Cohort

Shares in Cohort (CHRT) have surged over 25% today, after the defence services company reported a solid set of results and news of a multi-million pound contract.

In the year to April adjusted pre-tax profits increased 23% to £4.9m as sales fell 17% to £65.1m - the net cash balance also doubled, to £6.7m. Cohort has three divisions but the problem child has been surveillance systems arm SEA, here trading crumbled due to project delays in space and on the Astute communications system. Led by a new managing director, it has restructured its four operating businesses, which has slashed operating costs by £1.3m.

Specialist defence business MASS had a record performance as it boosted operating profits 19% to £4.2m. It has won a large three-year contract known as 'Project Shepherd' for electronic warfare as part of the Logica consortium. The order book is solid at £69.8m, so MASS should be well placed to grow.

Now in new premises, defence consultancy SCS returned to profitability, driven by a restructuring of its cost base that has taken £2m of annual running costs out. The MOD market in the UK remains tough, however recent new business includes a framework agreement for NATO, and a contract to provide security testing at the London Olympics.

Chief executive Andy Thomis says 'market conditions remain competitive but Cohort is in a strong position'. He also argues that the shares, which have suffered a major de-rating, are undervalued and that the board are looking to address this. Broker Investec forecasts 2012 pre-tax profits of £5.9m and EPS of 11.6p. Due to the strength of its order book Cohort has good visibility of c.60% for the current year, so even after the rally the shares look too low.