REG - Kromek Group PLC - Interim Results
18/01/2022 07:05
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RNS Number : 7360Y Kromek Group PLC 18 January 2022
18 January 2022
Kromek Group plc
("Kromek" or the "Group")
Interim Results
On track to deliver significant revenue growth for full year with over 90%
visibility of forecasts
Kromek (AIM: KMK), a leading developer of radiation and bio-detection
technology solutions for the advanced imaging and CBRN detection segments,
announces its interim results for the six months ended 31 October 2021.
Financial Highlights
· Revenue was £4.7m (H1 2021: £4.6m)
· Gross margin was 47% (H1 2021: 54%; FY 2021: 48%)
· Adjusted EBITDA* improved to £0.6m loss (H1 2021: £0.9m loss)
· Loss before tax reduced to £3.1m (H1 2021: £3.4m loss)
· Gross cash and cash equivalents at 31 October 2021 were £10.2m
(30 April 2021: £15.6m; 31 October 2020: £5.8m)
*Adjusted EBITDA is defined as earnings before interest, taxation,
depreciation, amortisation, exceptional items, early settlement discounts and
share-based payments. For further details, see the Financial Review below.
Operational Highlights
· The Group delivered on existing contracts, won new orders and
experienced greater customer engagement regarding future projects in both of
its advanced imaging and CBRN detection segments
· Growth and, partly, margin were impacted by supply chain related
challenges for components, with certain deliveries being delayed into the
second half that are now being recovered. The Group took steps to increase the
surety of its supply, resulting in increased inventory and working capital,
and, accordingly, does not expect revenue to be impacted by similar issues in
the second half
· Delivery continued on the Group's existing advanced imaging
contracts and new business activity increased, significantly strengthening the
pipeline for the second half and beyond:
o Significant increase in medical imaging new business activity as the
impact of the pandemic continued to recede - strengthening the pipeline for H2
2022 and beyond
o Ramp up in delivery under the Group's significant multi-year medical
imaging contract
o Entered commercial development engagement with three new strategic OEMs
for key medical imaging applications
o Signed a seven-year supply agreement, worth up to $17m, to provide a CZT
detector solution for industrial screening
o Received a $250,000 repeat order in industrial screening from a US-based
aerospace and defence technology customer
o Entered commercial development engagement with two new security
screening OEMs
· New and repeat orders won in the CBRN detection segment along
with the Group participating in an increasing number of nuclear security
tenders and making significant progress in its bio-security development
programmes:
o Awarded a two-year contract worth up to $1.6m by a US federal entity for
the D3S-ID wearable nuclear radiation detector
o Received a £173,000 order for the D5 RIID high-performance handheld
radiation detector from a UK government-related customer
o Awarded a $6m contract extension from the Defense Advanced Research
Projects Agency ("DARPA"), an agency of the US Department of Defense, to
advance the development of a mobile wide-area bio-security system capable of
detecting and identifying airborne pathogens
o Successfully completed piloting in schools, airports and other locations
of an airborne COVID-19 detection system under a project funded by Innovate UK
and commenced productisation phase
o 15 new customers won in the civil nuclear market
· Three new patents were filed and three were granted during the
period
Dr Arnab Basu, CEO of Kromek, said: "During the first half of the 2022
financial year, we continued to deliver on our existing contracts as well as
win new and repeat orders in both our advanced imaging and CBRN detection
segments. We also made substantial progress with our existing development
programmes and initiated new programmes with a number of strategic partners.
While our growth and margin during the period were impacted by challenges
related to the supply chain for components, this is being recovered in the
second half and we remain on track to deliver a significant increase in
revenue for full year 2022, in line with market expectations, with visibility
of over 90% of full year forecasts. This would represent our highest ever full
year revenue with growth in both segments.
"Looking further ahead, we have significantly strengthened our pipeline in the
multiple substantial markets in which we operate. We offer our customers a
differentiating technology that supports early medical diagnosis to improve
patient outcomes and government vigilance to the threat of terrorism - which
are long-term growth drivers. As a result, the Board continues to look to the
future with great confidence."
For further information, please contact:
Kromek Group plc
Arnab Basu, CEO +44 (0)1740 626 060
Paul Farquhar, CFO
Cenkos Securities plc (Nominated Adviser and Broker)
Giles Balleny/Camilla Hume (NOMAD) +44 (0)20 7397 8900
Julian Morse (Sales)
Luther Pendragon Ltd (Financial PR)
Harry Chathli/Claire Norbury +44 (0)20 7618 9100
Analyst Presentation
Arnab Basu, CEO, and Paul Farquhar, CFO, will be hosting a presentation for
analysts and investors at 9.30am GMT today via webcast. To register to
participate, please contact amysmart@luther.co.uk
(mailto:amysmart@luther.co.uk) at Luther Pendragon.
About Kromek Group plc
Kromek Group plc is a leading developer of radiation detection and
bio-detection technology solutions for the advanced imaging and CBRN detection
segments. Headquartered in County Durham, UK, Kromek has manufacturing
operations in the UK and US, delivering on the vision of enhancing the quality
of life through innovative detection technology solutions.
The advanced imaging segment comprises the medical (including CT and SPECT),
security and industrial markets. Kromek provides its OEM customers with
detector components, based on its core cadmium zinc telluride (CZT) platform,
to enable better detection of diseases such as cancer and Alzheimer's,
contamination in industrial manufacture and explosives in aviation settings.
In CBRN detection, the Group provides nuclear radiation detection solutions to
the global homeland defence and security market. Kromek's compact, handheld,
high-performance radiation detectors, based on advanced scintillation
technology, are primarily used to protect critical infrastructure and urban
environments from the threat of 'dirty bombs'.
The Group is also developing bio-security solutions in the CBRN detection
segment. These consist of fully automated and autonomous systems to detect a
wide range of airborne pathogens.
Kromek is listed on AIM, a market of the London Stock Exchange, under the
trading symbol 'KMK'.
Further information is available at www.kromek.com (http://www.kromek.com) .
Operational Review
During the six months to 31 October 2021, the Group delivered on existing
contracts and development programmes, won new and repeat orders and
experienced greater customer engagement regarding future projects in both the
advanced imaging and chemical, biological, radiological and nuclear (CBRN)
detection segments of the business. This resulted in a slight increase in
revenue over the same period of the prior year and a significantly
strengthened pipeline for the second half of the year and beyond. Whilst the
Group's growth during the first half was impeded by supply chain pressures,
particularly global electronic component shortages, which meant certain
deliveries were postponed into early in the second half, the Group has taken
steps during the period to increase the surety of its supply and, as such,
revenue in the second half of the year is not expected to be similarly
impacted. The Group also continued to strengthen its manufacturing
capabilities with the ongoing rollout of the capacity expansion projects that
it had commenced in the prior year.
Advanced Imaging Segment
The advanced imaging segment comprises the medical imaging, security screening
and industrial screening markets. Kromek provides its OEM customers with
detector components, based on its core cadmium zinc telluride (CZT) platform,
to enable better detection of diseases such as cancer and cardiac conditions,
contamination in industrial manufacture and explosives in aviation settings.
In this segment, commercial engagement with customers consists of an initial
design phase followed by incorporation of the Group's detectors and
technologies into a customer's system and then the award to the Group of a
multi-year supply contract, which provides long-term revenue visibility.
Kromek has an established track record of winning orders for development
purposes that transition to multi-year supply contracts from customers in
gamma probes, bone mineral densitometry ("BMD") and single photon emission
computed tomography ("SPECT") in medical imaging as well as in security and
industrial screening. In particular, this success is evidenced by the
significant contracts awarded in H2 2019 in medical imaging and the period
under review in industrial imaging, which are expected to be worth
approximately $58.1m and $17m respectively. As the Group continues to win
such contracts, the Group's revenue base expands and the revenue profile
becomes increasingly predictable.
During the period, the Group continued to deliver detector components to its
customers under orders for development purposes and multi-year supply
contracts. It has also experienced greater customer engagement regarding
future projects as normal business increasingly resumes following the
temporary redirection of resources due to the COVID-19 pandemic. Kromek
remains on track to deliver strong growth in this segment compared with the
2021 financial year.
Medical Imaging
In recent years, leading OEMs in medical imaging have been increasingly
adopting CZT detector platforms as the enabling technology for their product
roadmaps. CZT detector platforms enable OEMs to significantly improve the
quality of imaging, which leads to earlier and more reliable diagnosis of
diseases such as cancer. Kromek's CZT detector solutions are increasingly
being commercially adopted for SPECT, molecular breast imaging ("MBI") and BMD
applications. These, along with computed tomography ("CT"), are key target
areas for future growth as they address diseases particularly associated with
an ageing population such as cancer, Alzheimer's, Parkinson's, cardiovascular
illnesses and osteoporosis. Kromek also serves the gamma probes market in
medical imaging, which are used during surgeries for the removal of lymph
nodes.
During the period, Kromek continued to fulfil its existing supply orders in
medical imaging and progress its development programmes. In particular,
delivery continued to ramp up as planned to the Group's significant OEM
customer that, in H2 2019, awarded the Group a contract expected to be worth a
minimum of $58.1m over an approximately seven-year period. In addition, the
Group continued delivery of a $600k order received in H2 2021 from a different
customer for the supply of detectors to be used in niche SPECT applications.
This delivery was completed by the end of the 2021 calendar year as planned
and the Group expects to receive further repeat orders under the ongoing
supply relationship with this customer.
There was a significant increase in new business activity as the impact of the
pandemic - which had caused a temporary redirection of resources in healthcare
settings - continued to recede. This applied particularly in the Group's key
target areas of CT and SPECT, supported by the growing industry adoption of
new techniques and rollout of new systems. Kromek commenced commercial
development engagement with three new strategic OEM customers in this market.
These initial orders are for the supply of CZT-based detectors for use by the
OEM customers in their commercial development programmes.
During the period, one of the Group's US medical imaging customers received
FDA approval for its system for a niche nuclear medical application, which is
using Kromek's detectors. The Group has received several orders from this
customer, which it expects to continue on an ongoing basis.
Security Screening
In security screening, Kromek's technologies are used in travel, primarily
aviation, settings to enable the Group's customers to meet the
high-performance standards they require, and as demanded by regulatory bodies,
to ensure passenger safety while increasing the convenience and efficiency of
the security process. The Group provides OEM and government customers with
components and systems for cabin and hold luggage scanning.
During the period, the Group continued to deliver under its existing component
supply agreements in the security screening market. In its development work,
Kromek completed a two-year $1.6m project funded by the US Department of
Homeland Security for a CZT detector platform for threat resolution for hold
baggage, hand baggage and cargo screening systems. The Group expects
commercial adoption and integration of this platform in multiple commercial
advanced baggage screening products. The Group also entered two new commercial
development engagements during the period where Kromek is customising its
detector solutions for incorporation into its OEM customers' systems.
Industrial Screening
In industrial screening, Kromek provides OEM customers with detector
components for incorporating into scanning systems used during manufacturing
processes to identify potential contaminants.
In October 2021, the Group signed a seven-year supply agreement, worth up to
$17m, to provide CZT-based detector components for incorporation into systems
for identifying contaminants for the purpose of product quality inspection.
The contract, which was awarded following the completion of a two-year
development programme, is expected to commence in the current financial year
and is with a US based, sector-leading industrial OEM with a global customer
base.
Also during the period, the Group was awarded a $250,000 repeat order from a
US-based customer that is a global leader in aerospace and defence
technologies. The customer's system, which incorporates Kromek detectors, is
used for in-line quality control in manufacturing processes.
CBRN Detection Segment
In CBRN detection, the Group provides nuclear radiation detection solutions to
the global homeland defence and security market. Kromek's compact, handheld,
high-performance radiation detectors, based on advanced scintillation
technology, are primarily used to protect critical infrastructure and urban
environments from the threat of 'dirty bombs'. Kromek's portfolio also
includes a range of high-resolution detectors and measurement systems used for
civil nuclear applications, primarily in nuclear power plants and research
establishments. In addition, the Group is developing bio-security solutions to
detect a wide range of airborne pathogens, including SARS-CoV-2 (COVID-19).
The Group won new and repeat orders in the nuclear security and civil nuclear
markets during the first half of the year and participated in an increasing
number of tenders reflecting the growth in global government defence spending.
The outcomes of these tenders are expected to be known during 2022 and the
Group expects that the procurement activity in this market will remain high
throughout the year. The Group also made significant progress with its
development programmes in bio-security and anticipates commercial deployment
of this technology in the next financial year.
Nuclear Security
Kromek's nuclear security platforms - D3S and D5 - consist of a family of
products designed to cater for the varying demands of homeland security and
defence markets. In particular, the D3S platform is widely deployed as a
networked solution to protect cities, buildings or critical infrastructure
against the threat of use of 'nuclear dirty bombs' by terrorists.
Kromek was awarded a contract by a US federal entity for the Group's D3S-ID
wearable nuclear radiation detector that is designed to enable first
responders, armed forces, border security and other CBRN experts to detect
radiological threats. The contract will be delivered over two years and is
worth up to $1.6m. The Group also continued to receive repeat orders from the
European Commission for the D3S-ID portable radiation detector.
During the first half of the year, Kromek received an order worth £173,000
from its UK government-related customer for the Group's D5 RIID
high-performance radiation detector designed for challenging environments.
This represents the first major order for the D5 RIID following its launch
last year. In addition, post period, the Group received orders from two new
customers for D5 detectors.
Civil Nuclear
In the civil nuclear market, Kromek won 15 new customers during the period.
The Group continued its development work under a development and supply
contract awarded in the previous financial year, worth a minimum of $960,000,
which is for a product with both nuclear security and civil nuclear
applications. The project is progressing on schedule, with the development
work being completed by the end of calendar year 2021 and the product now in
the validation phase ahead of the commencement of supply.
Biological-Threat Detection
Kromek is developing bio-security solutions consisting of fully automated and
autonomous systems to detect a wide range of airborne pathogens for the
purposes of national security and protecting public health. Since H2 2019, the
Group has been working with the Defense Advanced Research Projects Agency
("DARPA"), an agency of the US Department of Defense, to develop a
biological-threat detection system that autonomously senses, analyses and
identifies airborne pathogens. The programme was established to combat
bioterrorism and is now also aimed at providing an early warning system in the
event of a virus outbreak to enable action to be taken to localise the spread
and prevent it from becoming an epidemic or global pandemic. The Group is also
working under a programme funded by Innovate UK, which commenced in 2021, to
develop a bio-security solution to support end-use cases specifically for
COVID-19 detection.
During the period, the Group continued to deliver on the development
milestones under its programme with DARPA and received a $6m contract for the
next phase. The programme is for the development of a completely automated
wide spectrum airborne pathogen detection system that is fully mobile and runs
autonomously. It is being designed to be networkable and provide wide-area
monitoring capability in near real-time. To date, the Group has been awarded a
total of over $13m by DARPA under this programme.
Under its programme funded by Innovate UK to develop a solution for airborne
COVID-19 detection, the Group successfully completed piloting of the system at
a number of schools, airports and other locations. The solution is now in the
productisation phase, with a manufacturing partner having been identified and
a number of pre-production models also having been produced. Further, the
Group also engaged in validation of the technology in third party laboratories
with very positive results on both the detection levels, sensitivity and false
alarm rates.
R&D, IP and Manufacturing
During the period, the Group continued to ramp up several projects, which had
commenced in the prior year, for the expansion of production capacity and
increased process automation. These programmes are resulting in greater
productivity and cost efficiency in the manufacture of CZT and non-CZT
products in both the Group's UK and US facilities.
Kromek is focused on developing the next generation of products for commercial
application in its core markets. As noted, during the period the Group
continued to advance development programmes with a number of partners and, in
particular, significantly progressed the development of its biological-threat
detection solution.
In H1 2022, Kromek applied for three new patents and had three patents granted
across three patent families, bringing the total number of patents held by the
Group to in excess of 275. The new applications cover innovations in both of
the Group's segments.
Financial Review
Revenue for the six-month period ended 31 October 2021 increased slightly to
£4.7m (H1 2021: £4.6m). The Group's growth was impacted during the period by
supply chain pressures, particularly global electronic component shortages,
which resulted in the delivery of some contracts being delayed into the second
half of the year. As described further below, the Group took steps to increase
the surety of its supply during the period. Accordingly, the Group does not
expect revenue to be impacted by supply chain issues in the second half and
remains on track to deliver significant growth for the full year, with
visibility of over 90% of forecast revenue.
Gross profit was £2.2m (H1 2021: £2.5m) due to gross margin for the period
being 46.8% compared with 54.5% for H1 2021 and 43.5% for H2 2021. The
reduction compared with the first half of the prior year is due to product mix
and component price inflation driven by supply chain pressures.
The Group generated other operating income of £1.3m (H1 2021: £0.3m), which
predominantly comprises forgiveness of Paycheck Protection Programme (PPP)
loans in the US. The Group had been granted PPP loans totalling $1.8m in the
prior year and, during the period under review, applied for, and received,
forgiveness for repayment from the US Government. In the prior year period,
the £0.3m of other operating income comprised UK Government grants in
response to COVID-19.
Administrative expenses and distribution costs increased to £6.4m (H1 2021:
£5.9m), which is largely due to a combination of increased depreciation and
amortisation expense, staff costs, travel and consultancy fees.
The forgiveness of PPP loans offset the decline in gross profit and the
increased administrative and distribution costs to enable a reduction in
operating loss to £2.9m (H1 2021: £3.1m loss).
The Group recognised an exceptional income of £0.1m relating to the
impairment reversal of a specific trade receivable that was impaired in the
full year 2020 financial statements and subsequently classified as an
exceptional item.
Loss before tax reduced to £3.1m (H1 2021: £3.4m loss).
The adjusted EBITDA loss for the period was reduced to £0.6m (H1 2021: £0.9m
loss). Adjusted EBITDA is calculated as per the following table:
H1 2022 H1 2021 FY 2021
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Loss before tax (3,056) (3,399) (6,331)
EBITDA adjustments:-
Net interest 276 306 546
Depreciation 854 821 1,685
Amortisation 1,265 1,279 2,359
Share-based payments 120 120 106
COVID-19 related items
Exceptional items (89) - (52)
Adjusted EBITDA* (630) (873) (1,687)
*Adjusted EBITDA is defined as earnings before interest, taxation,
depreciation, amortisation, exceptional items and share-based payments. The
exceptional item in H1 2022 and FY 2021 relates to the reversal of items
impaired in the FY 2020 Annual Report. Share-based payments are added back
when calculating the Group's adjusted EBITDA as this is currently an expense
with a zero direct cash impact on financial performance. Adjusted EBITDA is
considered a key metric to the users of the financial statements as it
represents a useful milestone that is reflective of the performance of the
business resulting from movements in revenue, gross margin, and the costs of
the business.
Investment in product development was £3.1m for the six-month period ended 31
October 2021 (H1 2021: £2.7m). The expenditure in H1 2022 was in technology
and product developments, reflecting the continuing investment and commitment
in new and enhanced products, applications and platforms that can be
commercially marketed. Amortisation of such development activity in the period
was £1.0m (H1 2021: £1.0m).
Cash and cash equivalents at 31 October 2021 were £10.2m (30 April 2021:
£15.6m; 31 October 2020: £5.8m). The decrease over the six-month period
primarily reflects investment in product development and other intangibles,
with capitalised development costs of £3.1m and IP additions of £0.1m, and a
£1.7m reduction in working capital.
Inventories increased by £1.1m in the period from £6.2m to £7.3m. This
increase was primarily in order to secure surety of critical electronic
components for both H2 2022 and, in certain instances, H1 2023, in response to
the supply chain pressures experienced during the first half. As such, the
Group sourced component inventory when available, rather than in accordance
with normal supply lead times. As noted above, there was significant component
price inflation caused by the constrained market supply, which also
contributed to the increased spend on inventories.
Outlook
Kromek entered the second half of FY 2022 in a stronger position than when it
started the year and, the Board believes, than at any point in the Group's
history. The Group has continued to deliver on its existing contracts as well
as increase its contracted orderbook and pipeline. The Group has made
significant progress under development programmes that are in areas that the
Board believes will be key drivers of future growth, in particular, SPECT, CT
and bio-security. In addition, due to the mitigating actions and significant
forward planning that Kromek implemented during the first half of the year,
and which remain in place, the Group does not expect revenue to be impacted by
supply chain challenges in the second half of the year.
The Group currently has visibility in excess of 90% of expected full year
revenue based on orders already delivered and won and this is further
supported by a strong and increasing pipeline. As a result, Kromek is on track
to deliver an increase in revenue of approximately 45% for full year 2022, in
line with market expectations, which would represent the Group's highest ever
full year revenue and reflect growth in both the advanced imaging and CBRN
detection segments.
Looking further ahead, Kromek is operating in multiple substantial markets
where its technology enables its advanced imaging customers to differentiate
their products - forming an important part of the roadmap of major OEMs - and
its CBRN detection customers to enhance national defence. The demand for
technology that enables early medical diagnosis to improve patient outcomes
and government vigilance to the threat of terrorism will continue. In
addition, Kromek's strategic position in the advanced imaging segment has been
significantly strengthened this year with the Group becoming the only
commercial independent global supplier of CZT. As a result, the Board
continues to look to the future with great confidence.
Consolidated condensed income statement
For the six months ended 31 October 2021
Six months ended 31 October Six months Year
2021 ended 31 October ended
£'000 2020 30 April 2021
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Note
Continuing operations
Revenue 4 4,707 4,576 10,352
Cost of sales (2,503) (2,083) (5,346)
Gross profit 2,204 2,493 5,006
Other operating income 5 1,343 300 379
Distribution costs (273) (128) (287)
Administrative expenses (including operating expenses) (6,143) (5,758) (10,935)
Operating loss (2,869) (3,093) (5,837)
Exceptional impairment reversal on trade receivables and amounts recoverable 6 89 - 52
on contract
Operating results (post exceptional items) (2,780) (3,093) (5,785)
Finance income 6 1 2
Finance costs (282) (307) (548)
Loss before tax (3,056) (3,399) (6,331)
Tax 7 707 385 978
Loss from continuing operations (2,349) (3,014) (5,353)
Losses per share
9 (0.5) (0.9) (1.5)
-basic (p)
-diluted (p) (0.5) (0.9) (1.5)
Consolidated condensed statement of comprehensive income
For the six months ended 31 October 2021
Six months ended 31 October Six months Year
2021 ended ended
£'000 31 October 30 April 2021
(Unaudited) 2020 £'000
£'000 (Audited)
(Unaudited)
Loss for the period (2,349) (3,014) (5,353)
Items that may be recycled to the income statement
Exchange gains/(losses) on translation of foreign operations 1,154 (640) (1,981)
Total comprehensive loss for the period (1,195) (3,654) (7,334)
Consolidated condensed statement of financial position
31 October 31 October 30 April
2021 2020 2021
£'000 £'000 £'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 1,275 1,275 1,275
Other intangible assets 26,240 23,048 24,144
Property, plant and equipment 10 10,884 12,052 11,200
Right-of-use asset 3,884 3,597 4,076
42,283 39,972 40,695
Current assets
Inventories 7,336 6,579 6,202
Trade and other receivables 7,166 6,282 6,644
Current tax assets 422 1,415 1,015
Cash and bank balances 10,243 5,810 15,602
25,167 20,086 29,463
Total assets 67,450 60,058 70,158
Current liabilities
Trade and other payables (5,959) (5,966) (6,174)
Lease obligation (389) (328) (399)
Borrowings (4,813) (3,654) (5,387)
Provisions for liabilities - - -
(11,161) (9,948) (11,960)
Net current assets 14,006 10,138 17,503
Non-current liabilities
Deferred income (1,221) (1,068) (1,071)
Lease obligation (4,111) (3,575) (4,256)
Borrowings (1,977) (3,928) (2,816)
Total liabilities (18,470) (18,519) (20,103)
Net assets 48,980 41,539 50,055
As at 31 October 2021
Equity
Share capital 12 4,319 3,449 4,319
Share premium account 72,943 61,603 72,943
Merger reserve 21,853 21,853 21,853
Translation reserve 1,154 1,341 -
Accumulated losses (51,289) (46,707) (49,060)
Total equity 48,980 41,539 50,055
Consolidated condensed statement of changes in equity
For the six months ended 31 October 2021
Equity attributable to equity holders of the Group
Share
Share Capital Premium Merger Reserve Translation Accumulated Losses
£'000 Account £'000 Reserve £'000 Total
£'000 £'000 £'000
Balance at 1 May 2021 4,319 72,943 21,853 - (49,060) 50,055
Loss for the period - - - - (2,349) (2,394)
Other comprehensive income for the period
- - - 1,154 - 1,154
Total comprehensive loss for the period - - - 1,154 (2,349) (1,195)
Transactions with shareholders recorded in equity
Issue of share capital net of expenses - - - - - -
Premium on shares issued less expenses
- - - - - -
Credit to equity for equity-settled share-based payments
- - - - 120 120
Balance at 31 October 2021 4,319 72,943 21,853 1,154 (51,289) 48,980
Balance at 1 May 2020 3,446 61,600 21,853 1,981 (43,813) 45,067
Loss for the period - - - - (3,014) (3,014)
Other comprehensive loss for the period - - - (640) - (640)
Total comprehensive loss for the period
- - - (640) (3,014) (3,654)
Transactions with shareholders recorded in equity
Issue of share capital net of expenses 3 - - - - 3
Premium on shares issued less expenses
- 3 - - - 3
Credit to equity for equity-settled share-based payments
- - - - 120 120
Balance at 31 October 2020 3,449 61,603 21,853 1,341 (46,707) 41,539
Balance at 1 May 2020 3,446 61,600 21,853 1,981 (43,813) 45,067
Loss for the year - - - - (5,353) (5,353)
Other comprehensive loss for the year
- - - (1,981) - (1,981)
Total comprehensive loss for the year
- - - (1,981) (5,353) (7,334)
Transactions with shareholders recorded in equity
Issue of share capital net of expenses 873
873 - - - -
Premium on shares issued less expenses 11,343 11,343
- - - -
Credit to equity for equity-settled share-based payments
- - - - 106 106
Balance at 30 April 2021 4,319 72,943 21,853 - (49,060) 50,055
Consolidated condensed statement of cash flows
For the six months ended 31 October 2021
Note Six months ended 31 October Six months Year
2021 ended 31 October ended 30 April
£'000 2020 2021
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Net cash used in operating activities 11 (2,213) (1,890) (1,309)
Investing activities
Interest received 6 1 2
Purchases of property, plant and equipment (260) (295) (454)
Purchases of patents and trademarks (96) (114) (156)
Capitalisation of research and development costs (3,125) (2,667) (5,463)
Net cash used in investing activities (3,475) (3,075) (6,071)
Financing activities
New borrowings 560 2,283 3,215
Net proceeds on issue of shares - 3 12,216
Interest paid (162) (189) (309)
Payment of loan and borrowings (704) (307) (595)
Finance lease repayments (322) (272) (395)
Net cash (used in) / generated from financing activities (628) 1,518 14,132
Net (decrease) / increase in cash and cash equivalents (6,316) (3,447) 6,752
Cash and cash equivalents at beginning of period 15,602 9,444 9,444
Effect of foreign exchange rate changes 957 (187) (594)
Cash and cash equivalents at end of period 10,243 5,810 15,602
Notes to the unaudited interim statements
For the six months ended 31 October 2021
1. Basis of preparation
This interim financial report does not constitute statutory accounts as
defined in section 434 of the Companies Act 2006. The auditors reported on the
Kromek Group plc financial statements for the year ended 30 April 2021, their
report was unqualified and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006. The Group's consolidated annual financial
statements for the year ended 30 April 2021 have been filed with the Registrar
of Companies and are available on the Group's website: www.kromek.com
(http://www.kromek.com) .
2. Going concern
The Directors have a reasonable expectation that the going concern basis of
accounting remains appropriate and that the Group has adequate resources and
facilities to continue in operation for the next 12 months based on its cash
flow forecasts prepared. Accordingly, the Group's unaudited interim statements
for the six months ended 31 October 2021 have been prepared on a going concern
basis which contemplates the realisation of assets and the settlement of
liabilities and commitments in the normal course of operations.
3. Interim report
This interim financial report will be available from the Group's website at
www.kromek.com (http://www.kromek.com) .
4. Business and geographical segments
Products and services from which reportable segments derive their revenues
For management purposes, the Group is organised into two business units (UK
and USA) and it is on these operating segments that the Group is providing
disclosure.
The chief operating decision maker is the Board of Directors who assess
performance of the segments using the following key performance indicators;
revenue, gross profit, operating profit and EBITDA. The amounts provided to
the Board with respect to assets and liabilities are measured in a way
consistent with the Financial Statements.
The turnover, profit on ordinary activities and net assets of the Group are
attributable to one business segment, i.e. the development of digital colour
x-ray imaging enabling direct materials identification, as well as developing
a number of detection products in the industrial market. Whilst results are
not measured by end market, the Group currently categorises its customers as
belonging to the advanced imaging and CBRN detection markets.
Analysis by geographical area
A geographical analysis of the Group's revenue by destination is as follows:
Six months ended 31 October Six months ended 31 October Year
2021 2020 ended
£'000 £'000 30 April 2021
£'000
(Unaudited) (Unaudited) (Audited)
United Kingdom 928 683 1,627
North America 1,916 3,055 5,693
Asia 125 197 610
Europe 1,695 630 2,387
Australasia 43 11 3
Africa - - 32
Total revenue 4,707 4,576 10,352
4. Business and geographical segments (continued)
A geographical analysis of the Group's revenue by origin is as follows:
Six months ended 31 October 2021
UK Operations USA Operations Total for Group
£'000 £'000 £'000
Revenue from sales 3,487 3,813 7,300
Revenue by segment:
-Sale of goods and services
-Revenue from grants 409 - 409
-Revenue from contract customers 374 142 516
Total sales by segment 4,270 3,955 8,225
Removal of inter-segment sales (2,459) (1,059) (3,518)
Total external sales 1,811 2,896 4,707
Segment result - operating loss (2,382) (398) (2,780)
Net interest (162) (114) (276)
Loss before tax (2,544) (512) (3,056)
Tax credit 707 - 707
Loss for the period (1,837) (512) (2,349)
Other information
Property, plant and equipment additions 65 195 260
Depreciation of property, plant and equipment 506 348 854
Intangible asset additions 2,627 594 3,221
Amortisation of intangible assets 751 514 1,265
Balance Sheet
Total assets 41,942 25,508 67,450
Total liabilities (11,911) (6,559) (18,470)
Inter-segment sales are charged at prevailing market prices.
No impairment losses were recognised in respect of property, plant and
equipment and goodwill.
4. Business and geographical segments (continued)
Six months ended 31 October 2020
UK Operations USA Operations Total for Group
£'000 £'000 £'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 2,255 1,615 3,870
-Revenue from grants 8 - 8
-Revenue from contract customers 2,266 320 2,586
Total sales by segment 4,529 1,935 6,464
Removal of inter-segment sales (1,317) (571) (1,888)
Total external sales 3,212 1,364 4,576
Segment result - operating loss (537) (2,556) (3,093)
Net interest (179) (127) (306)
Loss before tax (716) (2,683) (3,399)
Tax credit 385 - 385
Loss for the period (331) (2,683) (3,014)
Other information
Property, plant and equipment additions 229 66 295
Depreciation of property, plant and equipment 483 338 821
Intangible asset additions 2,172 609 2,781
Amortisation of intangible assets 777 502 1,279
Balance Sheet
Total assets 35,203 24,855 60,058
Total liabilities (11,887) (6,632) (18,519)
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment profit or loss represents the profit or loss
earned by each segment without allocation of the share of profits or losses of
associates, central administration costs including Directors' salaries,
investment revenue and finance costs, and income tax expense. This is the
measure reported to the Group's Chief Executive for the purpose of resource
allocation and assessment of segment performance.
5. Other Operating Income
In the period to 31 October 2021, other operating income comprised the
forgiveness of PPP loans granted by the US Government and grants received from
the Coronavirus Job Retention Scheme provided by the UK Government in response
to COVID-19's economic impact on businesses. In the prior year period, the
£0.3m of other operating income comprised UK Government grants in response to
COVID-19.
6. Exceptional Items
The Group has reversed £89k in relation to an item impaired in the full year
2020 financial statements.
7. Tax
The Group has recognised R&D tax credits of £707k for the six months
ended 31 October 2021 (six months ended 31 October 2020: £385k).
8. Dividends
The Directors do not recommend the payment of a dividend (six months ended 31
October 2020: £nil).
9. Losses per share
The calculation of the basic and diluted loss per share is based on the
following data:
Losses
Six months ended 31 October Six months Year
2021 ended 31 October ended
£'000 2020 30 April 2021
£'000 £'000
(Unaudited) (Unaudited) (Audited)
Losses for the purposes of basic loss per share being net loss attributable to (3,014) (5,353)
owners of the Group
(2,349)
Six months Year
Six months ended 31 October ended 31 October ended
2021 2020 30 April 2021
'000 '000 '000
(Unaudited) (Unaudited) (Audited)
Number of shares
Weighted average number of ordinary shares for the purposes of basic loss per 431,852 344,751 358,912
share
Effect of dilutive potential ordinary shares:
Share options and warrants 618 340 373
Weighted average number of ordinary shares for the purposes of diluted loss 432,470 345,745 359,285
per share
Basic (p) (0.5) (0.9) (1.5)
Diluted (p) (0.5) (0.9) (1.5)
Due to the Group having losses in each of the periods, the fully diluted loss
per share for disclosure purposes, as shown in the income statement, is the
same as for the basic loss per share.
10. Property, plant and equipment
During the six months ended 31 October 2021, the Group acquired property,
plant and equipment with a cost of £260k (six months ended 31 October 2020:
£295k).
11. Notes to the cash flow statement
Six months ended 31 October Six months Year
2021 ended 31 October ended
£'000 2020 30 April 2021
£'000 £'000
(Unaudited) (Unaudited) (Audited)
(2,349) (3,014) (5,353)
Loss for the period
Adjustments for:
Finance income (6) (1) (2)
Finance costs 282 307 548
Income tax credit (707) (385) (978)
Depreciation of property, plant and equipment 854 821 1,685
Amortisation of intangible assets 1,265 1,279 2,359
Share-based payment expense 120 120 106
PPP loan forgiveness (1,253) - -
Impairment of intangible asset - - 30
Loss on disposal - - 82
Operating cash flows before movements in working capital (1,794) (873) (1,523)
(1,134) (163) 214
(Increase) / decrease in inventories
(Increase) / decrease in receivables (524) 1,928 1,566
(Decrease) in payables (61) (2,782) (2,571)
Cash used in operations (3,513) (1,890) (2,314)
Income taxes received 1,300 - 1,005
Net cash used in operating activities (2,213) (1,890) (1,309)
12. Share capital
During the period, no ordinary shares (six months ended 31 October 2020:
250,000) were issued to satisfy the exercise of employee share options.
13. Events after the balance sheet date
There are no significant or disclosable post-balance sheet events.
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