BERLIN, July 31 (UPI) -- Cuts in defense budgets over the next few years in the wake of the recession are worrying major contractors across Europe. But the pressure to save on costs allied with the increasingly complex and fragmented nature of the security threats facing the world today could favor the growth of smaller independent technology service companies operating alongside major military equipment manufacturers or working directly with government defense agencies.
In a phone interview with UPI, one U.K.-based group -- Cohort Plc -- made no secret of the fact that it has plans to expand the group both internally and through new acquisitions. As a service company supplying consultancy and technological expertise, Cohort sees growing opportunities for smaller companies like itself to supplement the activities of traditionally large one-stop defense contractors.
The increasing influence and role of smaller, nimbler companies can sometimes be masked by headline news about the closure of facilities. Delays in committing government money into future big-ticket items of military hardware to replace aging fleets of aircraft carriers, nuclear submarines and fighter and bomber aircraft are a source of concern for big equipment manufacturers.
While some national governments -- notably the United Kingdom and France -- are anxious to retain defense know-how and industrial manufacturing capability on home soil in the interests of long-term national security, spending cuts and uncertainty are plaguing the defense industry.
Cohort believes companies like itself, while not immune from budgetary austerity, may be less directly impacted than manufacturers. "Whether you build five new warships or one, the technology input is broadly the same," a leading company official noted. Cohort sees opportunities in likely growth areas including homeland defense; cyber warfare; protection against chemical, biological, radiological and nuclear threats; operational intelligence gathering and dissemination; networked data communications; and the protection of deployed troops against improvised explosive devices.
Chief Executive Andy Thomis told Jane's Defense Weekly that one of the areas U.K. defense planners have clearly got in their sights for cuts in manpower Defense Equipment & Support. "And if that does happen then they'll need to outsource the science and technological input that they had previously."
Cohort sees a major strength when governments are looking for efficiency and cost saving -- and it's a feature that should benefit other smaller companies in the field -- in its independence. Compared with major contractors with factories and workforces to maintain and hardware they want to sell, a smaller independents like Cohort is better able to mix and match sources of supply in advising on and implementing technological solutions.
Cohort's Systems Consultants Services Ltd. is working on a two-phase, four-year contract for the U.K. Ministry of Defense's Land Environment Air Picture Provision as an integral part of Team Athena, a consortium led by Lockheed Martin, with whom the company says it has built up close relations. It is also part of the Raytheon Systems JETTS Team. This provides management, integration and coordination of the Joint Effects (artillery, fighter ground attack, naval gunfire support, etc.) available to the Land Component Commander, and a critical element of Battlespace Management.
For smaller niche players like Cohort, international business and relationships and participation in cross-border consortiums are likely to play an ever larger part in their activities, a company spokesman said. While the U.K. government accounts for the bulk of its revenues, reported at $130 million in the financial year to April 2009, Cohort has business in the Middle East, Japan and France. It sees its international business growing as a proportion of sales and is looking for acquisitions to help it expand in the Middle East, Southeast Asia, Central and Eastern Europe, and the United States.
Cohort has been listed on the U.K. Alternative Investments Market for three years and has a current market capitalization of $97 million. At its core is the independent defense consultancy SCS. Since going public three years ago, the group has added two main specialist companies.
In Augusts 2006 it bought MASS Consultants, which offers specialist skills in four main business areas: Electronic Warfare, Managed IT Services, Communications & Electronic Systems and Information Systems. In October 2007 Cohort spent some $34 million to acquire surveillance systems and software house SEA.
