranty undertakings are recognised at the date of sale of the relevant product or service. The
provision is the Directors’ best estimate of the expenditure required to settle the Group’s obligation.

Strategic reportGovernanceFinancial statements

Accounting policies continued

Provisions continued
Other contract related provisions including contract loss provisions
The Group undertakes a number of contracts where contractual and/or third-party obligations arise as a result
of delivering the contract. This provision includes amounts for losses on contracts which are recognised in full
immediately when it is probable that total contract costs will exceed total contract revenue. In some cases, after a
product has been delivered and revenue has been recognised, the Group receives claims (including warranty issues)
from customers in respect of work done. Where the amount required to settle the claim is uncertain or the Group
disputes the amount of the claim, provision is made for the best estimate of the amount that will be required to
settle the claim.

Contract loss provisions are reviewed on a regular basis to determine whether the provision is still adequate or
excessive. Contract loss provisions and subsequent adjustments to them are charged as cost of sales in the
income statement.

Where such an obligation relates to a discontinued operation then the charge will be disclosed as an
exceptional item.

Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

An internally generated intangible asset arising from the Group’s own development activity is recognised only if all
of the following conditions are met:

X an asset is created that can be identified (such as software, product and new processes) and is technically and

commercially feasible;

X it is probable that the asset created will generate future economic benefits and the Group has available to itself
sufficient resources to complete the development and to subsequently sell and/or use the asset created; and

X the development cost of the asset can be measured reliably.

Internally generated intangible assets are amortised on a straight-line basis over their useful lives. Where no
internally generated intangible asset can be recognised, development expenditure is recognised as an expense in
the period in which it is incurred.

Revenue and profit recognition
The Group applies IFRS 15 ‘Revenue from Contracts with Customers’.

Revenue represents income derived from contracts for the provision of goods and services, over time or at a point
in time, by the Group to customers in exchange for consideration in the ordinary course of the Group’s activities.

Performance obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a
distinct good or service or a series of distinct goods or services that are substantially the same and have the same
pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance
obligations in the contract if the customer can benefit from them either on their own or together with other
resources that are readily available to the customer and they are separately identifiable in the contract.

Cohort plc Annual Report and Accounts 2023 112

The Group provides warranties to its customers to give them assurance that its products and services will function
in line with agreed-upon specifications. Warranties are not provided separately and, therefore, do not represent
separate performance obligations.

Transaction price
At the start of the contract, the total transaction price is estimated as the amount of consideration to which the
Group expects to be entitled in exchange for transferring the promised goods and services to the customer,
excluding sales taxes. Variable consideration, such as price escalation, is included based on the expected value or
most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of
cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from
contract modifications, such as change orders, until they have been approved by the parties to the contract. The
total transaction price is allocated to the performance obligations identified in the contract in proportion to their
relative standalone selling prices. Given the bespoke nature of many of the Group’s products and services, which
are designed and/or manufactured under contract to the customer’s individual specifications, there are typically no
observable standalone selling prices. Instead, standalone selling prices are typically estimated based on expected
costs plus contract margin.

Whilst payment terms vary from contract to contract, on some of the Group’s contracts, an element of the
transaction price is received in advance of delivery. The Group therefore has contract liabilities disclosed as
advance receipts (note 14). The Group’s contracts are not considered to include significant financing components
on the basis that there is no difference between the consideration and the cash selling price. UK Ministry of
Defence contracting rules prohibit the inclusion of financing in the sales price.

Revenue and profit recognition
Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to
the customer. For each performance obligation within a contract, the Group determines whether it is satisfied over
time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied:

X the customer simultaneously receives and consumes the benefits provided by the Group’s performance as it performs;

X the Group’s performance creates or enhances an asset that the customer controls as the asset is created or

enhanced; or

X the Group’s performance does not create an asset with an alternative use to the Group and it has an

enforceable right to payment for performance completed to date.

The Group has determined that most of its contracts satisfy the over time criteria, either because the customer
simultaneously receives and consumes the benefits provided by the Group’s performance as it performs (typically
services or support contracts) or the Group’s performance does not create an asset with an alternative use to the
Group and it has an enforceable right to payment for performance completed to date (typically development or
production contracts).

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Cohort plc Annual Report and Accounts 2023 113

Revenue and profit recognition continued
For each performance obligation to be recognised over time, the Group recognises revenue using an input method,
based on costs incurred in the period. Revenue and attributable margin are calculated by reference to estimates of
transaction price and total expected costs to complete the contract, after making suitable allowances for technical
and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as
risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group’s
performance in transferring control of the goods and services to the customer.

If the over time criteria for revenue recognition are not met, revenue is recognised at the point in time that control
is transferred to the customer, which is usually when legal title passes to the customer and the business has the
right to payment, for example on delivery.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised
immediately as an expense.

Internally, the Group categorises revenue recognition according to three types. One or more of each type can apply
to a single customer contract.

A software licence is considered to be a right to access the Group’s intellectual property as it exists throughout the
licence period if all of the following criteria are satisfied:

X the contract requires, or the customer reasonably expects, that the Group will undertake activities that

significantly affect the intellectual property;

X the licence directly exposes the customer to the effects of those activities; and

X those activities do not result in the transfer of a good or service to the customer.

Contract modifications
The Group’s contracts are often amended for changes in customers’ requirements and specifications. A contract
modification exists when the parties to the contract approve a modification that either changes existing or creates
new enforceable rights and obligations. The effect of a contract modification on the transaction price and the
Group’s measure of progress towards the satisfaction of the performance obligation to which it relates is
recognised in one of the following ways:

1. prospectively, as an additional, separate contract;

Point in time or over time

Reason for type applied

2. prospectively, as a termination of the existing contract and creation of a new contract; or

Type

One

Point in time

Two

Over time service

Three

Over time

Revenue is recognised when the product or service is delivered to the customer
per the contract and the customer is obliged to pay at this point. This usually
applies to all the Group’s standard products, support, spares and repairs.

Revenue is recognised for a service provision over time. Typically, these services
are long term (greater than one year) but the contract with the customer fixes
the annual revenue where the costs incurred per annum are variable. Revenue is
typically recognised on a monthly basis based on either timesheets or a fixed
receivable from the customer.

Revenue is recognised over the contract based on the input costs to deliver the
contract to that stage, taking account of appropriate risk contingencies in the
remaining costs to complete the contract. Revenue is recognised (typically
monthly) on input costs including internal labour (timesheets) and bought in
goods and services (invoices or delivery notes).

3. as part of the original contract using a cumulative catch-up.

The majority of the Group’s contract modifications are treated under either 1 (for example, the requirement for
additional distinct goods or services) or 3 (for example, a change in the specification of the distinct goods or
services for a partially completed contract), although the facts and circumstances of any contract modification are
considered individually as the types of modifications will vary contract by contract and may result in different
accounting outcomes.

Costs to obtain a contract
The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is awarded.
The Group does not typically incur costs to obtain contracts that it would not have incurred had the contracts not
been awarded, such as sales commission.

The Group’s businesses determine the revenue category/categories at the contract outset and apply this
recognition method consistently until the contract is completed.

Software licences
The Group sells software licences either separately or together with other goods and services, including computer
hardware and implementation, hosting and support. Revenue recognition in respect of software licences sold as
part of a bundle of goods and services is considered separately when the licence is determined to be a separate
performance obligation. Software licences either represent a right to access the Group’s intellectual property as it
exists throughout the licence period or a right to use the Group’s intellectual property as it exists at the point in
time at which the licence is granted. Revenue in respect of right to access licences is recognised over the licence
term or, in relation to perpetual licences, over the related customer relationship and revenue in respect of right to
use licences is recognised upfront on delivery to the customer.

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Cohort plc Annual Report and Accounts 2023 114

Costs to fulfil a contract
Contract fulfilment costs in respect of over time contracts are expensed as incurred. Contract fulfilment costs in
respect of point in time contracts are accounted for under IAS 2 ‘Inventories’.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets
against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on a net basis.

Sales of goods are recognised when goods are delivered, and title has passed.

Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based
payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of
grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a
straight-line basis over the vesting period based on the Group’s estimate of shares that will eventually vest and
adjusted for the non-market-based vesting conditions.

Fair value is measured by use of the Quoted Companies Alliance binomial model. The expected life used in the
models has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.

The cost of share-based payments is charged to the income statement with a corresponding credit applied to the
share option reserve. The appropriate element of the reserve is transferred to the retained profit of the Group
when the share options to which the reserve relates vest.

Taxation
The tax expense represents the sum of the tax currently payable and the deferred tax expense or credit.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in
the income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used in the computation of
taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction
that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and
associates, and interest in joint ventures, except where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or
the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Trade and other receivables
Trade receivables are initially measured at fair value.

With the exception of derivative financial instruments (see above) all other trade and other receivables are
reported at amortised cost.

The Group recognises provisions for doubtful debts on a credit loss basis taking into account the future anticipated
credit losses based upon the creditworthiness of the end customer. The allowance recognised is measured as the
difference between the asset’s carrying amount and the estimated recoverable amount.

Where revenue recognised over time on a contract exceeds the value that has been invoiced, the excess is
recognised as a contract asset and is included within trade and other receivables.

Accrued income is recognised on revenue recognised at a point in time where a delivery or service has been made
and revenue can be recognised, but no invoice has been raised.

Trade and other payables
Trade and other payables are initially measured at fair value.

With the exception of derivative financial instruments (see above) all other trade and other payables are reported
at amortised cost.

Subsequent measurement is based on changes in the fair value and any changes recognised in the Consolidated
income statement. To the extent that receipts from customers exceed relevant revenue, whether invoiced or a
contract asset, then this is included as an advance receipt within trade and other payables.

Deferred income will arise on point in time contracts where customers have been invoiced, usually as a result of
supplier costs incurred by the Group but where the service/delivery has not been made.

Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described above, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources.

The estimates and associated assumptions are based on historical experience and other factors that are considered
to be relevant.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised.

The Directors have identified the following critical judgements and estimates in applying the Group’s accounting
policies that have the most significant impact on the amounts recognised in the financial statements.

Strategic reportGovernanceFinancial statementsNotes to the accounting policies

Cohort plc Annual Report and Accounts 2023 115

1. Critical accounting judgements
Revenue recognition
Judgement is applied in whether to recognise revenue over time or at a point in time with respect to contracts and
other sales agreements in place. This will make reference to the contractual arrangements on each contract and
which revenue recognition method is most appropriate for that contract or sales agreement.

Recoverability of trade and other receivables
Judgement is applied in determining whether any of the Group’s trade and other receivables require a bad debt
provision to be recognised. This takes account of the nature of our customers, many of which are ultimately
governments, our historical experience, and the commercial terms we have in place to protect the recoverability of
our receivables. Within the receivables balance and contract assets there is a balance of £7.7m relating to a project
that was placed on hold for a period of over four years, which has not been provided for. Currently the contract to
which this asset relates is in the process of being novated to a new prime contractor, with discussions being held
with the end customer to put in place a payment plan for the outstanding amounts and to rescope the project.
This process has already commenced; management has reassessed the recoverability of this balance and concluded
that, as the ultimate customer is a sovereign government, the risk of impairment is low.

Fair values on acquisition
Judgement is applied in recognising the fair value of assets and liabilities on acquisition. This judgement will make
use of the experience of the Directors, knowledge of the business acquired and the due diligence exercise during
the acquisition process. Provisional fair values are recognised on the initial reporting of any acquisition, allowing
the Directors to reassess any judgements or estimates made in the first 12 months of ownership.

Acquisition of other intangible assets
Intangible assets other than goodwill that are obtained through acquisition are capitalised on the balance sheet.
These other intangible assets are valued on acquisition using a discounted cash flow methodology which depends
on future assumptions about the revenue from contracts, prices and costs and on the Group’s cost of capital.
At the time of an acquisition, the Directors use the business’s projected gross margin from contracts acquired or
future prospects. These gross margin figures will depend upon each contract’s cost to complete estimate at that
point in time and the Directors will apply judgement in whether those costs to complete are appropriate or not.
The Directors will also take into account the expected timing of the recognition of revenue (and gross margin)
on each contract or future prospect.

Provisions
The Group makes estimates of provisions for existing commitments arising from past events. In estimating these
provisions, the Group makes judgements as to the quantity and likelihood of the liability arising. Certain provisions
require more judgement than others. In particular, warranty provisions and contract loss provisions have to take
account of future outcomes arising from past deliveries of products and services. In estimating these provisions,
the Group makes use of management experience, precedents and specific contract and customer issues.

Research and development
The recognition of research and development expenditure as an internally generated intangible asset requires the
Directors to make judgements, especially with respect to whether the asset created will generate future economic
benefit. This is a key judgement in this respect as the time between development and any income can be
considerable (over five years) and often the income-generating asset may have considerably evolved from the

asset originally created. As a result of this, the Group almost always expenses research and development in the
period it is incurred.

Taxation
In accordance with IFRS IC 23 ‘Uncertainty over Income Tax Treatments’ the Group currently takes a cautious
approach to recognition of R&D tax credits for periods that are still open. As at 30 April 2023, a provision of
£825,000 (2022: £950,000) was recognised against R&D tax credit claims made in the final and early build
computations for 2021/22 and 2022/23. The Group considers this level of provision as not material.

2. Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are as follows:

Revenue and profit recognition
The judgement applied in recognising revenue on a contract over time as performance obligations are completed is
in respect of the input costs incurred and the attributable margin. The latter is particularly a judgement in respect
of estimating the cost to complete on a particular contract and the remaining risk and associated contingency. The
Directors make use of monthly project (contract) control processes in each business within the Group to monitor
and review cost to complete estimates and the utilisation or release of risk contingencies within each contract.
This cost contingency takes account of the stage that the contract has reached and any judgement and uncertainty
remaining to deliver the remainder of the contract. It is usual for these cost contingencies to reduce as the contract
progresses and risk and uncertainty reduces.

Incremental borrowing rate
In respect of the application of IFRS 16 ‘Leases’, the incremental borrowing rate of the Group in respect of leases
reported as right of use assets and lease liabilities has been estimated at 3.0% (2022: 3.0%). This is based upon the
Group’s current secured borrowing rate from its banks and peer and market rates for such leasing arrangements.

Provisions
Judgement is applied on recognising contract provisions for uncertainties inherent in the type of projects
undertaken throughout the Group. Management takes a prudent approach to recognising provisions against risks
in projects especially on initial acquisition of subsidiaries where less historical information is available to inform
management’s decisions (see note 16).

Impairment
Judgement is applied in determining the discount rate used to value goodwill. Management takes a prudent
approach to the selection of appropriate discount rates used, using rates provided by the Group’s Nomad (Investec)
and providing additional risk premiums on top of this. See note 9 for further discussion of sensitivity surrounding
goodwill impairment testing.

Other
Where a reasonably possible change in a key assumption could give rise to a change in the amount reported, this is
disclosed within the relevant note to the accounts.

Strategic reportGovernanceFinancial statementsFive-year record

Headline results (£’000)
Revenue

– Communications and Intelligence
– Sensors and Effectors

Adjusted operating profit

– Communications and Intelligence
– Sensors and Effectors
– Corporate

Operating profit

– Communications and Intelligence
– Sensors and Effectors
– Corporate

Adjusted earnings per share (pence)
Basic
Diluted

Statutory earnings per share (pence)
Basic
Diluted

Dividend per share (pence)

Net operating cash flow (£’000)
Net funds/(debt) (£’000)

Order intake (£m)
Order book (£m)

1. The order book at 30 April 2021 is after including the acquired order book of ELAC SONAR (£23.2m) on 2 December 2020.
2. The order book at 30 April 2019 is after including the acquired order book of Chess (£20.1m) on 12 December 2018.

Cohort plc Annual Report and Accounts 2023 116

2023

2022

2021

2020

2019

182,713

137,765

143,308

131,059

121,182

86,195
96,518

19,064

14,911
9,320
(5,167)

15,251

14,815
5,765
(5,329)

36.48
36.40

27.92
27.86

13.40

16,497
15,608

220.9
329.1

68,369
69,396

15,525

12,253
7,469
(4,197)

11,090

12,310
2,395
(3,615)

31.08
30.91

22.55
22.42

12.20

19,525
10,997

186.4
291.0

78,559
64,749

18,609

15,647
6,544
(3,582)

7,808

15,978
(4,519)
(3,651)

33.63
33.29

13.38
13.24

11.10

16,216
2,464

180.3
242.41

74,199
56,860

18,223

13,682
7,455
(2,914)

10,731

12,401
1,650
(3,320)

37.10
36.73

23.47
23.24

10.10

11,597
(4,707)

124.4
183.3

72,181
49,001

16,164

11,814
7,174
(2,824)

5,944

8,375
1,302
(3,733)

33.60
33.41

13.37
13.29

9.10

8,635
(6,424)

189.9
190.9 2

Strategic reportGovernanceFinancial statementsGlossary of terms

Cohort plc Annual Report and Accounts 2023 117

ANZAC

C4IS

C4ISTAR

C-UAS

C-UAV

DARPA

DSEI

Dstl

ECS

EPS

EWOS

GHG

GPS

ISO

ISTAR

MOD

NATO

SAYE

SECR

SIGINT

SIP

SSAFA

STEM

s-UAV

TLS

UAV

UGS

UGV

Australia and New Zealand

Command, Control and Communications

Command, Control, Communications, Computers and Information Systems

Command, Control, Communications, Computers, Intelligence, Surveillance,
Target Acquisition and Reconnaissance

Please visit our subsidiary websites for more information on the products and services mentioned in this report:

Communications and Intelligence
EID – eid.pt

Sensors and Effectors
Chess – chess-dynamics.com

MASS – mass.co.uk

ELAC – elac-sonar.de

MCL – marlboroughcomms.com

SEA – sea.co.uk

Counter-Unmanned Aerial Systems

Counter-Unmanned Air Vehicle

Defense Advanced Research Projects Agency

Defence and Security Equipment International event

Defence Science and Technology Laboratory

External Communications System

Earnings Per Share

Electronic Warfare

Electronic Warfare Operational Support

Greenhouse gas

Global Positioning System

Intermodal shipping container

Intelligence, Surveillance, Target Acquisition and Reconnaissance

Ministry of Defence

North Atlantic Treaty Organisation

Save As You Earn scheme

Streamlined Energy and Carbon Reporting

Signals intelligence

Share Incentive Plan

Soldiers, Sailors, Airmen and Families Association

Science, Technology, Engineering and Maths

Small Unmanned Air Vehicle

Torpedo Launcher System

Unmanned Air Vehicle

Unmanned Ground Systems

Unmanned Ground Vehicle

Strategic reportGovernanceFinancial statementsShareholder information, financial calendar and advisers

Cohort plc Annual Report and Accounts 2023 118

Advisers
Nominated adviser and broker
Investec
30 Gresham Street,
London EC2V 7QP

Auditor
RSM UK Audit LLP
The Pinnacle, 170 Midsummer Boulevard,
Milton Keynes, Buckinghamshire MK9 1BP

Tax advisers
Deloitte LLP
Abbots House, Abbey Street,
Reading RG1 3BD

Legal advisers
Shoosmiths LLP
Apex Plaza, Forbury Road,
Reading RG1 1SH

Registrars
Equiniti
Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA

Public and investor relations
MHP Communications
4th Floor, 60 Great Portland Street,
London W1W 7RT

Bankers
Lloyds Bank
3rd Floor, 10 Gresham Street,
London EC2V 7AE

NatWest Bank
Abbey Gardens, 4 Abbey Street,
Reading RG1 3BA

Commerzbank AG
30 Gresham Street,
London EC2V 7PG

Shareholders’ enquiries
If you have an enquiry about the Company’s business, or about something
affecting you as a shareholder (other than queries which are dealt with by
the registrars), you should contact the Company Secretary by letter to the
Company’s registered office or by email to info@cohortplc.com.

Share register
Equiniti maintains the register of members of the Company.

If you have any questions about your personal holding of the Company’s
shares or notification of a change of name or address please contact:

Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA

Telephone: 0371 384 2030 (Calls are charged at the standard geographic
rate and will vary by provider.) From outside the UK: +44 371 384 2030
(calls are charged at the applicable international rate). Lines are open from
8:30am to 5.30pm, Monday to Friday, excluding public holidays in England
and Wales. Please quote your eleven digit shareholder reference number
when calling us, this can be found on your share certificate, share
statement, recent dividend information or correspondence.

For more information visit: shareview.co.uk

Daily share price listings
The Financial Times – AIM, Aerospace and Defence

The Times – Engineering

The Daily Telegraph – AIM section

London Evening Standard – AIM section

Financial calendar
Annual General Meeting
26 September 2023

Final dividend payable
3 October 2023

Expected announcements of results for the year ending
30 April 2024
Preliminary half year announcement
December 2023

Preliminary full year announcement
July 2024

Registered office
Cohort plc
One Waterside Drive
Arlington Business Park
Theale
Reading RG7 4SW

Registered company number
of Cohort plc
05684823

Cohort plc is a company registered in England and Wales.

Strategic reportGovernanceFinancial statementsNotes

CBP020191

Cohort plc’s commitment to environmental stewardship is reflected
in this Annual Report, which has been printed on Revive 100 Silk, which
is 100% post-consumer recycled, FSC® certified. This document was
printed by Pureprint Group using its environmental print technology,
with 99% of dry waste diverted from landfill, minimising the impact of
printing on the environment. The printer is a CarbonNeutral® company.
Both the printer and the paper mill are registered to ISO 14001.

One Waterside Drive
Arlington Business Park
Theale
Reading RG7 4SW

cohortplc.com