MIDAS SHARE TIPS UPDATE: Cohort is reaping the benefits of a changing world

Not that long ago, defence was almost considered a dirty word. Few people talked about it, businesses tried to disguise their involvement and politicians preferred to spend their cash elsewhere. Russia’s invasion of Ukraine shifted the dial completely.

Amid mounting tensions worldwide, Rishi Sunak has unveiled plans to increase annual defence spending to £87 billion a year, equivalent to 2.5 per cent of GDP. He is not alone. Governments across the globe are upping their game, concerned not just by Russia but also mounting turmoil in the Middle East and China’s growing aggression in Asia.

As defence moves centre-stage, Reading-based Cohort is reaping the benefits. It specialises in high-tech systems and software that help to keep countries and their armed forces safe. Midas recommended the shares in the summer of 2022, when they were £5.29. Today, they are £8.16 and brokers expect further gains.

The company recently announced a £135 million contract to supply the Royal Navy with units that detect and protect ships against threats such as missiles. Traditional decoy launchers are fixed to a ship’s side and the entire vessel has to move when a missile is detected. Cohort systems do the moving themselves so they can respond to threats faster than anything else on offer.

High-tech: Cohort recently announced a £135 million contract to supply the Royal Navy with units that detect and protect ships against threats such as missiles

The Royal Navy is Cohort’s first customer for this new technology but others are expected to follow. The group derives around half its revenues from overseas and effective protection against hostile naval forces is much in demand.

Reflecting growth here and abroad, Cohort chief executive Andrew Thomis confirmed last week that results for the year to April 30 would be significantly ahead of expectations, with brokers forecasting robust figures for next year and 2026.

Cohort is formed of six individual businesses, each of which operates quasi-independently. The structure helps firms to make decisions quickly and work closely with customers, freed from the constraints of overbearing, bureaucratic managers.

Innovation is prized, too, and this is reflected in a spate of recent contracts won in the face of intense competition. The Canadian and Australian navies have chosen Cohort to supply surveillance equipment at sea and the group has also developed highly accurate sonar systems for submarines, allowing the use of unmanned vessels in hazardous waters.

Brokers expect an 8 per cent increase in 2024 profits to £19.2 million, with stronger gains in 2025 and 2026. Cohort has also rewarded shareholders with dividends every year since joining Aim in 2006 and a payout of 14.8p is forecast for this year, up 10 per cent since 2023.

Midas verdict: Cohort is a nimble, fast-growing business in an industry where spending is expected only to increase. The shares have performed well since 2022 but, at £8.16, there is still plenty of potential for further gains.

Traded on: Aim Ticker: CHRT Contact: cohortplc.com 

This post first appeared on Dailymail.co.uk