The Cohort Group comprises six military, electronics and intelligence development operations spread across the UK, Germany, and Portugal. The six are: Chess offering electro-optical tracking and surveillance systems for naval and land defence and security customers; EID designs and makes advanced communications systems for naval and land defence customers; ELAC SONAR supplies advanced sonar systems and underwater communications to global customers in the naval marketplace; MASS provides advanced digital services serving the defence and security markets MCL designs, sources and supports advanced electronic and surveillance technology for the UK MOD and other government agencies; SEA delivers and supports technology-based products for the defence and transport markets alongside specialist research and training services.

22 Nov 2024

SATCOM deal is Group’s largest acquisition

Cohort has announced a conditional sale and purchase agreement to acquire EM Solutions Pty Ltd from Electro Optic Systems Holdings Ltd, for an enterprise value of AUS$144.0m, c.£75.0m This is Cohort’s largest acquisition to date. The purchase will be funded from Group cash resources, debt facility plus a share placing, and is expected to be EPS-accretive from FY25/26.

EM Solutions offers a range of satellite-based secure communications systems including satellite on-the-move (SOTM) and radio frequency (RF) systems, plus contract manufacturing and design. For Cohort it adds complementary expertise in satellite communications for global naval and defence applications.

We estimate that the acquisition enhances Cohort FY25 revenue by 4% (pro rata for 151 days remaining) and in FY26 by 17%, with an uplift to (adj.) EBIT of 10% and 32% respectively.

Our Fair Value is raised to 1090p/share, indicative of a FY26 E PE of 19.4x and EV/EBITDA of 10.1x. This compares favourably to a market cap weighted average for Cohort’s peer group of: PE, 21.3x and EV/EBITDA of 12.1x

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